0000065984us-gaap:ElectricityMemberetr:ResidentialMemberetr:EntergyArkansasMember2022-07-012022-09-30
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 September 30, 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) 670-3700670-3702 |
| 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 October 31, 20222023 |
Entergy Corporation | ($0.01 par value) | 203,483,660211,473,074 |
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 hereinmakes representations 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, 20212022 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 20222023 and June 30, 2022,2023, 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, nuclear materials and fuel, 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, 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, such as hurricanes or wildfires, 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 the CARES Act of 2020, and any related intended or unintended consequences on financial results and future cash flows;
•the effects of Entergy’s strategies to reduce tax payments;
•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;
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, proceedings, or proceedings;audits;
•changes in technology, including (i) Entergy’s ability to effectively address and 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 related increasing investment in renewable power generation sources, 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 catastrophe, pandemic (or other health related event), or a global or geopolitical event, or pandemic, such as the 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 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 benefitbenefits 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 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 customers. With the sale of Palisades in JuneIn 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.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 |
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 |
GAAP | Generally Accepted Accounting Principles |
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 Commoditiesas part of Entergy’s non-utility 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 Commoditiesas part of Entergy’s non-utility 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 subsidiary in the Entergy Wholesale Commoditiesas part of Entergy’s non-utility business, segment, which ceased power production in May 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. |
DEFINITIONS (Concluded)
| | | | | |
Abbreviation or Acronym | Term |
| |
System Energy | System Energy Resources, Inc. |
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 in portions of Louisiana |
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.
•The Entergy Wholesale Commoditiesbusiness segment includes the ownership, operation, and decommissioningin portions 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.Louisiana. See “Entergy Wholesale Commodities Exit from the Merchant Power BusinessPlanned Sale of Gas Distribution Businesses” below and in the Form 10-K for discussion of the shutdown andplanned sale of each of the Entergy Wholesale CoNew Orleans and Entergy Louisiana gas distribution businesses.
mmodities nuclear power plants. With
As discussed in Note 13 to the sale of Palisadesfinancial statements in June 2022,the Form 10-K, Entergy completed its multi-year strategy to exit the merchant nuclear power business.
business in 2022 and upon completion of all transition activities, effective January 1, 2023, Entergy Wholesale Commodities is no longer a reportable segment. 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 third quarter 2022 and the nine months ended September 30, 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
Third Quarter 20222023 Compared to Third Quarter 20212022
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the third quarter 20222023 to the third 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 | | $570,366 | | | $25,517 | | | ($64,880) | | | $531,003 | | |
2022 Net Income (Loss) Attributable to Entergy Corporation | | 2022 Net Income (Loss) Attributable to Entergy Corporation | | $672,368 | | | ($111,779) | | | $560,589 | |
| Operating revenues | Operating revenues | | 965,376 | | | (100,266) | | | (27) | | | 865,083 | | Operating revenues | | (597,376) | | | (25,717) | | | (623,093) | |
Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | 623,649 | | | 5,380 | | | (3) | | | 629,026 | | Fuel, fuel-related expenses, and gas purchased for resale | | (643,951) | | | (15,369) | | | (659,320) | |
Purchased power | Purchased power | | 101,408 | | | 2,323 | | | 3 | | | 103,734 | | Purchased power | | (98,305) | | | (7,385) | | | (105,690) | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | (111,607) | | | — | | | — | | | (111,607) | | Other regulatory charges (credits) - net | | (40,206) | | | — | | | (40,206) | |
Other operation and maintenance | Other operation and maintenance | | 132,029 | | | (40,994) | | | 1,515 | | | 92,550 | | Other operation and maintenance | | (32,682) | | | (8,700) | | | (41,382) | |
Asset write-offs, impairments, and related charges (credits) | Asset write-offs, impairments, and related charges (credits) | | — | | | (4) | | | — | | | (4) | | Asset write-offs, impairments, and related charges (credits) | | 78,434 | | | (40,213) | | | 38,221 | |
Taxes other than income taxes | Taxes other than income taxes | | 8,938 | | | (1,257) | | | 28 | | | 7,709 | | Taxes other than income taxes | | 8,088 | | | (490) | | | 7,598 | |
Depreciation and amortization | Depreciation and amortization | | 39,246 | | | (7,298) | | | (405) | | | 31,543 | | Depreciation and amortization | | (13,261) | | | (154) | | | (13,415) | |
| Other income (deductions) | Other income (deductions) | | (35,648) | | | (2,819) | | | (24,279) | | | (62,746) | | Other income (deductions) | | 10,785 | | | (14,765) | | | (3,980) | |
Interest expense | Interest expense | | 14,589 | | | (1,042) | | | 4,413 | | | 17,960 | | Interest expense | | 18,096 | | | 9,885 | | | 27,981 | |
Other expenses | Other expenses | | 10,097 | | | (24,800) | | | — | | | (14,703) | | Other expenses | | 2,421 | | | 2 | | | 2,423 | |
Income taxes | Income taxes | | 18,616 | | | 9,416 | | | (2,202) | | | 25,830 | | Income taxes | | 47,901 | | | (5,016) | | | 42,885 | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | | (9,239) | | | — | | | (48) | | | (9,287) | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | | Preferred dividend requirements of subsidiaries and noncontrolling interests | | 7,666 | | | — | | | 7,666 | |
| 2022 Net Income (Loss) Attributable to Entergy Corporation | | $672,368 | | | ($19,292) | | | ($92,487) | | | $560,589 | | |
2023 Net Income (Loss) Attributable to Entergy Corporation | | 2023 Net Income (Loss) Attributable to Entergy Corporation | | $751,576 | | | ($84,821) | | | $666,755 | |
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Third quarter 2023 results of operations include write-offs of $78 million ($59 million net-of-tax), recorded at Utility, as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and Entergy Arkansas’s October 2023 commitment to the APSC.
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $3,1914,157 | |
Fuel, rider, and other revenues that do not significantly affect net income | 811 (882) | |
Retail electric priceReturn of unprotected excess accumulated deferred income taxes to customers | 100 | |
Volume/weather | 9216 | |
Retail one-time bill credit | (37)37 | |
2022Retail electric price | 89 | |
Volume/weather | 142 | |
2023 operating revenues | $4,1573,559 | |
The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In third quarter 2022, $16 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes for Entergy or the Utility operating companies for third quarter 2023. There was 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 retail one-time bill credit represents the disbursement of settlement proceeds, in third quarter 2022, in the form of a one-time bill credit provided to Entergy Mississippi’s retail customers during the September 2022 billing cycle as a result of the System Energy settlement agreement with the MPSC. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.
The retail electric price variance is primarily due to:
•an increase in Entergy Arkansas’s formula rate plan rates effective January 2022;2023;
•increases in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 20212022 and September 2022;2023;
•increases in Entergy Mississippi’s formula rate plan rates effective April 20222023 and August 2022;July 2023;
•increasesan increase in Entergy New Orleans’s formula rate plan rates effective November 2021 and September 2022; and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•an increase in the annual base rate, including the realignment of the costs previously being collected through the distribution cost recovery factor rider effective January 2022 and an increase in the transmission cost recovery factor riders and the generation cost recovery rider to base rates, effective March 2022, eachJune 2023, 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.
The volume/weather variance is primarily due to an increase of 2,260 GWh, or 7%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales.
Total electric energy sales for Utility for the three months ended September 30, 2023 and 2022 are as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | % Change |
| (GWh) | | |
Residential | 12,661 | | | 11,272 | | | 12 | |
Commercial | 8,648 | | | 8,223 | | | 5 | |
Industrial | 13,781 | | | 13,926 | | | (1) | |
Governmental | 700 | | | 702 | | | — | |
Total retail | 35,790 | | | 34,123 | | | 5 | |
Sales for resale | 3,916 | | | 4,809 | | | (19) | |
Total | 39,706 | | | 38,932 | | | 2 | |
See Note 13 to the effectsfinancial statements herein for additional discussion of Hurricane Ida inoperating revenues.
Other Income Statement Items
Utility
Other operation and maintenance expenses decreased from $776 million for the third quarter 2021. The increase2022 to $743 million for the third quarter 2023 primarily due to:
•a decrease of $17 million in industrial usage was due to an increase in demand from expansion projects, primarily in the chemicals industry, an increase in demand from small industrial customers, and an increase in demand from cogeneration customers. The increase in weather-adjusted commercial usage wasnuclear generation expenses primarily due to the effecta lower scope of the COVID-19 pandemic on businesseswork, including during plant outages, performed in third quarter 2021.2023 as compared to prior year and lower nuclear labor costs;
•
The retail one-time bill credit representsa decrease of $11 million in transmission costs allocated by MISO. See Note 2 to the disbursement of settlement proceedsfinancial statements in the formForm 10-K for further information on the recovery of these costs; and
•a one-time bill credit provideddecrease of $8 million in compensation and benefits costs primarily due to Entergy Mississippi’s retail customers, effective during the September 2022 billing cycle,lower healthcare claims activity in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the System Energy partial settlement agreement withdiscount rates used to value the MPSC. There is no effect on net income asbenefits liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the reductionForm 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in operating revenues was offsetthe Form 10-K for further discussion of pension and other postretirement benefits costs.
Asset write-offs, impairments, and related charges (credits) includes the effects of a commitment, made in October 2023, by regulatory credits recorded inEntergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. In third quarter 2022.2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident. See Note 21 to the financial statements herein for further discussion of the partial settlement agreementANO stator incident and the MPSC directive relatedEntergy Arkansas’s October 2023 commitment to the disbursement of settlement proceeds.APSC.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Utility for the three months ended September 30, 2022Depreciation and 2021 are as follows:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | % Change |
| (GWh) | | |
Residential | 11,272 | | | 10,545 | | | 7 | |
Commercial | 8,223 | | | 7,649 | | | 8 | |
Industrial | 13,926 | | | 13,021 | | | 7 | |
Governmental | 702 | | | 648 | | | 8 | |
Total retail | 34,123 | | | 31,863 | | | 7 | |
Sales for resale | 4,809 | | | 4,350 | | | 11 | |
Total | 38,932 | | | 36,213 | | | 8 | |
See Note 13 to the financial statements herein for additional discussion of operating revenues.
Entergy Wholesale Commodities
Operating revenues for Entergy Wholesale Commoditiesamortization expenses decreased from $162 million for the third quarter 2021 to $62 million for the third quarter 2022 primarily due to the shutdown of Palisades in May 2022.
Following are key performance measures for Entergy Wholesale Commodities for the third quarters 2022 and 2021:
| | | | | | | | | | | |
| 2022 | | 2021 |
Owned capacity (MW) (a) | 394 | | 1,205 |
GWh billed | 577 | | 2,166 |
| | | |
Entergy Wholesale Commodities Nuclear Fleet | | | |
Capacity factor | —% | | 97% |
GWh billed | — | | 1,702 |
Average energy price ($/MWh) | $— | | $69.35 |
Average capacity price ($/kW-month) | $— | | $0.15 |
| | | |
| | | |
(a)Thea reduction in owned capacity is due to the shutdowndepreciation expense of the 811 MW Palisades plant in May 2022. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $644$41 million for the third quarter 2021 to $776 million for the third quarter 2022 primarily due to:
•an increase of $36 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expensesat System Energy as a result of the deploymentapproval by the FERC in August 2023 of advanced metering systems;
Entergy Corporationthe settlement establishing updated depreciation rates used in calculating Grand Gulf plant depreciation and Subsidiaries
Management's Financial Discussionamortization expenses under the Unit Power Sales Agreement. The decrease was partially offset by additions to plant in service and Analysis
•an increase of $30 million in nuclear generation expenses primarily due to a higher scope of work performed and higher outage costsdepreciation rates at Entergy Texas, effective in 2022 as compared to prior year and higher nuclear labor costs;
•an increase of $20 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•a gain of $15 million, recorded in the third quarter 2021, on the sale of a pipeline; and
•an increase of $13 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic.June 2023. See Note 2 to the financial statements herein and in the Form 10-K10-K for discussion of regulatory activity associated with the COVID-19 pandemic.
DepreciationUnit Power Sales Agreement depreciation amendment proceeding. See Note 2 to the financial statements herein and amortization expenses increased primarily due to additions to plant in service.the Form 10-K for discussion of the 2022 base rate case filing at Entergy Texas.
Other regulatory charges (credits) - net includes:
•a regulatory credit of $37 million, recorded by Entergy Mississippi in the third quarter 2022, at Entergy Mississippi, to reflect a one-time bill credit to customers as a result of the partialSystem Energy settlement agreement and offer of settlement with System Energy.the MPSC. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill2022 billing cycle. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and
•regulatory credits of $23 million, recorded by Entergy Mississippi in the third quarter 2022, at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the 2022 formula rate plan filing.filing; and
•the reversal in third quarter 2023 of $22 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case.
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-related costs collected in revenue.
Other income decreasedincreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2021. The decrease was partially offset by an increase of $24$26 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust’s investment of securitization proceeds in affiliated preferred membership interests, partially offset byrelated to storm cost securitizations, and a decrease in charitable donations in 2023 as compared to the liquidation of Entergy Louisiana’s investmentsame period in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs.2022. 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. The increase was partially offset by:
•lower interest income from carrying costs related to deferred fuel balances;
•an increase in net periodic pension non-service costs as a result of a non-qualified pension settlement charge recorded in third 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; and
•changes in decommissioning trust fund activity.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the securitization.Entergy Louisiana storm cost securitizations.
Interest expense increased primarily due to:
•the issuance by Entergy Arkansas of $200$425 million of 4.20%5.15% Series mortgage bonds in March 2022;
•the issuance by Entergy Louisiana of $1 billion of 0.95% Series mortgage bonds in October 2021;January 2023;
•the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022;
•the issuance by Entergy Mississippi of $200 million of 2.55% Series mortgage bonds in November 2021;
•the $150 million unsecured term loan proceeds received by Entergy Mississippi in June 2022;
•borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility;
•the issuances by Entergy New Orleans of $90 million of 4.19% Series mortgage bonds and $70 million of 4.51% Series mortgage bonds, each in November 2021; and
•the issuance by Entergy Texas of $325 million of 5.00% Series mortgage bonds in August 2022.2022;
•the issuance by Entergy Texas of $350 million of 5.80% Series mortgage bonds in August 2023; and
•the issuance by System Energy of $325 million of 6.00% Series mortgage bonds in March 2023.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The increase was partially offset by the repayment by System Energy of $250 million of 4.10% Series mortgage bonds in April 2023.
Entergy Wholesale CommoditiesParent and Other
Other operationAsset write-offs, impairments, and maintenance expenses decreased from $51related charges (credits) includes the effects of recording a final judgment of $40 million for thein third quarter 20212023 to $10 million for the third quarter 2022 primarily due to a decrease of $39 million resulting from the absence of expenses from Palisades, after it was shut down in May 2022, and a decrease of $3 million in severance and retention expenses. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below andresolve claims in the Form 10-K for a discussion of management’s strategy to shut downIndian Point 2 fourth round and sell all plants in Entergy Wholesale Commodities’ merchant nuclear fleet.Indian Point 3 third round combined damages case against the DOE. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.
Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from Palisades, after it was shut down in May 2022.
Other expenses decreased primarily due to the absence of decommissioning expense and nuclear refueling outage expense from Palisades, after it was shut down in May 2022 and sold in June 2022. See Note 141 to the financial statements herein for discussion of the sale of Palisades.spent nuclear fuel litigation.
Parent and Other
Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income of $26 million from affiliated preferred membership interests, as discussed above.above, partially offset by higher non-service pension income. 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.
Interest expense increased primarily due to higher variable interest rates on commercial paper in 2023. See Note 4 to the financial statements herein for discussion of Entergy’s commercial paper program.
Income Taxes
The effective income tax rate was 25.3% for the third quarter 2023. The difference in the effective income tax rate for the third quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes.
The effective income tax rate was 24.9% for the third quarter 2022. The difference in the effective income tax rate for the third quarter 2022 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and a provision recorded for uncertain tax positions, partially offset by 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.
The effective income tax rate was 22.8% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 20222023 to the nine months ended September 30, 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 | | $1,252,835 | | | ($212,101) | | | ($181,140) | | | $859,594 | | |
2022 Net Income (Loss) Attributable to Entergy Corporation | | 2022 Net Income (Loss) Attributable to Entergy Corporation | | $1,165,569 | | | ($168,877) | | | $996,692 | |
| Operating revenues | Operating revenues | | 1,729,800 | | | (258,430) | | | (73) | | | 1,471,297 | | Operating revenues | | (865,064) | | | (204,066) | | | (1,069,130) | |
Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | 803,142 | | | 17,533 | | | 3 | | | 820,678 | | Fuel, fuel-related expenses, and gas purchased for resale | | (449,003) | | | (47,099) | | | (496,102) | |
Purchased power | Purchased power | | 305,790 | | | 6,093 | | | (3) | | | 311,880 | | Purchased power | | (489,036) | | | (12,083) | | | (501,119) | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | 643,891 | | | — | | | — | | | 643,891 | | Other regulatory charges (credits) - net | | (847,672) | | | — | | | (847,672) | |
Other operation and maintenance | Other operation and maintenance | | 192,684 | | | (139,562) | | | 8,054 | | | 61,176 | | Other operation and maintenance | | (123,001) | | | (83,489) | | | (206,490) | |
Asset write-offs, impairments, and related charges (credits) | Asset write-offs, impairments, and related charges (credits) | | — | | | (508,690) | | | — | | | (508,690) | | Asset write-offs, impairments, and related charges (credits) | | 78,434 | | | 123,108 | | | 201,542 | |
Taxes other than income taxes | Taxes other than income taxes | | 48,849 | | | (1,427) | | | 66 | | | 47,488 | | Taxes other than income taxes | | 35,807 | | | (11,586) | | | 24,221 | |
Depreciation and amortization | Depreciation and amortization | | 103,258 | | | (22,689) | | | (1,359) | | | 79,210 | | Depreciation and amortization | | 34,701 | | | (8,992) | | | 25,709 | |
| Other income (deductions) | Other income (deductions) | | (87,226) | | | (109,424) | | | (36,762) | | | (233,412) | | Other income (deductions) | | 99,978 | | | (16,907) | | | 83,071 | |
Interest expense | Interest expense | | 40,651 | | | (6,357) | | | 18,803 | | | 53,097 | | Interest expense | | 54,368 | | | 21,832 | | | 76,200 | |
Other expenses | Other expenses | | 11,199 | | | (93,355) | | | — | | | (82,156) | | Other expenses | | 17,872 | | | (46,612) | | | (28,740) | |
Income taxes | Income taxes | | (408,823) | | | 93,639 | | | 342 | | | (314,842) | | Income taxes | | 422,609 | | | (30,757) | | | 391,852 | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | | (10,801) | | | — | | | (144) | | | (10,945) | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | | Preferred dividend requirements of subsidiaries and noncontrolling interests | | 2,298 | | | — | | | 2,298 | |
| 2022 Net Income (Loss) Attributable to Entergy Corporation | | $1,165,569 | | | $74,860 | | | ($243,737) | | | $996,692 | | |
2023 Net Income (Loss) Attributable to Entergy Corporation | | 2023 Net Income (Loss) Attributable to Entergy Corporation | | $1,663,106 | | | ($294,172) | | | $1,368,934 | |
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
Results of operations for the nine months ended September 30, 2023 include: (1) 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; and (2) write-offs of $78 million ($59 million net-of-tax), recorded at Utility, as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. See Notes 2 and 10 to the financial statements herein for further discussion of the Entergy Louisiana March 2023 storm cost securitization. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and Entergy Arkansas’s October 2023 commitment to the APSC.
Results of operations for the nine months ended September 30, 2022 include: 1)(1) a regulatory charge of $551 million ($413 million net-of-tax), recorded at Utility, as a result of System Energy’s partial settlement agreement and offer of settlement related to pending proceedings before the FERC; (2) a $283 million reduction in income tax expense as a result of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida May 2022 securitization financing, which also resulted in a $224 million ($165 million net-of-tax) regulatory charge, recorded at Utility, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding; and 3)(3) a gain of $166 million ($130 million net-of-tax), reflected in “Asset write-offs, impairments, and related charges (credits),” as a result of the sale of the Palisades plant in June 2022. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the System Energy partial settlement agreement and offer of settlement.with the MPSC. See Notes 2 and 103 to the financial statements herein for further discussion of the securitization. See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant.
Results of operations for the nine months ended September 30, 2021 include a charge of $340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
statements in the Form 10-K for further discussion of the Entergy Louisiana May 2022 storm cost securitization. See Note 14 to the financial statements in the Form 10-K for further discussion of the sale of the Palisades plant.
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 20222023 to the nine months ended September 30, 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $8,46110,191 | |
Fuel, rider, and other revenues that do not significantly affect net income | 1,220 | |
Retail electric price | 249 | |
Volume/weather | 218 (1,232) | |
Storm restoration carrying costs | 59(29) | |
Volume/weather | 21 | |
Retail one-time bill credit | 37 | |
Return of unprotected excess accumulated deferred income taxes to customers | 2150 | |
Retail one-time bill creditelectric price | (37)288 | |
20222023 operating revenues | $10,1919,326 | |
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:
•increases in Entergy Arkansas’s formula rate plan rates effective May 2021 and January 2022;
•increases in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022;
•increases in Entergy Mississippi’s formula rate plan rates effective April 2021, July 2021, April 2022, and August 2022;
•an increase in Entergy New Orleans’s formula rate plan rates effective November 2021; and
•increases 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 the implementation of the generation cost recovery rider, which includes the first-year revenue requirement for the Montgomery County Power Station, effective in late January 2021, 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.
The volume/weather variance is primarily due to an increase of 5,317 GWh, or 6%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales. The increase in industrial usage was due to an increase in demand from expansion projects, primarily in the chemicals, transportation, and petroleum refining industries, an increase in demand from cogeneration customers, an increase in demand from existing customers, primarily in the chemicals, pulp and paper, and transportation industries as a result of prior year temporary plant shutdowns, partially offset by decreased demand in the petroleum refining industry as a result of a permanent plant shutdown due to Hurricane Ida, and an increase in demand from small industrial customers. The increase in weather-adjusted commercial usage was primarily due to an increase in customers and the effect of the COVID-19 pandemic on businesses in 2021. The increased usage from these
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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.
Storm restoration carrying costs, representing the equity component of storm restoration carrying costs, includes $37 million atrecorded by Entergy Louisiana and $22 million at Entergy Texas, recorded in second quarter 2022, recognized as part of the Entergy Louisiana storm cost securitization in May 2022 and $22 million recorded by Entergy Texas in second quarter 2022, recognized as part of the Entergy Texas storm cost securitization in April 2022. 2022, partially offset by $31 million recorded by Entergy Louisiana in first quarter 2023, recognized as part of the Entergy Louisiana storm cost securitization in March 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the storm cost securitizations.
The volume/weather variance is primarily due to the effect of more favorable weather on commercial sales.
The retail one-time bill credit represents the disbursement of settlement proceeds, in third quarter 2022, in the form of a one-time bill credit provided to Entergy Mississippi’s retail customers during the September 2022 billing cycle as a result of the System Energy settlement agreement with the MPSC. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.
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 nine months ended September 30, 2022, $50 million was returned to customers through reductions in operating revenues as compared to $71 million inrevenues. There was no return of unprotected excess accumulated deferred income taxes for Entergy or the Utility operating companies for the nine months ended September 30, 2021.2023. There iswas no effect on net income as the reductions in operating
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 retail one-time bill credit represents the disbursement of settlement proceedselectric price variance is primarily due to:
•an increase in Entergy Arkansas’s formula rate plan rates effective January 2023;
•an increase in Entergy Louisiana’s formula rate plan revenues, including increases in the form of a one-time bill credit provided todistribution and transmission recovery mechanisms, effective September 2022;
•increases in Entergy Mississippi’s retail customers,formula rate plan rates effective duringAugust 2022, April 2023, and July 2023;
•an increase in Entergy New Orleans’s formula rate plan rates effective September 2022; and
•an increase in the September 2022 billing cycle, as a resultannual base rate, including the realignment of the System Energy partial settlement agreement withcosts previously being collected through the MPSC. There is no effect on net income asdistribution and transmission cost recovery factor riders and the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. generation cost recovery rider to base rates, effective June 2023, at Entergy Texas.
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.regulatory proceedings discussed above.
Total electric energy sales for Utility for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 29,218 | | | 27,695 | | | 5 | | Residential | 28,963 | | | 29,218 | | | (1) | |
Commercial | Commercial | 21,697 | | | 20,490 | | | 6 | | Commercial | 21,865 | | | 21,697 | | | 1 | |
Industrial | Industrial | 39,903 | | | 37,399 | | | 7 | | Industrial | 39,823 | | | 39,903 | | | — | |
Governmental | Governmental | 1,928 | | | 1,845 | | | 4 | | Governmental | 1,887 | | | 1,928 | | | (2) | |
Total retail | Total retail | 92,746 | | | 87,429 | | | 6 | | Total retail | 92,538 | | | 92,746 | | | — | |
Sales for resale | Sales for resale | 12,371 | | | 13,365 | | | (7) | | Sales for resale | 11,589 | | | 12,371 | | | (6) | |
Total | Total | 105,117 | | | 100,794 | | | 4 | | Total | 104,127 | | | 105,117 | | | (1) | |
See Note 13 to the financial statements herein for additional discussion of operating revenues.
Entergy Wholesale CommoditiesOther Income Statement Items
Operating revenues for Entergy Wholesale CommoditiesUtility
Other operation and maintenance expenses decreased from $559 million for the nine months ended September 30, 2021 to $301$2,130 million for the nine months ended September 30, 2022 to $2,007 million for the nine months ended September 30, 2023 primarily due to:
•a decrease of $50 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in second quarter 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the shutdowndiscount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first 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 Indian Point 3pension and other postretirement benefits costs;
•a decrease of $39 million in 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;
•a decrease of $23 million in nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year and lower nuclear labor costs;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•a decrease of $17 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year;
•the effects of recording a final judgment in first quarter 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; and
•a gain of $7 million on the partial sale of a service center at Entergy Texas in April 2021 and Palisades in May 2022.2023 as part of an eminent domain proceeding.
The decrease was partially offset by an increase of $13 million in insurance expenses primarily due to lower nuclear insurance refunds received in 2023.
Asset write-offs, impairments, and related charges (credits) includes the effects of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. In third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and Entergy Arkansas’s October 2023 commitment to the APSC.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in local franchise taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in depreciation rates at Entergy Texas, effective in June 2023, partially offset by a reduction in depreciation expense of $41 million at System Energy as a result of the approval by the FERC in August 2023 of the settlement establishing updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case filing at Entergy Texas. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Unit Power Sales Agreement depreciation amendment proceeding.
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 cost securitization;
•a regulatory charge of $224 million, recorded by Entergy Louisiana in second quarter 2022, to reflect its obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Louisiana May 2022 storm cost securitization;
•a regulatory credit of $37 million, recorded by Entergy Mississippi in third quarter 2022, to reflect a one-time bill credit to customers as a result of the System Energy settlement with the MPSC. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September 2022 billing cycle. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement agreement and the MPSC directive related to the disbursement of settlement proceeds;
•regulatory credits of $23 million, recorded by Entergy Mississippi in third quarter 2022, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 formula rate plan filing;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Following are key performance measures for Entergy Wholesale Commodities for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | |
| 2022 | | 2021 |
Owned capacity (MW) (a) | 394 | | 1,205 |
GWh billed | 4,172 | | 9,265 |
| | | |
Entergy Wholesale Commodities Nuclear Fleet | | | |
Capacity factor | 93% | | 97% |
GWh billed | 2,741 | | 8,046 |
Average energy price ($/MWh) | $48.99 | | $54.65 |
Average capacity price ($/kW-month) | $0.15 | | $0.26 |
| | | |
| | | |
(a)The reduction in owned capacity is due to the shutdown of the 811 MW Palisades plant in May 2022. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,937 million for the nine months ended September 30, 2021 to $2,130 million for the nine months ended September 30, 2022 primarily due to:
•an increase of $54 millionthe reversal in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
•an increase of $37 million in nuclear generation expenses primarily due to a higher scope of work performed and higher nuclear labor costs in 2022, partially offset by spending in 2021 on sanitation and social distancing protocols as a result of the COVID-19 pandemic;
•an increase of $21 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•an increase of $16 million in customer service center support costs primarily due to higher contract costs;
•a gain of $15 million, recorded in the third quarter 2021, on2023 of $22 million of regulatory liabilities to reflect the salerecognition of a pipeline;
•an increase of $14 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic.certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic; and
•an increase of $11 million in energy efficiency expenses due to the timing of recovery from customers.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments, increases in franchise taxes, and increases in employment taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes:
•the reversal in first quarter 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. See Note 2 to the financial statements in the Form 10-K for discussion of the 2020 formula rate plan filing;
•a regulatory charge of $224 million, recorded by Entergy Louisiana in second quarter 2022, to reflect its obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the storm cost securitization;
•a regulatory credit of $37 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds;
•regulatory credits of $20 million, recorded in the second quarter 2021 at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2021 formula rate plan filing;
•regulatory credits of $23 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2022 formulabase rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing; case; and
•a regulatory charge of $551 million, recorded by System Energy in second quarter 2022, to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the partial settlement agreement and offer of settlement.agreement.
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-related costs collected in revenue.
Other income decreasedincreased primarily due to:
•changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2022 and 2021; and
•a $32 million charge at Entergy Louisiana for the LURC’s 1% beneficial interest in the storm trust established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization.
This decrease was partially offset by:
•an increase of $35$88 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust’s 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 ofrelated to storm restoration costs. cost securitizations. 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 of $12 millionin the allowance for equity funds used during construction due to higher construction work in progress in 2023, including the recognitionOrange County Advanced Power Station project; and
•a $32 million charge, recorded by Entergy Louisiana in second quarter 2022, for the LURC’s 1% beneficial interest in the storm trust I established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida May 2022 storm cost securitization as compared to a $15 million charge recorded by Entergy Louisiana in first quarter 2023, for the LURC’s 1% beneficial interest in the storm trust II established as part of the March 2023 storm cost securitization.
The increase was partially offset by:
•an increase in net periodic pension non-service costs as a result of a non-qualified pension settlement charge recorded in third 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; and
•a decrease of $17 million in the amount of storm restoration carrying costs recognized in 2023 as compared to 2022, primarily related to Hurricane Ida.
See Note 2 to the financial statementsstatements herein and in the Form 10-K for discussion of the securitization.Entergy Louisiana storm cost 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;
•the issuance by Entergy Arkansas of $200 million of 4.20% Series mortgage bonds in March 2022;
•the issuances by Entergy Louisiana of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•the issuance by Entergy Louisiana of $1 billion of 0.95% Series mortgage bonds in October 2021;
•the $1.2 billion unsecured term loan proceeds received by Entergy Louisiana in January 2022. The term loan was repaid in June 2022;2023;
•the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022;
•thethe issuance by Entergy MississippiTexas of $200$325 million of 3.50%5.00% Series mortgage bonds in March 2021;August 2022;
•the issuance by Entergy MississippiTexas of $200$350 million of 2.55%5.80% Series mortgage bonds in November 2021;August 2023; and
•the issuancesissuance by Entergy New OrleansSystem Energy of $90$325 million of 4.19%6.00% Series mortgage bonds and $70 million of 4.51% Series mortgage bonds, each in November 2021.March 2023.
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%3.30% Series mortgage bonds in May 2021.
Entergy Wholesale Commodities
Other operationDecember 2022 and maintenance expenses decreased from $233the repayment by System Energy of $250 million for the nine months ended September 30, 2021 to $94 million for the nine months ended September 30, 2022 primarily due to a decrease of $127 million resulting from the absence of expenses from Indian Point 3, after it was shut down4.10% Series mortgage bonds in April 2021, and Palisades, after it was shut down in May 2022, and a decrease of $8 million in severance and retention expenses. Severance and retention expenses were incurred in 2022 and 2021 due to management’s strategy to exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.
Asset write-offs, impairments, and related charges (credits) for the nine months ended September 30, 2022 include a gain of $166 million ($130 million net-of-tax) as a result of the sale of the Palisades plant in June 2022.Asset write-offs, impairments, and related charges (credits) for the nine months ended September 30, 2021 include a charge of $340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant and Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all of the plants in the Entergy Wholesale Commodities merchant nuclear fleet.
Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from Indian Point 3, after it was shut down in April 2021, and Palisades, after it was shut down in May 2022. The decrease was partially offset by the effect of recording in 2021 a final judgment to resolve claims in the Palisades damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded included $9 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Other income decreased primarily due to the absence of earnings from the nuclear decommissioning trust funds that were transferred in the sale of the Indian Point Energy Center in May 2021 and the sale of Palisades in June 2022, partially offset by lower non-service pension costs. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See Note 14 to the financial statements herein for discussion of the sale of Palisades. See Note 6 to the financial statements herein for a discussion of pension and other postretirement benefits costs.2023.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Parent and Other
Operating 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 primarily due to the absence of decommissioning expense from Indian Point 2 and Indian Point 3, after the sale of the Indian Point Energy Center in May 2021, andexpenses from Palisades, after the saleit was shut down in May 2022.
Asset write-offs, impairments, and related charges (credits) includes a gain of Palisades in June 2022. See Note 14 to the financial statements in the Form 10-K for discussion$166 million as a result of the sale of the Palisades plant in June 2022 and the effects of recording a final judgment of $40 million in third quarter 2023 to resolve claims in the Indian Point Energy Center.2 fourth round and Indian Point 3 third round combined damages case against the DOE. See Note 141 to the financial statements herein for discussion of the sale of Palisades.spent nuclear fuel litigation.
Parent and OtherTaxes other than income taxes decreased primarily due to decreases in employment taxes due to the absence of expenses from Palisades, after its sale in June 2022.
Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from Palisades, after it was shut down in May 2022.
Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income of $88 million from affiliated preferred membership interests, as discussed above.above, substantially offset by losses on Palisades decommissioning trust fund investments in 2022, higher non-service pension income, and higher interest income primarily due to higher interest rates. 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.
Interest expense increased primarily due to higher variable interest rates on commercial paper in 2023, partially offset by the redemption by Entergy of $650 million of 4.00% Series senior notes in June 2022. See Note 4 to the financial statements herein for discussion of Entergy’s commercial paper program.
Other expenses decreased primarily due to the absence of decommissioning expense and nuclear refueling outage expense as a result of the shutdown and sale of Palisades in second quarter 2022.
See Note 14 to the financial statements in the Form 10-K for a discussion of the shutdown and sale of the Palisades plant.
Income Taxes
The effective income tax rate was 17.1% for the nine months ended September 30, 2023. The difference in the effective income tax rate for the nine months ended September 30, 2023 versus the federal statutory rate of 21% was 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, and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes. See Notes 2 and 10 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm cost securitization under Act 293.
The effective income tax rate was (12.2%) for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the May 2022 securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by the accrual for 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. See Notes 2 and 10 to the financial statements herein for discussion of the Entergy Louisiana securitization.
The effective income tax rate was 19.1% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, a reduction of a valuation allowance, book and tax differences related to the allowance for equity funds used during construction, and certain book and tax differences related to utility plant items, 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 afurther discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the valuation allowance reduction.Entergy Louisiana May 2022 storm cost securitization.
Income Tax Legislation and Regulation
In April 2023 the IRS issued Revenue Procedure 2023-15, which provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized and provides procedures for taxpayers to obtain automatic consent to change their method of accounting. Entergy intends to adopt this new method of income tax accounting under the safe harbor in accordance with Revenue Procedure 2023-15, which is not expected to have a significant effect on the results of operations, cash flows, or financial condition of Entergy or the Registrant Subsidiaries.
The Inflation Reduction Act of 2022 (IRA), signed into law on August 16, 2022, significantly expanded federal tax incentives for clean energy production, including the extension of production tax credits to solar projects and certain qualified nuclear power plants. Additionally,In June 2023 the Inflation Reduction ActIRS issued temporary and proposed regulations related to applicable tax credit transferability and direct pay provisions of 2022 enacted a 1% excise tax on the buyback of public company stock and a new corporate alternative minimum tax (CAMT). Effective for tax years beginning after December 31, 2022,IRA. In August 2023 the CAMT imposes a 15% tax on the Adjusted Financial Statement Income (AFSI) on each corporation in a group of corporations that averages greater than $1 billion in AFSI over a three-year period. Taxpayers subjectIRS issued proposed regulations related to the CAMT regime must payprevailing wage and apprenticeship requirements under the greater of 15% of AFSI or their regular federal tax liability.IRA. Entergy and the Registrant Subsidiaries are closely monitoring any potential impact associated with the expansion ofsuch federal tax incentives the 1% excise tax, and CAMT. Based on current information and forecasts, Entergy and the Registrant Subsidiaries may be subject to the CAMT beginning in 2026. The United States Treasury Department is expected to issue guidance beginning later this year that will further clarify how the tax credit provisions and CAMT provisions will be interpreted and applied. This guidance will determine the amount of tax credits and incremental cash tax payments Entergy expects in the future as a result of the legislation. Prior to receiving this guidance, Entergy cannot adequately assess the expected future effects on itstheir results of operations, cash flows, and financial position and cash flows.condition. There are no expected effects on the financial statements of Entergy or the Registrant Subsidiaries as of and for the yearthree and nine months ended December 31, 2022.September 30, 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the IRA, including Entergy’s estimates regarding the new corporate alternative minimum tax.
Planned Sale of Gas Distribution Businesses
On October 28, 2023, Entergy New Orleans and Entergy Louisiana each entered into separate purchase and sale agreements with respect to the sale of their respective regulated natural gas local distribution company businesses to two separate affiliates of Bernhard Capital Partners Management LP. Under the purchase and sale agreements, Entergy New Orleans has agreed to sell its regulated natural gas local distribution company business serving customers in the Parish of Orleans, Louisiana, and Entergy Louisiana has agreed to sell its regulated natural gas local distribution company business serving customers in the Parish of East Baton Rouge, Louisiana.
The base purchase price to be paid by the buyer of the Entergy New Orleans gas business is $285.5 million, and the base purchase price to be paid by the buyer of the Entergy Louisiana gas business is $198 million, in each case subject to certain adjustments at the closing of the transactions. Each purchase and sale agreement contains customary representations, warranties, and covenants related to the applicable business and the respective transactions. Between the date of the purchase and sale agreements and the completion of the transactions, Entergy New Orleans and Entergy Louisiana have each agreed to operate the respective gas businesses in the ordinary course of business and to certain other operating covenants.
The transactions will proceed in two phases: (1) an “Initial Phase” prior to regulatory approvals in connection with both transactions; and (2) a “Second Phase” following regulatory approvals in connection with both transactions to the extent that certain conditions are satisfied or (where permissible) waived for both transactions. These regulatory approvals include the approval of the City Council for the sale of the Entergy New Orleans gas business and the approval of the LPSC and the Metropolitan Council for the City of Baton Rouge and Parish of East Baton Rouge for the sale of the Entergy Louisiana gas business. Additionally, while approval of the transactions is
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Exitgenerally not required from the Merchant Power BusinessFERC, the parties will seek a waiver of the FERC’s capacity release rules, as applicable.
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit fromThe purchase and sale agreements may be terminated by any party if the Merchant Power Business” inSecond Phase does not start within 15 months of October 28, 2023 (or within 18 months if the Form 10-K for a discussiononly remaining conditions to starting the Second Phase are obtaining the regulatory approvals). The consummation of management’s strategyeach of the transactions is subject to shut downsatisfaction of certain customary closing conditions, including the receipt of the regulatory approvals, clearance under the Hart-Scott Rodino Act, and sell all plants in the Entergy Wholesale Commodities merchant nuclear fleet. Following are updates to that discussion.
In April 2022, Entergy and Nebraska Public Power District signed an agreement to mutually terminate the management support services contract, under which Entergy provided plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska, effective July 31, 2022.
In October 2022, Entergy sold its 50% membership interest in RS Cogen LLC, an unconsolidated joint venture which owns the RS Cogen plant, to a subsidiaryconcurrent closing of the other 50% equity partner. Entergy sold its 50% membership interest in RS Cogen, LLC for approximately $5 million with no resulting income statement effect.
Shutdown and Sale of Palisades
As discussed intransaction. Under 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 to adjustment for net liabilities and other amounts) to a Holtec subsidiary. Palisades was shut down in May 2022 and defueled in June 2022. The transaction closed in June 2022. The sale included the transfer of the nuclear decommissioning trust and the asset retirement obligation for spent fuel management and plant decommissioning. The transaction resulted in a gain of $166 million ($130 million net-of-tax) in the second quarter of 2022. See Note 14 to the financial statements herein for further discussion of the sale of the Palisades plant. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. In February 2021 several parties, including the Michigan Attorney General, filed with the NRC petitions to intervene and requests for hearing challenging the license transfer application. The NRC issued an order approving the application in December 2021, subject to the NRC’s authority to condition, revise, or rescind the approval order based on the resolution of pending requests for hearing. These petitions and requests for hearing remained pending with the NRC at the time ofagreements, the closing of the Palisadestransactions is not required to occur earlier than the later of six months following the initiation of the Second Phase and July 28, 2025, and the purchase and sale agreements may be terminated by either party in the event the closing has not occurred prior to October 28, 2025. Neither transaction is subject to a financing condition for the applicable buyer.
The purchase and sale agreements are subject to customary termination provisions. If the purchase and sale agreements are terminated in June 2022. In July 2022certain circumstances, each seller may be liable to the NRC issued an order grantingapplicable buyer for a portion of the Michigan Attorney General’s petition hearing request.buyer’s transition costs incurred in connection with transitioning the applicable business. Entergy New Orleans’s and Entergy Louisiana’s aggregate liability for such transaction costs shall not exceed $7.5 million if termination occurs during the Initial Phase or $12.5 million if termination occurs during the Second Phase (with responsibility allocated between the sellers pro rata based on the relative purchase price). If the purchase and sale agreements are terminated in certain circumstances, each buyer may be liable to the corresponding seller for a reverse termination fee, equal to 7% of the applicable base purchase price if termination occurs during the Initial Phase, or 10% of the applicable base purchase price if the termination occurs in the Second Phase.
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 expenditurespending plans and other uses of capital, and sources of capital. FollowingThe following are updates to that discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure and Resources
Entergy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy as of September 30, 2022 is primarily due to an increase in equity resulting from net income, partially offset by the net issuance of debt in 2022.
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 69.0 | % | | 69.5 | % | Debt to capital | 66.3 | % | | 66.9 | % |
Effect of excluding securitization bonds | Effect of excluding securitization bonds | (0.2 | %) | | (0.1 | %) | Effect of excluding securitization bonds | (0.2 | %) | | (0.3 | %) |
Debt to capital, excluding securitization bonds (a) | 68.8 | % | | 69.4 | % | |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 66.1 | % | | 66.6 | % |
Effect of subtracting cash | Effect of subtracting cash | (0.8 | %) | | (0.3 | %) | Effect of subtracting cash | (1.3 | %) | | (0.1 | %) |
Net debt to net capital, excluding securitization bonds (a) | 68.0 | % | | 69.1 | % | |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 64.8 | % | | 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 September 30, 2022, 20%2023, 19.4% of the debt outstanding is at the parent company, Entergy Corporation, 79.5%and 80.1% 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 2027.2028. 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 averageweighted-average interest rate for the nine months ended September 30, 20222023 was 2.39%6.44% on the drawn portion of the facility. As of September 30, 2022,2023, amounts outstanding and capacity available under the $3.5 billion credit facility are:
| Capacity | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | (In Millions) | (In Millions) |
$3,500 | $3,500 | | $150 | | $3 | | $3,347 | $3,500 | | $— | | $3 | | $3,497 |
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companiesRegistrant Subsidiaries (except Entergy New Orleans)Orleans and System Energy) 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 and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of September 30, 2022,2023, Entergy Corporation had $1.387 billion$1,351.1 million of commercial paper outstanding. The weighted-average interest rate for the nine months ended September 30, 20222023 was 1.52%5.35%.
Entergy Louisiana had $291 million and Entergy Mississippi had $33 million in their storm reserve escrow accounts at September 30, 2022.
Equity Issuances and Equity Distribution Program
As discussedSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources- Sources 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 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 also enter into forward sale agreements for the sale of its common stock. Initially, the aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement could not exceed an aggregate gross sales price of $1 billion. In May 2022, Entergy increased the aggregate gross sales price authorized under the at the market equity distribution program by $1 billion. Through September 30, 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 $1 billion, of which approximately $870 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. Entergy currently expects to settle the forward sales agreements by December 31, 2022. In addition to settlement of existing forward sale agreements, Entergy Corporation currently expects to issue approximately $130 million of equity through 2024. See Note 3 to the financial statements herein for further 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 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 soughtwas 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 Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 September 2021, Entergy Louisiana filed an application at 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 for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
After filing of testimony by2022 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 intervenors, which generally supported or did not opposeeligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s requestsplans to securitize these costs, net of the $1 billion in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida,funds withdrawn from the storm escrow account described 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,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 $1.942 billion from utility plantwere reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to other regulatory assets.
In May 2022authorize the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana.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 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 approved inLegislature’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 III (the storm trust)trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 31,635,718.722114,576,757.48 Class AB 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, 20222023 on the preferred membership interests issued to the storm trust.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.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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
annual cumulative cash dividend rate of 7%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 June 2022April 2023 and the system restoration charge is expected to remain in place for 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company distributed $1.4loaned approximately $1.5 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy, which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 andwas indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.
Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.
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 $290$133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million.$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 $224$103 million ($16576 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 secondfirst quarter 2022,2023, Entergy Louisiana recorded a charge of $31.6$14.6 million in other income to reflect the LURC’s beneficial interest in the trust.storm trust II.
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 of $57 million 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 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 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In 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 October 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 plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. A procedural schedule has been established with a hearing in December 2022.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Hurricane Ida (Entergy New Orleans)
As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million.million, which were subsequently included in an addendum to the June 2022 application. Also, Entergy New Orleans is requestingrequested approval that the $39 million withdrawal from its funded storm reserve in September 2021, and $7the $125 million in excesswithdrawal from its securitized storm reserve, escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms are properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered from Entergy New Orleans customers by $46 million.
Additionally, as discussed in the Form 10-K, 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. In August 2022 the City Council’s advisors recommended that the City Council authorize a single securitization bond issuance to fund Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved by the City Council along with a financing order in October 2022, authorizing Entergy New Orleans to proceed with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject to City Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 the City Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certify the record for City Council consideration no later than August 2023.
Hurricane Laura, Hurricane Delta, and Winter Storm Uri (Entergy Texas)
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
$7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms were properly applied to Hurricane Ida storm restoration costs.
bonds.In August 2023 the City Council advisors issued a report recommending that the City Council find that Entergy Texas began cost recoveryNew Orleans prudently incurred approximately $164.1 million in storm restoration costs and $7.5 million in carrying charges and that such costs have already been properly recovered by Entergy New Orleans through withdrawals from the systemstorm reserve escrow account. The City Council advisors also recommended that the City Council find that approximately $1.2 million in storm restoration charge effective withcosts had already been recovered through Entergy New Orleans’s base rates and that approximately $0.9 million in unused credits be applied against future storm costs. In August 2023 the first billing cycle of May 2022 andCity Council hearing officer certified 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.evidentiary record.
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. Following2025. The following are updates to that discussion.
Entergy is developing its capital investment plan for 20232024 through 20252026 and currently anticipates that the Utility will make approximately $15.5$19.6 billion in capital investments during that period. The preliminary Utility estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy’s portfolio, including Walnut Bend Solar, West Memphis Solar, Driver Solar, and Orange County Advanced Power Station, and St. Jacques Louisiana Solar;Station; investments in Entergy’s nuclear fleet; transmission spending to drive reliability and resilience while also supporting renewables expansion;expansion and customer growth; distribution and Utility support spending to improve reliability, resilience, and customer experience through projects focused on asset renewals and enhancements and grid stability; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.
While Entergy is still assessing the effect on its planned solar projects, the 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 exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.
Walnut Bend Solar
As discussed in the Form 10-K, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In January 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. Closing was expected to occur in 2022. The counter-party notified Entergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.
West Memphis Solar
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. 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. Closing had been expected to occur in 2023. The counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Driver Solar
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 and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022, but the parties later agreed to waive the hearing and submit the matter to the APSC for a decision consistent with the filed record. In August 2022 the APSC granted Entergy Arkansas’s petition and approved the acquisition of Driver Solar and cost recovery through the formula rate plan rider. In addition, the APSC directed Entergy Arkansas to inform the APSC as to the status of a tax equity partnership once construction is commenced. The parties are evaluating the effects of certain matters related to the Inflation Reduction Act of 2022, including with respect to the viability of a tax equity partnership. 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 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). These resources, all of which would be constructed in Louisiana, include (i) Vacherie Solar Energy Center, a 150 megawatt resource in St. James Parish; (ii) Sunlight Road Solar, a 50 megawatt resource in Washington Parish; (iii) St. Jacques Louisiana Solar, a 150 megawatt resource in St. James Parish; and (iv) Elizabeth Solar facility, a 125 megawatt resource in Allen Parish. St. Jacques Louisiana Solar would be acquired through a build-own-transfer agreement; the remaining resources involve power purchase agreements. Sunlight Road Solar and Elizabeth Solar facility have estimated in service dates in 2024, and Vacherie Solar Energy Center and St. Jacques Louisiana Solar have estimated in service dates in 2025. 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 complied with applicable LPSC orders. The LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022 the LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Entergy Louisiana filed rebuttal testimony in June 2022. In August 2022 the parties reached a settlement certifying the 2021 Solar Portfolio and approving implementation of Rider GGO. In September 2022 the LPSC approved the settlement.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. In July 2022, pursuant to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filing to the MPSC with updated calculations of the impact of the Sunflower Solar facility on rate base and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022 the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorized the recovery of the costs of the Sunflower Solar facility through the interim capacity rate adjustment mechanism in the formula rate plan with rates effective in December 2022. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 both Entergy Mississippi and the tax equity investor made additional capital contributions to the tax equity partnership that were then used to make the substantial completion payment of $30.4 million for acquisition of the facility. The final payment of $4.7 million for acquisition of the facility was made in October 2023. See Note 14 to the financial statements hereinin the Form 10-K for a discussion of Entergy Mississippi’s purchase of 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 obtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Orange County Advanced Power Stationcost and schedule and to updates arising as a result 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 APSC. In June 2023, Entergy Arkansas, the APSC general staff, and the Arkansas Attorney General filed a unanimous settlement supporting that the approval of the Walnut Bend Solar facility is in the public interest based on the terms in the settlement, which relate in part to certain treatment for the production tax credits associated with the facility. In July 2023, after requesting further testimony and purporting to modify several terms in the settlement and upon rehearing, the APSC approved the settlement largely on the terms submitted, including a 30-year amortization period for the production tax credits. The project is currently expected to achieve commercial operation in 2024.
West Memphis Solar
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 DecemberOctober 2021 the PUCT referredAPSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the proceeding topurpose of acquiring 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 testimony opposing the project outright. Also in March 2022 the 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.West Memphis Solar facility. In April 2022, Entergy TexasArkansas filed rebuttal testimony addressingits tax equity partnership status report and rebutting these various arguments. Alsowill file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in April2023. In March 2022 the ALJscounter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. In January 2023, Entergy Arkansas filed a supplemental application with the State Office of Administrative HearingsAPSC seeking approval for a change in the transmission route and updates to the cost and schedule that were previously approved a continuanceby 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, and settlement negotiations are ongoing. 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 merits from April 2022 to June 2022, providing Entergy Texas an opportunity to acceleratecurrent RFP and certification process allows. The initial phase of the determination and fixing of pricing for 60 daysfiling established the need for the Orange County Advanced Power Station prioracquisition of additional resources and the need for an alternative to the hearing.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, was filed in May 2023. In May 2022, Entergy Texas obtained and providedaddition 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 an updated fixed pricing option of $1.58 billion, available until mid-July 2022. Thehave intervened, and a procedural schedule was established in May 2023 with a hearing onscheduled for March 2024. In October 2023 the merits was held in June 2022,LPSC staff and post-hearing briefs were submitted in July 2022. In September 2022 the ALJsintervenors filed testimony, with the State OfficeLPSC staff supporting the amount of Administrative Hearings issued a proposal for decision recommendingsolar resources to be acquired and the PUCT approve alternative RFP process. The LPSC staff also
Entergy Texas’s application for certification of Orange County Advanced Power StationCorporation and Subsidiaries
Management's Financial Discussion and Analysis
supported, subject to certain conditions,recommendations, the proposed framework for evaluation and certification of the solar resources by the LPSC and the proposed tariff.
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 cap onprocedural schedule was established with a hearing scheduled for January 2024. The LPSC staff and certain intervenors filed direct testimony in August, September, and October 2023. The LPSC staff filed cross-answering testimony in October 2023. The testimony largely supports implementation of some level of accelerated investment in resilience but raises various issues related to the magnitude of the investment, the cost recovery at $1.37 billion,mechanism applicable to the exclusioninvestment, and the ratemaking for the investment.
The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of investment associated with co-firing hydrogen, weatherization requirements, and customer receipt of any contractual benefits associated withelectric utility infrastructure. In April 2023 the facility’s guaranteed heat rate. In October 2022 the partiesLPSC staff issued a draft rule in the rulemaking proceeding filed exceptions and repliesrelated to exceptionsa requirement to file a grid resilience plan. The procedural schedule entered in the proposal for decision. Alsorulemaking proceeding contemplated adoption of a final rule in October 2023, but this did not occur, and a new date has not been set.
Entergy New Orleans
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 July 2022, Entergy TexasNew Orleans filed with the PUCT information regardingCity Council a new fixed pricing optionresponse identifying a plan for storm hardening and resiliency projects, including microgrids, to be implemented over ten years at an estimated projectapproximate 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 City Council approval of the first phase (five years and approximately $1.55 billion associated with$559 million) of a ten-year infrastructure hardening plan totaling approximately $1 billion. Entergy Texas’s issuanceNew Orleans also sought, among other relief, City Council approval of limited noticea rider to proceed by mid-November 2022. A final order byrecover from customers the PUCT is expectedcosts of the infrastructure hardening plan. In July 2023, Entergy New Orleans filed comments in the fourth quartersupport 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 the end of 2026.its application.
Dividends
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its October 20222023 meeting, the Board declared a dividend of $1.07$1.13 per share, an increase from the previous $1.01$1.07 quarterly dividend per share that Entergy has paid since the third quarter 2021.2022.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 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 | 1,809 | | | 2,011 | | Operating activities | 3,231 | | | 1,809 | |
Investing activities | Investing activities | (4,369) | | | (3,862) | | Investing activities | (3,579) | | | (4,369) | |
Financing activities | Financing activities | 3,120 | | | 1,092 | | Financing activities | 1,644 | | | 3,120 | |
Net increase (decrease) in cash and cash equivalents | 560 | | | (759) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 1,296 | | | 560 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $1,003 | | | $1,000 | | Cash and cash equivalents at end of period | $1,520 | | | $1,003 | |
Operating Activities
Net cash flow provided by operating activities decreased $202increased $1,422 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•increasedlower fuel costs.costs and the timing of recovery of fuel and purchased power costs;
•a decrease of $228 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•payments to vendors, including timing and an increase in Utility cost of operations;
•an increase of $66 million in storm spending primarily due to spending on Hurricane Ida in 2022, partially offset by decreased spending on Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” above and in the Form 10-K for discussion of storm restoration efforts;
•an increase of $41 million in interest paid; and
•lower cash from Entergy Wholesale Commodities plant operationsseverance and retention payments of $40 million in 2022. See “Entergy Wholesale Commodities Exit2022 related to Entergy’s exit from the Merchant Power Business” abovemerchant power business. See Note 13 to the financial statements in the Form 10-K for afurther discussion of theEntergy’s exit offrom the Entergy Wholesale Commodities merchant power business.
The decreaseincrease was partially offset by:
•higherlower collections from Utility customers;
•a decreasean increase of $178$97 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” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
•a decreasean increase of $79$54 million in severance and retention payments in 2022 as compared to the same period in 2021. See Note 7 to the financial statements herein for a discussion of the severance and retention payments related to Entergy Wholesale Commodities. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of the exit of the Entergy Wholesale Commodities merchant power business;interest paid; and
•income tax payments of $35 million in 2023 compared to income tax refunds of $7 million in 2022 compared to2022. Entergy had income tax payments in 2023 as a result of $29 million in 2021.higher estimated income taxes as compared to 2022. Entergy had income tax refunds in 2022 as a result of an overpayment on a prior year state income tax return. Entergy had net income tax payments
Investing Activities
Net cash flow used in 2021 as investing activities decreased $790 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•a resultdecrease of amended Mississippi state tax returns filed and other state income taxes paid,$555 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by federal income tax refunds received associated withincreased investment in the completionreliability and infrastructure of the 2014-2015 IRS audit.distribution system;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $507 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:
•a decrease of $277 million in net payments to storm reserve escrow accounts of $291 million in 2022 compared to net receipts from storm reserve escrow accounts of $83 million in 2021;
•an increase of $153 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022;accounts;
•the initial payment of approximately $105 million in May 2022 as compared to the substantial completion payment of approximately $30 million in April 2023 for the purchase of the Sunflower Solar facility by the Entergy Mississippi tax equity partnership. See Note 14 to the financial statements hereinin the Form 10-K for discussion of the Sunflower Solar facility purchase;
•a decrease of $57$56 million in decommissioning trust fundtransmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by increased investment activity;in the reliability and infrastructure of the transmission system;
•an increasea decrease of $47$37 million in information technology capital expenditures primarily due to increaseddecreased spending on various technology projects in 2022;2023; and
•cash collateral of $31 million posted in 2022 to support Entergy Texas’s obligations to MISO.
The increasedecrease was partially offset by a decreaseby:
•an increase of $268$164 million in transmissionnon-nuclear generation construction expenditures primarily due to lower capital expenditures for storm restorationhigher spending on the Orange County Advanced Power Station project; and
•an increase of $76 million in 2022nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the purchasetiming of cash payments during the Hardin County Peaking Facility by Entergy Texas in June 2021 for approximately $37 million.nuclear fuel cycle.
Financing Activities
Net cash flow provided by financing activities increased $2,028decreased $1,476 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•proceeds from securitization of $1.5 billion received by the storm trust II at Entergy Louisiana in 2023 compared to proceeds from securitization of $3,164 million$3.2 billion received by the storm trust I at Entergy Louisiana in 2022 and an increase of $807 million in net issuances of commercial paper in 2022 compared to 2021. The increase was partially offset by:
2022;
•long-term debt activity providing approximately $221 million of cash in 2023 compared to providing approximately $318 million of cash in 2022 compared to providing approximately $2,222 million of cash in 2021;2022; and
•an increase of $44$63 million in common stock dividends paid in 2023 as a result of an increase in the dividend paid per share and an increase in 2022the number of shares outstanding.
The decrease was partially offset by an increase of $338 million in net issuances of commercial paper in 2023 compared to 2021.2022 and an increase of $66 million in prepaid deposits related to contributions-in-aid-of-construction for generation interconnection agreements.
See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the Entergy Louisiana securitization. Forstorm cost securitizations. 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.
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. The 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 September 30, 2022,2023, based on power prices at that time, Entergy had liquidity exposure of $13$7 million under the guarantees in place supporting Entergy Wholesale CommoditiesEntergy’s non-utility operations transactions and $8 million of posted cash collateral.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. FollowingThe following is an update to that discussion.
NRC Reactor Oversight Process
As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except Waterford 3,River Bend, which is in Column 2.
In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until2022 and also corrected a subsequent radiation monitor calibration issue. In May 2023 the NRC conductscompleted a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.2 and Waterford 3 was returned to Column 1.
In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. In August 2023 the NRC issued a finding and notice of violation related to a radiation monitor calibration issue at River Bend. River Bend will remain in Column 2 pending successful completion of supplemental inspections related to both issues.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’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. Following is an update to that discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Qualified Pension and Other Postretirement Benefits
As discussed in the Form 10-K, Entergy sponsors qualified, defined benefit pension plans, including cash balance plans and final average pay plans. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements in the Form 10-K, are affected by numerous factors. Key actuarial assumptions utilized in determining qualified pension and other postretirement health care and life insurance costs include the expected long-term rate of return on plan assets. For 2022, Entergy assumed a long-term rate of return on its qualified pension plan assets of 6.75%. Through September 30, 2022, due to the decline in the equity markets, Entergy experienced a 24% loss on its qualified pension plan assets, which have declined in fair value from $7 billion at December 31, 2021 to $5 billion at September 30, 2022.
As described more fully in the Form 10-K, in accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. The excess is amortized over the average remaining service period of active employees or the average remaining life expectancy of plan participants if almost all are inactive, as in the case of certain qualified pension plans in which the companies within the Entergy Wholesale Commodities segment participate. Also, with regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. In general, Entergy determines the MRV of its pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns and for its other postretirement benefit plan assets Entergy generally uses fair value.
Minimum required funding calculations as determined under Pension Protection Act guidance, as amended by the American Rescue Plan Act of 2021, are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date, and Entergy’s expected contributions for 2022 are reported in Note 6 to the financial statements herein. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall that, under the Pension Protection Act, must be funded over a fifteen-year rolling period. The Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed into the calculated fair market value of assets. The funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury which is generally subject to a corridor of the 25-year average of prior segment rates. Periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
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 and Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | | | | |
| Three Months Ended | | Nine Months Ended |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | $4,110,058 | | | $3,159,969 | | | $10,024,089 | | | $8,339,764 | |
Natural gas | 46,548 | | | 31,254 | | | 166,917 | | | 121,420 | |
Competitive businesses | 62,009 | | | 162,309 | | | 300,731 | | | 559,256 | |
TOTAL | 4,218,615 | | | 3,353,532 | | | 10,491,737 | | | 9,020,440 | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | 1,366,811 | | | 737,785 | | | 2,685,694 | | | 1,865,016 | |
Purchased power | 415,066 | | | 311,332 | | | 1,255,318 | | | 943,438 | |
Nuclear refueling outage expenses | 39,707 | | | 43,309 | | | 119,625 | | | 130,747 | |
Other operation and maintenance | 793,145 | | | 700,595 | | | 2,249,674 | | | 2,188,498 | |
Asset write-offs, impairments, and related charges (credits) | (143) | | | (139) | | | (163,464) | | | 345,226 | |
Decommissioning | 49,263 | | | 60,364 | | | 174,171 | | | 245,205 | |
Taxes other than income taxes | 190,056 | | | 182,347 | | | 542,448 | | | 494,960 | |
Depreciation and amortization | 453,288 | | | 421,745 | | | 1,337,019 | | | 1,257,809 | |
Other regulatory charges (credits) - net | (43,283) | | | 68,324 | | | 689,355 | | | 45,464 | |
TOTAL | 3,263,910 | | | 2,525,662 | | | 8,889,840 | | | 7,516,363 | |
| | | | | | | |
OPERATING INCOME | 954,705 | | | 827,870 | | | 1,601,897 | | | 1,504,077 | |
| | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | |
Allowance for equity funds used during construction | 20,245 | | | 17,180 | | | 49,685 | | | 48,629 | |
Interest and investment income (loss) | 2,966 | | | 75,112 | | | (118,002) | | | 289,757 | |
Miscellaneous - net | (10,462) | | | (16,797) | | | 32,720 | | | (140,571) | |
TOTAL | 12,749 | | | 75,495 | | | (35,597) | | | 197,815 | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | 235,322 | | | 216,612 | | | 694,558 | | | 642,839 | |
Allowance for borrowed funds used during construction | (7,862) | | | (7,112) | | | (18,710) | | | (20,088) | |
TOTAL | 227,460 | | | 209,500 | | | 675,848 | | | 622,751 | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 739,994 | | | 693,865 | | | 890,452 | | | 1,079,141 | |
| | | | | | | |
Income taxes | 184,112 | | | 158,282 | | | (109,034) | | | 205,808 | |
| | | | | | | |
CONSOLIDATED NET INCOME | 555,882 | | | 535,583 | | | 999,486 | | | 873,333 | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | (4,707) | | | 4,580 | | | 2,794 | | | 13,739 | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $560,589 | | | $531,003 | | | $996,692 | | | $859,594 | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | $2.76 | | | $2.64 | | | $4.90 | | | $4.28 | |
Diluted | $2.74 | | | $2.63 | | | $4.88 | | | $4.26 | |
| | | | | | | |
Basic average number of common shares outstanding | 203,445,773 | | | 200,963,049 | | | 203,259,373 | | | 200,756,267 | |
Diluted average number of common shares outstanding | 204,578,013 | | | 202,003,329 | | | 204,357,916 | | | 201,568,508 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | |
| Three Months Ended | | Nine Months Ended |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | $3,526,935 | | | $4,110,058 | | | $9,195,588 | | | $10,024,089 | |
Natural gas | 32,305 | | | 46,548 | | | 130,389 | | | 166,917 | |
Other | 36,282 | | | 62,009 | | | 96,630 | | | 300,731 | |
TOTAL | 3,595,522 | | | 4,218,615 | | | 9,422,607 | | | 10,491,737 | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | 707,491 | | | 1,366,811 | | | 2,189,592 | | | 2,685,694 | |
Purchased power | 309,376 | | | 415,066 | | | 754,199 | | | 1,255,318 | |
Nuclear refueling outage expenses | 39,057 | | | 39,707 | | | 111,075 | | | 119,625 | |
Other operation and maintenance | 751,763 | | | 793,145 | | | 2,043,184 | | | 2,249,674 | |
Asset write-offs, impairments, and related charges (credits) | 38,078 | | | (143) | | | 38,078 | | | (163,464) | |
Decommissioning | 52,336 | | | 49,263 | | | 153,981 | | | 174,171 | |
Taxes other than income taxes | 197,654 | | | 190,056 | | | 566,669 | | | 542,448 | |
Depreciation and amortization | 439,873 | | | 453,288 | | | 1,362,728 | | | 1,337,019 | |
Other regulatory charges (credits) - net | (83,489) | | | (43,283) | | | (158,317) | | | 689,355 | |
TOTAL | 2,452,139 | | | 3,263,910 | | | 7,061,189 | | | 8,889,840 | |
| | | | | | | |
OPERATING INCOME | 1,143,383 | | | 954,705 | | | 2,361,418 | | | 1,601,897 | |
| | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | |
Allowance for equity funds used during construction | 24,225 | | | 20,245 | | | 72,238 | | | 49,685 | |
Interest and investment income (loss) | 2,562 | | | 2,966 | | | 96,250 | | | (118,002) | |
Miscellaneous - net | (18,018) | | | (10,462) | | | (121,014) | | | 32,720 | |
TOTAL | 8,769 | | | 12,749 | | | 47,474 | | | (35,597) | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | 264,934 | | | 235,322 | | | 781,613 | | | 694,558 | |
Allowance for borrowed funds used during construction | (9,493) | | | (7,862) | | | (29,565) | | | (18,710) | |
TOTAL | 255,441 | | | 227,460 | | | 752,048 | | | 675,848 | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 896,711 | | | 739,994 | | | 1,656,844 | | | 890,452 | |
| | | | | | | |
Income taxes | 226,997 | | | 184,112 | | | 282,818 | | | (109,034) | |
| | | | | | | |
CONSOLIDATED NET INCOME | 669,714 | | | 555,882 | | | 1,374,026 | | | 999,486 | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $666,755 | | | $560,589 | | | $1,368,934 | | | $996,692 | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | $3.15 | | | $2.76 | | | $6.47 | | | $4.90 | |
Diluted | $3.14 | | | $2.74 | | | $6.45 | | | $4.88 | |
| | | | | | | |
Basic average number of common shares outstanding | 211,459,244 | | | 203,445,773 | | | 211,420,117 | | | 203,259,373 | |
Diluted average number of common shares outstanding | 212,238,117 | | | 204,578,013 | | | 212,195,735 | | | 204,357,916 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
(Page left blank intentionally)
| ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES | ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three and Nine Months Ended September 30, 2022 and 2021 | |
For the Three and Nine Months Ended September 30, 2023 and 2022 | | For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | |
| | 2022 | | 2021 | | 2022 | | 2021 | | Three Months Ended | | Nine Months Ended |
| | | | | | | | | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
| Net Income | Net Income | $555,882 | | | $535,583 | | | $999,486 | | | $873,333 | | Net Income | $669,714 | | | $555,882 | | | $1,374,026 | | | $999,486 | |
| Other comprehensive income (loss) | Other comprehensive income (loss) | | Other comprehensive income (loss) | |
Cash flow hedges net unrealized gain (loss) (net of tax benefit of $—, $—, $—, and ($7,935)) | 24 | | | 24 | | | 72 | | | (29,778) | | |
Pension and other postretirement liabilities (net of tax expense of $3,505, $2,596, $7,689, and $15,141) | 11,867 | | | 8,838 | | | 26,240 | | | 53,903 | | |
Net unrealized investment loss (net of tax expense (benefit) of $1,223, ($1,259), ($2,230), and ($26,867)) | (1,223) | | | (2,162) | | | (7,154) | | | (46,957) | | |
Cash flow hedges net unrealized gain (net of tax expense of $—, $—, $—, and $—) | | Cash flow hedges net unrealized gain (net of tax expense of $—, $—, $—, and $—) | — | | | 24 | | | — | | | 72 | |
Pension and other postretirement liabilities (net of tax expense (benefit) of ($743), $3,505, ($1,078), and $7,689) | | Pension and other postretirement liabilities (net of tax expense (benefit) of ($743), $3,505, ($1,078), and $7,689) | (2,434) | | | 11,867 | | | (3,699) | | | 26,240 | |
Net unrealized investment loss (net of tax expense (benefit) of $—, $1,223, $—, and ($2,230)) | | Net unrealized investment loss (net of tax expense (benefit) of $—, $1,223, $—, and ($2,230)) | — | | | (1,223) | | | — | | | (7,154) | |
Other comprehensive income (loss) | Other comprehensive income (loss) | 10,668 | | | 6,700 | | | 19,158 | | | (22,832) | | Other comprehensive income (loss) | (2,434) | | | 10,668 | | | (3,699) | | | 19,158 | |
| Comprehensive Income | Comprehensive Income | 566,550 | | | 542,283 | | | 1,018,644 | | | 850,501 | | Comprehensive Income | 667,280 | | | 566,550 | | | 1,370,327 | | | 1,018,644 | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | (4,707) | | | 4,580 | | | 2,794 | | | 13,739 | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | | Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
Comprehensive Income Attributable to Entergy Corporation | Comprehensive Income Attributable to Entergy Corporation | $571,257 | | | $537,703 | | | $1,015,850 | | | $836,762 | | Comprehensive Income Attributable to Entergy Corporation | $664,321 | | | $571,257 | | | $1,365,235 | | | $1,015,850 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $1,374,026 | | | $999,486 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,668,540 | | | 1,667,756 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 257,210 | | | (76,672) | |
Asset write-offs, impairments, and related charges (credits) | | 38,078 | | | (163,464) | |
| | | | |
Changes in working capital: | | | | |
Receivables | | (217,483) | | | (368,772) | |
Fuel inventory | | (34,601) | | | 19,433 | |
Accounts payable | | (304,264) | | | (59,787) | |
Taxes accrued | | 107,899 | | | 89,554 | |
Interest accrued | | 66,571 | | | 38,361 | |
Deferred fuel costs | | 620,440 | | | (821,386) | |
Other working capital accounts | | (137,061) | | | (124,677) | |
Changes in provisions for estimated losses | | (7,171) | | | 297,842 | |
Changes in regulatory assets | | 415,101 | | | 587,128 | |
Changes in other regulatory liabilities | | 204,817 | | | (116,315) | |
Effect of securitization on regulatory asset | | (491,150) | | | (1,036,955) | |
| | | | |
Changes in pension and other postretirement liabilities | | (347,886) | | | (258,141) | |
Other | | 17,927 | | | 1,136,050 | |
Net cash flow provided by operating activities | | 3,230,993 | | | 1,809,441 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (3,373,617) | | | (3,853,121) | |
Allowance for equity funds used during construction | | 72,238 | | | 49,685 | |
Nuclear fuel purchases | | (201,213) | | | (125,619) | |
Payment for purchase of assets | | (30,433) | | | (106,193) | |
Net proceeds (payments) from sale of assets | | 11,000 | | | (7,082) | |
Insurance proceeds received for property damages | | 19,493 | | | — | |
Litigation proceeds from settlement agreement | | — | | | 9,829 | |
Changes in securitization account | | (4,839) | | | 1,224 | |
Payments to storm reserve escrow accounts | | (14,320) | | | (1,291,593) | |
Receipts from storm reserve escrow accounts | | — | | | 1,000,278 | |
Increase in other investments | | (4,998) | | | (33,238) | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 23,655 | | | 32,367 | |
Proceeds from nuclear decommissioning trust fund sales | | 806,658 | | | 1,377,304 | |
Investment in nuclear decommissioning trust funds | | (882,686) | | | (1,422,808) | |
Net cash flow used in investing activities | | (3,579,062) | | | (4,368,967) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 3,605,237 | | | 5,316,693 | |
| | | | |
Treasury stock | | 5,184 | | | 31,802 | |
| | | | |
Retirement of long-term debt | | (3,384,007) | | | (4,998,642) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 523,484 | | | 185,455 | |
Capital contributions from noncontrolling interest | | 25,708 | | | 9,595 | |
Proceeds received by storm trust related to securitization | | 1,457,676 | | | 3,163,572 | |
Other | | 102,835 | | | 41,659 | |
Dividends paid: | | | | |
Common stock | | (678,699) | | | (615,937) | |
Preferred stock | | (13,739) | | | (13,739) | |
Net cash flow provided by financing activities | | 1,643,679 | | | 3,120,458 | |
| | | | |
| | | | |
| | | | |
Net increase in cash and cash equivalents | | 1,295,610 | | | 560,932 | |
| | | | |
Cash and cash equivalents at beginning of period | | 224,164 | | | 442,559 | |
| | | | |
Cash and cash equivalents at end of period | | $1,519,774 | | | $1,003,491 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $685,231 | | | $631,211 | |
Income taxes | | $35,291 | | | ($7,412) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $105,288 | | | $115,290 | |
Temporary cash investments | | 1,414,486 | | | 108,874 | |
Total cash and cash equivalents | | 1,519,774 | | | 224,164 | |
Accounts receivable: | | | | |
Customer | | 986,010 | | | 788,552 | |
Allowance for doubtful accounts | | (27,813) | | | (30,856) | |
Other | | 203,151 | | | 241,702 | |
Accrued unbilled revenues | | 551,392 | | | 495,859 | |
Total accounts receivable | | 1,712,740 | | | 1,495,257 | |
Deferred fuel costs | | 188,885 | | | 710,401 | |
Fuel inventory - at average cost | | 182,233 | | | 147,632 | |
Materials and supplies - at average cost | | 1,362,098 | | | 1,183,308 | |
Deferred nuclear refueling outage costs | | 125,101 | | | 143,653 | |
Prepayments and other | | 238,828 | | | 190,611 | |
TOTAL | | 5,329,659 | | | 4,095,026 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 4,417,704 | | | 4,121,864 | |
Non-utility property - at cost (less accumulated depreciation) | | 419,931 | | | 366,405 | |
Storm reserve escrow accounts | | 416,274 | | | 401,955 | |
Other | | 65,613 | | | 102,259 | |
TOTAL | | 5,319,522 | | | 4,992,483 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 65,954,146 | | | 64,646,911 | |
| | | | |
Natural gas | | 712,374 | | | 691,970 | |
Construction work in progress | | 2,296,265 | | | 1,844,171 | |
Nuclear fuel | | 606,600 | | | 582,119 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 69,569,385 | | | 67,765,171 | |
Less - accumulated depreciation and amortization | | 26,274,303 | | | 25,288,047 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 43,295,082 | | | 42,477,124 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $257,502 as of September 30, 2023 and $282,886 as of December 31, 2022) | | 5,690,179 | | | 6,036,397 | |
Deferred fuel costs | | 172,202 | | | 241,085 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 50,895 | | | 84,100 | |
Other | | 317,436 | | | 291,804 | |
TOTAL | | 6,607,884 | | | 7,030,558 | |
| | | | |
TOTAL ASSETS | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,524,057 | | | $2,309,037 | |
Notes payable and commercial paper | | 1,351,105 | | | 827,621 | |
Accounts payable | | 1,336,107 | | | 1,777,590 | |
Customer deposits | | 441,018 | | | 424,723 | |
Taxes accrued | | 531,990 | | | 424,091 | |
Interest accrued | | 261,835 | | | 195,264 | |
Deferred fuel costs | | 98,924 | | | — | |
| | | | |
Pension and other postretirement liabilities | | 53,533 | | | 104,845 | |
| | | | |
Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | | 250,123 | | | 202,779 | |
TOTAL | | 5,848,692 | | | 6,369,447 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 5,063,523 | | | 4,818,837 | |
Accumulated deferred investment tax credits | | 204,839 | | | 211,220 | |
| | | | |
Regulatory liability for income taxes - net | | 1,223,532 | | | 1,258,276 | |
Other regulatory liabilities | | 2,667,648 | | | 2,324,590 | |
Decommissioning and asset retirement cost liabilities | | 4,449,832 | | | 4,271,531 | |
Accumulated provisions | | 524,030 | | | 531,201 | |
Pension and other postretirement liabilities | | 916,981 | | | 1,213,555 | |
Long-term debt (includes securitization bonds of $278,286 as of September 30, 2023 and $292,760 as of December 31, 2022) | | 24,659,343 | | | 23,623,512 | |
Other | | 955,309 | | | 688,720 | |
TOTAL | | 40,665,037 | | | 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 | | 7,649,370 | | | 7,632,895 | |
Retained earnings | | 11,192,276 | | | 10,502,041 | |
Accumulated other comprehensive loss | | (195,453) | | | (191,754) | |
Less - treasury stock, at cost (68,182,125 shares in 2023 and 68,477,429 shares in 2022) | | 4,957,522 | | | 4,978,994 | |
Total common shareholders' equity | | 13,691,468 | | | 12,966,985 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interests | | 127,540 | | | 97,907 | |
TOTAL | | 13,819,008 | | | 13,064,892 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $999,486 | | | $873,333 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,667,756 | | | 1,696,323 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (76,672) | | | 280,193 | |
Asset write-offs, impairments, and related charges (credits) | | (163,464) | | | 345,200 | |
| | | | |
Changes in working capital: | | | | |
Receivables | | (368,772) | | | (245,082) | |
Fuel inventory | | 19,433 | | | 46,951 | |
Accounts payable | | (59,787) | | | 362,529 | |
Taxes accrued | | 89,554 | | | 19,611 | |
Interest accrued | | 38,361 | | | 29,313 | |
Deferred fuel costs | | (821,386) | | | (356,833) | |
Other working capital accounts | | (124,677) | | | (94,791) | |
Changes in provisions for estimated losses | | 297,842 | | | (72,577) | |
Changes in other regulatory assets | | 587,128 | | | (631,172) | |
Changes in other regulatory liabilities | | (116,315) | | | 117,301 | |
Effect of securitization on regulatory asset | | (1,036,955) | | | — | |
| | | | |
Changes in pension and other postretirement liabilities | | (258,141) | | | (422,028) | |
Other | | 1,136,050 | | | 62,712 | |
Net cash flow provided by operating activities | | 1,809,441 | | | 2,010,983 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (3,853,121) | | | (3,925,632) | |
Allowance for equity funds used during construction | | 49,685 | | | 48,629 | |
Nuclear fuel purchases | | (125,619) | | | (127,606) | |
Payment for purchase of plant or assets | | (106,193) | | | (36,534) | |
Net proceeds (payments) from sale of assets | | (7,082) | | | 17,421 | |
Litigation proceeds from settlement agreement | | 9,829 | | | — | |
Changes in securitization account | | 1,224 | | | 13,862 | |
Payments to storm reserve escrow account | | (1,291,593) | | | (23) | |
Receipts from storm reserve escrow account | | 1,000,278 | | | 83,105 | |
Decrease (increase) in other investments | | (33,238) | | | 4,239 | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 32,367 | | | 49,236 | |
Proceeds from nuclear decommissioning trust fund sales | | 1,377,304 | | | 4,475,142 | |
Investment in nuclear decommissioning trust funds | | (1,422,808) | | | (4,463,814) | |
Net cash flow used in investing activities | | (4,368,967) | | | (3,861,975) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2023 |
(Unaudited) |
| | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
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) | 1,364 | | | — | | | — | | | — | | | 310,935 | | | — | | | 312,299 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,027 | | | 2,027 | |
Common stock issuances related to stock plans | — | | | — | | | 19,599 | | | (15,118) | | | — | | | — | | | 4,481 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,194) | | | — | | | (226,194) | |
Beneficial interest in storm trust | 14,577 | | | — | | | — | | | — | | | — | | | — | | | 14,577 | |
Distributions to noncontrolling interests | (574) | | | — | | | — | | | — | | | — | | | — | | | (574) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at March 31, 2023 | $108,694 | | | $2,797 | | | ($4,959,395) | | | $7,617,777 | | | $10,586,782 | | | ($189,727) | | | $13,166,928 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 770 | | | — | | | — | | | — | | | 391,244 | | | — | | | 392,014 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (3,292) | | | (3,292) | |
Common stock issuances related to stock plans | — | | | — | | | 600 | | | 16,528 | | | — | | | — | | | 17,128 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,248) | | | — | | | (226,248) | |
Capital contribution from noncontrolling interest | 25,708 | | | — | | | — | | | — | | | — | | | — | | | 25,708 | |
Distributions to noncontrolling interests | (113) | | | — | | | — | | | — | | | — | | | — | | | (113) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2023 | $130,479 | | | $2,797 | | | ($4,958,795) | | | $7,634,305 | | | $10,751,778 | | | ($193,019) | | | $13,367,545 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 2,959 | | | — | | | — | | | — | | | 666,755 | | | — | | | 669,714 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,434) | | | (2,434) | |
Common stock issuances related to stock plans | — | | | — | | | 1,273 | | | 15,065 | | | — | | | — | | | 16,338 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,257) | | | — | | | (226,257) | |
Distributions to noncontrolling interests | (1,318) | | | — | | | — | | | — | | | — | | | — | | | (1,318) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2023 | $127,540 | | | $2,797 | | | ($4,957,522) | | | $7,649,370 | | | $11,192,276 | | | ($195,453) | | | $13,819,008 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023, second quarter 2023, and third quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 5,316,693 | | | 6,269,152 | |
| | | | |
Treasury stock | | 31,802 | | | 5,613 | |
Common stock | | — | | | 26,817 | |
Retirement of long-term debt | | (4,998,642) | | | (4,046,791) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 185,455 | | | (621,168) | |
Capital contribution from noncontrolling interest | | 9,595 | | | — | |
Proceeds from trust related to securitization | | 3,163,572 | | | — | |
Other | | 41,659 | | | 44,176 | |
Dividends paid: | | | | |
Common stock | | (615,937) | | | (572,131) | |
Preferred stock | | (13,739) | | | (13,739) | |
Net cash flow provided by financing activities | | 3,120,458 | | | 1,091,929 | |
| | | | |
| | | | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | 560,932 | | | (759,063) | |
| | | | |
Cash and cash equivalents at beginning of period | | 442,559 | | | 1,759,099 | |
| | | | |
Cash and cash equivalents at end of period | | $1,003,491 | | | $1,000,036 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $631,211 | | | $590,581 | |
Income taxes | | ($7,412) | | | $29,454 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
September 30, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $80,695 | | | $44,944 | |
Temporary cash investments | | 922,796 | | | 397,615 | |
Total cash and cash equivalents | | 1,003,491 | | | 442,559 | |
Accounts receivable: | | | | |
Customer | | 955,138 | | | 786,866 | |
Allowance for doubtful accounts | | (30,723) | | | (68,608) | |
Other | | 244,114 | | | 231,843 | |
Accrued unbilled revenues | | 538,232 | | | 420,255 | |
Total accounts receivable | | 1,706,761 | | | 1,370,356 | |
Deferred fuel costs | | 1,138,041 | | | 324,394 | |
Fuel inventory - at average cost | | 135,142 | | | 154,575 | |
Materials and supplies - at average cost | | 1,129,485 | | | 1,041,515 | |
Deferred nuclear refueling outage costs | | 141,012 | | | 133,422 | |
Prepayments and other | | 255,873 | | | 156,774 | |
TOTAL | | 5,509,805 | | | 3,623,595 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 3,910,411 | | | 5,514,016 | |
Non-utility property - at cost (less accumulated depreciation) | | 360,709 | | | 357,576 | |
Other | | 446,664 | | | 159,455 | |
TOTAL | | 4,717,784 | | | 6,031,047 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 63,947,067 | | | 64,263,250 | |
| | | | |
Natural gas | | 682,645 | | | 658,989 | |
Construction work in progress | | 1,878,427 | | | 1,511,966 | |
Nuclear fuel | | 526,773 | | | 577,006 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 67,034,912 | | | 67,011,211 | |
Less - accumulated depreciation and amortization | | 25,316,065 | | | 24,767,051 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 41,718,847 | | | 42,244,160 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $291,283 as of September 30, 2022 and $49,579 as of December 31, 2021) | | 6,026,128 | | | 6,613,256 | |
Deferred fuel costs | | 241,085 | | | 240,953 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 89,848 | | | 54,186 | |
Other | | 294,626 | | | 269,873 | |
TOTAL | | 7,028,859 | | | 7,555,440 | |
| | | | |
TOTAL ASSETS | | $58,975,295 | | | $59,454,242 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
September 30, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,584,037 | | | $1,039,329 | |
Notes payable and commercial paper | | 1,386,632 | | | 1,201,177 | |
Accounts payable | | 1,744,246 | | | 2,610,132 | |
Customer deposits | | 417,132 | | | 395,184 | |
Taxes accrued | | 509,382 | | | 419,828 | |
Interest accrued | | 229,512 | | | 191,151 | |
Deferred fuel costs | | — | | | 7,607 | |
| | | | |
Pension and other postretirement liabilities | | 65,916 | | | 68,336 | |
Current portion of unprotected excess accumulated deferred income taxes | | 2,660 | | | 53,385 | |
Other | | 215,358 | | | 204,613 | |
TOTAL | | 6,154,875 | | | 6,190,742 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 4,677,276 | | | 4,706,797 | |
Accumulated deferred investment tax credits | | 208,239 | | | 211,975 | |
| | | | |
Regulatory liability for income taxes - net | | 1,225,190 | | | 1,255,692 | |
Other regulatory liabilities | | 2,608,757 | | | 2,643,845 | |
Decommissioning and asset retirement cost liabilities | | 4,224,934 | | | 4,757,084 | |
Accumulated provisions | | 454,964 | | | 157,122 | |
Pension and other postretirement liabilities | | 1,693,604 | | | 1,949,325 | |
Long-term debt (includes securitization bonds of $311,156 as of September 30, 2022 and $83,639 as of December 31, 2021) | | 24,635,942 | | | 24,841,572 | |
Other | | 677,838 | | | 815,284 | |
TOTAL | | 40,406,744 | | | 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 | | 6,765,113 | | | 6,766,239 | |
Retained earnings | | 10,621,307 | | | 10,240,552 | |
Accumulated other comprehensive loss | | (313,370) | | | (332,528) | |
Less - treasury stock, at cost (68,483,278 shares in 2022 and 69,312,326 shares in 2021) | | 4,979,419 | | | 5,039,699 | |
Total common shareholders' equity | | 12,096,351 | | | 11,637,284 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interest | | 97,915 | | | 68,110 | |
TOTAL | | 12,194,266 | | | 11,705,394 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $58,975,295 | | | $59,454,242 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 |
(Unaudited) |
| | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling Interest | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | ENTERGY CORPORATION AND SUBSIDIARIES | | ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 | | For the Nine Months Ended September 30, 2022 |
(Unaudited) | | (Unaudited) |
| | | | Common Shareholders’ Equity | |
| | | Subsidiaries' Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| | | (In Thousands) |
| 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 | | 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) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | | Consolidated net income (a) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | |
Other comprehensive loss | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | |
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 | — | | | — | | | 36,612 | | | (31,085) | | | — | | | — | | | 5,527 | |
Common stock dividends declared | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,058) | | | — | | | (205,058) | | 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, 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 March 31, 2022 | $66,723 | | | $2,720 | | | ($5,003,087) | | | $6,735,154 | | | $10,311,894 | | | ($336,578) | | | $11,776,826 | |
| Consolidated net income (a) | Consolidated net income (a) | 4,308 | | | — | | | — | | | — | | | 159,703 | | | — | | | 164,011 | | Consolidated net income (a) | 4,308 | | | — | | | — | | | — | | | 159,703 | | | — | | | 164,011 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 12,540 | | | 12,540 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 12,540 | | | 12,540 | |
| Common stock issuances related to stock plans | Common stock issuances related to stock plans | — | | | — | | | 18,927 | | | 15,214 | | | — | | | — | | | 34,141 | | Common stock issuances related to stock plans | — | | | — | | | 18,927 | | | 15,214 | | | — | | | — | | | 34,141 | |
Common stock dividends declared | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,408) | | | — | | | (205,408) | | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,408) | | | — | | | (205,408) | |
Beneficial interest in storm trust | Beneficial interest in storm trust | 31,636 | | | — | | | — | | | — | | | — | | | — | | | 31,636 | | Beneficial interest in storm trust | 31,636 | | | — | | | — | | | — | | | — | | | — | | | 31,636 | |
Capital contributions from noncontrolling interest | 9,595 | | | — | | | — | | | — | | | — | | | — | | | 9,595 | | |
Capital contribution from noncontrolling interest | | Capital contribution from noncontrolling interest | 9,595 | | | — | | | — | | | — | | | — | | | — | | | 9,595 | |
Distributions to noncontrolling interest | Distributions to noncontrolling interest | (190) | | | — | | | — | | | — | | | — | | | — | | | (190) | | Distributions to noncontrolling interest | (190) | | | — | | | — | | | — | | | — | | | — | | | (190) | |
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 June 30, 2022 | Balance at June 30, 2022 | $107,492 | | | $2,720 | | | ($4,984,160) | | | $6,750,368 | | | $10,266,189 | | | ($324,038) | | | $11,818,571 | | Balance at June 30, 2022 | $107,492 | | | $2,720 | | | ($4,984,160) | | | $6,750,368 | | | $10,266,189 | | | ($324,038) | | | $11,818,571 | |
| Consolidated net income (loss) (a) | Consolidated net income (loss) (a) | (4,707) | | | — | | | — | | | — | | | 560,589 | | | — | | | 555,882 | | Consolidated net income (loss) (a) | (4,707) | | | — | | | — | | | — | | | 560,589 | | | — | | | 555,882 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 10,668 | | | 10,668 | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 10,668 | | | 10,668 | |
Common stock issuances related to stock plans | Common stock issuances related to stock plans | — | | | — | | | 4,741 | | | 14,745 | | | — | | | — | | | 19,486 | | Common stock issuances related to stock plans | — | | | — | | | 4,741 | | | 14,745 | | | — | | | — | | | 19,486 | |
Common stock dividends declared | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,471) | | | — | | | (205,471) | | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,471) | | | — | | | (205,471) | |
Distributions to noncontrolling interest | Distributions to noncontrolling interest | (290) | | | — | | | — | | | — | | | — | | | — | | | (290) | | Distributions to noncontrolling interest | (290) | | | — | | | — | | | — | | | — | | | — | | | (290) | |
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 September 30, 2022 | Balance at September 30, 2022 | $ | 97,915 | | | $ | 2,720 | | | $ | (4,979,419) | | | $ | 6,765,113 | | | $ | 10,621,307 | | | $ | (313,370) | | | $ | 12,194,266 | | Balance at September 30, 2022 | $97,915 | | | $2,720 | | | ($4,979,419) | | | $6,765,113 | | | $10,621,307 | | | ($313,370) | | | $12,194,266 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| (a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for first quarter 2022, second quarter 2022, and third 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 2022, second quarter 2022, and third quarter 2023 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 2022, second quarter 2022, and third quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2021 |
(Unaudited) |
| | | | | | | | | | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling Interest | | 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 |
| | | | | | | | | | | | | |
Consolidated net income (a) | 4,580 | | | — | | | — | | | — | | | 334,565 | | | — | | | 339,145 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (51,300) | | | (51,300) | |
Common stock issuances related to stock plans | — | | | — | | | 28,235 | | | (29,871) | | | — | | | — | | | (1,636) | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (190,595) | | | — | | | (190,595) | |
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 | |
| | | | | | | | | | | | | |
Consolidated net income (loss) (a) | 4,580 | | | — | | | — | | | — | | | (5,974) | | | — | | | (1,394) | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 21,768 | | | 21,768 | |
Common stock issuances and sales under the at the market equity distribution program | — | | | 3 | | | — | | | 28,213 | | | — | | | — | | | 28,216 | |
| | | | | | | | | | | | | |
Common stock issuance costs | — | | | — | | | — | | | (1,399) | | | — | | | — | | | (1,399) | |
Common stock issuances related to stock plans | — | | | — | | | 3,979 | | | 14,810 | | | — | | | — | | | 18,789 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (190,629) | | | — | | | (190,629) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2021 | $35,000 | | | $2,703 | | | ($5,042,242) | | | $6,561,676 | | | $9,844,549 | | | ($478,739) | | | $10,922,947 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 4,580 | | | — | | | — | | | — | | | 531,003 | | | — | | | 535,583 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 6,700 | | | 6,700 | |
Common stock issuances related to stock plans | — | | | — | | | 1,605 | | | 16,176 | | | — | | | — | | | 17,781 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (190,907) | | | — | | | (190,907) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2021 | $ | 35,000 | | | $ | 2,703 | | | $ | (5,040,637) | | | $ | 6,577,852 | | | $ | 10,184,645 | | | $ | (472,039) | | | $ | 11,287,524 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for first quarter 2021, second quarter 2021, and third quarter 2021 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. The following are updates to that discussion.
As discussed in the Form 10-K, in March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. Entergy Arkansas pursued its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy Arkansas collected $50 million in 2014 from Nuclear Electric Insurance Limited, a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants. Entergy Arkansas also collected a total of $21 million in 2018 as a result of stator-related settlements.
In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident was available.
In October 2023, Entergy Arkansas made a commitment to the APSC to make a filing to forgo its opportunity to seek recovery of the identified costs resulting from the ANO stator incident, specifically all incremental fuel and purchased energy expense, capital and incremental non-fuel operations and maintenance costs, and costs of any judgement that may be rendered against Entergy Arkansas in civil litigation that is not covered by insurance. As a result, in third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million, which includes interest, and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Spent Nuclear Fuel Litigation
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation. The following are updates to that discussion.
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 judgment in that amount in favor of Entergy Arkansas and against the DOE. Entergy Arkansas received payment from the U.S. Treasury in April 2023. The effects of recording the judgment were reductions to plant, nuclear fuel expense, other operation and maintenance expense, materials and supplies, and taxes other than income taxes. The ANO damages awarded included $18 million related to costs previously recorded as plant, $10 million related to costs previously recorded as other operation and maintenance expense, $8 million related to costs previously recorded as nuclear fuel expense, $3 million related to costs previously recorded as materials and supplies, and $2 million related to costs previously recorded as taxes other than income taxes.
In July 2023 the DOE submitted an offer of judgment to resolve claims in the Indian Point 2 fourth round and Indian Point 3 third round combined damages case. The $59 million offer was accepted by Entergy and Holtec International, as the current owner. The U.S. Court of Federal Claims issued a final judgment in thethat amount of $83 million in favor of Holtec Indian Point 2, LLC and Holtec Indian Point 3, LLC (previously Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear Indian Point 3, LLCLLC) and against the DOE in the Indian Point Unit 2 third round and Unit 3 second round combined damages case. EntergyDOE. Holtec received payment from the U.S. Treasury in January 2022.July 2023. Consistent with certain terms agreed upon in connection with the sale of Indian Point Energy Center in May 2021, Holtec transferred $40 million to Entergy for its pro-rata share of the litigation proceeds in August 2023. The remainder of the judgment was retained by Holtec. The effect of recording Entergy’s pro-rata share of the judgment in October 2021 was a reduction to asset write-offs, impairments, and related charges (credits). TheEntergy’s pro-rata share of the damages awarded included $32$18 million related to costs previously recorded as plant, $47spending on the asset retirement obligation, $15 million related to costs previously recorded as other operation and maintenance expenses,expense, $6 million related to costs previously recorded as plant, and $4$1 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. In May 2023, Entergy Louisiana filed an application with the FERC for transaction authorization pursuant to Section 203 of the Federal Power Act. In June 2023 the LPSC filed a notice to intervene in the proceeding. Entergy Louisiana is evaluating the effect of the transaction on its results of operations, cash flows, and financial condition, but at this time does not expect the effect 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.
Regulatory activity regarding the Tax Cuts and Jobs Act
System Energy
As discussed in the Form 10-K, in a filing made with the FERC in March 2018, System Energy proposed revisions to the Unit Power Sales Agreement to reflect the effects of the Tax Cuts and Jobs Act. In July 2020 the presiding ALJ in the proceeding issued an initial decision finding that there is an additional $147 million in unprotected excess accumulated deferred income taxes related to System Energy’s uncertain decommissioning tax deduction. In December 2022 the FERC issued an order addressing the ALJ’s initial decision and denying System Energy’s motion to vacate the initial decision. The FERC disagreed with the ALJ’s determination that $147 million should be credited to customers in the same manner as the excess accumulated deferred income taxes addressed in System Energy’s March 2018 filing, which had included a stated amount of excess accumulated deferred income taxes to be returned pursuant to a specified methodology and had not included any excess accumulated deferred income taxes associated with the decommissioning tax position.Instead, the FERC ordered System Energy to compute the amount of excess accumulated deferred income taxes associated with the decommissioning tax position with consideration for the resolution of the tax position by the IRS. In February 2023, System Energy made the required filing with the FERC.In June 2023 the FERC issued a deficiency letter requesting additional information about the IRS’s resolution of the tax position for 2016 and 2017.In July 2023, System Energy provided the additional information.
Fuel and purchased power cost recovery
Entergy Arkansas
See Note 1 to the financial statements herein for discussion of the write-off in third quarter 2023 of Entergy Arkansas’s $68.9 million regulatory asset for deferred fuel related to the ANO stator incident as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing to forgo its opportunity to seek recovery of the incremental fuel and purchased energy expense resulting from the ANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Energy Cost Recovery Rider
As discussed in the Form 10-K, in March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. In February 2023 the APSC issued orders initiating proceedings with the utilities under its jurisdiction to address the prudence of costs incurred and appropriate cost allocation of the February 2021 winter storms. With respect to any prudence review of Entergy Arkansas fuel costs, as part of the APSC’s draft report issued in its February 2021 winter storms investigation docket, the APSC included findings that the load shedding plans of the investor-owned utilities and some cooperatives were appropriate and comprehensive, and, further, that Entergy Arkansas’s emergency plan was comprehensive and had a multilayered approach supported by a system-wide response plan, which is considered an industry standard. In September 2023 the APSC issued an order in Entergy Arkansas's company-specific proceeding and found that Entergy Arkansas’s practices during the winter storms were prudent.
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-recovered balance as a result of higher natural gas prices in 2022 and a $32 million deferral related to the February 2021 particularly in the fourth quarter 2021. At the request ofwinter storms consistent with the APSC general staff,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 deferred its request for recovery of $32 million from the under-recoveryin January 2023 related to the 2021 February winter storms untilsale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the 2023 energy cost rate redetermination, unless a request for an interim adjustment to the energy cost recovery rider is necessary. This resulted in aFERC. 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.
Entergy Louisiana
As discussed in the Form 10-K, in February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months beginning in April 2021. In April 2022 the LPSC staff issued a draft audit report regarding Entergy Louisiana’s fuel adjustment clause charges in February 2021 that did not recommend any financial disallowances, but included several prospective recommendations. Responsive testimony was filed by one intervenor and the parties agreed to suspend any procedural schedule and move toward settlement discussions to close the matter.
In May 2022 the LPSC staff issuedprovided notice of an audit report regardingof Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges in February 2021flowed through Entergy Louisiana’s purchased gas adjustment clause for that did not propose any financial disallowances. Theperiod. In August 2023 the LPSC staff and Entergy Louisiana
Entergy Corporation and Subsidiaries
Notes to Financial Statements
submitted a joint report on theits audit report and draft order tofound that materially all costs recovered through the LPSC concluding that Entergy Louisiana’spurchased gas distribution operationsadjustment filings were reasonable and fuel costs were not significantly adversely affected byeligible for recovery through the February 2021 winter storms and the resulting increase in naturalpurchased gas prices. The LPSC issued an order approving the joint report in October 2022.
To mitigate high electric bills, primarily driven by high summer usage and elevated gas prices, Entergy Louisiana has deferred approximately $225 million of fuel expense incurred in April, May, June, July, August, and September 2022 (as reflected on June, July, August, September, October, and November 2022 bills). These deferrals were included in the over/under calculation of the fuel adjustment clause, which is intended to recover the full amount of the costs included on a rolling twelve-month basis.clause.
Entergy Mississippi
See “Complaints Against System Energy - System Energy Settlement withIn June 2023 the MPSC” below approved the joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for discussion of the partial settlement agreement filed with the FERC in June 2022.Entergy Mississippi’s 2023 formula rate plan filing. The settlement, which is contingent upon FERC approval, provides for a refund of $235 million from System Energy to Entergy Mississippi. In July 2022 the MPSCstipulation directed the disbursement of settlement proceeds, ordering Entergy Mississippi to providemake a one-time $80 bill creditcompliance filing to each ofrevise its approximately 460,000 retail customerspower management cost adjustment factor, to be effective during the September 2022 billing cycle,revise its grid modernization cost adjustment factor, and to apply the remaining proceedsinclude a revision to Entergy Mississippi’s under-recovered deferred fuel balance. System Energy requested an order from the FERC by November 2022.
Entergy Mississippi had a deferred fuel balance of approximately $291.7 million under the energy cost recovery rider as of July 31, 2022, along with an over-recovery balance of $51.1 million under the power management rider. Without further action, Entergy Mississippi anticipated a year-end deferred fuel balance of approximately $200 million after application of a portion of the System Energy settlement proceeds, as discussed above. In September 2022, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider. Entergy Mississippi proposed five monthly incremental adjustments toreduce the net energy cost factor designed to collect the under-recovered fuel balance as of July 31, 2022 anda level necessary to reflect the recovery of a higheran average natural gas price. Entergy Mississippi also proposed five monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance asprice of July 31, 2022. In October 2022 the MPSC approved modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider.$4.50 per MMBtu. The MPSC approved dividing the energy cost recovery rider interim adjustment into two components that would allow Entergy Mississippi to 1) recover a natural gas fuel rate that is better alignedcompliance filing in June 2023, effective for July 2023 bills. See “Retail Rate Proceedings - Filings with current prices and 2) recover the estimated under-recovered deferred fuel balance as of September 30, 2022 over a period of 20 months. The MPSC approved six monthly incremental adjustments to the net energy cost factor designed to reflect the recovery of a higher natural gas price. The MPSC also approved six monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance. Entergy Mississippi will not file its annual redetermination(Entergy Mississippi) - Retail Rates - 2023 Formula Rate Plan Filing” below for further discussion of the energy cost recovery rider or2023 formula rate plan filing and the power management rider in November 2022. Entergy Mississippi’s November 2023 annual redetermination will not reflect any part of the estimated under-recovered deferred fuel balance as of September 30, 2022; it will only reflect any over/under recovery that accumulates after September 2022. The November 2024 annual redetermination will include the total deferred fuel balance, including any over- or under-recovery of the deferred fuel balance as of September 30, 2022.joint stipulation agreement.
Entergy TexasSunflower 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 TexasMississippi 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 both Entergy Mississippi and the tax equity investor made additional capital contributions to the tax equity partnership that were then used to make the substantial completion payment of $30.4 million for acquisition of the facility. The final payment of $4.7 million for acquisition of the facility was made in October 2023. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi’s purchase of 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 obtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
cost and schedule and to updates arising as a result 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 APSC. In June 2023, Entergy Arkansas, the APSC general staff, and the Arkansas Attorney General filed a unanimous settlement supporting that the approval of the Walnut Bend Solar facility is in the public interest based on the terms in the settlement, which relate in part to certain treatment for the production tax credits associated with the facility. In July 2023, after requesting further testimony and purporting to modify several terms in the settlement and upon rehearing, the APSC approved the settlement largely on the terms submitted, including a 30-year amortization period for the production tax credits. The project is currently expected to achieve commercial operation in 2024.
West Memphis Solar
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 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. Closing had been expected to occur in 2023. In March 2022 the counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-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 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 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 PUCTLPSC 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 implementinclude 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, and settlement negotiations are ongoing. 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 interim fuel surchargealternative to collect the cumulative under-recoveryrequests 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, was 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 procedural schedule was established in May 2023 with a hearing scheduled for March 2024. In October 2023 the LPSC staff and intervenors filed testimony, with the LPSC staff supporting the amount of solar resources to be acquired and the alternative RFP process. The LPSC staff also
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
supported, subject to certain recommendations, the proposed framework for evaluation and certification of the solar resources by the LPSC and the proposed tariff.
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 $51.7$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 staff and certain intervenors filed direct testimony in August, September, and October 2023. The LPSC staff filed cross-answering testimony in October 2023. The testimony largely supports implementation of some level of accelerated investment in resilience but raises various issues related to the magnitude of the investment, the cost recovery mechanism applicable to the investment, and the ratemaking for the investment.
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 contemplated adoption of a final rule in October 2023, but this did not occur, and a new date has not been set.
Entergy New Orleans
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 July 2022, Entergy New Orleans filed with the City 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 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. In July 2023, Entergy New Orleans filed comments in support of its application.
Dividends
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its October 2023 meeting, the Board declared a dividend of $1.13 per share, an increase from the previous $1.07 quarterly dividend per share that Entergy has paid since the third quarter 2022.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
Cash and cash equivalents at beginning of period | $224 | | | $443 | |
| | | |
Net cash provided by (used in): | | | |
Operating activities | 3,231 | | | 1,809 | |
Investing activities | (3,579) | | | (4,369) | |
Financing activities | 1,644 | | | 3,120 | |
Net increase in cash and cash equivalents | 1,296 | | | 560 | |
| | | |
Cash and cash equivalents at end of period | $1,520 | | | $1,003 | |
Operating Activities
Net cash flow provided by operating activities increased $1,422 million including interest,for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•lower fuel costs and the timing of recovery of fuel and purchased power costs incurred from May 1, 2020 through December 31, 2021. The under-recovery balance iscosts;
•a decrease of $228 million in storm spending primarily attributabledue to Hurricane Ida restoration efforts in 2022. See Note 2 to the impactsfinancial statements herein and in the Form 10-K for a discussion of Winter Storm Uri, including historically high natural gas prices,fuel and purchased power cost recovery; and
•severance and retention payments of $40 million in 2022 related to Entergy’s exit from the merchant power business. See Note 13 to the financial statements in the Form 10-K for further discussion of Entergy’s exit from the merchant power business.
The increase was partially offset by:
•lower collections from Utility customers;
•an increase of $97 million in pension contributions in 2023 as compared to the same period in 2022. 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;
•an increase of $54 million in interest paid; and
•income tax payments of $35 million in 2023 compared to income tax refunds of $7 million in 2022. Entergy had income tax payments in 2023 as a result of higher estimated income taxes as compared to 2022. Entergy had income tax refunds in 2022 as a result of an overpayment on a prior year state income tax return.
Investing Activities
Net cash flow used in investing activities decreased $790 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•a decrease of $555 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas proposed thatincreased investment in the interim fuel surcharge be assessed over a periodreliability and infrastructure of six months beginning with the first billing cycle after the PUCTdistribution system;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•a decrease of $277 million in net payments to storm reserve escrow accounts;
•the initial payment of approximately $105 million in May 2022 as compared to the substantial completion payment of approximately $30 million in April 2023 for the purchase of the Sunflower Solar facility by the Entergy Mississippi tax equity partnership. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase;
•a decrease of $56 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by increased investment in the reliability and infrastructure of the transmission system;
•a decrease of $37 million in information technology capital expenditures primarily due to decreased spending on various technology projects in 2023; and
•cash collateral of $31 million posted in 2022 to support Entergy Texas’s obligations to MISO.
The decrease was partially offset by:
•an increase of $164 million in non-nuclear generation construction expenditures primarily due to higher spending on the Orange County Advanced Power Station project; and
•an increase of $76 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.
Financing Activities
Net cash flow provided by financing activities decreased $1,476 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•proceeds from securitization of $1.5 billion received by the storm trust II at Entergy Louisiana in 2023 compared to proceeds from securitization of $3.2 billion received by the storm trust I at Entergy Louisiana in 2022;
•long-term debt activity providing approximately $221 million of cash in 2023 compared to providing approximately $318 million of cash in 2022; and
•an increase of $63 million in common stock dividends paid in 2023 as a result of an increase in the dividend paid per share and an increase in the number of shares outstanding.
The decrease was partially offset by an increase of $338 million in net issuances of commercial paper in 2023 compared to 2022 and an increase of $66 million in prepaid deposits related to contributions-in-aid-of-construction for generation interconnection agreements.
See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the Entergy Louisiana storm cost securitizations. 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.
Rate, Cost-recovery, and Other Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Rate, Cost-recovery, and Other Regulation” in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.
State and Local Rate Regulation and Fuel-Cost Recovery
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
See 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
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. The following is an update to that discussion.
Some of the agreements to sell the power produced by Entergy’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 September 30, 2023, based on power prices at that time, Entergy had liquidity exposure of $7 million under the guarantees in place supporting Entergy’s non-utility operations transactions and $8 million of posted cash collateral.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
NRC Reactor Oversight Process
As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except River Bend, which is in Column 2.
In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022 and also corrected a subsequent radiation monitor calibration issue. In May 2023 the NRC completed a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2 and Waterford 3 was returned to Column 1.
In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. In August 2023 the NRC issued a finding and notice of violation related to a radiation monitor calibration issue at River Bend. River Bend will remain in Column 2 pending successful completion of supplemental inspections related to both issues.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’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 and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | |
| Three Months Ended | | Nine Months Ended |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | $3,526,935 | | | $4,110,058 | | | $9,195,588 | | | $10,024,089 | |
Natural gas | 32,305 | | | 46,548 | | | 130,389 | | | 166,917 | |
Other | 36,282 | | | 62,009 | | | 96,630 | | | 300,731 | |
TOTAL | 3,595,522 | | | 4,218,615 | | | 9,422,607 | | | 10,491,737 | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | 707,491 | | | 1,366,811 | | | 2,189,592 | | | 2,685,694 | |
Purchased power | 309,376 | | | 415,066 | | | 754,199 | | | 1,255,318 | |
Nuclear refueling outage expenses | 39,057 | | | 39,707 | | | 111,075 | | | 119,625 | |
Other operation and maintenance | 751,763 | | | 793,145 | | | 2,043,184 | | | 2,249,674 | |
Asset write-offs, impairments, and related charges (credits) | 38,078 | | | (143) | | | 38,078 | | | (163,464) | |
Decommissioning | 52,336 | | | 49,263 | | | 153,981 | | | 174,171 | |
Taxes other than income taxes | 197,654 | | | 190,056 | | | 566,669 | | | 542,448 | |
Depreciation and amortization | 439,873 | | | 453,288 | | | 1,362,728 | | | 1,337,019 | |
Other regulatory charges (credits) - net | (83,489) | | | (43,283) | | | (158,317) | | | 689,355 | |
TOTAL | 2,452,139 | | | 3,263,910 | | | 7,061,189 | | | 8,889,840 | |
| | | | | | | |
OPERATING INCOME | 1,143,383 | | | 954,705 | | | 2,361,418 | | | 1,601,897 | |
| | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | |
Allowance for equity funds used during construction | 24,225 | | | 20,245 | | | 72,238 | | | 49,685 | |
Interest and investment income (loss) | 2,562 | | | 2,966 | | | 96,250 | | | (118,002) | |
Miscellaneous - net | (18,018) | | | (10,462) | | | (121,014) | | | 32,720 | |
TOTAL | 8,769 | | | 12,749 | | | 47,474 | | | (35,597) | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | 264,934 | | | 235,322 | | | 781,613 | | | 694,558 | |
Allowance for borrowed funds used during construction | (9,493) | | | (7,862) | | | (29,565) | | | (18,710) | |
TOTAL | 255,441 | | | 227,460 | | | 752,048 | | | 675,848 | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 896,711 | | | 739,994 | | | 1,656,844 | | | 890,452 | |
| | | | | | | |
Income taxes | 226,997 | | | 184,112 | | | 282,818 | | | (109,034) | |
| | | | | | | |
CONSOLIDATED NET INCOME | 669,714 | | | 555,882 | | | 1,374,026 | | | 999,486 | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $666,755 | | | $560,589 | | | $1,368,934 | | | $996,692 | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | $3.15 | | | $2.76 | | | $6.47 | | | $4.90 | |
Diluted | $3.14 | | | $2.74 | | | $6.45 | | | $4.88 | |
| | | | | | | |
Basic average number of common shares outstanding | 211,459,244 | | | 203,445,773 | | | 211,420,117 | | | 203,259,373 | |
Diluted average number of common shares outstanding | 212,238,117 | | | 204,578,013 | | | 212,195,735 | | | 204,357,916 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| Three Months Ended | | Nine Months Ended |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands) |
| | | | | | | |
Net Income | $669,714 | | | $555,882 | | | $1,374,026 | | | $999,486 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Cash flow hedges net unrealized gain (net of tax expense of $—, $—, $—, and $—) | — | | | 24 | | | — | | | 72 | |
Pension and other postretirement liabilities (net of tax expense (benefit) of ($743), $3,505, ($1,078), and $7,689) | (2,434) | | | 11,867 | | | (3,699) | | | 26,240 | |
Net unrealized investment loss (net of tax expense (benefit) of $—, $1,223, $—, and ($2,230)) | — | | | (1,223) | | | — | | | (7,154) | |
Other comprehensive income (loss) | (2,434) | | | 10,668 | | | (3,699) | | | 19,158 | |
| | | | | | | |
Comprehensive Income | 667,280 | | | 566,550 | | | 1,370,327 | | | 1,018,644 | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
Comprehensive Income Attributable to Entergy Corporation | $664,321 | | | $571,257 | | | $1,365,235 | | | $1,015,850 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $1,374,026 | | | $999,486 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,668,540 | | | 1,667,756 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 257,210 | | | (76,672) | |
Asset write-offs, impairments, and related charges (credits) | | 38,078 | | | (163,464) | |
| | | | |
Changes in working capital: | | | | |
Receivables | | (217,483) | | | (368,772) | |
Fuel inventory | | (34,601) | | | 19,433 | |
Accounts payable | | (304,264) | | | (59,787) | |
Taxes accrued | | 107,899 | | | 89,554 | |
Interest accrued | | 66,571 | | | 38,361 | |
Deferred fuel costs | | 620,440 | | | (821,386) | |
Other working capital accounts | | (137,061) | | | (124,677) | |
Changes in provisions for estimated losses | | (7,171) | | | 297,842 | |
Changes in regulatory assets | | 415,101 | | | 587,128 | |
Changes in other regulatory liabilities | | 204,817 | | | (116,315) | |
Effect of securitization on regulatory asset | | (491,150) | | | (1,036,955) | |
| | | | |
Changes in pension and other postretirement liabilities | | (347,886) | | | (258,141) | |
Other | | 17,927 | | | 1,136,050 | |
Net cash flow provided by operating activities | | 3,230,993 | | | 1,809,441 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (3,373,617) | | | (3,853,121) | |
Allowance for equity funds used during construction | | 72,238 | | | 49,685 | |
Nuclear fuel purchases | | (201,213) | | | (125,619) | |
Payment for purchase of assets | | (30,433) | | | (106,193) | |
Net proceeds (payments) from sale of assets | | 11,000 | | | (7,082) | |
Insurance proceeds received for property damages | | 19,493 | | | — | |
Litigation proceeds from settlement agreement | | — | | | 9,829 | |
Changes in securitization account | | (4,839) | | | 1,224 | |
Payments to storm reserve escrow accounts | | (14,320) | | | (1,291,593) | |
Receipts from storm reserve escrow accounts | | — | | | 1,000,278 | |
Increase in other investments | | (4,998) | | | (33,238) | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 23,655 | | | 32,367 | |
Proceeds from nuclear decommissioning trust fund sales | | 806,658 | | | 1,377,304 | |
Investment in nuclear decommissioning trust funds | | (882,686) | | | (1,422,808) | |
Net cash flow used in investing activities | | (3,579,062) | | | (4,368,967) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 3,605,237 | | | 5,316,693 | |
| | | | |
Treasury stock | | 5,184 | | | 31,802 | |
| | | | |
Retirement of long-term debt | | (3,384,007) | | | (4,998,642) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 523,484 | | | 185,455 | |
Capital contributions from noncontrolling interest | | 25,708 | | | 9,595 | |
Proceeds received by storm trust related to securitization | | 1,457,676 | | | 3,163,572 | |
Other | | 102,835 | | | 41,659 | |
Dividends paid: | | | | |
Common stock | | (678,699) | | | (615,937) | |
Preferred stock | | (13,739) | | | (13,739) | |
Net cash flow provided by financing activities | | 1,643,679 | | | 3,120,458 | |
| | | | |
| | | | |
| | | | |
Net increase in cash and cash equivalents | | 1,295,610 | | | 560,932 | |
| | | | |
Cash and cash equivalents at beginning of period | | 224,164 | | | 442,559 | |
| | | | |
Cash and cash equivalents at end of period | | $1,519,774 | | | $1,003,491 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $685,231 | | | $631,211 | |
Income taxes | | $35,291 | | | ($7,412) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $105,288 | | | $115,290 | |
Temporary cash investments | | 1,414,486 | | | 108,874 | |
Total cash and cash equivalents | | 1,519,774 | | | 224,164 | |
Accounts receivable: | | | | |
Customer | | 986,010 | | | 788,552 | |
Allowance for doubtful accounts | | (27,813) | | | (30,856) | |
Other | | 203,151 | | | 241,702 | |
Accrued unbilled revenues | | 551,392 | | | 495,859 | |
Total accounts receivable | | 1,712,740 | | | 1,495,257 | |
Deferred fuel costs | | 188,885 | | | 710,401 | |
Fuel inventory - at average cost | | 182,233 | | | 147,632 | |
Materials and supplies - at average cost | | 1,362,098 | | | 1,183,308 | |
Deferred nuclear refueling outage costs | | 125,101 | | | 143,653 | |
Prepayments and other | | 238,828 | | | 190,611 | |
TOTAL | | 5,329,659 | | | 4,095,026 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 4,417,704 | | | 4,121,864 | |
Non-utility property - at cost (less accumulated depreciation) | | 419,931 | | | 366,405 | |
Storm reserve escrow accounts | | 416,274 | | | 401,955 | |
Other | | 65,613 | | | 102,259 | |
TOTAL | | 5,319,522 | | | 4,992,483 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 65,954,146 | | | 64,646,911 | |
| | | | |
Natural gas | | 712,374 | | | 691,970 | |
Construction work in progress | | 2,296,265 | | | 1,844,171 | |
Nuclear fuel | | 606,600 | | | 582,119 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 69,569,385 | | | 67,765,171 | |
Less - accumulated depreciation and amortization | | 26,274,303 | | | 25,288,047 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 43,295,082 | | | 42,477,124 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $257,502 as of September 30, 2023 and $282,886 as of December 31, 2022) | | 5,690,179 | | | 6,036,397 | |
Deferred fuel costs | | 172,202 | | | 241,085 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 50,895 | | | 84,100 | |
Other | | 317,436 | | | 291,804 | |
TOTAL | | 6,607,884 | | | 7,030,558 | |
| | | | |
TOTAL ASSETS | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,524,057 | | | $2,309,037 | |
Notes payable and commercial paper | | 1,351,105 | | | 827,621 | |
Accounts payable | | 1,336,107 | | | 1,777,590 | |
Customer deposits | | 441,018 | | | 424,723 | |
Taxes accrued | | 531,990 | | | 424,091 | |
Interest accrued | | 261,835 | | | 195,264 | |
Deferred fuel costs | | 98,924 | | | — | |
| | | | |
Pension and other postretirement liabilities | | 53,533 | | | 104,845 | |
| | | | |
Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | | 250,123 | | | 202,779 | |
TOTAL | | 5,848,692 | | | 6,369,447 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 5,063,523 | | | 4,818,837 | |
Accumulated deferred investment tax credits | | 204,839 | | | 211,220 | |
| | | | |
Regulatory liability for income taxes - net | | 1,223,532 | | | 1,258,276 | |
Other regulatory liabilities | | 2,667,648 | | | 2,324,590 | |
Decommissioning and asset retirement cost liabilities | | 4,449,832 | | | 4,271,531 | |
Accumulated provisions | | 524,030 | | | 531,201 | |
Pension and other postretirement liabilities | | 916,981 | | | 1,213,555 | |
Long-term debt (includes securitization bonds of $278,286 as of September 30, 2023 and $292,760 as of December 31, 2022) | | 24,659,343 | | | 23,623,512 | |
Other | | 955,309 | | | 688,720 | |
TOTAL | | 40,665,037 | | | 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 | | 7,649,370 | | | 7,632,895 | |
Retained earnings | | 11,192,276 | | | 10,502,041 | |
Accumulated other comprehensive loss | | (195,453) | | | (191,754) | |
Less - treasury stock, at cost (68,182,125 shares in 2023 and 68,477,429 shares in 2022) | | 4,957,522 | | | 4,978,994 | |
Total common shareholders' equity | | 13,691,468 | | | 12,966,985 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interests | | 127,540 | | | 97,907 | |
TOTAL | | 13,819,008 | | | 13,064,892 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2023 |
(Unaudited) |
| | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
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) | 1,364 | | | — | | | — | | | — | | | 310,935 | | | — | | | 312,299 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,027 | | | 2,027 | |
Common stock issuances related to stock plans | — | | | — | | | 19,599 | | | (15,118) | | | — | | | — | | | 4,481 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,194) | | | — | | | (226,194) | |
Beneficial interest in storm trust | 14,577 | | | — | | | — | | | — | | | — | | | — | | | 14,577 | |
Distributions to noncontrolling interests | (574) | | | — | | | — | | | — | | | — | | | — | | | (574) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at March 31, 2023 | $108,694 | | | $2,797 | | | ($4,959,395) | | | $7,617,777 | | | $10,586,782 | | | ($189,727) | | | $13,166,928 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 770 | | | — | | | — | | | — | | | 391,244 | | | — | | | 392,014 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (3,292) | | | (3,292) | |
Common stock issuances related to stock plans | — | | | — | | | 600 | | | 16,528 | | | — | | | — | | | 17,128 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,248) | | | — | | | (226,248) | |
Capital contribution from noncontrolling interest | 25,708 | | | — | | | — | | | — | | | — | | | — | | | 25,708 | |
Distributions to noncontrolling interests | (113) | | | — | | | — | | | — | | | — | | | — | | | (113) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2023 | $130,479 | | | $2,797 | | | ($4,958,795) | | | $7,634,305 | | | $10,751,778 | | | ($193,019) | | | $13,367,545 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 2,959 | | | — | | | — | | | — | | | 666,755 | | | — | | | 669,714 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,434) | | | (2,434) | |
Common stock issuances related to stock plans | — | | | — | | | 1,273 | | | 15,065 | | | — | | | — | | | 16,338 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,257) | | | — | | | (226,257) | |
Distributions to noncontrolling interests | (1,318) | | | — | | | — | | | — | | | — | | | — | | | (1,318) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2023 | $127,540 | | | $2,797 | | | ($4,957,522) | | | $7,649,370 | | | $11,192,276 | | | ($195,453) | | | $13,819,008 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023, second quarter 2023, and third quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 |
(Unaudited) |
| | | | | | | | | | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries' Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
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) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | |
Common stock issuances related to stock plans | — | | | — | | | 36,612 | | | (31,085) | | | — | | | — | | | 5,527 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,058) | | | — | | | (205,058) | |
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 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 4,308 | | | — | | | — | | | — | | | 159,703 | | | — | | | 164,011 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 12,540 | | | 12,540 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Common stock issuances related to stock plans | — | | | — | | | 18,927 | | | 15,214 | | | — | | | — | | | 34,141 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,408) | | | — | | | (205,408) | |
Beneficial interest in storm trust | 31,636 | | | — | | | — | | | — | | | — | | | — | | | 31,636 | |
Capital contribution from noncontrolling interest | 9,595 | | | — | | | — | | | — | | | — | | | — | | | 9,595 | |
Distributions to noncontrolling interest | (190) | | | — | | | — | | | — | | | — | | | — | | | (190) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2022 | $107,492 | | | $2,720 | | | ($4,984,160) | | | $6,750,368 | | | $10,266,189 | | | ($324,038) | | | $11,818,571 | |
| | | | | | | | | | | | | |
Consolidated net income (loss) (a) | (4,707) | | | — | | | — | | | — | | | 560,589 | | | — | | | 555,882 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 10,668 | | | 10,668 | |
Common stock issuances related to stock plans | — | | | — | | | 4,741 | | | 14,745 | | | — | | | — | | | 19,486 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,471) | | | — | | | (205,471) | |
Distributions to noncontrolling interest | (290) | | | — | | | — | | | — | | | — | | | — | | | (290) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2022 | $97,915 | | | $2,720 | | | ($4,979,419) | | | $6,765,113 | | | $10,621,307 | | | ($313,370) | | | $12,194,266 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2022, second quarter 2022, and third quarter 2023 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. The following are updates to that discussion.
As discussed in the Form 10-K, in March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. Entergy Arkansas pursued its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy Arkansas collected $50 million in 2014 from Nuclear Electric Insurance Limited, a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants. Entergy Arkansas also collected a total of $21 million in 2018 as a result of stator-related settlements.
In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident was available.
In October 2023, Entergy Arkansas made a commitment to the APSC to make a filing to forgo its opportunity to seek recovery of the identified costs resulting from the ANO stator incident, specifically all incremental fuel and purchased energy expense, capital and incremental non-fuel operations and maintenance costs, and costs of any judgement that may be rendered against Entergy Arkansas in civil litigation that is not covered by insurance. As a result, in third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million, which includes interest, and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
issues a final order, but no later than the first billing cycle of September 2022. Also in May 2022, the PUCT referred the proceedingSpent Nuclear Fuel Litigation
See Note 8 to the State Office of Administrative Hearings. In July 2022, Entergy Texas filed on behalf of the parties an unopposed settlement resolving all issuesfinancial statements in the proceeding. In addition, Entergy Texas filedForm 10-K for information on behalf of the parties a motionEntergy’s spent nuclear fuel litigation. The following are updates to admit evidence, to approve interim rates as requested in the initial application, and to remand the proceeding to the PUCT to consider the unopposed settlement. In August 2022 the ALJ with the State Office of Administrative Hearings issued an order granting Entergy Texas’s motion, approving interim rates effective with the first billing cycle of September 2022, and remanding the case to the PUCT for final approval.that discussion.
In September 2022,March 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 Texas filed an application withArkansas, and the PUCTU.S. Court of Federal Claims issued a judgment in that amount in favor of Entergy Arkansas and against the DOE. Entergy Arkansas received payment from the U.S. Treasury in April 2023. The effects of recording the judgment were reductions to reconcile itsplant, nuclear fuel expense, other operation and purchased powermaintenance expense, materials and supplies, and taxes other than income taxes. The ANO damages awarded included $18 million related to costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligiblepreviously recorded as plant, $10 million related to costs previously recorded as other operation and maintenance expense, $8 million related to costs previously recorded as nuclear fuel expense, $3 million related to costs previously recorded as materials and purchased power expenses, net of certain revenues creditedsupplies, and $2 million related to such expenses andcosts previously recorded as taxes 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. A PUCT decision is expected in September 2023.than income taxes.
Retail RateIn July 2023 the DOE submitted an offer of judgment to resolve claims in the Indian Point 2 fourth round and Indian Point 3 third round combined damages case. The $59 million offer was accepted by Entergy and Holtec International, as the current owner. The U.S. Court of Federal Claims issued a final judgment in that amount in favor of Holtec Indian Point 2, LLC and Holtec Indian Point 3, LLC (previously Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear Indian Point 3, LLC) and against the DOE. Holtec received payment from the U.S. Treasury in July 2023. Consistent with certain terms agreed upon in connection with the sale of Indian Point Energy Center in May 2021, Holtec transferred $40 million to Entergy for its pro-rata share of the litigation proceeds in August 2023. The remainder of the judgment was retained by Holtec. The effect of recording Entergy’s pro-rata share of the judgment was a reduction to asset write-offs, impairments, and related charges (credits). Entergy’s pro-rata share of the damages awarded included $18 million related to costs previously recorded as spending on the asset retirement obligation, $15 million related to costs previously recorded as other operation and maintenance expense, $6 million related to costs previously recorded as plant, and $1 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.
Employment and Labor-related Proceedings
See Note 28 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 retail rate proceedings involving the Utility operating companies. The following are updates to that discussion.asbestos litigation.
Filings with the APSC (Entergy Arkansas)
Retail Rates
2022 Formula Rate Plan Filing
In July 2022, Entergy Arkansas filed with the APSC its 2022 formula rate plan filing to set its formula rate for the 2023 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2023 and a netting adjustment for the historical year 2021. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2023 projected year is 7.40% resulting in a revenue deficiency of $104.8 million. The earned rate of return on common equity for the 2021 historical year was 8.38% resulting in a $15.2 million netting adjustment. The total proposed revenue change for the 2023 projected year and 2021 historical year netting adjustment is $119.9 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the resulting increase is limited to $79.3 million. In October 2022 other parties filed their testimony recommending various adjustments to Entergy Arkansas’s overall proposed revenue deficiency, and Entergy Arkansas filed a response including an update to actual revenues through August 2022, which raised the constraint to $79.8 million. In November 2022, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues in the proceeding. As a result of the settlement agreement, the total proposed revenue change is $102.8 million, including a $87.7 million increase for the 2023 projected year and a $15.2 million netting adjustment. Because Entergy Arkansas’s revenue requirement exceeded the constraint, the resulting increase is limited to $79.8 million. The APSC will rule on the settlement at a later date. A hearing is currently scheduled for November 2022.
COVID-19 OrdersGrand Gulf - Related Agreements
See Note 8 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of September 30, 2022, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.
information regarding Grand Gulf-related agreements.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the LPSC (Entergy Louisiana)
Nelson Industrial Steam Company
Retail Rates - ElectricEntergy 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 to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. In May 2023, Entergy Louisiana filed an application with the FERC for transaction authorization pursuant to Section 203 of the Federal Power Act. In June 2023 the LPSC filed a notice to intervene in the proceeding. Entergy Louisiana is evaluating the effect of the transaction on its results of operations, cash flows, and financial condition, but at this time does not expect the effect to be material.
2021 Formula Rate Plan Filing
NOTE 2. RATE AND REGULATORY MATTERS(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
In May 2022, Entergy Louisiana filed its formula rate plan evaluation report for its 2021 calendar year operations. The 2021 test year evaluation report produced an earned return on common equity of 8.33%, with a base formula rate plan revenue increase of $65.3 million. Other increases in formula rate plan revenue driven by reductions in Tax CutRegulatory Assets and Jobs Act credits and additions to transmission and distribution plant in service reflected through the transmission recovery mechanism and distribution recovery mechanism are partly offset by an increase in net MISO revenues, leading to a net increase in formula rate plan revenue of $152.9 million. The effects of the changes to total formula rate plan revenue are different for each legacy company, primarily due to differences in the legacy companies’ capacity cost changes, including the effect of true-ups. Legacy Entergy Louisiana formula rate plan revenues will increase by $86 million and legacy Entergy Gulf States Louisiana formula rate plan revenues will increase by $66.9 million. In August 2022 the LPSC staff filed a list of objections/reservations, including outstanding issues from the test years 2017-2020 formula rate plan filings, utilizing the extraordinary cost mechanism to address one-time changes such as state tax rate changes, and failing to include an adjustment for revenues not received as a result of Hurricane Ida. Subject to refund and LPSC review, the resulting changes to formula rate plan revenues became effective for bills rendered during the first billing cycle of September 2022.Regulatory Liabilities
COVID-19 OrdersSee Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Regulatory activity regarding the Tax Cuts and Jobs Act
System Energy
As discussed in the Form 10-K, in Aprila filing made with the FERC in March 2018, System Energy proposed revisions to the Unit Power Sales Agreement to reflect the effects of the Tax Cuts and Jobs Act. In July 2020 the LPSCpresiding ALJ in the proceeding issued an initial decision finding that there is an additional $147 million in unprotected excess accumulated deferred income taxes related to System Energy’s uncertain decommissioning tax deduction. In December 2022 the FERC issued an order authorizing utilitiesaddressing the ALJ’s initial decision and denying System Energy’s motion to recordvacate the initial decision. The FERC disagreed with the ALJ’s determination that $147 million should be credited to customers in the same manner as the excess accumulated deferred income taxes addressed in System Energy’s March 2018 filing, which had included a regulatory asset expenses incurred from the suspensionstated amount of disconnectionsexcess accumulated deferred income taxes to be returned pursuant to a specified methodology and collection of late fees imposed by LPSC ordershad not included any excess accumulated deferred income taxes associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subjectdecommissioning tax position.Instead, the FERC ordered System Energy to LPSC review and approval,compute the amount of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of September 30, 2022, Entergy Louisiana had a regulatory asset of $47.8 million for costsexcess accumulated deferred income taxes associated with the COVID-19 pandemic.decommissioning tax position with consideration for the resolution of the tax position by the IRS. In February 2023, System Energy made the required filing with the FERC.In June 2023 the FERC issued a deficiency letter requesting additional information about the IRS’s resolution of the tax position for 2016 and 2017.In July 2023, System Energy provided the additional information.
Filings with the MPSC (Entergy Mississippi)Fuel and purchased power cost recovery
Retail RatesEntergy Arkansas
2022 Formula Rate Plan Filing
In March 2022, Entergy Mississippi submitted its formula rate plan 2022 test year filing and 2021 look-back filing showing Entergy Mississippi’s earned return for the historical 2021 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2022 calendar year to be below the formula rate plan bandwidth. The 2022 test year filing shows a $69 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equitySee Note 1 to the specified pointfinancial statements herein for discussion of adjustmentthe write-off in third quarter 2023 of 6.70% return on rate base, 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 2021 look-back filing compares actual 2021 resultsEntergy Arkansas’s $68.9 million regulatory asset for deferred fuel related to the approved benchmark return on rate base and reflectsANO stator incident as a result of a commitment, made in October 2023, by Entergy Arkansas to the need forAPSC to make a $34.5 million interim increase in formula rate plan revenues. In fourth quarter 2021, Entergy Mississippi recorded a regulatory asset of $19 millionfiling to reflect the then-current estimate in connection with the look-back featureforgo its opportunity to seek recovery of the formula rate plan. In accordance withincremental fuel and purchased energy expense resulting from the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2021 retail revenues, effective in April 2022.ANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Energy Cost Recovery Rider
As discussed in the Form 10-K, in March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. In February 2023 the APSC issued orders initiating proceedings with the utilities under its jurisdiction to address the prudence of costs incurred and appropriate cost allocation of the February 2021 winter storms. With respect to any prudence review of Entergy Arkansas fuel costs, as part of the APSC’s draft report issued in its February 2021 winter storms investigation docket, the APSC included findings that the load shedding plans of the investor-owned utilities and some cooperatives were appropriate and comprehensive, and, further, that Entergy Arkansas’s emergency plan was comprehensive and had a multilayered approach supported by a system-wide response plan, which is considered an industry standard. In September 2023 the APSC issued an order in Entergy Arkansas's company-specific proceeding and found that Entergy Arkansas’s practices during the winter storms were prudent.
In March 2023, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.01639 per kWh to $0.01883 per kWh. The primary reason for the rate increase is a large under-recovered balance as a result of higher natural gas prices in 2022 and a $32 million deferral related to the February 2021 winter storms consistent with the 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 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. The redetermined rate of $0.01883 per kWh became effective with the first billing cycle in April 2023 through the normal operation of the tariff.
Entergy Louisiana
As discussed in the Form 10-K, in March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. In August 2023 the LPSC submitted its audit report and found that materially all costs recovered through the purchased gas adjustment filings were reasonable and eligible for recovery through the purchased gas adjustment clause.
Entergy Mississippi
In June 2022,2023 the MPSC approved the joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2022 test year filing that resulted in a total rate increase of $48.6 million. Pursuant to the joint stipulation,for Entergy Mississippi’s 2021 look-back filing reflected an earned return on rate base of 5.99% in calendar year 2021, which is below the look-back bandwidth, resulting in a $34.3 million increase in the formula rate plan revenues on an interim basis through June 2023. In July 2022 the MPSC approved the joint stipulation with rates effective in August 2022. In July 2022, Entergy Mississippi recorded regulatory credits of $22.6 million to reflect the effects of the joint stipulation. In August 2022 an intervenor filed a statutorily-authorized direct appeal to the Mississippi Supreme Court seeking review of the MPSC’s July 2022 order approving the joint stipulation confirming Entergy Mississippi’s 20222023 formula rate plan filing. The rates that went into effect in August 2022 are not stayed or otherwise impacted while the appeal is pending.
In July 2022 the MPSCstipulation directed Entergy Mississippi to flow $14.1 millionmake a compliance filing to revise its power management cost adjustment factor, to revise its grid modernization cost adjustment factor, and to include a revision to reduce the net energy cost factor to a level necessary to reflect an average natural gas price of $4.50 per MMBtu. The MPSC approved the compliance filing in June 2023, effective for July 2023 bills. See “Retail Rate Proceedings - Filings with the MPSC (Entergy Mississippi) - Retail Rates - 2023 Formula Rate Plan Filing” below for further discussion of the power management rider over-recovery balance to customers beginning in August 2022 through December 2022 to mitigate the bill impact of the increase in2023 formula rate plan revenues.filing and the joint stipulation agreement.
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 JulyMay 2022 pursuantboth Entergy Mississippi and the tax equity investor made capital contributions to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filingtax equity partnership that were then used to the MPSC with updated calculationsmake an initial payment of $105 million for acquisition of the impact offacility. Commercial operation at the Sunflower Solar facility on rate basecommenced in September 2022. In April 2023 both Entergy Mississippi and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022investor made additional capital contributions to the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorizedtax equity partnership that were then used to make the recoverysubstantial completion payment of $30.4 million for acquisition of the costsfacility. The final payment of $4.7 million for acquisition of the Sunflower Solar facility through the interim capacity rate adjustment mechanismwas made in the formula rate plan with rates effective in December 2022.October 2023. See Note 14 to the financial statements hereinin the Form 10-K for a discussion of Entergy Mississippi’s purchase of the Sunflower Solar facility.
COVID-19 OrdersWalnut 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 obtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
cost and schedule and to updates arising as a result 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 APSC. In June 2023, Entergy Arkansas, the APSC general staff, and the Arkansas Attorney General filed a unanimous settlement supporting that the approval of the Walnut Bend Solar facility is in the public interest based on the terms in the settlement, which relate in part to certain treatment for the production tax credits associated with the facility. In July 2023, after requesting further testimony and purporting to modify several terms in the settlement and upon rehearing, the APSC approved the settlement largely on the terms submitted, including a 30-year amortization period for the production tax credits. The project is currently expected to achieve commercial operation in 2024.
West Memphis Solar
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 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. Closing had been expected to occur in 2023. In March 2022 the counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-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 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 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, and settlement negotiations are ongoing. 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, was 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 procedural schedule was established in May 2023 with a hearing scheduled for March 2024. In October 2023 the LPSC staff and intervenors filed testimony, with the LPSC staff supporting the amount of solar resources to be acquired and the alternative RFP process. The LPSC staff also
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
supported, subject to certain recommendations, the proposed framework for evaluation and certification of the solar resources by the LPSC and the proposed tariff.
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 staff and certain intervenors filed direct testimony in August, September, and October 2023. The LPSC staff filed cross-answering testimony in October 2023. The testimony largely supports implementation of some level of accelerated investment in resilience but raises various issues related to the magnitude of the investment, the cost recovery mechanism applicable to the investment, and the ratemaking for the investment.
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 contemplated adoption of a final rule in October 2023, but this did not occur, and a new date has not been set.
Entergy New Orleans
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 July 2022, Entergy New Orleans filed with the City 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 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. In July 2023, Entergy New Orleans filed comments in support of its application.
Dividends
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its October 2023 meeting, the Board declared a dividend of $1.13 per share, an increase from the previous $1.07 quarterly dividend per share that Entergy has paid since the third quarter 2022.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
Cash and cash equivalents at beginning of period | $224 | | | $443 | |
| | | |
Net cash provided by (used in): | | | |
Operating activities | 3,231 | | | 1,809 | |
Investing activities | (3,579) | | | (4,369) | |
Financing activities | 1,644 | | | 3,120 | |
Net increase in cash and cash equivalents | 1,296 | | | 560 | |
| | | |
Cash and cash equivalents at end of period | $1,520 | | | $1,003 | |
Operating Activities
Net cash flow provided by operating activities increased $1,422 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•lower fuel costs and the timing of recovery of fuel and purchased power costs;
•a decrease of $228 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery; and
•severance and retention payments of $40 million in 2022 related to Entergy’s exit from the merchant power business. See Note 13 to the financial statements in the Form 10-K for further discussion of Entergy’s exit from the merchant power business.
The increase was partially offset by:
•lower collections from Utility customers;
•an increase of $97 million in pension contributions in 2023 as compared to the same period in 2022. 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;
•an increase of $54 million in interest paid; and
•income tax payments of $35 million in 2023 compared to income tax refunds of $7 million in 2022. Entergy had income tax payments in 2023 as a result of higher estimated income taxes as compared to 2022. Entergy had income tax refunds in 2022 as a result of an overpayment on a prior year state income tax return.
Investing Activities
Net cash flow used in investing activities decreased $790 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•a decrease of $555 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by increased investment in the reliability and infrastructure of the distribution system;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•a decrease of $277 million in net payments to storm reserve escrow accounts;
•the initial payment of approximately $105 million in May 2022 as compared to the substantial completion payment of approximately $30 million in April 2023 for the purchase of the Sunflower Solar facility by the Entergy Mississippi tax equity partnership. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase;
•a decrease of $56 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by increased investment in the reliability and infrastructure of the transmission system;
•a decrease of $37 million in information technology capital expenditures primarily due to decreased spending on various technology projects in 2023; and
•cash collateral of $31 million posted in 2022 to support Entergy Texas’s obligations to MISO.
The decrease was partially offset by:
•an increase of $164 million in non-nuclear generation construction expenditures primarily due to higher spending on the Orange County Advanced Power Station project; and
•an increase of $76 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.
Financing Activities
Net cash flow provided by financing activities decreased $1,476 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to:
•proceeds from securitization of $1.5 billion received by the storm trust II at Entergy Louisiana in 2023 compared to proceeds from securitization of $3.2 billion received by the storm trust I at Entergy Louisiana in 2022;
•long-term debt activity providing approximately $221 million of cash in 2023 compared to providing approximately $318 million of cash in 2022; and
•an increase of $63 million in common stock dividends paid in 2023 as a result of an increase in the dividend paid per share and an increase in the number of shares outstanding.
The decrease was partially offset by an increase of $338 million in net issuances of commercial paper in 2023 compared to 2022 and an increase of $66 million in prepaid deposits related to contributions-in-aid-of-construction for generation interconnection agreements.
See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the Entergy Louisiana storm cost securitizations. 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.
Rate, Cost-recovery, and Other Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Rate, Cost-recovery, and Other Regulation” in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.
State and Local Rate Regulation and Fuel-Cost Recovery
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
See 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
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. The following is an update to that discussion.
Some of the agreements to sell the power produced by Entergy’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 September 30, 2023, based on power prices at that time, Entergy had liquidity exposure of $7 million under the guarantees in place supporting Entergy’s non-utility operations transactions and $8 million of posted cash collateral.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
NRC Reactor Oversight Process
As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except River Bend, which is in Column 2.
In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022 and also corrected a subsequent radiation monitor calibration issue. In May 2023 the NRC completed a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2 and Waterford 3 was returned to Column 1.
In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. In August 2023 the NRC issued a finding and notice of violation related to a radiation monitor calibration issue at River Bend. River Bend will remain in Column 2 pending successful completion of supplemental inspections related to both issues.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’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 and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | |
| Three Months Ended | | Nine Months Ended |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | $3,526,935 | | | $4,110,058 | | | $9,195,588 | | | $10,024,089 | |
Natural gas | 32,305 | | | 46,548 | | | 130,389 | | | 166,917 | |
Other | 36,282 | | | 62,009 | | | 96,630 | | | 300,731 | |
TOTAL | 3,595,522 | | | 4,218,615 | | | 9,422,607 | | | 10,491,737 | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | 707,491 | | | 1,366,811 | | | 2,189,592 | | | 2,685,694 | |
Purchased power | 309,376 | | | 415,066 | | | 754,199 | | | 1,255,318 | |
Nuclear refueling outage expenses | 39,057 | | | 39,707 | | | 111,075 | | | 119,625 | |
Other operation and maintenance | 751,763 | | | 793,145 | | | 2,043,184 | | | 2,249,674 | |
Asset write-offs, impairments, and related charges (credits) | 38,078 | | | (143) | | | 38,078 | | | (163,464) | |
Decommissioning | 52,336 | | | 49,263 | | | 153,981 | | | 174,171 | |
Taxes other than income taxes | 197,654 | | | 190,056 | | | 566,669 | | | 542,448 | |
Depreciation and amortization | 439,873 | | | 453,288 | | | 1,362,728 | | | 1,337,019 | |
Other regulatory charges (credits) - net | (83,489) | | | (43,283) | | | (158,317) | | | 689,355 | |
TOTAL | 2,452,139 | | | 3,263,910 | | | 7,061,189 | | | 8,889,840 | |
| | | | | | | |
OPERATING INCOME | 1,143,383 | | | 954,705 | | | 2,361,418 | | | 1,601,897 | |
| | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | |
Allowance for equity funds used during construction | 24,225 | | | 20,245 | | | 72,238 | | | 49,685 | |
Interest and investment income (loss) | 2,562 | | | 2,966 | | | 96,250 | | | (118,002) | |
Miscellaneous - net | (18,018) | | | (10,462) | | | (121,014) | | | 32,720 | |
TOTAL | 8,769 | | | 12,749 | | | 47,474 | | | (35,597) | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | 264,934 | | | 235,322 | | | 781,613 | | | 694,558 | |
Allowance for borrowed funds used during construction | (9,493) | | | (7,862) | | | (29,565) | | | (18,710) | |
TOTAL | 255,441 | | | 227,460 | | | 752,048 | | | 675,848 | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 896,711 | | | 739,994 | | | 1,656,844 | | | 890,452 | |
| | | | | | | |
Income taxes | 226,997 | | | 184,112 | | | 282,818 | | | (109,034) | |
| | | | | | | |
CONSOLIDATED NET INCOME | 669,714 | | | 555,882 | | | 1,374,026 | | | 999,486 | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $666,755 | | | $560,589 | | | $1,368,934 | | | $996,692 | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | $3.15 | | | $2.76 | | | $6.47 | | | $4.90 | |
Diluted | $3.14 | | | $2.74 | | | $6.45 | | | $4.88 | |
| | | | | | | |
Basic average number of common shares outstanding | 211,459,244 | | | 203,445,773 | | | 211,420,117 | | | 203,259,373 | |
Diluted average number of common shares outstanding | 212,238,117 | | | 204,578,013 | | | 212,195,735 | | | 204,357,916 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| Three Months Ended | | Nine Months Ended |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands) |
| | | | | | | |
Net Income | $669,714 | | | $555,882 | | | $1,374,026 | | | $999,486 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Cash flow hedges net unrealized gain (net of tax expense of $—, $—, $—, and $—) | — | | | 24 | | | — | | | 72 | |
Pension and other postretirement liabilities (net of tax expense (benefit) of ($743), $3,505, ($1,078), and $7,689) | (2,434) | | | 11,867 | | | (3,699) | | | 26,240 | |
Net unrealized investment loss (net of tax expense (benefit) of $—, $1,223, $—, and ($2,230)) | — | | | (1,223) | | | — | | | (7,154) | |
Other comprehensive income (loss) | (2,434) | | | 10,668 | | | (3,699) | | | 19,158 | |
| | | | | | | |
Comprehensive Income | 667,280 | | | 566,550 | | | 1,370,327 | | | 1,018,644 | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,959 | | | (4,707) | | | 5,092 | | | 2,794 | |
Comprehensive Income Attributable to Entergy Corporation | $664,321 | | | $571,257 | | | $1,365,235 | | | $1,015,850 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $1,374,026 | | | $999,486 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,668,540 | | | 1,667,756 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 257,210 | | | (76,672) | |
Asset write-offs, impairments, and related charges (credits) | | 38,078 | | | (163,464) | |
| | | | |
Changes in working capital: | | | | |
Receivables | | (217,483) | | | (368,772) | |
Fuel inventory | | (34,601) | | | 19,433 | |
Accounts payable | | (304,264) | | | (59,787) | |
Taxes accrued | | 107,899 | | | 89,554 | |
Interest accrued | | 66,571 | | | 38,361 | |
Deferred fuel costs | | 620,440 | | | (821,386) | |
Other working capital accounts | | (137,061) | | | (124,677) | |
Changes in provisions for estimated losses | | (7,171) | | | 297,842 | |
Changes in regulatory assets | | 415,101 | | | 587,128 | |
Changes in other regulatory liabilities | | 204,817 | | | (116,315) | |
Effect of securitization on regulatory asset | | (491,150) | | | (1,036,955) | |
| | | | |
Changes in pension and other postretirement liabilities | | (347,886) | | | (258,141) | |
Other | | 17,927 | | | 1,136,050 | |
Net cash flow provided by operating activities | | 3,230,993 | | | 1,809,441 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (3,373,617) | | | (3,853,121) | |
Allowance for equity funds used during construction | | 72,238 | | | 49,685 | |
Nuclear fuel purchases | | (201,213) | | | (125,619) | |
Payment for purchase of assets | | (30,433) | | | (106,193) | |
Net proceeds (payments) from sale of assets | | 11,000 | | | (7,082) | |
Insurance proceeds received for property damages | | 19,493 | | | — | |
Litigation proceeds from settlement agreement | | — | | | 9,829 | |
Changes in securitization account | | (4,839) | | | 1,224 | |
Payments to storm reserve escrow accounts | | (14,320) | | | (1,291,593) | |
Receipts from storm reserve escrow accounts | | — | | | 1,000,278 | |
Increase in other investments | | (4,998) | | | (33,238) | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 23,655 | | | 32,367 | |
Proceeds from nuclear decommissioning trust fund sales | | 806,658 | | | 1,377,304 | |
Investment in nuclear decommissioning trust funds | | (882,686) | | | (1,422,808) | |
Net cash flow used in investing activities | | (3,579,062) | | | (4,368,967) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 3,605,237 | | | 5,316,693 | |
| | | | |
Treasury stock | | 5,184 | | | 31,802 | |
| | | | |
Retirement of long-term debt | | (3,384,007) | | | (4,998,642) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 523,484 | | | 185,455 | |
Capital contributions from noncontrolling interest | | 25,708 | | | 9,595 | |
Proceeds received by storm trust related to securitization | | 1,457,676 | | | 3,163,572 | |
Other | | 102,835 | | | 41,659 | |
Dividends paid: | | | | |
Common stock | | (678,699) | | | (615,937) | |
Preferred stock | | (13,739) | | | (13,739) | |
Net cash flow provided by financing activities | | 1,643,679 | | | 3,120,458 | |
| | | | |
| | | | |
| | | | |
Net increase in cash and cash equivalents | | 1,295,610 | | | 560,932 | |
| | | | |
Cash and cash equivalents at beginning of period | | 224,164 | | | 442,559 | |
| | | | |
Cash and cash equivalents at end of period | | $1,519,774 | | | $1,003,491 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $685,231 | | | $631,211 | |
Income taxes | | $35,291 | | | ($7,412) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $105,288 | | | $115,290 | |
Temporary cash investments | | 1,414,486 | | | 108,874 | |
Total cash and cash equivalents | | 1,519,774 | | | 224,164 | |
Accounts receivable: | | | | |
Customer | | 986,010 | | | 788,552 | |
Allowance for doubtful accounts | | (27,813) | | | (30,856) | |
Other | | 203,151 | | | 241,702 | |
Accrued unbilled revenues | | 551,392 | | | 495,859 | |
Total accounts receivable | | 1,712,740 | | | 1,495,257 | |
Deferred fuel costs | | 188,885 | | | 710,401 | |
Fuel inventory - at average cost | | 182,233 | | | 147,632 | |
Materials and supplies - at average cost | | 1,362,098 | | | 1,183,308 | |
Deferred nuclear refueling outage costs | | 125,101 | | | 143,653 | |
Prepayments and other | | 238,828 | | | 190,611 | |
TOTAL | | 5,329,659 | | | 4,095,026 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 4,417,704 | | | 4,121,864 | |
Non-utility property - at cost (less accumulated depreciation) | | 419,931 | | | 366,405 | |
Storm reserve escrow accounts | | 416,274 | | | 401,955 | |
Other | | 65,613 | | | 102,259 | |
TOTAL | | 5,319,522 | | | 4,992,483 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 65,954,146 | | | 64,646,911 | |
| | | | |
Natural gas | | 712,374 | | | 691,970 | |
Construction work in progress | | 2,296,265 | | | 1,844,171 | |
Nuclear fuel | | 606,600 | | | 582,119 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 69,569,385 | | | 67,765,171 | |
Less - accumulated depreciation and amortization | | 26,274,303 | | | 25,288,047 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 43,295,082 | | | 42,477,124 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $257,502 as of September 30, 2023 and $282,886 as of December 31, 2022) | | 5,690,179 | | | 6,036,397 | |
Deferred fuel costs | | 172,202 | | | 241,085 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 50,895 | | | 84,100 | |
Other | | 317,436 | | | 291,804 | |
TOTAL | | 6,607,884 | | | 7,030,558 | |
| | | | |
TOTAL ASSETS | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
September 30, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,524,057 | | | $2,309,037 | |
Notes payable and commercial paper | | 1,351,105 | | | 827,621 | |
Accounts payable | | 1,336,107 | | | 1,777,590 | |
Customer deposits | | 441,018 | | | 424,723 | |
Taxes accrued | | 531,990 | | | 424,091 | |
Interest accrued | | 261,835 | | | 195,264 | |
Deferred fuel costs | | 98,924 | | | — | |
| | | | |
Pension and other postretirement liabilities | | 53,533 | | | 104,845 | |
| | | | |
Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | | 250,123 | | | 202,779 | |
TOTAL | | 5,848,692 | | | 6,369,447 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 5,063,523 | | | 4,818,837 | |
Accumulated deferred investment tax credits | | 204,839 | | | 211,220 | |
| | | | |
Regulatory liability for income taxes - net | | 1,223,532 | | | 1,258,276 | |
Other regulatory liabilities | | 2,667,648 | | | 2,324,590 | |
Decommissioning and asset retirement cost liabilities | | 4,449,832 | | | 4,271,531 | |
Accumulated provisions | | 524,030 | | | 531,201 | |
Pension and other postretirement liabilities | | 916,981 | | | 1,213,555 | |
Long-term debt (includes securitization bonds of $278,286 as of September 30, 2023 and $292,760 as of December 31, 2022) | | 24,659,343 | | | 23,623,512 | |
Other | | 955,309 | | | 688,720 | |
TOTAL | | 40,665,037 | | | 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 | | 7,649,370 | | | 7,632,895 | |
Retained earnings | | 11,192,276 | | | 10,502,041 | |
Accumulated other comprehensive loss | | (195,453) | | | (191,754) | |
Less - treasury stock, at cost (68,182,125 shares in 2023 and 68,477,429 shares in 2022) | | 4,957,522 | | | 4,978,994 | |
Total common shareholders' equity | | 13,691,468 | | | 12,966,985 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interests | | 127,540 | | | 97,907 | |
TOTAL | | 13,819,008 | | | 13,064,892 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $60,552,147 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2023 |
(Unaudited) |
| | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
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) | 1,364 | | | — | | | — | | | — | | | 310,935 | | | — | | | 312,299 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,027 | | | 2,027 | |
Common stock issuances related to stock plans | — | | | — | | | 19,599 | | | (15,118) | | | — | | | — | | | 4,481 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,194) | | | — | | | (226,194) | |
Beneficial interest in storm trust | 14,577 | | | — | | | — | | | — | | | — | | | — | | | 14,577 | |
Distributions to noncontrolling interests | (574) | | | — | | | — | | | — | | | — | | | — | | | (574) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at March 31, 2023 | $108,694 | | | $2,797 | | | ($4,959,395) | | | $7,617,777 | | | $10,586,782 | | | ($189,727) | | | $13,166,928 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 770 | | | — | | | — | | | — | | | 391,244 | | | — | | | 392,014 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (3,292) | | | (3,292) | |
Common stock issuances related to stock plans | — | | | — | | | 600 | | | 16,528 | | | — | | | — | | | 17,128 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,248) | | | — | | | (226,248) | |
Capital contribution from noncontrolling interest | 25,708 | | | — | | | — | | | — | | | — | | | — | | | 25,708 | |
Distributions to noncontrolling interests | (113) | | | — | | | — | | | — | | | — | | | — | | | (113) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2023 | $130,479 | | | $2,797 | | | ($4,958,795) | | | $7,634,305 | | | $10,751,778 | | | ($193,019) | | | $13,367,545 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 2,959 | | | — | | | — | | | — | | | 666,755 | | | — | | | 669,714 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (2,434) | | | (2,434) | |
Common stock issuances related to stock plans | — | | | — | | | 1,273 | | | 15,065 | | | — | | | — | | | 16,338 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (226,257) | | | — | | | (226,257) | |
Distributions to noncontrolling interests | (1,318) | | | — | | | — | | | — | | | — | | | — | | | (1,318) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2023 | $127,540 | | | $2,797 | | | ($4,957,522) | | | $7,649,370 | | | $11,192,276 | | | ($195,453) | | | $13,819,008 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023, second quarter 2023, and third quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 |
(Unaudited) |
| | | | | | | | | | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries' Preferred Stock and Noncontrolling Interests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
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) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | |
Common stock issuances related to stock plans | — | | | — | | | 36,612 | | | (31,085) | | | — | | | — | | | 5,527 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,058) | | | — | | | (205,058) | |
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 | |
| | | | | | | | | | | | | |
Consolidated net income (a) | 4,308 | | | — | | | — | | | — | | | 159,703 | | | — | | | 164,011 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 12,540 | | | 12,540 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Common stock issuances related to stock plans | — | | | — | | | 18,927 | | | 15,214 | | | — | | | — | | | 34,141 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,408) | | | — | | | (205,408) | |
Beneficial interest in storm trust | 31,636 | | | — | | | — | | | — | | | — | | | — | | | 31,636 | |
Capital contribution from noncontrolling interest | 9,595 | | | — | | | — | | | — | | | — | | | — | | | 9,595 | |
Distributions to noncontrolling interest | (190) | | | — | | | — | | | — | | | — | | | — | | | (190) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at June 30, 2022 | $107,492 | | | $2,720 | | | ($4,984,160) | | | $6,750,368 | | | $10,266,189 | | | ($324,038) | | | $11,818,571 | |
| | | | | | | | | | | | | |
Consolidated net income (loss) (a) | (4,707) | | | — | | | — | | | — | | | 560,589 | | | — | | | 555,882 | |
Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 10,668 | | | 10,668 | |
Common stock issuances related to stock plans | — | | | — | | | 4,741 | | | 14,745 | | | — | | | — | | | 19,486 | |
Common stock dividends declared | — | | | — | | | — | | | — | | | (205,471) | | | — | | | (205,471) | |
Distributions to noncontrolling interest | (290) | | | — | | | — | | | — | | | — | | | — | | | (290) | |
Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at September 30, 2022 | $97,915 | | | $2,720 | | | ($4,979,419) | | | $6,765,113 | | | $10,621,307 | | | ($313,370) | | | $12,194,266 | |
| | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2022, second quarter 2022, and third quarter 2023 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. The following are updates to that discussion.
As discussed in the Form 10-K, in March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. Entergy Arkansas pursued its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy Arkansas collected $50 million in 2014 from Nuclear Electric Insurance Limited, a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants. Entergy Arkansas also collected a total of $21 million in 2018 as a result of stator-related settlements.
In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident was available.
In October 2023, Entergy Arkansas made a commitment to the APSC to make a filing to forgo its opportunity to seek recovery of the identified costs resulting from the ANO stator incident, specifically all incremental fuel and purchased energy expense, capital and incremental non-fuel operations and maintenance costs, and costs of any judgement that may be rendered against Entergy Arkansas in civil litigation that is not covered by insurance. As a result, in third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million, which includes interest, and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Spent Nuclear Fuel Litigation
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation. The following are updates to that discussion.
In March 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 judgment in that amount in favor of Entergy Arkansas and against the DOE. Entergy Arkansas received payment from the U.S. Treasury in April 2023. The effects of recording the judgment were reductions to plant, nuclear fuel expense, other operation and maintenance expense, materials and supplies, and taxes other than income taxes. The ANO damages awarded included $18 million related to costs previously recorded as plant, $10 million related to costs previously recorded as other operation and maintenance expense, $8 million related to costs previously recorded as nuclear fuel expense, $3 million related to costs previously recorded as materials and supplies, and $2 million related to costs previously recorded as taxes other than income taxes.
In July 2023 the DOE submitted an offer of judgment to resolve claims in the Indian Point 2 fourth round and Indian Point 3 third round combined damages case. The $59 million offer was accepted by Entergy and Holtec International, as the current owner. The U.S. Court of Federal Claims issued a final judgment in that amount in favor of Holtec Indian Point 2, LLC and Holtec Indian Point 3, LLC (previously Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear Indian Point 3, LLC) and against the DOE. Holtec received payment from the U.S. Treasury in July 2023. Consistent with certain terms agreed upon in connection with the sale of Indian Point Energy Center in May 2021, Holtec transferred $40 million to Entergy for its pro-rata share of the litigation proceeds in August 2023. The remainder of the judgment was retained by Holtec. The effect of recording Entergy’s pro-rata share of the judgment was a reduction to asset write-offs, impairments, and related charges (credits). Entergy’s pro-rata share of the damages awarded included $18 million related to costs previously recorded as spending on the asset retirement obligation, $15 million related to costs previously recorded as other operation and maintenance expense, $6 million related to costs previously recorded as plant, and $1 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.
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. In May 2023, Entergy Louisiana filed an application with the FERC for transaction authorization pursuant to Section 203 of the Federal Power Act. In June 2023 the LPSC filed a notice to intervene in the proceeding. Entergy Louisiana is evaluating the effect of the transaction on its results of operations, cash flows, and financial condition, but at this time does not expect the effect 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.
Regulatory activity regarding the Tax Cuts and Jobs Act
System Energy
As discussed in the Form 10-K, in a filing made with the FERC in March 2018, System Energy proposed revisions to the Unit Power Sales Agreement to reflect the effects of the Tax Cuts and Jobs Act. In July 2020 the MPSCpresiding ALJ in the proceeding issued an initial decision finding that there is an additional $147 million in unprotected excess accumulated deferred income taxes related to System Energy’s uncertain decommissioning tax deduction. In December 2022 the FERC issued an order authorizing utilitiesaddressing the ALJ’s initial decision and denying System Energy’s motion to defer incremental costsvacate the initial decision. The FERC disagreed with the ALJ’s determination that $147 million should be credited to customers in the same manner as the excess accumulated deferred income taxes addressed in System Energy’s March 2018 filing, which had included a stated amount of excess accumulated deferred income taxes to be returned pursuant to a specified methodology and expenseshad not included any excess accumulated deferred income taxes associated with COVID-19 compliance andthe decommissioning tax position.Instead, the FERC ordered System Energy to seek future recovery through ratescompute the amount of excess accumulated deferred income taxes associated with the decommissioning tax position with consideration for the resolution of the prudently incurred incremental coststax position by the IRS. In February 2023, System Energy made the required filing with the FERC.In June 2023 the FERC issued a deficiency letter requesting additional information about the IRS’s resolution of the tax position for 2016 and expenses. 2017.In July 2023, System Energy provided the additional information.
Fuel and purchased power cost recovery
Entergy Mississippi beganArkansas
See Note 1 to the financial statements herein for discussion of the write-off in third quarter 2023 of Entergy Arkansas’s $68.9 million regulatory asset for deferred fuel related to the ANO stator incident as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing to forgo its opportunity to seek recovery of the bad debtincremental fuel and purchased energy expense deferral resulting from the COVID-19 pandemic overANO stator incident.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Energy Cost Recovery Rider
As discussed in the Form 10-K, in March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which included an adjustment to account for a three-year period with implementationportion of the interimincreased fuel costs resulting from the February 2021 winter storms. In February 2023 the APSC issued orders initiating proceedings with the utilities under its jurisdiction to address the prudence of costs incurred and appropriate cost allocation of the February 2021 winter storms. With respect to any prudence review of Entergy Arkansas fuel costs, as part of the APSC’s draft report issued in its February 2021 winter storms investigation docket, the APSC included findings that the load shedding plans of the investor-owned utilities and some cooperatives were appropriate and comprehensive, and, further, that Entergy Arkansas’s emergency plan was comprehensive and had a multilayered approach supported by a system-wide response plan, which is considered an industry standard. In September 2023 the APSC issued an order in Entergy Arkansas's company-specific proceeding and found that Entergy Arkansas’s practices during the winter storms were prudent.
In March 2023, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.01639 per kWh to $0.01883 per kWh. The primary reason for the rate increase is a large under-recovered balance as a result of higher natural gas prices in 2022 and a $32 million deferral related to the February 2021 winter storms consistent with the 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 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. The redetermined rate of $0.01883 per kWh became effective with the first billing cycle in April 2023 through the normal operation of the tariff.
Entergy Louisiana
As discussed in the Form 10-K, in March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. In August 2023 the LPSC submitted its audit report and found that materially all costs recovered through the purchased gas adjustment filings were reasonable and eligible for recovery through the purchased gas adjustment clause.
Entergy Mississippi
In June 2023 the MPSC approved the joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 2023 formula rate plan ratesfiling. The stipulation directed Entergy Mississippi to make a compliance filing to revise its power management cost adjustment factor, to revise its grid modernization cost adjustment factor, and to include a revision to reduce the net energy cost factor to a level necessary to reflect an average natural gas price of $4.50 per MMBtu. The MPSC approved the compliance filing in June 2023, effective for July 2023 bills. See “Retail Rate Proceedings - Filings with the MPSC (Entergy Mississippi) - Retail Rates - 2023 Formula Rate Plan Filing” below for further discussion of the 2023 formula rate plan filing and the joint stipulation agreement.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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. The PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023. In May 2023, Entergy Texas filed, and the ALJ with the State Office of Administrative Hearings granted, a joint motion to abate the proceeding to give parties additional time to finalize a settlement and cancelling the hearing on the merits previously scheduled for May 2023. In July 2023, Entergy Texas filed an unopposed settlement, supporting testimony, and an agreed motion to admit evidence and remand the proceeding to the PUCT. Pursuant to the unopposed settlement, Entergy Texas would receive no disallowance of fuel costs incurred over the three-year reconciliation period and retain $9.3 million in margins from off-system sales made during the reconciliation period, resulting in a cumulative under-recovery balance of approximately $99.7 million, including interest, as of the end of the reconciliation period. In July 2023 the ALJ with the State Office of Administrative Hearings granted the motion to admit evidence and remanded the proceeding to the PUCT for consideration of the unopposed settlement. The PUCT approved the settlement 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)
Retail Rates
2023 Formula Rate Plan Filing
In July 2023, Entergy Arkansas filed with the APSC its 2023 formula rate plan filing to set its formula rate for the 2024 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2024 and a netting adjustment for the historical year 2022. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2024 projected year is 8.11% resulting in a revenue deficiency of $80.5 million. The earned rate of return on common equity for the 2022 historical year was 7.29% resulting in a $49.8 million netting adjustment. The total proposed revenue change for the 2024 projected year and 2022 historical year netting adjustment is $130.3 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the resulting increase was limited to $88.6 million. The APSC general staff and intervenors filed their errors and objections in October 2023, proposing certain adjustments, including the APSC general staff’s update to annual filing year revenues which lowers the constraint to $87.7 million. Entergy Arkansas filed its rebuttal in October 2023. In October 2023, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues in the proceeding, none of which affected Entergy Arkansas’s requested recovery up to the cap constraint of $87.7 million. The settlement agreement is pending the APSC’s approval.
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. In its 2023 formula rate plan filing, Entergy Arkansas proposed to amortize the COVID-19 regulatory asset over a ten-year period. No party opposed Entergy Arkansas’s request. As of September 30, 2022,2023, Entergy MississippiArkansas had a remaining regulatory asset of $10.9$39 million for costs associated with the COVID-19 pandemic.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
2022 Formula Rate Plan Filing
In May 2023, Entergy Louisiana filed its formula rate plan evaluation report for its 2022 calendar year operations. The 2022 test year evaluation report produced an earned return on common equity of 8.33%, requiring an approximately $70.7 million increase to base rider revenue. Due to a cap for the 2021 and 2022 test years, however, base rider formula rate plan revenues are only being increased by approximately $4.9 million, leaving an ongoing revenue deficiency of approximately $65.9 million and providing for prospective return on common equity opportunity of approximately 8.38%. Other changes in formula rate plan revenue driven by increases in capacity costs, primarily legacy capacity costs, additions eligible for recovery through the transmission recovery mechanism and distribution recovery mechanism, and higher sales during the test period are offset by reductions in net MISO costs as well as credits for FERC-ordered refunds. Also included in the 2022 test year distribution recovery mechanism revenue requirement is a $6 million credit relating to the distribution recovery mechanism performance accountability standards and requirements. In total, the net increase in formula rate plan revenues, including base formula rate plan revenues inside the formula rate plan bandwidth and subject to the cap, as well as other formula rate plan revenues outside of the bandwidth, is $85.2 million. In August 2023 the LPSC staff filed a list of objections/reservations, including outstanding issues from the test years 2017-2021 formula rate plan filings, the calculation of certain refunds from System Energy, and certain calculations relating to the tax reform adjustment mechanism. Subject to refund and LPSC review, the resulting net increase in formula rate plan revenues of $85.2 million became effective for bills rendered during the first billing cycle of September 2023.
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
In August 2023, Entergy Louisiana filed an application for approval of a regulatory blueprint necessary for it to strengthen the electric grid for the State of Louisiana, which contains a dual-path request to update rates through either: (1) extension of Entergy Louisiana’s current formula rate plan (with certain modifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of rates resulting from a cost-of-service study (the Rate Case path). The application complies with Entergy Louisiana’s previous formula rate plan extension order requiring that for Entergy Louisiana to obtain another extension of its formula rate plan that included a rate reset, Entergy Louisiana would need to submit a full cost-of-service/rate case. Entergy Louisiana’s filing supports the need to extend Entergy Louisiana’s formula rate plan with credit supportive mechanisms needed to facilitate investment in the distribution, transmission, and generation functions.
The Rate Case path proposes a 2024-2026 test year formula rate plan with an initial revenue requirement increase, net of $17 million of one-time credits, of $430 million and a return on common equity of 10.5%. Depreciation rates would be updated for all asset classes. The Rate Mitigation Proposal proposes a 2023-2025 test year formula rate plan with an expected initial revenue requirement increase, also net of $17 million of one-time credits, of $173 million and a return on common equity of 10.0%. Depreciation rates would be updated only for nuclear assets and would be phased in over three years.
Under both paths, Entergy Louisiana’s filing proposes removing the cap on amounts allowed to be recovered through the distribution recovery mechanism and continuing the distribution recovery mechanism performance accountability targets, which tie Entergy Louisiana’s ability to fully recover its distribution recovery mechanism investments to its reliability performance. Entergy Louisiana’s filing also includes new customer-centric programs specifically focused on affordability, such as reducing late fees and certain other fees assessed to customers, lowering additional facilities charge rates, providing eligible low-income seniors with monthly discounts on their electric bill, and adding new voluntary customer options to support new transportation electrification
Entergy Corporation and Subsidiaries
Notes to Financial Statements
technologies. A status conference was held in October 2023 at which a procedural schedule was adopted that includes a hearing date of August 2024.
2017-2021 Formula Rate Plan Filings
In October 2023, Entergy Louisiana and the LPSC staff jointly filed an uncontested stipulated settlement agreement for consideration by the LPSC that would resolve the evaluation of Entergy Louisiana’s formula rate plan for test years 2017, 2018, and 2019 and resolve certain disputed issues for test years 2020 and 2021. If approved by the LPSC, the settlement would result in a one-time cost of service credit to customers of $5.8 million, would allow Entergy Louisiana to retain approximately $6.2 million of excess securitization collection as recovery of a regulatory asset associated with late fees related to the 2016 Baton Rouge flood, and would result in the reversal of a regulatory liability for excess accumulated deferred income taxes recognized in 2017 as a result of the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for further discussion of the Tax Cuts and Jobs Act. It is anticipated that the settlement will be considered by the LPSC in November 2023.
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 April 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, as well as to conduct additional outside right-of-way vegetation management activities and to apply to the minor storm reserve account. 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. The LPSC approved Entergy Louisiana’s requested relief in June 2023 and a subsequent filing will be required to permit the LPSC to review the COVID-19 regulatory asset. As of September 30, 2023, Entergy Louisiana had a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.
Filings with the MPSC (Entergy Mississippi)
Retail Rates
2023 Formula Rate Plan Filing
In March 2023, Entergy Mississippi submitted its formula rate plan 2023 test year filing and 2022 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 2022 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2023 calendar year to be below the formula rate plan bandwidth. The 2023 test year filing shows a $39.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 6.67%, within the formula rate plan bandwidth. The 2022 look-back filing compares actual 2022 results to the approved benchmark return on rate base and reflects the need for a $19.8 million temporary increase in formula rate plan 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 2022, Entergy Mississippi recorded a regulatory asset of $18.2 million in connection with the look-back feature of the formula rate 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 $27.9 million interim rate increase, reflecting a cap equal to 2% of 2022 retail revenues, effective in April 2023.
In May 2023, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed a 2023 test year filing resulting in a total revenue increase of $26.5 million for 2023. Pursuant to the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
joint stipulation, Entergy Mississippi’s 2022 look-back filing reflected an earned return on rate base of 6.10% in calendar year 2022, which is below the look-back bandwidth, resulting in a $19 million increase in the formula rate plan revenues on an interim basis through June 2024. Entergy Mississippi recorded a regulatory credit of $0.8 million in June 2023 to reflect the increase in the look-back regulatory asset. In addition, certain long-term service agreement and conductor handling costs were authorized for realignment from the formula rate plan to the annual power management and grid modernization riders effective January 2023, resulting in regulatory credits recorded in June 2023 of $4.1 million and $4.3 million, respectively. Also, the amortization of Entergy Mississippi’s COVID-19 bad debt deferral was suspended for calendar year 2023 and will resume in 2024. In June 2023 the MPSC approved the joint stipulation with rates effective in July 2023.
Filings with the City Council (Entergy New Orleans)
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 subsequently updated in a July 2022 filing, 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 sought approval of a $42.1$25.6 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula resultswould result in an increase in authorized electric revenues of $34.1$17.4 million and an increase in authorized gas revenues of $3.3$8.2 million. Entergy New Orleans also sought 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. In July 20222023, Entergy New Orleans filed a report to decrease its requested formula rate plan revenues by approximately $0.5 million to account for minor errors discovered after the filing. The City Council’sCouncil advisors issued a report seeking a reduction to Entergy New Orleans’s proposed increasein the requested formula rate plan revenues of approximately $17.1$8.3 million, in totalcombined for electric and gas, revenues.due to alleged errors. The City Council advisors proposed additional rate mitigation in the amount of $12 million through offsets to the formula rate plan rate increase by certain regulatory liabilities. In September 2023 the City Council approved an agreement to settle the 2023 formula rate plan filing. Effective with the first billing cycle of September 2022,2023, Entergy New Orleans implemented rates reflecting an amount agreed upon by Entergy New
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Orleans and the City Council, including adjustments filed in the City Council’s advisors’ report, per the approved process for formula rate plan implementation. The agreement provides for a total formula rate plan increase implemented was $24.7 million, which includes an increase of $18.2 million in electric revenues $4.7of $10.5 million in previously approved electric revenues, and ana total increase of $1.8 million in gas revenues. Additionally, creditsrevenues of $13.9$6.9 million. The agreement also provides for a minor storm accrual of $0.5 million funded by certain regulatory liabilitiesper year and the distribution of $8.9 million of currently held bycustomer credits to implement the City Council advisors’ mitigation recommendations.
Request for Extension and Modification of Formula Rate Plan
In September 2023, Entergy New Orleans for customers will be issued over an eight-month period beginning September 2022.
COVID-19 Orders
As discussed in the Form 10-K, in May 2020filed a motion seeking City Council approval of a three-year extension of Entergy New Orleans’s electric and gas formula rate plans. In October 2023 the City Council issued an accounting order authorizinggranted Entergy New OrleansOrleans’s request for an extension, subject to establishminor modifications which included a regulatory asset for incremental COVID-19-related expenses. As of September 30, 2022, Entergy New Orleans had a regulatory asset of $13.9 million for costs associated with the COVID-19 pandemic. As part of the agreed-upon terms of its 2022 formula rate plan filing, Entergy New Orleans will recover this regulatory asset over a five-year period beginning September 2023.capital structure not to exceed 55% equity.
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
2022 Base Rate Case
InAs discussed in the Form 10-K, in July 2022, Entergy Texas filed a base rate case with the PUCT seeking a net increase in base rates of approximately $131.4 million. The base rate case was based on a 12-month test year ending December 31, 2021. Key drivers of the requested increase arewere changes in depreciation rates as the result of
Entergy Corporation and Subsidiaries
Notes to Financial Statements
a depreciation study and an increase in the return on equity. In addition, Entergy Texas included capital additions placed into service for the period of January 1, 2018 through December 31, 2021, including those additions currently reflected in the then-effective distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which would behave been reset to zero as a result of this proceeding. In July 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In October 2022 intervenors filed direct testimony challenging and supporting various aspects of Entergy Texas’s rate case application. The key issues addressed included the appropriate return on equity, generation plant deactivations, depreciation rates, and proposed tariffs related to electric vehicles. In November 2022 the PUCT staff filed direct testimony addressing a similar set of issues and recommending a reduction of $50.7 million to Entergy Texas’s overall cost of service associated with the requested net increase in base rates of approximately $131.4 million. Entergy Texas will file rebuttal testimony in November 2022. A hearing on the merits is scheduled for December 2022. If a settlement is not reached, a final decision by the PUCT is expected in second quarter 2023.
Distribution Cost Recovery Factor (DCRF) Rider
As discussed in the Form 10-K, in August 2021,In May 2023, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended rider was 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 then-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 Officebehalf 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 aexcept for issues related to electric vehicle charging infrastructure, and Entergy Texas filed an agreed motion for interim rates, subject to take effectrefund or surcharge to the extent that the interim rates differ from the final approved rates. The unopposed settlement reflected a net base rate increase to be effective and relate back to December 2022 of $54 million, exclusive of, and incremental to, the costs being realigned from the distribution and transmission cost recovery factor riders and the generation cost recovery rider and $4.8 million of rate case expenses to be recovered through a rider over a period of 36 months. The net base rate increase of $54 million includes updated depreciation rates and a total annual revenue requirement of $14.5 million for usage onthe accrual of a self-insured storm reserve and after January 24, 2022. Also, in December 2021,the recovery of the regulatory assets for the pension and postretirement benefits expense deferral, costs associated with the COVID-19 pandemic, and retired non-advanced metering system electric meters. In May 2023 the ALJ with the State Office of Administrative Hearings issued an order grantinggranted the motion for interim rates, which went into effectbecame effective in January 2022, admitting evidence, and remandingJune 2023. Additionally, the ALJ remanded the proceeding, except for the issues related to electric vehicle charging infrastructure, to the PUCT to consider the settlement. In March 2022June 2023 the ALJ issued a proposal for decision related to the electric vehicle charging infrastructure issues and which noted recent legislation enacted which permits electric utilities to own and operate such infrastructure. The ALJ’s proposal for decision deferred to the PUCT regarding whether it is appropriate for any vertically integrated electric utility, or Entergy Texas specifically, to own electric vehicle charging infrastructure, and in the event that the PUCT decided ownership is permissible, the ALJ recommended approval of the proposed tariff to charge host customers for utility-owned and operated electric vehicle charging infrastructure sited on customer premises and denial of the proposed tariff to temporarily adjust billing demand charges for separately metered electric vehicle charging infrastructure, citing cost-shifting concerns. In July 2023 the parties filed exceptions and replies to exceptions to the proposal for decision. In August 2023 the PUCT issued an order approving the settlement.unopposed settlement and also issued an order severing the issues related to electric vehicle charging infrastructure addressed in the ALJ’s proposal for decision to a separate proceeding. Concurrently, Entergy Texas recorded the reversal of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved.
the unopposed settlement in August 2023, Entergy CorporationTexas recorded a regulatory liability of $8.9 million, which reflects the net effects of higher depreciation and Subsidiaries
Notes to Financial Statements
Transmission Cost Recovery Factor (TCRF) Rider
As discussedamortizations for the relate back period, partially offset by the relate back of base rate revenues that would have been collected had the approved rates been in effect for the Form 10-K, inperiod from December 2022 through June 2023, the date the new base rates were implemented on an interim basis. In October 2021,2023, Entergy Texas filed a relate back surcharge rider to collect over six months beginning in January 2024 an additional approximately $24.6 million, which is the revenue requirement associated with the PUCT a request to amend its TCRF rider. The amended rider was designed to collectrelate back of rates from Entergy Texas’s retail customers approximately $66.1 million annually, or $15.1 million in incremental annual revenues beyond Energy Texas’s then-effective TCRF rider based on its capital invested in transmission between September 1, 2020 and July 31, 2021 and changes in approved transmission charges. In JanuaryDecember 2022 through June 2023, including carrying costs, as authorized by the PUCT’s August 2023 order. A final decision by the PUCT referred the proceeding to the State Office of Administrative Hearings. In February 2022 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2022. In February 2022 the ALJ granted the motion for interim rates, admitted evidence, and remanded the case to the PUCT for consideration of a final order at a future open meeting. In June 2022 the PUCT issued an order approving the settlement.is expected by first quarter 2024.
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 the PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request. The PUCT approved the relate-back rider consistent with Entergy Texas’s as-filed request, and rates became effective over a five month period, in August 2022.
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. Concurrently with filing of the unanimous settlement agreement, Entergy Texas submitted an agreed motion to admit evidence and remand the case to the PUCT for review and consideration of the settlement agreement, which motion was granted by the ALJ with the State Office of Administrative Hearings. The PUCT approved the settlement agreementFacility, and rates became effective in August 2022.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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 with rates effective over three months beginning in May 2023.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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,Pursuant to the August 2023 PUCT will consider whether each utility's request forapproval of the unopposed settlement in Entergy Texas’s 2022 base rate case proceeding, the base rate increase of $54 million includes an annual revenue requirement of $3.4 million related to recovery of thesethe regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As of September 30, 2022, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic. As partEntergy Texas began recovery of its 2022the regulatory asset with the interim increase in the annual base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022.effective in June 2023.
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, 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. 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 February 2023. In June 2022, Entergy Arkansas filed a motion asserting that it is entitled to summary judgment because Entergy Arkansas’s position that the APSC’s order is pre-empted by the filed rate doctrine and violates the Dormant Commerce Clause is premised on facts that are not subject to genuine dispute. In July 2022,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 hold Entergy Arkansas’sstay 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 summary judgmentthe Eighth District to stay the proceedings pending the appeal, which also was denied. The trial was held in abeyance pending a ruling onFebruary 2023. Following the motion to intervene.trial, Entergy Arkansas filed a consolidated oppositionmotion with the United States Court of Appeals for the Eighth District to both motions.expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The United States Court of Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments were held in June 2023. In August 20222023 the APSC filed aUnited States Court of Appeals for the Eighth District denied Arkansas Electric Energy Consumers, Inc.’s motion for summary judgment arguing that thereto intervene. An order from the district court is no genuine issue as to any material fact and the APSC is entitled to judgment as a matter of law. In September 2022, Entergy Arkansas filed an opposition to the motion. In October 2022 the APSC filed a motion asking the court to hold further proceedings in abeyance pending a decision on the motions for summary judgment filed by Entergy Arkansas and the APSC. Also in October 2022, Entergy Arkansas filed an opposition to the motion, and the APSC filed a reply in support of its motion for summary judgment.pending.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC, including challenges with respect to System Energy’s authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain tax positions, a broader investigation of rates under the Unit Power Sales Agreement, and two prudence complaints, one challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of Grand Gulf, particularly in the 2016-2020 time period, and the second challenging the operation and management of Grand Gulf in the 2021-2022 time period. 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. The settlement in principle with the APSC described in “System Energy Settlement with the APSC” below, if approved by the FERC, will substantially reduce the aggregate amount of this exposure. 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. The following are updates to that discussion. See “System Energy Settlement with the MPSC” below for discussion of a partial settlement agreement and offer of settlement related to the pending proceedings before the FERC.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 $62$40 million, which includes interest through September 30, 2022,2023, and the estimated resulting annual rate reduction would be approximately $34$29 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.
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, the APSC, the MPSC, the 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, the APSC, the 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.
In August 2022 the D.C. Circuit Court of Appeals issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found FERC’s use of the Risk Premium model as part of the methodology to be arbitrary and capricious, and remanded the case back to FERC. The remanded case is pending FERC action.
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 thatrefunds 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’s rate base should have been reduced for those liabilities. IfEnergy filed its compliance report with the ALJ’s initial decision is upheld,FERC. With respect to the estimatedsale-leaseback renewal costs, System Energy calculated a refund for this issue through September 30, 2022 is approximately $422of $89.8 million, plus interest, which is approximately $144 million through September 30, 2022. The ALJ also foundrepresented all of the sale-leaseback renewal rental costs that System Energy should include liabilities associatedrecovered in rates, with interest. With respect to the decommissioning uncertain tax positions asposition 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 reduction going forward. Third, with regardcredit 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 adjustments,previously collected, plus interest, offset by the ALJ foundadditional return on rate base that System Energy should correct for the error in re-billings retroactively and prospectively, but that previously did not collect, without interest. See “System Energy should not be permittedSettlement with the MPSC” in the Form 10-K for discussion of the regulatory charge and corresponding regulatory liability recorded in June 2022 related to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue,these proceedings. In January 2023, System Energy estimatespaid the refunds of approximately $20$103.5 million, which includes interest through September 30, 2022.included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans.
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. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in
Entergy Corporation and Subsidiaries
Notes to Financial Statements
whole orIn January 2023, System Energy filed a request for rehearing of the FERC’s determinations in part. Refunds, if any, that might be required will only become due afterthe December 2022 order on sale-leaseback refund issues and future lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the proper 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 December 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issuesissued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiates a sixty-day period in which aggrieved parties may petition for federal appellate court review of the underlying FERC orders; however, the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case. In March 2023, System Energy filed in the 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 the 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 to clarify that, consistent with the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its allocation of the 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.
In August 2023 the FERC issued an order reviewingaddressing arguments raised on rehearing and partially setting aside the prior order (rehearing order). The rehearing order addresses rehearing requests that were filed in January 2023 separately by System Energy and the LPSC, the APSC, and the City Council.
In the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial decision.lease term. With regard to the depreciation input issue, the rehearing order allows System Energy to offset refunds so that System Energy may collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. The rehearing order further directs System Energy to submit within 60 days of the date of the rehearing order an additional compliance filing to revise the total refunds for these two issues. As discussed above, System Energy’s January 2023 compliance filing calculated $103.5 million in total refunds, and the refunds were paid in January 2023. In October 2023, System Energy filed its compliance report with the FERC as directed in the August 2023 rehearing order. The October 2023 compliance report reflected recalculated refunds totaling $35.7 million for the two issues resulting in $67.8 million in refunds that could be recouped by System Energy. As discussed below in “System Energy Settlement with the APSC,” System Energy reached a settlement in principle with the APSC to resolve several pending cases under the FERC’s jurisdiction, including this one, pursuant to which it has agreed not to recoup the $27.3 million calculated for Entergy Arkansas in the compliance filing. Consistent with the compliance filing, in October 2023, Entergy Louisiana and Entergy New Orleans paid recoupment amounts of $18.2 million and $22.3 million, respectively, to System Energy. As a result of the FERC’s rulings on the sale-leaseback and depreciation input issues in the August 2023 rehearing order, in third quarter 2023, System Energy recorded a regulatory asset and corresponding regulatory credit of $40 million to reflect the portion of the January 2023 refunds to be recouped from Entergy Louisiana and Entergy New Orleans.
On the third refund issue identified in the rehearing requests, concerning the decommissioning uncertain tax positions, the rehearing order denied all rehearing requests, re-affirmed the remedy contained in the December 2022 order, and did not direct System Energy to recalculate refunds or to submit an additional compliance filing. On this
Entergy Corporation and Subsidiaries
Notes to Financial Statements
issue, as reflected in its January 2023 compliance filing, System Energy believes it has already paid the refunds due under the remedy that the FERC outlined for the uncertain tax positions issue in its December 2022 order. In August 2023 the LPSC issued a media release in which it stated that it disagrees with System Energy’s determination that the rehearing order requires no further refunds to be made on this issue.
In September 2023, System Energy filed a protective appeal of the rehearing order with the United States Court of Appeals for the Fifth Circuit. The appeal was consolidated with System Energy’s prior appeal of the December 2022 order, and both appeals are currently in abeyance.
In September 2023 the LPSC filed with the FERC a request for rehearing and clarification of the rehearing order. The LPSC requests that the FERC reverse its determination in the rehearing order that System Energy may collect an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback, as of the expiration of the initial lease term, as well as its determination in the rehearing order that System Energy may offset the refunds for the depreciation rate input issue and collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. In addition, the LPSC requests that the FERC either confirm the LPSC’s interpretation of the refund associated with the decommissioning uncertain tax positions or explain why it is not doing so. In October 2023 the FERC issued a notice that the rehearing request has been deemed denied by operation of law. The deemed denial of the rehearing request initiates the sixty-day period in which aggrieved parties may petition for federal appellate court review of the underlying FERC orders; however the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case.
LPSC 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 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, the APSC,recommending refunds and the 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, the APSC, and the 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 of refunds for the accumulated deferred income taxes issues and proposed modifications to the Unit Power Sales Agreement for the executive incentive compensation issues.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 associated with a deemed contract satisfaction and reissuance that occurred190. in 2005. Based on the testimony revisions, the FERC trial staff’s recommended refunds total $106.6 million, exclusive of any tax gross-up or FERC awarded interest. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the changes in 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. The LPSC’s testimony assertsand asserted new claims, including that: (1) certainclaims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of the sale-leaseback transaction costs may have been imprudently incurred; (2) accumulated deferred income taxes associated with sale-leaseback transaction costs should have been included in rate base; (3) accumulated deferred income taxes associated with federal investment tax credits should have been excluded from rate base; (4) monthly net operating loss accumulated deferred income taxes should have been excluded from rate base;testimony and (5) several categories of proposed rate changes, including executive incentive compensation, air travel, industry dues, and legal costs, also warrant historical refunds. The LPSC’s rebuttal testimony argues that refunds for the alleged tariff violations and other claims must be calculated by rerunning the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 May 2023 deadline for the initial decision was granted.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolved the following issues raised in the Unit Power Sales Agreement formula rate; however, it includes estimatescomplaint: advance collection of refunds associated with some, but not all, of its claims, totaling $286 million without interest. The City Council’s rebuttal testimony also proposes a new, alternate theory and claim for relief regarding System Energy’s participation in the Entergy Systemlease payments, aircraft costs, executive incentive compensation, money pool under which it calculates estimated refundsborrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of approximately $51.7 million.the capital funds agreement. The APSC’s rebuttal testimony agreessettlement provided that System Energy would 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 LPSC’s direct testimony that retained earnings should be adjusted in a comprehensive refund calculation. The testimony quantifies the estimated impacts of three issues: (1) a $1.5 million reduction in the revenue requirementUtility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales AgreementAgreement. The settlement further provided that if System Energy’s borrowings from the money pool are included in short-term debt; (2) a $1.9 million reduction inAPSC, the revenue requirement if System Energy’s allocated share of money pool earnings are credited throughCity Council, or the Unit Power Sales Agreement; and (3) a $1.9 million reduction inLPSC agrees to the revenue requirement for every $50 million of refunds ordered in a given year, without interest.
In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony, for the hearing to begin in September 2022, and for the initial decision to be issued in March 2023. In July 2022,global settlement System Energy filed responsive rebuttal testimony responding toentered into with the new claims in the LPSC’s and the City Council’s rebuttal testimony. Also in July 2022 the LPSC filed supplemental rebuttal testimony responding to System Energy’s revised cross-answering testimony, and MPSC (see “System Energy fileSettlement with the MPSCd responsive rebuttal testimony responding to that testimony. In August 2022 the LPSC filed responsive rebuttal testimony to System Energy’s responsive rebuttal testimony. The hearing commenced in September 2022.
LPSC Petition for Writ of Mandamus
In August 2022 the LPSC filed a petition for a writ of mandamus asking the Fifth Circuit Court of Appeals to order the FERC to act within ninety days on certain pending proceedings, including the Grand Gulf prudence complaint, the return on equity and capital structure complaints, and the Grand Gulf sale-leaseback renewal complaint. In September 2022 the FERC and System Energy filed oppositions to the LPSC’s petition, and the APSC and the City Council filed interventions in support of the petition. See Note 2 to the financial statements” in the Form 10-K for further discussion of the complaints.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 addressed 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 was included in the May 2023 service month bills under the Unit Power Sales Agreement.
In May 2023 the presiding ALJ issued an initial decision finding that System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2020 Calendar Year Bills
System Energy’sshould have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power Sales Agreement includes formula rate protocolsbills. Based on this finding, the initial decision recommended refunds; System Energy estimates that providethose refunds for Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans would total approximately $116 million plus $147 million of interest through September 30, 2023. The initial decision also finds that the disclosureUnit Power Sales Agreement should be modified such that a cash working capital allowance of cost inputs, an opportunitynegative $36.4 million is applied prospectively. If the FERC ultimately orders these modifications to cash working capital be implemented, the estimated annual revenue requirement impact is expected to be immaterial. On the other non-settled issues for informal discovery procedures, and a challenge process. In February 2022, pursuantwhich the complainants sought refunds or changes to the protocols procedures,Unit Power Sales Agreement, the LPSC,initial decision ruled against the complainants.
The initial decision is an interim step in the FERC litigation process, and an ALJ’s determination made in an initial decision is not controlling on the FERC. System Energy disagrees with the ALJ’s findings concerning the accumulated deferred income taxes issues and cash working capital. In July 2023, System Energy filed a brief on exceptions to the initial decision’s accumulated deferred income taxes findings. Also in July 2023, the APSC, the MPSC,LPSC, the City Council, and the Mississippi Public Utilities StaffFERC trial staff filed withseparate briefs on exceptions. The APSC’s brief on exceptions challenges the ALJ’s determinations on the money pool interest and retained earnings issues. The LPSC’s brief on exceptions challenges the ALJ’s determinations regarding the sale-leaseback transaction costs, legal fees, and retained earnings issues. The City Council’s brief on exceptions challenges the ALJ’s determinations on the money pool and cash management issues. The FERC a formal challenge to System Energy’s implementationtrial staff’s brief on exceptions challenges the ALJ’s determinations on the cash working capital issue as well as certain of the formula rate during calendar year 2020. 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 recording the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made; (3) that the equity ratio charged in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5) thataccumulated deferred income taxes issues. In August 2023 all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2020 bills. While System Energy disagrees that any refunds are owed for the 2020 calendar year bills, the formal challenge estimates that the financial impact of the first through fourth allegations is approximately $53 million in refunds, excluding interest which will be calculated after a FERC order is issued; it does not provide an estimate of the financial impact of the fifth allegation.
In March 2022,parties filed separate briefs opposing exceptions. System Energy filed an answer toa brief opposing the formal challenge in which it requested thatexceptions of the APSC, the LPSC, and the City Council. The APSC, the LPSC, and the City Council filed separate briefs opposing the exceptions raised by System Energy and the FERC denytrial staff. The FERC trial staff filed its own brief opposing certain exceptions raised by System Energy, the formal challenge asAPSC, the LPSC, and the City Council. The case is now pending a matter of law, or else holddecision by the proceeding in abeyance pendingFERC.Refunds, if any, that might be required will become due only after the resolution of related dockets.FERC issues its order reviewing the initial decision.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Grand Gulf Prudence Complaint
As discussed in the Form 10-K, in March 2021, the second of the additional complaints was filed at the FERC by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. In November 2022 the FERC issued an order setting the complaint for settlement and hearing procedures. In February 2023 the FERC issued an order denying rehearing and thereby affirming its order setting the complaint for settlement and hearing procedures. In July 2023 the FERC chief ALJ terminated settlement procedures and appointed a presiding ALJ to oversee hearing procedures. In September 2023 a procedural schedule for hearing procedures was established. Pursuant to that schedule, testimony is due in December 2023 and throughout 2024. The hearing is scheduled to begin in January 2025, with the presiding ALJ’s initial decision due in July 2025.
In September 2023 the LPSC authorized its staff to file an additional complaint concerning the prudence of System Energy’s operation and management of Grand Gulf in the year 2022. In October 2023 the LPSC, the APSC, and the City Council filed what they styled as an amended and supplemental complaint with the FERC against System Energy, Entergy Services, and Entergy Operations. The amended complaint states that it is being filed for three primary purposes: (1) to include System Energy’s performance in 2021-2022 in the scope of the hearing; (2) to explicitly allege that System Energy’s inadequate performance, excessive costs, unplanned outages, and costs attributable to safety violations violate the contractual obligation to maintain and operate the plant in accordance with “good utility practice”; and (3) to provide and substantiate allegations concerning the damages attributable to the alleged breach of contractual obligations. The amended complaint alleges that potentially more than $1 billion in damages may be due. The current deadline for System Energy and the other named respondents to respond is in November 2023.
System Energy Settlement with the MPSCAPSC
In June 2022,October 2023, System Energy, Entergy Mississippi,Arkansas, and additional named Entergy parties involved in thirteenmultiple docketed proceedings pending before the FERC filedreached a settlement in principle with the FERC a partial settlement agreement and offer of settlement. The settlement memorializes the Entergy parties’ agreement with the MPSCAPSC to globally resolve all of their actual and potential claims between the Entergy parties and the MPSC associated within those FERC proceedingsdockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement in principle also covers the amended and supplemental complaint, discussed above in “Grand Gulf Prudence Complaint,” filed at the FERC in October 2023. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. System Energy previously settled with the MPSC with respect to these complaints before the FERC. Entergy Mississippi purchases the greatest single amount,has nearly 40% of System Energy’s share of Grand Gulf,Gulf’s output, after its additional purchases from affiliates are considered. The settlement therefore limitssettlements with both the APSC and the MPSC represent almost 65% of System Energy’s overall refund exposure associatedshare of the output of Grand Gulf.
The terms of the settlement in principle align with the identified proceedings because they will$588 million global black box settlement reached between System Energy and the MPSC in June 2022 and provide for Entergy Arkansas to receive a black box refund of $142 million from System Energy, inclusive of $50 million already received by Entergy Arkansas from System Energy. In November 2022 the FERC approved the System Energy settlement with the MPSC and stated that the settlement “appears to be resolved completely as betweenfair and reasonable and in the public interest.”
System Energy, Entergy Arkansas, additional Entergy parties, and the MPSC.
TheAPSC intend to file the settlement agreement and supporting materials with the FERC proceedings that are resolved as between the Entergy parties and the MPSC include the return on equity and capital structure complaints, the Grand Gulf sale-leaseback renewal complaint and uncertain tax position rate base issue, the Unit Power Sales Agreement complaint, and the Grand Gulf prudence complaint, all of which are discussed in Note 2November 2023. In addition to the financial statements in the Form 10-K, and updated above. They also include the proceedings concerning System Energy’s return of excess accumulated deferred income taxes after the Tax Cuts and Jobs Act and the proceedings established to address System Energy’s October 2020 and December 2020 Federal Power Act section 205 filings to provide credits to customers related to the IRS’s decision as to the uncertain decommissioning tax position, also as all discussed in Note 2 to the financial statements in the Form 10-K. The settlement also resolves the MPSC’s involvement in the formal challenge filed by the retail regulators of System Energy’s customers in connection with the implementation of the Unit Power Sales Agreement annual formula rate protocols for the 2020 test year, which is discussed above.
The settlement provides for a black-boxblack box refund of $235$142 million from System Energy to Entergy Mississippi, which will be paid within 120 days of the settlement’s effective date (either the date of the FERC approval of the settlement without material modification, or the date that all settling parties agree to accept modifications or otherwise modify the settlement in response to a proposed material modification by the FERC). In addition,described above, beginning with the July 2022November 2023 service month, the settlement in principle provides for Entergy Mississippi’sArkansas’s bills from System Energy to be adjusted to reflect:reflect an authorized rate of return on equity of 9.65%, and a capital structure not to exceed 52% equity, a rate base reduction for the advance collection of sale-leaseback rental costs, and the exclusion of certain long-term incentive plan performance unit costs from rates.
The settlement is expressly contingent upon the approval of the FERC and the MPSC. It was approved by the MPSC in June 2022. The remaining retail regulators of Entergy’s utility operating company purchasers under the Unit Power Sales Agreement (the APSC, the LPSC, and the City Council) may elect to join the settlement. If all of them elect to do so under the terms of the settlement, then the total black-box refund payment by System Energy would be $588.25 million, and the prospective rate adjustments would apply to all purchasers under the Unit Power Sales Agreement.equity.
If the FERC approves the filed settlement in accordance with its terms, then it will become binding upon the Entergy parties and the MPSC even if no additional retail regulators electAPSC.
Entergy Corporation and Subsidiaries
Notes to join the settlement. The settlement will have no effect on the rights of non-settling parties to the identified FERC proceedings.Financial Statements
System Energy Regulatory Liability for Pending Complaints
Prior to June 2022, System Energy previously recorded a provision and associated liability of $37 million for elements of the applicable litigation.complaints against System Energy. In June 2022, as discussed in “System Energy Settlement with the MPSC” in the Form 10-K, System Energy recorded a regulatory charge of $551 million ($413 million net-of-tax), increasing theSystem Energy’s regulatory liability to $588 million, which consistsconsisted of $235 million for the settlement with the MPSC and $353 million for potential future refunds to Entergy Arkansas, Entergy New Orleans, and Entergy Louisiana. The $142 million of refunds for Entergy Arkansas, discussed above in “System Energy Settlement with the APSC” is covered within the $353 million previously recorded. System Energy paid the black-box refund of $235 million to Entergy Mississippi in November 2022. As discussed above in “Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue,” in January 2023 System Energy paid refunds of $103.5 million as a result of the FERC’s order in December 2022 in that proceeding and recouped $40.5 million of the $103.5 million from Entergy Louisiana and Entergy New Orleans.Orleans in October 2023. In August 2022 commentsaddition, as discussed above in “Unit Power Sales Agreement Complaint,” a black-box refund of $18 million was made by System Energy in 2023 in connection with a partial settlement in that proceeding.
Based on analysis of the pending complaints against System Energy and potential future settlement negotiations, in third quarter 2023, System Energy recorded a regulatory charge of $40 million to increase System Energy’s regulatory liability related to complaints against System Energy. System Energy’s remaining regulatory liability related to complaints against System Energy as of September 30, 2023 is approximately $270 million. This regulatory liability is consistent with the settlement were filed byagreements reached with the MPSC and the APSC, as described above, taking into account amounts already refunded.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2021 Calendar Year Bills
In March 2023, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC, the City Council, and the FERC trial staff. The APSC, the LPSC, and the City Council dofiled with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 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 used incorrect inputs for retained earnings that are used to determine the capital structure; (3) that the equity ratio charged in rates was excessive; and (4) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2021 bills. The first, third, and fourth allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 bills. The formal challenge to the calendar year 2021 bills states that the impact of the first allegation is “tens of millions of dollars,” but it does not intendprovide an estimate of the financial impact of the remaining allegations.
In May 2023, System Energy filed an answer to jointhe formal challenge in which it requested that the FERC either deny the formal challenge as a matter of law or hold the proceeding in abeyance pending the resolution of related dockets.
Depreciation Amendment Proceeding
As discussed in Note 2 to the financial statements in the Form 10-K, in December 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to adopt updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses. The proposed amendments would result in higher charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. In February 2022 the FERC accepted System Entergy’s proposed increased depreciation rates with an effective date of March 1, 2022, subject to refund pending the outcome of the settlement but they do notand/or hearing procedures. In June 2023 System Energy filed with the FERC an unopposed offer of settlement that it had
Entergy Corporation and Subsidiaries
Notes to Financial Statements
oppose its approval as betweennegotiated with intervenors to the MPSCproceeding. In August 2023 the FERC approved the settlement, which resolves the proceeding. In third quarter 2023, System Energy recorded a reduction in depreciation expense of $41 million representing the cumulative difference in depreciation expense resulting from the depreciation rates used from March 2022 through June 2023 and the Entergy parties. The FERC trial staff concludes thatdepreciation rates included in the settlement is fair, reasonable, andfiling approved by the FERC. In October 2023, System Energy filed a refund report with the FERC. The refund provided for in the public interest. Replyrefund report was included in the September 2023 service month bills under the Unit Power Sales Agreement. The deadline for any comments were filed in August 2022. System Energy requested an order from the FERC byand protests is November 2022.2023.
Pension Costs Amendment Proceeding
In October 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to include in rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Entergy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony will be filed through April 2024, and the hearing is scheduled to begin in May 2024. The presiding ALJ’s initial decision is expected to be due in September 2024.
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 updates 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 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 soughtwas 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-establishment
Entergy Corporation and Subsidiaries
Notes to Financial Statements
approved 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 to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application at 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 for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
After filing of testimony by2022 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 intervenors, which generally supported or did not opposeeligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s requestsplans to securitize these costs, net of the $1 billion in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida,funds withdrawn from the storm escrow account described 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,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 $1.942 billion from utility plantwere reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to other regulatory assets.
In May 2022authorize the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana.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 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 approved inLegislature’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 III (the storm trust)trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 31,635,718.722114,576,757.48 Class AB 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, 20222023 on the preferred membership interests issued to the storm trust.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.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%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 June 2022April 2023 and the system restoration charge is expected to remain in place for up to 15 years. Entergy and Entergy Louisiana do not
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 distributed $1.4loaned approximately $1.5 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy, which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 andwas indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.
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 $290$133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million.$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 $224$103 million ($16576 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 secondfirst quarter 2022,2023, Entergy Louisiana recorded a charge of $31.6$14.6 million in other income to reflect the LURC’s beneficial interest in the trust.
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 of $57 million 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 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 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In 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 October 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 plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. A procedural schedule has been established with a hearing in December 2022.trust II.
Entergy New Orleans
Hurricane Zeta
As discussed in the Form 10-K, in October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. In May 2021, Entergy New Orleans filed an application with the City Council requesting approval and certification that its system restoration costs associated with Hurricane Zeta of approximately $36 million, which included $7 million in estimated costs, were reasonable and necessary to
Entergy Corporation and Subsidiaries
Notes to Financial Statements
enable Entergy New Orleans to restore electric service to its customers and Entergy New Orleans’s electric utility infrastructure. In May 2022 the City Council advisors issued a report recommending that the City Council find that Entergy New Orleans acted prudently in restoring service following Hurricane Zeta and approximately $33 million in storm restoration costs were prudently incurred and recoverable. Additionally, the advisors concluded that approximately $7 million of the $44 million withdrawn from its funded storm reserve was in excess of Entergy New Orleans’s costs and should be considered in Entergy New Orleans’s application for certification of costs related to Hurricane Ida. In September 2022 the City Council issued a resolution finding that Entergy New Orleans’s system restoration costs were reasonable and necessary, and that Entergy New Orleans acted prudently in restoring electricity following Hurricane Zeta. The City Council also found that approximately $33 million in storm costs were recoverable.
Hurricane Ida
As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million.million, which were subsequently included in an addendum to the June 2022 application. Also, Entergy New Orleans is requestingrequested approval that the $39 million withdrawal from its funded storm reserve in September 2021, the $125 million withdrawal from its securitized storm reserve, and $7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms arewere properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered from Entergy New Orleans customers by $46 million.costs.
Additionally, as discussed in the Form 10-K, in February 2022, Entergy New Orleans filed withIn August 2023 the City Council advisors issued a securitization application requestingreport recommending that the City Council reviewfind that Entergy New Orleans’sOrleans prudently incurred approximately $164.1 million in storm reserverestoration costs and increase$7.5 million in carrying charges and that such costs have already been properly recovered by Entergy New Orleans through withdrawals from the storm reserve funding level to $150 million, to be funded through securitization. In August 2022 theescrow account. The City Council’sCouncil advisors also recommended that the City Council authorize a single securitization bond issuance to fundfind that approximately $1.2 million in storm restoration costs had already been recovered through Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council reviewbase rates and certification; (2) provide initial funding ofthat approximately $0.9 million in unused credits be applied against future storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved byAugust 2023 the City Council along with a financing order in October 2022, authorizing Entergy New Orleans to proceed with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject to City Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 the City Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certifycertified the record for City Council consideration no later than August 2023.evidentiary record.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
NOTE 3. EQUITY (Entergy Corporation Entergy Louisiana, and Entergy Mississippi)Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
| | | | For the Three Months Ended September 30, |
| | For the Three Months Ended September 30, | | 2023 | | 2022 |
| | 2022 | | 2021 | | (In Millions, Except Per Share Data) |
| | (In Millions, Except Per Share Data) | | $/share | | $/share |
| Income | | Shares | | $/share | | Income | | Shares | | $/share | |
Basic earnings per share | | |
Net income attributable to Entergy Corporation | Net income attributable to Entergy Corporation | $560.6 | | | 203.4 | | | $2.76 | | | $531.0 | | | 201.0 | | | $2.64 | | Net income attributable to Entergy Corporation | $666.8 | | | $560.6 | | |
Basic shares and earnings per average common share | | Basic shares and earnings per average common share | 211.5 | | | $3.15 | | | 203.4 | | | $2.76 | |
Average dilutive effect of: | Average dilutive effect of: | | Average dilutive effect of: | |
Stock options | Stock options | | 0.5 | | | (0.01) | | | 0.4 | | | — | | Stock options | 0.2 | | | — | | | 0.5 | | | (0.01) | |
Other equity plans | Other equity plans | | 0.6 | | | (0.01) | | | 0.6 | | | (0.01) | | Other equity plans | 0.5 | | | (0.01) | | | 0.6 | | | (0.01) | |
Equity Forwards | | 0.1 | | | — | | | — | | | — | | |
Diluted earnings per share | $560.6 | | | 204.6 | | | $2.74 | | | $531.0 | | | 202.0 | | | $2.63 | | |
Equity forwards | | Equity forwards | — | | | — | | | 0.1 | | | — | |
Diluted shares and earnings per average common shares | | Diluted shares and earnings per average common shares | 212.2 | | | $3.14 | | | 204.6 | | | $2.74 | |
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.9 million1,305,354 options for the three months ended September 30, 20222023 and approximately 1 million926,403 options for the three months ended September 30, 2021.2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
| | | For the Nine Months Ended September 30, | | For the Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions, Except Per Share Data) | | (In Millions, Except Per Share Data) |
| | Income | | Shares | | $/share | | Income | | Shares | | $/share | | $/share | | $/share |
Basic earnings per share | | |
Net income attributable to Entergy Corporation | Net income attributable to Entergy Corporation | $996.7 | | | 203.3 | | | $4.90 | | | $859.6 | | | 200.8 | | | $4.28 | | Net income attributable to Entergy Corporation | $1,368.9 | | | $996.7 | | |
Basic shares and earnings per average common share | | Basic shares and earnings per average common share | 211.4 | | | $6.47 | | | 203.3 | | | $4.90 | |
Average dilutive effect of: | Average dilutive effect of: | | Average dilutive effect of: | |
Stock options | Stock options | | 0.5 | | | (0.01) | | | 0.4 | | | (0.01) | | Stock options | 0.3 | | | (0.01) | | | 0.5 | | | (0.01) | |
Other equity plans | Other equity plans | | 0.5 | | | (0.01) | | | 0.4 | | | (0.01) | | Other equity plans | 0.5 | | | (0.01) | | | 0.5 | | | (0.01) | |
Equity forwards | Equity forwards | | 0.1 | | | — | | | — | | | — | | Equity forwards | — | | | — | | | 0.1 | | | — | |
Diluted earnings per share | $996.7 | | | 204.4 | | | $4.88 | | | $859.6 | | | 201.6 | | | $4.26 | | |
Diluted shares and earnings per average common shares | | Diluted shares and earnings per average common shares | 212.2 | | | $6.45 | | | 204.4 | | | $4.88 | |
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.9 million1,138,384 options for the nine months ended September 30, 20222023 and approximately 1 million937,350 options for the nine months ended September 30, 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Dividends declared per common share were $1.07 for the three months ended September 30, 2023 and $1.01 for the three months ended September 30, 2022 and $0.95 for the three months ended September 30, 2021.2022. Dividends declared per common share were $3.21 for the nine months ended September 30, 2023 and $3.03 for the nine months ended September 30, 2022 and $2.85 for the nine months ended September 30, 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. Initially, theThe aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement couldmay not exceed an aggregate gross sales price of $1 billion. In May 2022, Entergy increased the aggregate gross sales price authorized under the at the market equity distribution program by $1$2 billion. As of September 30, 2022,2023, shares at an aggregate gross sales price of approximately $1,077.8$1,126 million hashave been sold under the at the market equity distribution program. 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.
During the nine months ended September 30, 2023 and 2022, there were no shares of common stock issued under the at the market equity distribution program. During the nine months ended
In March, June, and September 30, 2021,2022, Entergy Corporation issued 265,468entered into forward sale agreements for 1,538,010 shares, 2,124,086 shares, and 1,666,172 shares of common stock, under the at the market equity distribution program. The net sales proceeds from these shares totaled $26.8 million, which includes the gross sales price of $28.2 million received by Entergy Corporation less $1.1 million of general issuance costs and $0.3 million of aggregate compensation to the agents with respect to such sales.
In June 2021, Entergy entered into a forward sale agreement for 416,853 shares of common stock. The forward sale agreement was amended in August 2022 to extend the duration of the forward sale agreement by one year.respectively. 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.agreements occurred in November 2022. The forward sale agreement requiresagreements required Entergy to, at its election prior to September 30,29, 2023 for the March 2022 agreements and prior to December 29, 2023 for the June and September agreements, either (i) physically settle the transactions by issuing the total of 416,853
Entergy Corporation1,538,010 shares, 2,124,086 shares, and Subsidiaries
Notes to Financial Statements
1,666,172 shares, respectively, of its common stock to the investment bankforward counterparties in exchange for net proceeds at the then-applicable forward sale price specified by the agreementagreements (initially $106.87approximately $108.12, $116.94, and $115.46 per share)share, respectively) or (ii) net settle the transactiontransactions in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 416,853 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled $45 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $0.5 million, which have not been deducted from the gross sales price. Entergy Corporation did not receive any proceeds from such sales of borrowed shares.
In August and October 2021, Entergy entered into forward sale agreements for 1,692,555 and 250,743 shares of common stock, respectively. The forward sale agreements were amended in August 2022 to extend the duration of the forward sale agreements by one year. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreements occur. In each case, the forward sale agreement requires Entergy to, at its election prior to September 30, 2023, either (i) physically settle the transactions by issuing the total of 1,692,555 and 250,743 shares, respectively, of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the respective forward sale agreement (initially approximately $111.16 and $100.35 per share, respectively) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the respective forward sale agreement.agreements. In connection with the forward sale agreements, the forward seller, or its affiliates, borrowed from third parties and sold 1,692,5551,538,010 shares, 2,124,086 shares, and 250,7431,666,172 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled $190.1approximately $168 million, $250.9 million, and $25.4$194.2 million, respectively. In connection with the sales of these shares, Entergy paid the forward sellers fees of $1.9approximately $1.7 million, $2.5 million, and $0.3$1.9 million, respectively, which have not been deducted from the gross sales prices. Entergy did not receive any proceeds from such sales of borrowed shares.
In MarchNovember 2022, Entergy physically settled its obligations under the then-outstanding 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 at the market equity distribution program.
In June 2023, Entergy entered into a forward sale agreementagreements for 1,538,010102,995 shares and 365,307 shares of common stock. No amounts have been or will be recorded on Entergy’s balance sheet with respect to the equity offeringofferings until settlements of the equity forward sale agreementagreements occur. The forward sale agreement requiresagreements require Entergy to, at its election prior to September 29, 2023,May 31, 2024 or June 28, 2024, respectively, either (i) physically settle the transactions by issuing the total of 1,538,010102,995 shares and 365,307 shares, respectively, 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$101.36 and $101.39 per share)share, respectively) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. TheEach forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement,agreements, the forward seller, or its affiliates, borrowed from third parties and sold 1,538,010102,995 shares and 365,307 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $168 million.$10.5 million and $37.4 million, respectively. 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.
In June 2022, Entergy entered into a forward sale agreement for 2,124,086 shares of common stock. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to December 29, 2023, either (i) physically settle the transactions by issuing the total of 2,124,086 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 $116.94 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 is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 2,124,086 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $250.9 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of
Entergy Corporation and Subsidiaries
Notes to Financial Statements
approximately $2.5 million, which have not been deducted from the gross sales price. Entergy did not receive any proceeds from such sales of borrowed shares.
In September 2022, Entergy entered into a forward sale agreement for 1,666,172 shares of common stock. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to December 29, 2023, either (i) physically settle the transactions by issuing the total of 1,666,172 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 $115.46 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 is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 1,666,172 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $194.2 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $1.9$0.1 million and $0.4 million, respectively, 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 agreements, earnings per share dilution resulting from the agreement,agreements, if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higher than the average forward sales price. For the nine months ended September 30, 2023 and 2022, approximately 4.8 million468,302 shares and 4,757,308 shares, respectively, under the forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive.
Treasury Stock
During the nine months ended September 30, 2022,2023, Entergy Corporation issued 829,048295,304 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the nine months ended September 30, 2022.2023.
Retained Earnings
On October 28, 2022,27, 2023, Entergy Corporation’s Board of Directors declared a common stock dividend of $1.07$1.13 per share, payable on December 1, 20222023 to holders of record as of November 14, 2022.2023.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 2023:
| | | | | |
| Pension and Other Postretirement Liabilities |
| (In Thousands) |
Beginning balance, July 1, 2023 | ($193,019) | |
| |
| |
Amounts reclassified from accumulated other comprehensive income (loss) | (2,434) | |
Net other comprehensive income (loss) for the period | (2,434) | |
| |
Ending balance, September 30, 2023 | ($195,453) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 2022 by component:
| | | | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | | Total Accumulated Other Comprehensive Income (Loss) |
| | | | | | | | | | | | | | | | | | | | | | (In Thousands) |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Total Accumulated Other Comprehensive Income (Loss) | |
| | (In Thousands) | |
Beginning balance, July 1, 2022 | Beginning balance, July 1, 2022 | ($987) | | | ($324,274) | | | $1,223 | | | ($324,038) | | Beginning balance, July 1, 2022 | ($987) | | | ($324,274) | | | $1,223 | | | | ($324,038) | |
| Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | (14) | | | — | | | (1,223) | | | (1,237) | | Other comprehensive income (loss) before reclassifications | (14) | | | — | | | (1,223) | | | | (1,237) | |
Amounts reclassified from accumulated other comprehensive income (loss) | 38 | | | 11,867 | | | — | | | 11,905 | | |
Amounts reclassified from accumulated other comprehensive income | | Amounts reclassified from accumulated other comprehensive income | 38 | | | 11,867 | | | — | | | | 11,905 | |
Net other comprehensive income (loss) for the period | Net other comprehensive income (loss) for the period | 24 | | | 11,867 | | | (1,223) | | | 10,668 | | Net other comprehensive income (loss) for the period | 24 | | | 11,867 | | | (1,223) | | | | 10,668 | |
| Ending balance, September 30, 2022 | Ending balance, September 30, 2022 | ($963) | | | ($312,407) | | | $— | | | ($313,370) | | Ending balance, September 30, 2022 | ($963) | | | ($312,407) | | | $— | | | | ($313,370) | |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the
three nine months ended September 30, 2021 by component:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | | | Total Accumulated Other Comprehensive Income (Loss) |
| (In Thousands) |
Beginning balance, July 1, 2021 | ($1,083) | | | ($489,511) | | | $11,855 | | | | | ($478,739) | |
| | | | | | | | | |
Other comprehensive income (loss) before reclassifications | (14) | | | — | | | (2,173) | | | | | (2,187) | |
Amounts reclassified from accumulated other comprehensive income (loss) | 38 | | | 8,838 | | | 11 | | | | | 8,887 | |
Net other comprehensive income (loss) for the period | 24 | | | 8,838 | | | (2,162) | | | | | 6,700 | |
| | | | | | | | | |
Ending balance, September 30, 2021 | ($1,059) | | | ($480,673) | | | $9,693 | | | | | ($472,039) | |
| | | | | |
| Pension and Other Postretirement Liabilities |
| (In Thousands) |
Beginning balance, January 1, 2023 | ($191,754) | |
| |
| |
Amounts reclassified from accumulated other comprehensive income (loss) | (3,699) | |
Net other comprehensive income (loss) for the period | (3,699) | |
| |
Ending balance, September 30, 2023 | ($195,453) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2022 by component:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | | | Total Accumulated Other Comprehensive Income (Loss) |
| (In Thousands) |
| | | | | | | | | |
| | | | | | | | | |
Beginning balance, January 1, 2022 | ($1,035) | | | ($338,647) | | | $7,154 | | | | | ($332,528) | |
| | | | | | | | | |
Other comprehensive income (loss) before reclassifications | (42) | | | — | | | (12,997) | | | | | (13,039) | |
Amounts reclassified from accumulated other comprehensive income (loss) | 114 | | | 26,240 | | | 5,843 | | | | | 32,197 | |
Net other comprehensive income (loss) for the period | 72 | | | 26,240 | | | (7,154) | | | | | 19,158 | |
| | | | | | | | | |
Ending balance, September 30, 2022 | ($963) | | | ($312,407) | | | $— | | | | | ($313,370) | |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2021 by component:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | | | Total Accumulated Other Comprehensive Income (Loss) |
| (In Thousands) |
| | | | | | | | | |
| | | | | | | | | |
Beginning balance, January 1, 2021 | $28,719 | | | ($534,576) | | | $56,650 | | | | | ($449,207) | |
| | | | | | | | | |
Other comprehensive income (loss) before reclassifications | 1,454 | | | — | | | (46,826) | | | | | (45,372) | |
Amounts reclassified from accumulated other comprehensive income (loss) | (31,232) | | | 53,903 | | | (131) | | | | | 22,540 | |
Net other comprehensive income (loss) for the period | (29,778) | | | 53,903 | | | (46,957) | | | | | (22,832) | |
| | | | | | | | | |
Ending balance, September 30, 2021 | ($1,059) | | | ($480,673) | | | $9,693 | | | | | ($472,039) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended September 30, 20222023 and 2021:2022:
| | | Pension and Other Postretirement Liabilities | | Pension and Other Postretirement Liabilities |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Beginning balance, July 1, | Beginning balance, July 1, | | $7,174 | | | $4,508 | | Beginning balance, July 1, | | $52,811 | | | $7,174 | |
| Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | | 295 | | | (131) | | Amounts reclassified from accumulated other comprehensive income (loss) | | (1,829) | | | 295 | |
Net other comprehensive income (loss) for the period | Net other comprehensive income (loss) for the period | | 295 | | | (131) | | Net other comprehensive income (loss) for the period | | (1,829) | | | 295 | |
| Ending balance, September 30, | Ending balance, September 30, | | $7,469 | | | $4,377 | | Ending balance, September 30, | | $50,982 | | | $7,469 | |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 20222023 and 2021:2022:
| | | Pension and Other Postretirement Liabilities | | Pension and Other Postretirement Liabilities |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Beginning balance, January 1, | Beginning balance, January 1, | | $8,278 | | | $4,327 | | Beginning balance, January 1, | | $55,370 | | | $8,278 | |
| | Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | | (809) | | | 50 | | Amounts reclassified from accumulated other comprehensive income (loss) | | (4,388) | | | (809) | |
Net other comprehensive income (loss) for the period | Net other comprehensive income (loss) for the period | | (809) | | | 50 | | Net other comprehensive income (loss) for the period | | (4,388) | | | (809) | |
| | Ending balance, September 30, | Ending balance, September 30, | | $7,469 | | | $4,377 | | Ending balance, September 30, | | $50,982 | | | $7,469 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended September 30, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | | | | |
| Amounts reclassified from AOCI | | Income Statement Location |
| 2022 | | 2021 | | |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | | | |
Power contracts | $— | | | $— | | | Competitive business operating revenues |
Interest rate swaps | (48) | | | (48) | | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | (48) | | | (48) | | | |
Income taxes | 10 | | | 10 | | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) | ($38) | | | ($38) | | | |
| | | | | |
Pension and other postretirement liabilities | | | | | |
Amortization of prior-service credit | $3,837 | | | $5,248 | | | (a) |
Amortization of loss | (4,870) | | | (13,490) | | | (a) |
| | | | | |
Settlement loss | (14,339) | | | (3,192) | | | (a) |
Total amortization | (15,372) | | | (11,434) | | | |
Income taxes | 3,505 | | | 2,596 | | | Income taxes |
Total amortization (net of tax) | ($11,867) | | | ($8,838) | | | |
| | | | | |
Net unrealized investment gain (loss) | | | | | |
Realized gain (loss) | $— | | | ($17) | | | Interest and investment income |
Income taxes | — | | | 6 | | | Income taxes |
Total realized investment gain (loss) (net of tax) | $— | | | ($11) | | | |
| | | | | |
Total reclassifications for the period (net of tax) | ($11,905) | | | ($8,887) | | | |
(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 for the nine months ended September 30, 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 | $— | | | $39,679 | | | Competitive business operating revenues | |
Cash flow hedges net unrealized loss | | Cash flow hedges net unrealized loss | |
| Interest rate swaps | Interest rate swaps | (145) | | | (145) | | | Miscellaneous - net | Interest rate swaps | $— | | | ($48) | | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | (145) | | | 39,534 | | | |
Total realized loss on cash flow hedges | | Total realized loss on cash flow hedges | — | | | (48) | | |
Income taxes | Income taxes | 31 | | | (8,302) | | | Income taxes | Income taxes | — | | | 10 | | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) | ($114) | | | $31,232 | | | |
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 | $11,511 | | | $15,744 | | | (a) | Amortization of prior-service credit | $3,396 | | | $3,837 | | | (a) |
Amortization of loss | (29,774) | | | (75,553) | | | (a) | |
Amortization of net gain (loss) | | Amortization of net gain (loss) | 1,700 | | | (4,870) | | | (a) |
| Settlement loss | Settlement loss | (15,666) | | | (9,235) | | | (a) | Settlement loss | (1,919) | | | (14,339) | | | (a) |
Total amortization | (33,929) | | | (69,044) | | | |
Total amortization and settlement loss | | Total amortization and settlement loss | 3,177 | | | (15,372) | | |
Income taxes | Income taxes | 7,689 | | | 15,141 | | | Income taxes | Income taxes | (743) | | | 3,505 | | | Income taxes |
Total amortization (net of tax) | ($26,240) | | | ($53,903) | | | |
Total amortization and settlement loss (net of tax) | | Total amortization and settlement loss (net of tax) | $2,434 | | | ($11,867) | | |
| Net unrealized investment gain (loss) | Net unrealized investment gain (loss) | | Net unrealized investment gain (loss) | |
Realized gain (loss) | ($9,245) | | | $207 | | | Interest and investment income | |
Income taxes | 3,402 | | | (76) | | | Income taxes | |
Total realized investment gain (loss) (net of tax) | ($5,843) | | | $131 | | | |
| Total realized investment gain (loss) | | Total realized investment gain (loss) | $— | | | $— | | |
| Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | ($32,197) | | | ($22,540) | | | Total reclassifications for the period (net of tax) | $2,434 | | | ($11,905) | | |
(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 for the nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | |
| Amounts reclassified from AOCI | | Income Statement Location |
| 2023 | | 2022 | | |
| (In Thousands) | | |
Cash flow hedges net unrealized loss | | | | | |
| | | | | |
Interest rate swaps | $— | | | ($145) | | | Miscellaneous - net |
Total realized loss on cash flow hedges | — | | | (145) | | | |
Income taxes | — | | | 31 | | | Income taxes |
Total realized loss on cash flow hedges (net of tax) | $— | | | ($114) | | | |
| | | | | |
Pension and other postretirement liabilities | | | | | |
Amortization of prior-service credit | $10,191 | | | $11,511 | | | (a) |
Amortization of net gain (loss) | 4,994 | | | (29,774) | | | (a) |
| | | | | |
Settlement loss | (10,408) | | | (15,666) | | | (a) |
Total amortization and settlement loss | 4,777 | | | (33,929) | | | |
Income taxes | (1,078) | | | 7,689 | | | Income taxes |
Total amortization and settlement loss (net of tax) | $3,699 | | | ($26,240) | | | |
| | | | | |
Net unrealized investment loss | | | | | |
Realized loss | $— | | | ($9,245) | | | Interest and investment income |
Income taxes | — | | | 3,402 | | | Income taxes |
Total realized investment loss (net of tax) | $— | | | ($5,843) | | | |
| | | | | |
Total reclassifications for the period (net of tax) | $3,699 | | | ($32,197) | | | |
(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 September 30, 20222023 and 20212022 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 | | (222) | | | (519) | | | (a) | |
Amortization of gain (loss) | | Amortization of gain (loss) | | 1,574 | | | (222) | | | (a) |
Settlement loss | Settlement loss | | (1,340) | | | (534) | | | (a) | Settlement loss | | (22) | | | (1,340) | | | (a) |
Total amortization | | (404) | | | 177 | | | |
Total amortization and settlement loss | | Total amortization and settlement loss | | 2,503 | | | (404) | | |
Income taxes | Income taxes | | 109 | | | (46) | | | Income taxes | Income taxes | | (674) | | | 109 | | | Income taxes |
Total amortization (net of tax) | | (295) | | | 131 | | | |
Total amortization and settlement loss (net of tax) | | Total amortization and settlement loss (net of tax) | | 1,829 | | | (295) | | |
| Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | | ($295) | | | $131 | | | Total reclassifications for the period (net of tax) | | $1,829 | | | ($295) | | |
(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.
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the nine months ended September 30, 20222023 and 20212022 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 | | $3,474 | | | $3,690 | | | (a) | Amortization of prior-service credit | | $2,853 | | | $3,474 | | | (a) |
Amortization of loss | | (849) | | | (1,824) | | | (a) | |
Amortization of gain (loss) | | Amortization of gain (loss) | | 4,703 | | | (849) | | | (a) |
Settlement loss | Settlement loss | | (1,518) | | | (1,934) | | | (a) | Settlement loss | | (1,551) | | | (1,518) | | | (a) |
Total amortization | | 1,107 | | | (68) | | | |
Total amortization and settlement loss | | Total amortization and settlement loss | | 6,005 | | | 1,107 | | |
Income taxes | Income taxes | | (298) | | | 18 | | | Income taxes | Income taxes | | (1,617) | | | (298) | | | Income taxes |
Total amortization (net of tax) | | 809 | | | (50) | | | |
Total amortization and settlement loss (net of tax) | | Total amortization and settlement loss (net of tax) | | 4,388 | | | 809 | | |
| Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | | $809 | | | ($50) | | | Total reclassifications for the period (net of tax) | | $4,388 | | | $809 | | |
(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
Noncontrolling InterestInterests
The dollar value of noncontrolling interestinterests for Entergy Louisiana as of September 30, 20222023 and December 31, 20212022 is presented below:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Thousands) |
Entergy Louisiana Noncontrolling Interest | | | |
Restoration Law Trust I (a) | $32,448 | | | $— | |
Total Noncontrolling Interest | $32,448 | | | $— | |
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
Entergy Louisiana Noncontrolling Interests | | | |
Restoration Law Trust I (a) | $32,084 | | | $31,735 | |
Restoration Law Trust II (b) | 15,130 | | | — | |
Total Noncontrolling Interests | $47,214 | | | $31,735 | |
(a)See Note 12 to the financial statements herein and Note 17 to the financial statements in the Form 10-K for discussion of Restoration Law Trust II.
(b)Restoration Law Trust II (the storm trust II) was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs, as well as to establish a storm reserve to fund a portion of Hurricane Ida storm restoration costs. Restoration Law Trust Icosts in March 2023. 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 Restoration Law Trust Ithe storm trust II and the LURC’s 1% beneficial interest is shown asin noncontrolling interestinterests 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 cost securitization.
The dollar value of noncontrolling interest for Entergy Mississippi as of September 30, 2022 and December 31, 2021 is presented below:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Thousands) |
Entergy Mississippi Noncontrolling Interest | | | |
MS Sunflower Partnership, LLC (a) | $478 | | | $— | |
Total Noncontrolling Interest | $478 | | | $— | |
(a)In May 2022, MS Sunflower Partnership, LLC, a tax equity partnership between Entergy Mississippi and a tax equity investor, made the initial payment for the purchase of the Sunflower Solar facility. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment of the purchase price is currently expected in fourth quarter 2022. Entergy Mississippi, as the managing member, consolidates MS Sunflower Partnership, LLC and the tax equity investor’s interest is shown as noncontrolling interest in the consolidated financial statements for Entergy Mississippi and Entergy. Entergy Mississippi uses the HLBV method of accounting for income or loss allocation to the tax equity investor’s noncontrolling interest. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC which is the basis for treatment of Entergy Mississippi’s investment in MS Sunflower Partnership, LLC.
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 2027.2028. 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
on the senior unsecured debt ratings of Entergy Corporation. The weighted averageweighted-average interest rate for the nine months ended September 30, 20222023 was 2.39%6.44% on the drawn portion of the facility. As of September 30, 2022,2023, amounts outstanding and capacity available under the $3.5 billion credit facility are:
| Capacity | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | (In Millions) | (In Millions) |
$3,500 | $3,500 | | $150 | | $3 | | $3,347 | $3,500 | | $— | | $3 | | $3,497 |
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 companiesRegistrant Subsidiaries (except Entergy New Orleans)Orleans and System Energy) 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 September 30, 2022,2023, Entergy Corporation had $1.387 billion$1,351.1 million of commercial paper outstanding. The weighted-average interest rate for the nine months ended September 30, 20222023 was 1.52%5.35%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of September 30, 20222023 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of September 30, 20222023 | | Letters of Credit Outstanding as of September 30, 20222023 |
Entergy Arkansas | | April 20232024 | | $25 million (b) | | 4.37%7.27% | | $— | | $— |
Entergy Arkansas | | June 20272028 | | $150 million (c) | | 4.26%6.54% | | $— | | $— |
Entergy Louisiana | | June 20272028 | | $350 million (c) | | 4.38% | | $— | | $— |
Entergy Mississippi | | April 2023 | | $45 million (d) | | 4.63% | | $— | | $— |
Entergy Mississippi | | April 2023 | | $40 million (d) | | 4.63% | | $— | | $— |
Entergy Mississippi | | April 2023 | | $10 million (d) | | 4.63%6.67% | | $— | | $— |
Entergy Mississippi | | July 20242025 | | $150 million | | 3.97%6.54% | | $100 million— | | $— |
Entergy New Orleans | | June 2024 | | $25 million (c) | | 4.74%7.04% | | $— | | $— |
Entergy Texas | | June 20272028 | | $150 million (c) | | 4.38%6.67% | | $— | | $1.1 million |
(a)The interest rate is the estimated interest rate as of September 30, 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.
(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.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 obligations to MISO. FollowingThe following is a summary of the uncommitted standby letter of credit facilities as of September 30, 2022:2023:
| | | | | | | | | | | | | | | | | | | | |
Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of September 30, 20222023 (a) (b) |
Entergy Arkansas | | $25 million | | 0.78% | | $5.67.8 million |
Entergy Louisiana | | $125 million | | 0.78% | | $21.011.2 million |
Entergy Mississippi | | $65 million | | 0.78% | | $9.76.7 million |
Entergy New Orleans | | $15 million | | 1.625% | | $1.01 million |
Entergy Texas | | $80 million | | 0.875%1.250% | | $9.712.8 million |
(a)As of September 30, 2022,2023, letters of credit posted with MISO covered financial transmission right exposure of $1.7 million for Entergy Arkansas, $0.9 million for Entergy Louisiana, $0.8$0.6 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, and $0.8$0.5 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of September 30, 2022,2023, in addition to the $9.7$6.7 million MISO letters of credit, Entergy Mississippi had $1.0$1 million in 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 current FERC-authorized short-term borrowing limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas have FERC-
Entergy Corporation and Subsidiaries
Notes to Financial Statements
authorized short-term borrowing limits effective through April 2025. The FERC-authorized short-term borrowing limit for System Energy areis effective through October 2023.March 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 borrowings as of September 30, 20222023 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
| | | Authorized | | Borrowings | | Authorized | | Borrowings |
| | (In Millions) | | (In Millions) |
Entergy Arkansas | Entergy Arkansas | $250 | | $— | Entergy Arkansas | $250 | | $— |
Entergy Louisiana | Entergy Louisiana | $450 | | $— | Entergy Louisiana | $450 | | $— |
Entergy Mississippi | Entergy Mississippi | $200 | | $19 | Entergy Mississippi | $200 | | $24 |
Entergy New Orleans | Entergy New Orleans | $150 | | $— | Entergy New Orleans | $150 | | $— |
Entergy Texas | Entergy Texas | $200 | | $— | Entergy Texas | $200 | | $— |
System Energy | System Energy | $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 2023.2024. The commitment fee is
Entergy Corporation and Subsidiaries
Notes to Financial Statements
currently 0.20% of the undrawn commitment amount. As of September 30, 2022,2023, $139 million in cash borrowings were outstanding under the credit facility. The weighted averageweighted-average interest rate for the nine months ended September 30, 20222023 was 2.54%6.47% 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.
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 September 30, 2022:2023:
| Company | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of September 30, 2022 | Company | | Expiration Date | | Amount of Facility | | Weighted- Average Interest Rate on Borrowings (a) | | Amount Outstanding as of September 30, 2023 |
| | | | | (Dollars in Millions) | | | | | (Dollars in Millions) |
Entergy Arkansas VIE | Entergy Arkansas VIE | | June 2025 | | $80 | | 2.21% | | $— | Entergy Arkansas VIE | | June 2025 | | $80 | | 6.03% | | $10.6 |
Entergy Louisiana River Bend VIE | Entergy Louisiana River Bend VIE | | June 2025 | | $105 | | 1.75% | | $15.1 | Entergy Louisiana River Bend VIE | | June 2025 | | $105 | | 6.08% | | $57.1 |
Entergy Louisiana Waterford VIE | Entergy Louisiana Waterford VIE | | June 2025 | | $105 | | 2.12% | | $72.2 | Entergy Louisiana Waterford VIE | | June 2025 | | $105 | | 6.04% | | $13.9 |
System Energy VIE | System Energy VIE | | June 2025 | | $120 | | 2.15% | | $83.9 | System Energy VIE | | June 2025 | | $120 | | 5.90% | | $29.2 |
(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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
The nuclear fuel company variable interest entitiesVIEs had notes payable that were included in debt on the respective balance sheets as of September 30, 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 |
Entergy Louisiana Waterford VIE | | 5.94% Series J due September 2026 | | $70 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 September 30, 2023, Entergy Arkansas and Entergy Louisiana each has obtained financing authorization from the FERC that extend through April 2025 and System Energy each has obtained financing authorization from the FERC that extends through October 2023March 2025 for issuances by itstheir nuclear fuel company variable interest entities.VIEs.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Debt Issuances and Retirements
(Entergy Corporation)
In June 2022, Entergy Corporation redeemed $650 million of 4.00% Series senior notes due July 2022.
(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 used the proceeds, together with other funds, to repay, at maturity, its $250 million of 3.05% Series mortgage bonds due June 2023 and for general corporate purposes.
In August 2023, Entergy Arkansas issued $300 million of 5.30% Series mortgage bonds due September 2033. Entergy Arkansas used the proceeds, together with other funds, to repay debt outstanding under its $150 million long-term revolving credit facility and for general corporate purposes, including the repayment of borrowings from the Entergy System money pool.
(Entergy Louisiana)
In December 2021, Entergy Louisiana entered into a term loan credit agreement providing a $1.2 billion unsecured term loan due June 2023. The term loan bears interest at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weighted average interest rate over the life of the loan was 1.18%. Entergy Louisiana received the funds in January 2022 and used the proceeds for general corporate purposes, including storm restoration costs related to Hurricane Ida.September 2023, Entergy Louisiana repaid, the full amountat maturity, $325 million of the loan in June 2022.
In May 2022, Entergy Louisiana redeemed, prior to maturity, a portion of its 0.62%4.05% Series mortgage bonds due November 2023. Entergy Louisiana redeemed $435 million in aggregate principal amount of the bonds, leaving $665 million in aggregate principal amount outstanding.
In August 2022, Entergy Louisiana issued $500 million of 4.75% Series mortgage bonds due September 2052. Entergy Louisiana expects to use the proceeds, together with other funds, to repay on or prior to maturity its $200 million of 3.30% Series mortgage bonds due December 2022, to repay on or prior to maturity a portion of its $665 million of 0.62% Series mortgage bonds due November 2023, to repay a portion of the debt outstanding under its $350 million long-term revolving credit facility, and for general corporate purposes. Entergy Louisiana intends to allocate an amount equal to the net proceeds from the issuance to finance and/or refinance, in whole or in part, existing or new eligible green projects.bonds.
(Entergy Mississippi)
In June 2022,May 2023, Entergy Mississippi entered into a term loan credit agreement providing a $150issued $300 million of 5.0% Series mortgage bonds due September 2033. Entergy Mississippi used the proceeds, together with other funds, to repay, prior to maturity, its $250 million of 3.10% Series mortgage bonds due July 2023 and $50 million of its unsecured term loan due December 2023. The term loan bears interest 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 nine months ended September 30, 2022 was 3.30%. Entergy Mississippi used the funds2023 and for general corporate purposes.
(Entergy Texas)
In August 2022, Entergy Texas issued $325 million of 5.00% Series mortgage bonds due September 2052. Entergy Texas expects to use the proceeds for general corporate purposes.
(System Energy)New Orleans)
In May 2022, System Energy entered into a2023, Entergy New Orleans amended its $70 million unsecured term loan credit agreement, providing a $50to provide for additional borrowings of $15 million due June 2024. The amended term loan due November 2023. The term loan is secured by a series of first mortgage bonds and bears interest at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weightedfixed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
average interest rate forof 6.25% payable on the nine months ended September 30, 2022 was 2.97%unpaid principal amount, compared to the previous rate of 2.5%. System EnergyEntergy New Orleans used the funds for general corporate purposes.
In July 2023, Entergy Texas Securitization BondsNew Orleans repaid, at maturity, $100 million of 3.9% Series mortgage bonds.
(Entergy Texas)
In January 2022 the PUCT authorized the issuance of securitization bonds to recover $242.9 million of Entergy Texas’s Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration costs, plus carrying costs, plus approximately $13.3 million relating to a system restoration regulatory asset related to Hurricane Harvey, plus up-front qualified costs. In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated byAugust 2023, Entergy Texas issued $290.85$350 million of senior secured restoration5.80% Series mortgage 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 | |
due September 2053. Entergy Texas used the proceeds, together with other funds, to finance the construction of the Orange County Advanced Power Station and for general corporate purposes, including the repayment of borrowings from the Entergy System money pool.
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.(System Energy)
WithIn March 2023, System Energy issued $325 million of 6.00% Series mortgage bonds due April 2028. System Energy used the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the righttogether with other funds, to recover from customers through a system restoration charge amounts sufficientrepay, prior to service the securitization bonds. Entergy Texas expectsmaturity, its $50 million term loan due November 2023, and to use the proceeds to reducerepay, at maturity, its outstanding debt. The creditors$250 million of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding II, including the transition property,4.10% Series mortgage bonds due April 2023, 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.for general corporate purposes.
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of September 30, 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 | $26,219,979 | | | $22,567,380 | | Entergy | $26,183,400 | | | $22,233,532 | |
Entergy Arkansas | Entergy Arkansas | $4,164,866 | | | $3,570,817 | | Entergy Arkansas | $4,650,501 | | | $3,910,973 | |
Entergy Louisiana | Entergy Louisiana | $10,860,595 | | | $9,509,010 | | Entergy Louisiana | $10,399,014 | | | $8,893,051 | |
Entergy Mississippi | Entergy Mississippi | $2,430,783 | | | $1,998,266 | | Entergy Mississippi | $2,329,185 | | | $1,935,895 | |
Entergy New Orleans | Entergy New Orleans | $783,034 | | | $709,965 | | Entergy New Orleans | $685,002 | | | $599,005 | |
Entergy Texas | Entergy Texas | $2,907,947 | | | $2,445,550 | | Entergy Texas | $3,233,614 | | | $2,702,065 | |
System Energy | System Energy | $788,961 | | | $710,771 | | System Energy | $745,247 | | | $677,274 | |
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 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 September 30, 2022,2023, there were options on 2,789,0882,950,625 shares of common stock outstanding with a weighted-average exercise price of $96.37.$97.49. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted averageweighted-average exercise price of the stock options granted and Entergy Corporation’s common stock price as of September 30, 2022.2023. The aggregate intrinsic value of the stock options outstanding as of September 30, 20222023 was $30.9$16.6 million.
The following table includes financial information for outstanding stock options for the three months ended September 30, 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 | $0.9 | | | $1.2 | | Compensation expense included in Entergy’s consolidated net income | $1.1 | | | $0.9 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $0.2 | | | $0.3 | | Tax benefit recognized in Entergy’s consolidated net income | $0.3 | | | $0.2 | |
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 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for outstanding stock options for the nine months ended September 30, 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 | $3.2 | | | $3.2 | | Compensation expense included in Entergy’s consolidated net income | $3.2 | | | $3.2 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $0.8 | | | $0.8 | | Tax benefit recognized in Entergy’s consolidated net income | $0.9 | | | $0.8 | |
Compensation cost capitalized as part of fixed assets and materials and supplies | Compensation cost capitalized as part of fixed assets and materials and supplies | $1.2 | | | $1.2 | | Compensation cost capitalized as part of fixed assets and materials and supplies | $1.6 | | | $1.2 | |
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 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 eighty percent on relative total shareholder return and twenty percent on the credit measure. The performance units were granted on January 27, 202226, 2023 and eighty percent were valued at $138.99$130.65 per share based on various factors, primarily market conditions; and twenty 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 September 30, 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 | $9.1 | | | $10.6 | | Compensation expense included in Entergy’s consolidated net income | $9.3 | | | $9.1 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $2.3 | | | $2.7 | | Tax benefit recognized in Entergy’s consolidated net income | $2.4 | | | $2.3 | |
Compensation cost capitalized as part of fixed assets and materials and supplies | Compensation cost capitalized as part of fixed assets and materials and supplies | $3.9 | | | $4.1 | | Compensation cost capitalized as part of fixed assets and materials and supplies | $4.2 | | | $3.9 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the nine months ended September 30, 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 | $31.1 | | | $31.1 | | Compensation expense included in Entergy’s consolidated net income | $27.1 | | | $31.1 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $7.9 | | | $7.9 | | Tax benefit recognized in Entergy’s consolidated net income | $7.0 | | | $7.9 | |
Compensation cost capitalized as part of fixed assets and materials and supplies | Compensation cost capitalized as part of fixed assets and materials and supplies | $12.6 | | | $12.1 | | Compensation cost capitalized as part of fixed assets and materials and supplies | $11.8 | | | $12.6 | |
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 third 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 | $33,845 | | | $38,531 | | Service cost - benefits earned during the period | $25,302 | | | $33,845 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | 60,734 | | | 49,222 | | Interest cost on projected benefit obligation | 73,850 | | | 60,734 | |
Expected return on assets | Expected return on assets | (100,203) | | | (106,684) | | Expected return on assets | (96,775) | | | (100,203) | |
| Amortization of net loss | Amortization of net loss | 42,367 | | | 69,386 | | Amortization of net loss | 20,204 | | | 42,367 | |
Settlement charges | Settlement charges | 125,548 | | | 44,718 | | Settlement charges | 6,914 | | | 125,548 | |
Net pension costs | Net pension costs | $162,291 | | | $95,173 | | Net pension costs | $29,495 | | | $162,291 | |
Entergy’s qualified pension costs, including amounts capitalized, for the nine months ended September 30, 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 | $108,482 | | | $126,722 | | Service cost - benefits earned during the period | $76,346 | | | $108,482 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | 164,529 | | | 142,702 | | Interest cost on projected benefit obligation | 223,584 | | | 164,529 | |
Expected return on assets | Expected return on assets | (306,895) | | | (318,437) | | Expected return on assets | (290,660) | | | (306,895) | |
| Amortization of net loss | Amortization of net loss | 159,359 | | | 266,576 | | Amortization of net loss | 63,858 | | | 159,359 | |
Settlement charges | Settlement charges | 148,201 | | | 156,266 | | Settlement charges | 152,588 | | | 148,201 | |
| Net pension costs | Net pension costs | $273,676 | | | $373,829 | | Net pension costs | $225,716 | | | $273,676 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their current and former employees for the third 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 | | $6,138 | | | $8,261 | | | $1,953 | | | $690 | | | $1,441 | | | $1,891 | | Service cost - benefits earned during the period | | $4,566 | | | $6,175 | | | $1,431 | | | $492 | | | $1,074 | | | $1,430 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 11,866 | | | 12,523 | | | 3,383 | | | 1,368 | | | 2,795 | | | 2,882 | | Interest cost on projected benefit obligation | | 13,813 | | | 14,896 | | | 3,797 | | | 1,667 | | | 3,138 | | | 3,419 | |
Expected return on assets | Expected return on assets | | (18,731) | | | (20,586) | | | (5,006) | | | (2,487) | | | (4,551) | | | (4,509) | | Expected return on assets | | (17,639) | | | (18,892) | | | (4,830) | | | (2,206) | | | (4,147) | | | (4,392) | |
| Amortization of net loss | Amortization of net loss | | 10,283 | | | 10,156 | | | 2,941 | | | 1,208 | | | 2,130 | | | 2,641 | | Amortization of net loss | | 5,438 | | | 4,748 | | | 1,545 | | | 456 | | | 1,008 | | | 1,204 | |
Settlement charges | Settlement charges | | 11,477 | | | 33,507 | | | 6,853 | | | 4,402 | | | 13,082 | | | 4,593 | | Settlement charges | | 558 | | | 561 | | | 345 | | | 248 | | | 632 | | | 228 | |
Net pension cost | Net pension cost | | $21,033 | | | $43,861 | | | $10,124 | | | $5,181 | | | $14,897 | | | $7,498 | | Net pension cost | | $6,736 | | | $7,488 | | | $2,288 | | | $657 | | | $1,705 | | | $1,889 | |
| 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 | | $6,966 | | | $9,230 | | | $2,197 | | | $735 | | | $1,680 | | | $2,141 | | Service cost - benefits earned during the period | | $6,138 | | | $8,261 | | | $1,953 | | | $690 | | | $1,441 | | | $1,891 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 9,396 | | | 10,270 | | | 2,735 | | | 1,156 | | | 2,213 | | | 2,379 | | Interest cost on projected benefit obligation | | 11,866 | | | 12,523 | | | 3,383 | | | 1,368 | | | 2,795 | | | 2,882 | |
Expected return on assets | Expected return on assets | | (19,585) | | | (22,466) | | | (5,629) | | | (2,678) | | | (5,341) | | | (4,853) | | Expected return on assets | | (18,731) | | | (20,586) | | | (5,006) | | | (2,487) | | | (4,551) | | | (4,509) | |
| Amortization of net loss | Amortization of net loss | | 16,100 | | | 15,201 | | | 4,580 | | | 1,656 | | | 2,815 | | | 4,135 | | Amortization of net loss | | 10,283 | | | 10,156 | | | 2,941 | | | 1,208 | | | 2,130 | | | 2,641 | |
Settlement charges | Settlement charges | | 7,238 | | | 13,209 | | | 3,685 | | | 1,107 | | | 1,634 | | | 4,086 | | Settlement charges | | 11,477 | | | 33,507 | | | 6,853 | | | 4,402 | | | 13,082 | | | 4,593 | |
Net pension cost | Net pension cost | | $20,115 | | | $25,444 | | | $7,568 | | | $1,976 | | | $3,001 | | | $7,888 | | Net pension cost | | $21,033 | | | $43,861 | | | $10,124 | | | $5,181 | | | $14,897 | | | $7,498 | |
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their current and former employees for the nine months ended September 30, 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 | | $19,695 | | | $26,405 | | | $6,158 | | | $2,194 | | | $4,652 | | | $5,937 | | Service cost - benefits earned during the period | | $13,976 | | | $18,654 | | | $4,369 | | | $1,470 | | | $3,271 | | | $4,342 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 30,944 | | | 33,706 | | | 8,857 | | | 3,646 | | | 7,242 | | | 7,614 | | Interest cost on projected benefit obligation | | 42,010 | | | 45,219 | | | 11,551 | | | 5,051 | | | 9,542 | | | 10,382 | |
Expected return on assets | Expected return on assets | | (57,009) | | | (62,779) | | | (15,373) | | | (7,517) | | | (14,393) | | | (13,718) | | Expected return on assets | | (53,593) | | | (56,891) | | | (14,349) | | | (6,783) | | | (12,322) | | | (13,431) | |
| Amortization of net loss | Amortization of net loss | | 36,557 | | | 35,055 | | | 10,371 | | | 3,944 | | | 7,124 | | | 9,078 | | Amortization of net loss | | 18,170 | | | 14,704 | | | 4,937 | | | 1,453 | | | 3,057 | | | 3,939 | |
Settlement charges | Settlement charges | | 22,973 | | | 37,968 | | | 9,061 | | | 4,402 | | | 15,547 | | | 6,616 | | Settlement charges | | 24,516 | | | 38,791 | | | 12,088 | | | 1,948 | | | 10,902 | | | 5,518 | |
Net pension cost | Net pension cost | | $53,160 | | | $70,355 | | | $19,074 | | | $6,669 | | | $20,172 | | | $15,527 | | Net pension cost | | $45,079 | | | $60,477 | | | $18,596 | | | $3,139 | | | $14,450 | | | $10,750 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 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 | | $21,640 | | | $29,033 | | | $6,865 | | | $2,304 | | | $5,237 | | | $6,707 | | Service cost - benefits earned during the period | | $19,695 | | | $26,405 | | | $6,158 | | | $2,194 | | | $4,652 | | | $5,937 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 26,488 | | | 29,695 | | | 7,769 | | | 3,264 | | | 6,215 | | | 6,757 | | Interest cost on projected benefit obligation | | 30,944 | | | 33,706 | | | 8,857 | | | 3,646 | | | 7,242 | | | 7,614 | |
Expected return on assets | Expected return on assets | | (58,896) | | | (67,521) | | | (16,815) | | | (7,941) | | | (15,851) | | | (14,436) | | Expected return on assets | | (57,009) | | | (62,779) | | | (15,373) | | | (7,517) | | | (14,393) | | | (13,718) | |
| Amortization of net loss | Amortization of net loss | | 53,652 | | | 52,294 | | | 15,556 | | | 5,996 | | | 9,941 | | | 14,393 | | Amortization of net loss | | 36,557 | | | 35,055 | | | 10,371 | | | 3,944 | | | 7,124 | | | 9,078 | |
Settlement charges | Settlement charges | | 31,624 | | | 48,201 | | | 11,447 | | | 4,691 | | | 8,261 | | | 8,725 | | Settlement charges | | 22,973 | | | 37,968 | | | 9,061 | | | 4,402 | | | 15,547 | | | 6,616 | |
Net pension cost | Net pension cost | | $74,508 | | | $91,702 | | | $24,822 | | | $8,314 | | | $13,803 | | | $22,146 | | Net pension cost | | $53,160 | | | $70,355 | | | $19,074 | | | $6,669 | | | $20,172 | | | $15,527 | |
Non-Qualified Net Pension Cost
Entergy recognized $5.9$21.8 million and $6.9$5.9 million in pension cost for its non-qualified pension plans in the third quarters of 20222023 and 2021,2022, respectively. Reflected in the pension cost for non-qualified pension plans in the third quarters of 2023 and 2022, and 2021respectively, were settlement charges of $1.4$18 million and $2.5$1.4 million respectively, related to the payment of lump sum benefits out of the plan.plans. Entergy recognized $23.3$39.8 million and $16$23.3 million in pension cost for its non-qualified pension plans for the nine months ended September 30, 20222023 and 2021,2022, respectively. Reflected in the pension cost for non-qualified pension plans for the nine months ended September 30, 2023 and 2022, and 2021respectively, were settlement charges of $9.2$27.3 million and $2.5$9.2 million respectively, related to the payment of lump sum benefits out of the plan.plans.
The Registrant Subsidiaries recognized the following pension cost for their current and former employees for their non-qualified pension plans for the third 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 | $63 | | | $24 | | | $85 | | | $33 | | | $63 | |
2022 | 2022 | $69 | | | $24 | | | $80 | | | $28 | | | $961 | | 2022 | $69 | | | $24 | | | $80 | | | $28 | | | $961 | |
2021 | $86 | | | $192 | | | $91 | | | $7 | | | $115 | | |
Reflected in Entergy Texas’Texas’s non-qualified pension costs in the third quarter of 2022 were settlement charges of $886 thousand related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries recognized the following pension cost for their current and former employees for their non-qualified pension plans for the nine months ended September 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Thousands) |
2023 | $575 | | | $76 | | | $724 | | | $99 | | | $190 | |
2022 | $212 | | | $77 | | | $241 | | | $84 | | | $1,264 | |
Reflected in Entergy Louisiana’sArkansas’s non-qualified pension costs infor the third quarter of 2021nine months ended September 30, 2023 were settlement charges of $155$379 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs in the third quarter of 2021 were settlement charges of $3 thousand related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Thousands) |
2022 | $212 | | | $77 | | | $241 | | | $84 | | | $1,264 | |
2021 | $266 | | | $280 | | | $283 | | | $23 | | | $345 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reflected in Entergy Mississippi’s non-qualified pension costs for the nine months ended September 30, 2023 and 2022, respectively, were settlement charges of $453 thousand and $2 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’Texas’s non-qualified pension costs for the nine months ended September 30, 2022 were settlement charges of $1 million related to the payment of lump sum benefits out of the plan. Reflected in Entergy Louisiana’s non-qualified pension costs for the nine months ended September 30, 2021 were settlement charges of $155 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs for the nine months ended September 30, 2021 were settlement charges of $3 thousand related to the payment of lump sum benefits out of the plan.
Components of Net Other Postretirement Benefit Cost (Income)
Entergy’s other postretirement benefit income, including amounts capitalized, for the third quarters of 2022 and 2021, included the following components:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Thousands) |
Service cost - benefits earned during the period | $6,184 | | | $6,645 | |
Interest cost on accumulated postretirement benefit obligation (APBO) | 6,827 | | | 5,320 | |
Expected return on assets | (10,855) | | | (10,805) | |
| | | |
Amortization of prior service credit | (6,388) | | | (8,267) | |
Amortization of net loss | 1,083 | | | 713 | |
Net other postretirement benefit income | ($3,149) | | | ($6,394) | |
Entergy’s other postretirement benefit income, including amounts capitalized, for the nine months ended September 30, 2022 and 2021, included the following components:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Thousands) |
Service cost - benefits earned during the period | $18,552 | | | $19,935 | |
Interest cost on accumulated postretirement benefit obligation (APBO) | 20,481 | | | 15,960 | |
Expected return on assets | (32,565) | | | (32,415) | |
| | | |
Amortization of prior service credit | (19,164) | | | (24,801) | |
Amortization of net loss | 3,249 | | | 2,139 | |
Net other postretirement benefit income | ($9,447) | | | ($19,182) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’
Components of Net Other Postretirement Benefits Cost (Income)
Entergy’s other postretirement benefit cost (income),benefits income, including amounts capitalized, for their employees for the third quarters of 20222023 and 2021,2022, included the following components:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Service cost - benefits earned during the period | | $1,114 | | | $1,408 | | | $339 | | | $99 | | | $331 | | | $310 | |
Interest cost on APBO | | 1,263 | | | 1,443 | | | 350 | | | 174 | | | 399 | | | 279 | |
Expected return on assets | | (4,483) | | | — | | | (1,394) | | | (1,499) | | | (2,568) | | | (791) | |
| | | | | | | | | | | | |
Amortization of prior service cost/(credit) | | 471 | | | (1,158) | | | (443) | | | (229) | | | (1,093) | | | (80) | |
Amortization of net (gain) loss | | 218 | | | (186) | | | 56 | | | (225) | | | 162 | | | 30 | |
Net other postretirement benefit cost (income) | | ($1,417) | | | $1,507 | | | ($1,092) | | | ($1,680) | | | ($2,769) | | | ($252) | |
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
Service cost - benefits earned during the period | $3,664 | | | $6,184 | |
Interest cost on accumulated postretirement benefit obligation (APBO) | 10,568 | | | 6,827 | |
Expected return on assets | (9,183) | | | (10,855) | |
| | | |
Amortization of prior service credit | (5,640) | | | (6,388) | |
Amortization of net (gain) loss | (2,862) | | | 1,083 | |
Net other postretirement benefits income | ($3,453) | | | ($3,149) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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) | |
Entergy’s other postretirement benefits income, including amounts capitalized, for the nine months ended September 30, 2023 and 2022, included the following components: | | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
Service cost - benefits earned during the period | $10,992 | | | $18,552 | |
Interest cost on accumulated postretirement benefit obligation (APBO) | 31,704 | | | 20,481 | |
Expected return on assets | (27,549) | | | (32,565) | |
| | | |
Amortization of prior service credit | (16,920) | | | (19,164) | |
Amortization of net (gain) loss | (8,586) | | | 3,249 | |
Net other postretirement benefits income | ($10,359) | | | ($9,447) | |
The Registrant Subsidiaries’ other postretirement benefitbenefits cost (income), including amounts capitalized, for their current and former employees for the nine months ended September 30,third quarters of 2023 and 2022, and 2021, 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 | | $3,342 | | | $4,224 | | | $1,017 | | | $297 | | | $993 | | | $930 | | Service cost - benefits earned during the period | | $741 | | | $845 | | | $220 | | | $59 | | | $202 | | | $189 | |
Interest cost on APBO | Interest cost on APBO | | 3,789 | | | 4,329 | | | 1,050 | | | 522 | | | 1,197 | | | 837 | | Interest cost on APBO | | 2,001 | | | 2,233 | | | 543 | | | 290 | | | 649 | | | 432 | |
Expected return on assets | Expected return on assets | | (13,449) | | | — | | | (4,182) | | | (4,497) | | | (7,704) | | | (2,373) | | Expected return on assets | | (3,778) | | | — | | | (1,179) | | | (1,316) | | | (2,194) | | | (634) | |
Amortization of prior service cost/(credit) | | 1,413 | | | (3,474) | | | (1,329) | | | (687) | | | (3,279) | | | (240) | | |
| Amortization of prior service cost (credit) | | Amortization of prior service cost (credit) | | 524 | | | (951) | | | (239) | | | (229) | | | (1,093) | | | (73) | |
Amortization of net (gain) loss | Amortization of net (gain) loss | | 654 | | | (558) | | | 168 | | | (675) | | | 486 | | | 90 | | Amortization of net (gain) loss | | 43 | | | (1,764) | | | 21 | | | 117 | | | 229 | | | — | |
Net other postretirement benefit cost (income) | | ($4,251) | | | $4,521 | | | ($3,276) | | | ($5,040) | | | ($8,307) | | | ($756) | | |
Net other postretirement benefits cost (income) | | Net other postretirement benefits cost (income) | | ($469) | | | $363 | | | ($634) | | | ($1,079) | | | ($2,207) | | | ($86) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 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 | | $3,102 | | | $4,632 | | | $1,086 | | | $327 | | | $1,038 | | | $1,005 | | Service cost - benefits earned during the period | | $1,114 | | | $1,408 | | | $339 | | | $99 | | | $331 | | | $310 | |
Interest cost on APBO | Interest cost on APBO | | 2,796 | | | 3,390 | | | 834 | | | 390 | | | 951 | | | 660 | | Interest cost on APBO | | 1,263 | | | 1,443 | | | 350 | | | 174 | | | 399 | | | 279 | |
Expected return on assets | Expected return on assets | | (13,515) | | | — | | | (4,152) | | | (4,314) | | | (7,644) | | | (2,367) | | Expected return on assets | | (4,483) | | | — | | | (1,394) | | | (1,499) | | | (2,568) | | | (791) | |
| Amortization of prior service credit | | (840) | | | (3,690) | | | (1,332) | | | (687) | | | (2,808) | | | (327) | | |
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 | | 147 | | | (273) | | | 57 | | | (534) | | | 300 | | | 45 | | Amortization of net (gain) loss | | 218 | | | (186) | | | 56 | | | (225) | | | 162 | | | 30 | |
Net other postretirement benefit cost (income) | | ($8,310) | | | $4,059 | | | ($3,507) | | | ($4,818) | | | ($8,163) | | | ($984) | | |
Net other postretirement benefits cost (income) | | Net other postretirement benefits cost (income) | | ($1,417) | | | $1,507 | | | ($1,092) | | | ($1,680) | | | ($2,769) | | | ($252) | |
The Registrant Subsidiaries’ other postretirement benefits cost (income), including amounts capitalized, for their current and former employees for the nine months ended September 30, 2023 and 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 | | $2,223 | | | $2,535 | | | $660 | | | $177 | | | $606 | | | $567 | |
Interest cost on APBO | | 6,003 | | | 6,699 | | | 1,629 | | | 870 | | | 1,947 | | | 1,296 | |
Expected return on assets | | (11,334) | | | — | | | (3,537) | | | (3,948) | | | (6,582) | | | (1,902) | |
Amortization of prior service cost (credit) | | 1,572 | | | (2,853) | | | (717) | | | (687) | | | (3,279) | | | (219) | |
Amortization of net (gain) loss | | 129 | | | (5,292) | | | 63 | | | 351 | | | 687 | | | — | |
Net other postretirement benefits cost (income) | | ($1,407) | | | $1,089 | | | ($1,902) | | | ($3,237) | | | ($6,621) | | | ($258) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Service cost - benefits earned during the period | | $3,342 | | | $4,224 | | | $1,017 | | | $297 | | | $993 | | | $930 | |
Interest cost on APBO | | 3,789 | | | 4,329 | | | 1,050 | | | 522 | | | 1,197 | | | 837 | |
Expected return on assets | | (13,449) | | | — | | | (4,182) | | | (4,497) | | | (7,704) | | | (2,373) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Amortization of prior service cost (credit) | | 1,413 | | | (3,474) | | | (1,329) | | | (687) | | | (3,279) | | | (240) | |
Amortization of net (gain) loss | | 654 | | | (558) | | | 168 | | | (675) | | | 486 | | | 90 | |
Net other postretirement benefits cost (income) | | ($4,251) | | | $4,521 | | | ($3,276) | | | ($5,040) | | | ($8,307) | | | ($756) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the third quarters of 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total |
| | (In Thousands) | | |
Entergy | | | | | | | | |
Amortization of prior service (cost) credit | | $— | | | $3,509 | | | ($113) | | | $3,396 | |
Amortization of net gain (loss) | | (1,064) | | | 2,898 | | | (134) | | | 1,700 | |
| | | | | | | | |
Settlement loss | | (490) | | | — | | | (1,429) | | | (1,919) | |
| | ($1,554) | | | $6,407 | | | ($1,676) | | | $3,177 | |
Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | | $— | | | $951 | | | $— | | | $951 | |
Amortization of net gain (loss) | | (190) | | | 1,764 | | | — | | | 1,574 | |
Settlement loss | | (22) | | | — | | | — | | | (22) | |
| | ($212) | | | $2,715 | | | $— | | | $2,503 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | (3,976) | | | (596) | | | (298) | | | (4,870) | |
| | | | | | | | |
Settlement loss | | (14,263) | | | — | | | (76) | | | (14,339) | |
| | ($18,239) | | | $3,418 | | | ($551) | | | ($15,372) | |
Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | | $— | | | $1,158 | | | $— | | | $1,158 | |
Amortization of net gain (loss) | | (407) | | | 186 | | | (1) | | | (222) | |
Settlement loss | | (1,340) | | | — | | | — | | | (1,340) | |
| | ($1,747) | | | $1,344 | | | ($1) | | | ($404) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | (12,439) | | | (496) | | | (555) | | | (13,490) | |
| | | | | | | | |
Settlement loss | | (2,731) | | | — | | | (461) | | | (3,192) | |
| | ($15,170) | | | $4,792 | | | ($1,056) | | | ($11,434) | |
Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | | $— | | | $1,230 | | | $— | | | $1,230 | |
Amortization of net gain (loss) | | (609) | | | 91 | | | (1) | | | (519) | |
Settlement loss | | (528) | | | — | | | (6) | | | (534) | |
| | ($1,137) | | | $1,321 | | | ($7) | | | $177 | |
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the nine months ended September 30, 20222023 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 | | $— | | | $12,042 | | | ($531) | | | $11,511 | | Amortization of prior service (cost) credit | | $— | | | $10,529 | | | ($338) | | | $10,191 | |
Amortization of net loss | | (26,921) | | | (1,788) | | | (1,065) | | | (29,774) | | |
Amortization of net gain (loss) | | Amortization of net gain (loss) | | (3,208) | | | 8,693 | | | (491) | | | 4,994 | |
| Settlement loss | Settlement loss | | (14,441) | | | — | | | (1,225) | | | (15,666) | | Settlement loss | | (7,446) | | | — | | | (2,962) | | | (10,408) | |
| | ($41,362) | | | $10,254 | | | ($2,821) | | | ($33,929) | | | ($10,654) | | | $19,222 | | | ($3,791) | | | $4,777 | |
Entergy Louisiana | Entergy Louisiana | | | | | | | | | Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | Amortization of prior service credit | | $— | | | $3,474 | | | $— | | | $3,474 | | Amortization of prior service credit | | $— | | | $2,853 | | | $— | | | $2,853 | |
Amortization of net gain (loss) | Amortization of net gain (loss) | | (1,404) | | | 558 | | | (3) | | | (849) | | Amortization of net gain (loss) | | (588) | | | 5,292 | | | (1) | | | 4,703 | |
Settlement loss | Settlement loss | | (1,518) | | | — | | | — | | | (1,518) | | Settlement loss | | (1,551) | | | — | | | — | | | (1,551) | |
| | ($2,922) | | | $4,032 | | | ($3) | | | $1,107 | | | ($2,139) | | | $8,145 | | | ($1) | | | $6,005 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2021 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total | |
2022 | | 2022 | | 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 | | $— | | | $15,864 | | | ($120) | | | $15,744 | | Amortization of prior service (cost) credit | | $— | | | $12,042 | | | ($531) | | | $11,511 | |
Amortization of net loss | Amortization of net loss | | (72,322) | | | (1,486) | | | (1,745) | | | (75,553) | | Amortization of net loss | | (26,921) | | | (1,788) | | | (1,065) | | | (29,774) | |
| Settlement loss | Settlement loss | | (8,774) | | | — | | | (461) | | | (9,235) | | Settlement loss | | (14,441) | | | — | | | (1,225) | | | (15,666) | |
| | ($81,096) | | | $14,378 | | | ($2,326) | | | ($69,044) | | | ($41,362) | | | $10,254 | | | ($2,821) | | | ($33,929) | |
Entergy Louisiana | Entergy Louisiana | | | | | | | | | Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | Amortization of prior service credit | | $— | | | $3,690 | | | $— | | | $3,690 | | Amortization of prior service credit | | $— | | | $3,474 | | | $— | | | $3,474 | |
Amortization of net gain (loss) | Amortization of net gain (loss) | | (2,093) | | | 273 | | | (4) | | | (1,824) | | Amortization of net gain (loss) | | (1,404) | | | 558 | | | (3) | | | (849) | |
Settlement loss | Settlement loss | | (1,928) | | | — | | | (6) | | | (1,934) | | Settlement loss | | (1,518) | | | — | | | — | | | (1,518) | |
| | ($4,021) | | | $3,963 | | | ($10) | | | ($68) | | | ($2,922) | | | $4,032 | | | ($3) | | | $1,107 | |
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 CostCosts
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 the Entergy Corporation Retirement Plan II for Bargaining Employees, and the Entergy Corporation Retirement Plan II for Non-Bargaining Employees exceeded the sum of the Plan’s 2022Plans’ 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 New Orleans, Entergy Texas, and System Energy each participate in one or both of the Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, forto track 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 weresurplus or deficit 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 evaluatedamounts recorded for 2020 and 2021 were included in the base rate case that was filed with the PUCT in July 2022, and a reasonableamortization of that amount began in 2023 when interim rates became effective. The reserve amounts recorded for 2022 and through September 2023 will be evaluated in the next scheduled PUCT rate case and an amortization period will be determined by the PUCT.PUCT at that time. At September 30, 2022,2023, the balance in this reserve was approximately $25.4$39.3 million.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employer Contributions
Based on current assumptions, Entergy expects to contribute $400$267 million to its qualified pension plans in 2022.2023. As of September 30, 2022,2023, Entergy had contributed $170$267 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 | $78,605 | | | $41,641 | | | $27,716 | | | $922 | | | $1,924 | | | $26,376 | |
Pension contributions made through September 2022 | $44,300 | | | $24,319 | | | $15,685 | | | $922 | | | $1,632 | | | $12,754 | |
Remaining estimated pension contributions to be made in 2022 | $34,305 | | | $17,322 | | | $12,031 | | | $— | | | $292 | | | $13,622 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 September 2023 | $54,468 | | | $44,565 | | | $21,110 | | | $1,420 | | | $5,314 | | | $15,543 | |
Remaining estimated pension contributions to be made in 2023 | $— | | | $— | | | $— | | | $— | | | $— | | | $— | |
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 September 30, 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 Louisiana, including the City of New Orleans; 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. Seecustomers 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, and Note 14 to the financial statements herein for discussion of the shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business. “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy’s segment financial information for the third quarters ofin 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Consolidated |
| | (In Thousands) |
2022 | | | | | | | | | | |
Operating revenues | | $4,156,616 | | | $62,009 | | | $— | | | ($10) | | | $4,218,615 | |
Income taxes | | $178,088 | | | $18,252 | | | ($12,228) | | | $— | | | $184,112 | |
Consolidated net income (loss) | | $667,162 | | | ($18,745) | | | ($37,125) | | | ($55,410) | | | $555,882 | |
| | | | | | | | | | |
2021 | | | | | | | | | | |
Operating revenues | | $3,191,240 | | | $162,275 | | | $24 | | | ($7) | | | $3,353,532 | |
Income taxes | | $159,472 | | | $8,836 | | | ($10,026) | | | $— | | | $158,282 | |
Consolidated net income (loss) | | $574,399 | | | $26,064 | | | ($32,982) | | | ($31,898) | | | $535,583 | |
| | | | | | | | | | |
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 asset impairments and 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 third quarter 2022 and the nine months ended September 30, 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 third quarters of 2023 and 2022 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility | | Parent & Other | | Eliminations | | Consolidated |
| | (In Thousands) |
2023 | | | | | | | | |
Operating revenues | | $3,559,240 | | | $36,302 | | | ($20) | | | $3,595,522 | |
Income taxes | | $225,989 | | | $1,008 | | | $— | | | $226,997 | |
Consolidated net income (loss) | | $754,036 | | | ($3,304) | | | ($81,018) | | | $669,714 | |
2022 | | | | | | | | |
Operating revenues | | $4,156,616 | | | $62,009 | | | ($10) | | | $4,218,615 | |
Income taxes | | $178,088 | | | $6,024 | | | $— | | | $184,112 | |
Consolidated net income (loss) | | $667,162 | | | ($55,870) | | | ($55,410) | | | $555,882 | |
Entergy’s segment financial information for the nine months ended September 30, 2023 and 2022 and 2021 werewas 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 | | $9,325,977 | | | $96,661 | | | ($31) | | | $9,422,607 | |
Income taxes | | Income taxes | | $304,352 | | | ($21,534) | | | $— | | | $282,818 | |
Consolidated net income (loss) | | Consolidated net income (loss) | | $1,666,701 | | | ($74,257) | | | ($218,418) | | | $1,374,026 | |
Total assets as of September 30, 2023 | | Total assets as of September 30, 2023 | | $64,924,653 | | | $839,217 | | | ($5,211,723) | | | $60,552,147 | |
2022 | 2022 | | 2022 | |
Operating revenues | Operating revenues | | $10,191,041 | | | $300,720 | | | $— | | | ($24) | | | $10,491,737 | | Operating revenues | | $10,191,041 | | | $300,720 | | | ($24) | | | $10,491,737 | |
Income taxes | Income taxes | | ($118,257) | | | $46,340 | | | ($37,117) | | | $— | | | ($109,034) | | Income taxes | | ($118,257) | | | $9,223 | | | $— | | | ($109,034) | |
Consolidated net income (loss) | Consolidated net income (loss) | | $1,166,866 | | | $76,501 | | | ($113,273) | | | ($130,608) | | | $999,486 | | Consolidated net income (loss) | | $1,166,866 | | | ($36,772) | | | ($130,608) | | | $999,486 | |
Total assets as of September 30, 2022 | | $61,784,169 | | | $465,865 | | | $603,672 | | | ($3,878,411) | | | $58,975,295 | | |
2021 | | |
Operating revenues | | $8,461,241 | | | $559,150 | | | $77 | | | ($28) | | | $9,020,440 | | |
Income taxes | | $290,566 | | | ($47,299) | | | ($37,459) | | | $— | | | $205,808 | | |
Consolidated net income (loss) | | $1,264,933 | | | ($210,460) | | | ($85,445) | | | ($95,695) | | | $873,333 | | |
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 implemented a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which included the shutdown and sale of all plants in its merchant nuclear fleet. With the sale of Palisades in June 2022, Entergy has exited the merchant nuclear power business. 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 third 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 July 1, | $40 | | | $— | | | $40 | | | $33 | | | $— | | | $33 | |
Restructuring costs accrued | — | | | — | | | — | | | 2 | | | — | | | 2 | |
| | | | | | | | | | | |
Cash paid out | 40 | | | — | | | 40 | | | — | | | — | | | — | |
Balance as of September 30, | $— | | | $— | | | $— | | | $35 | | | $— | | | $35 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges for the nine months ended September 30, 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 | 3 | | | — | | | 3 | | | 9 | | | 1 | | | 10 | |
Cash paid out | 40 | | | — | | | 40 | | | 119 | | | 15 | | | 134 | |
Balance as of September 30, | $— | | | $— | | | $— | | | $35 | | | $— | | | $35 | |
In addition, Entergy Wholesale Commodities recorded a gain of $166 million in the nine months ended September 30, 2022 as a result of the sale of the Palisades plant, as well as $1 million of impairment and other related charges, and $345 million in the nine months ended September 30, 2021 of impairment and other related charges, including a $340 million loss as a result of the sale of the Indian Point Energy Center, associated with these strategic decisions and transactions.
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs, that are recovered from customers.
As a wholesale generator, Entergy Wholesale Commodities’ core business was 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. 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.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
September 30, 2022 and December 31, 2021. Cash collateral of $8 million was required to be posted by the Entergy subsidiary to its counterparties as of September 30, 2022 and December 31, 2021.
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 September 30, 2022 is 1.5 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of September 30, 20222023 is 6 months, for each forof Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of September 30, 20222023 is 22,880,03716,033,600 MMBtu for Entergy, including 10,960,0003,660,000 MMBtu for Entergy Louisiana, 10,701,00011,256,600 MMBtu for Entergy Mississippi, and 1,219,0371,117,000 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide
Entergy Corporation and Subsidiaries
Notes to Financial Statements
collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.
During the second quarter 2022,2023, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 20222023 through May 31, 2023.2024. 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 September 30, 20222023 is 96,835100,632 GWh for Entergy, including 22,17625,018 GWh for Entergy Arkansas, 43,39642,908 GWh for Entergy Louisiana, 10,51512,949 GWh for Entergy Mississippi, 4,1533,960 GWh for Entergy New Orleans, and 16,47315,596 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 September 30, 20222023 and December 31, 2021.2022. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas as of September 30, 2023 and for Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of September 30, 2022 and for Entergy Mississippi and Entergy Texas as of December 31, 2021.2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments innot designated as hedging instruments on the consolidated balance sheetsheets as of September 30, 2023 and December 31, 2022 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) | | Business | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) |
| | | | | (In Millions) | | | | | | | (In Millions) |
| Derivatives not designated as hedging instruments | | |
| 2023 | | 2023 | |
Assets: | Assets: | | Assets: | |
| Natural gas swaps and options | Natural gas swaps and options | | Prepayments and other | | $22 | | $— | | $22 | | Utility | Natural gas swaps and options | | Prepayments and other | | $1 | | $— | | $1 |
Natural gas swaps and options | | Other deferred debits and other assets | | $8 | | $— | | $8 | | Utility | |
| Financial transmission rights | Financial transmission rights | | Prepayments and other | | $23 | | ($2) | | $21 | | Utility and Entergy Wholesale Commodities | Financial transmission rights | | Prepayments and other | | $33 | | ($1) | | $32 |
| Liabilities: | | Liabilities: | |
| Natural gas swaps and options | | Natural gas swaps and options | | Other current liabilities | | $7 | | $— | | $7 |
|
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 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(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 September 30, 2022 and December 31, 2021.2022. Also excludes letters of credit in the amount of $3$4 million posted as of September 30, 2023 and $3 million posted as of December 31, 2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed above, 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. For the three months ended September 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements.
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the nine months ended September 30, 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 | | $40 |
(a) Before taxes of $8 million for the nine months ended September 30, 2021
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 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 September 30, 20222023 and 2021 were as follows:
| | | | | | | | | | | | | | |
| | | | |
Instrument | | Income Statement location | | Amount of gain (loss) recorded in the income statement |
| | | | (In Millions) |
2022 | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $42 |
Financial transmission rights | | Purchased power expense | (b) | $30 |
| | | | |
| | | | |
2021 | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $37 |
Financial transmission rights | | Purchased power expense | (b) | $18 |
Electricity swaps and options (c) | | Competitive business operating revenues | | $— |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the nine months ended September 30, 2022 and 2021 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) | ($6) |
Financial transmission rights | | Purchased power expense | (b) | $48 |
| | | | |
| | | | |
2022 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $12042 |
Financial transmission rights | | Purchased power expense | (b) | $9030 |
| | | | |
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the nine months ended September 30, 2023 and 2022 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) | ($44) |
Financial transmission rights | | Purchased power expense | (b) | $96 |
| | | | |
| | | | |
20212022 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $62120 |
Financial transmission rights | | Purchased power expense | (b) | $16290 |
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 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 | | $20.1 | | $— | | $20.1 | | Entergy Louisiana | Natural gas swaps and options | | Prepayments and other | | $1.0 | | $— | | $1.0 | | Entergy Louisiana |
Natural gas swaps and options | | Other deferred debits and other assets | | $8.0 | | $— | | $8.0 | | Entergy Louisiana | |
Natural gas swaps | | Prepayments and other | | $2.0 | | $— | | $2.0 | | Entergy Mississippi | |
| | | Financial transmission rights | Financial transmission rights | | Prepayments and other | | $9.6 | | $— | | $9.6 | | Entergy Arkansas | Financial transmission rights | | Prepayments and other | | $11.7 | | ($0.1) | | $11.6 | | Entergy Arkansas |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $10.0 | | ($0.6) | | $9.4 | | Entergy Louisiana | Financial transmission rights | | Prepayments and other | | $14.7 | | $— | | $14.7 | | Entergy Louisiana |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $1.5 | | $— | | $1.5 | | Entergy Mississippi | Financial transmission rights | | Prepayments and other | | $1.2 | | ($0.1) | | $1.1 | | Entergy Mississippi |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $1.1 | | $— | | $1.1 | | Entergy New Orleans | Financial transmission rights | | Prepayments and other | | $1.3 | | $— | | $1.3 | | Entergy New Orleans |
| Financial transmission rights | | Financial transmission rights | | Prepayments and other | | $3.6 | | ($0.3) | | $3.3 | | Entergy Texas |
| Liabilities: | Liabilities: | | Liabilities: | |
| Natural gas swaps | | Natural gas swaps | | Other current liabilities | | $7.1 | | $— | | $7.1 | | Entergy Mississippi |
Natural gas swaps | Natural gas swaps | | Other current liabilities | | $0.4 | | $— | | $0.4 | | Entergy New Orleans | Natural gas swaps | | Other current liabilities | | $0.3 | | $— | | $0.3 | | Entergy New Orleans |
| Financial transmission rights | | Other current liabilities | | $0.9 | | ($1.3) | | ($0.4) | | 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 September 30, 2022,2023, letters of credit posted with MISO covered financial transmission rights exposure of $1.7 million for Entergy Arkansas, $0.9 million for Entergy Louisiana, $0.8$0.6 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, and $0.8$0.5 million for Entergy 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 September 30, 20222023 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | |
| | | | | | |
Instrument | | Income Statement Location | | Amount of gain (loss) recorded in the income statement | | Registrant |
| | | | (In Millions) | | |
2022 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $17.9 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $24.4 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.2) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $12.4 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $10.2 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $4.8 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.6 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $2.3 | (b) | Entergy Texas |
| | | | | | |
2021 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $9.4 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $25.6 | (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 | | $4.5 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $8.7 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $1.5 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.6 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $2.6 | (b) | Entergy Texas |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the nine months ended September 30, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | |
Instrument | | Income Statement Location | | Amount of gain (loss) recorded in the income statement | | Registrant |
| | | | (In Millions) | | |
20222023 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $37.7($1.7) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $81.9($4.4) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.7($0.4) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $35.810.2 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $35.718.3 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $8.06.6 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $3.02.4 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $7.210.4 | (b) | Entergy Texas |
| | | | | | |
20212022 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $16.117.9 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $4424.4 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $2.2($0.2) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $3412.4 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $26.810.2 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $9.44.8 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $2.60.6 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $85.32.3 | (b) | Entergy Texas |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the nine months ended September 30, 2023 and 2022 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 | | ($7.5) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($34.1) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.5) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $18.2 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $46.7 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $11.1 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $4.8 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $14.5 | (b) | Entergy Texas |
| | | | | | |
2022 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $37.7 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $81.9 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.7 | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $35.8 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $35.7 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $8.0 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $3.0 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $7.2 | (b) | Entergy Texas |
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize
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 the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 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 itstheir 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 | | $923 | | | $— | | | $— | | | $923 | | Temporary cash investments | | $1,414 | | | $— | | | $— | | | $1,414 | |
| Decommissioning trust funds (a): | Decommissioning trust funds (a): | | Decommissioning trust funds (a): | |
| Equity securities | Equity securities | | 15 | | | — | | | — | | | 15 | | Equity securities | | 17 | | | — | | | — | | | 17 | |
Debt securities (b) | | 553 | | | 1,073 | | | — | | | 1,626 | | |
Common trusts (c) | | 2,269 | | |
Debt securities | | Debt securities | | 567 | | | 1,093 | | | — | | | 1,660 | |
Common trusts (b) | | Common trusts (b) | | 2,741 | |
| Securitization recovery trust account | Securitization recovery trust account | | 27 | | | — | | | — | | | 27 | | Securitization recovery trust account | | 18 | | | — | | | — | | | 18 | |
Escrow accounts | | 332 | | | — | | | — | | | 332 | | |
Storm reserve escrow accounts | | Storm reserve escrow accounts | | 416 | | | — | | | — | | | 416 | |
Gas hedge contracts | Gas hedge contracts | | 22 | | | 8 | | | — | | | 30 | | Gas hedge contracts | | 1 | | | — | | | — | | | 1 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 21 | | | 21 | | Financial transmission rights | | — | | | — | | | 32 | | | 32 | |
| | $1,872 | | | $1,081 | | | $21 | | | $5,243 | | | $2,433 | | | $1,093 | | | $32 | | | $6,299 | |
| Liabilities: | | Liabilities: | |
| Gas hedge contracts | | Gas hedge contracts | | $7 | | | $— | | | $— | | | $7 | |
|
| 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 | | 49 | | | — | | | — | | | 49 | | |
Storm reserve escrow accounts | | Storm reserve 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 $0.4 million as of December 31, 2021 on debt
Entergy Corporation and Subsidiaries
Notes to Financial Statements
securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses.
(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 September 30, 20222023 and 2021:2022:
| | | | 2022 | | | 2021 | | | | | | | | | | |
| | | | Financial transmission rights | | | | Financial transmission rights | | 2023 | | 2022 |
| | | (In Millions) | | (In Millions) |
Balance as of July 1, | Balance as of July 1, | | | $12 | | | | | $15 | | Balance as of July 1, | $40 | | | $12 | |
Total gains (losses) for the period | Total gains (losses) for the period | | | | | Total gains (losses) for the period | |
| Included as a regulatory liability/asset | Included as a regulatory liability/asset | | | 39 | | | | | 11 | | Included as a regulatory liability/asset | 40 | | | 39 | |
| Settlements | Settlements | | | (30) | | | | | (18) | | Settlements | (48) | | | (30) | |
Balance as of September 30, | Balance as of September 30, | | | $21 | | | | | $8 | | Balance as of September 30, | $32 | | | $21 | |
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 nine months ended September 30, 20222023 and 2021:2022:
| | | | 2022 | | 2021 | | | | | | | | | | | |
| | | Financial transmission rights | | Power Contracts | | Financial transmission rights | | | 2023 | | 2022 |
| | | (In Millions) | | | (In Millions) |
Balance as of January 1, | Balance as of January 1, | | $4 | | | $38 | | | $9 | | Balance as of January 1, | | $19 | | | $4 | |
Total gains (losses) for the period | Total gains (losses) for the period | | | Total gains (losses) for the period | | |
Included in earnings | | — | | | (2) | | | — | | |
Included in other comprehensive income | | — | | | 2 | | | — | | |
| Included as a regulatory liability/asset | Included as a regulatory liability/asset | | 91 | | | — | | | 149 | | Included as a regulatory liability/asset | | 67 | | | 91 | |
Issuances of financial transmission rights | Issuances of financial transmission rights | | 16 | | | — | | | 12 | | Issuances of financial transmission rights | | 42 | | | 16 | |
| Settlements | Settlements | | (90) | | | (38) | | | (162) | | Settlements | | (96) | | | (90) | |
Balance as of September 30, | Balance as of September 30, | | $21 | | | $— | | | $8 | | Balance as of September 30, | | $32 | | | $21 | |
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) |
| | | | | | | | |
| | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table setstables set forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 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 itstheir placement within the fair value hierarchy levels.
Entergy Arkansas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $76.9 | | | $— | | | $— | | | $76.9 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 6.7 | | | — | | | — | | | 6.7 | |
Debt securities | | 134.4 | | | 326.7 | | | — | | | 461.1 | |
Common trusts (b) | | | | | | | | 673.9 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 9.6 | | | 9.6 | |
| | $218.0 | | | $326.7 | | | $9.6 | | | $1,228.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $4.8 | | | $— | | | $— | | | $4.8 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 16.7 | | | — | | | — | | | 16.7 | |
Debt securities | | 119.5 | | | 406.8 | | | — | | | 526.3 | |
Common trusts (b) | | | | | | | | 895.4 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 2.3 | | | 2.3 | |
| | $141.0 | | | $406.8 | | | $2.3 | | | $1,445.5 | |
Entergy Louisiana
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $195.3 | | | $— | | | $— | | | $195.3 | |
| | | | | | | | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 5.4 | | | — | | | — | | | 5.4 | |
Debt securities | | 210.5 | | | 504.2 | | | — | | | 714.7 | |
Common trusts (b) | | | | | | | | 962.4 | |
Escrow accounts | | 291.2 | | | — | | | — | | | 291.2 | |
| | | | | | | | |
Gas hedge contracts | | 20.1 | | | 8.0 | | | — | | | 28.1 | |
Financial transmission rights | | — | | | — | | | 9.4 | | | 9.4 | |
| | $722.5 | | | $512.2 | | | $9.4 | | | $2,206.5 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $110.3 | | | $— | | | $— | | | $110.3 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 2.4 | | | — | | | — | | | 2.4 | |
Debt securities | | 128.8 | | | 342.1 | | | — | | | 470.9 | |
Common trusts (b) | | | | | | | | 812.3 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 11.6 | | | 11.6 | |
| | $241.5 | | | $342.1 | | | $11.6 | | | $1,407.5 | |
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 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $3.4 | | | $— | | | $— | | | $3.4 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 4.5 | | | — | | | — | | | 4.5 | |
Debt securities | | 126.8 | | | 343.9 | | | — | | | 470.7 | |
Common trusts (b) | | | | | | | | 724.7 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 10.3 | | | 10.3 | |
| | $134.7 | | | $343.9 | | | $10.3 | | | $1,213.6 | |
Entergy Mississippi
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| | | | | | | | |
Escrow accounts | | $41.1 | | | $— | | | $— | | | $41.1 | |
Gas hedge contracts | | 2.0 | | | — | | | — | | | 2.0 | |
Financial transmission rights | | — | | | — | | | 1.5 | | | 1.5 | |
| | $43.1 | | | $— | | | $1.5 | | | $44.6 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Louisiana
| 2021 | | 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 | | $47.6 | | | $— | | | $— | | | $47.6 | | Temporary cash investments | | $765.8 | | | $— | | | $— | | | $765.8 | |
Escrow accounts | | 48.9 | | | — | | | — | | | 48.9 | | |
| Decommissioning trust funds (a): | | Decommissioning trust funds (a): | |
| Equity securities | | Equity securities | | 10.6 | | | — | | | — | | | 10.6 | |
Debt securities | | Debt securities | | 243.3 | | | 493.5 | | | — | | | 736.8 | |
Common trusts (b) | | Common trusts (b) | | 1,165.5 | |
Storm reserve escrow account | | Storm reserve escrow account | | 303.9 | | | — | | | — | | | 303.9 | |
| Gas hedge contracts | | Gas hedge contracts | | 1.0 | | | — | | | — | | | 1.0 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 0.3 | | | 0.3 | | Financial transmission rights | | — | | | — | | | 14.7 | | | 14.7 | |
| | | $96.5 | | | $— | | | $0.3 | | | $96.8 | | | $1,324.6 | | | $493.5 | | | $14.7 | | | $2,998.3 | |
| Liabilities: | | |
Gas hedge contracts | | $6.7 | | | $— | | | $— | | | $6.7 | | |
|
Entergy New Orleans
| 2022 | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | | | | | | | | |
Temporary cash investments | Temporary cash investments | | $17.6 | | | $— | | | $— | | | $17.6 | | Temporary cash investments | | $6.3 | | | $— | | | $— | | | $6.3 | |
Securitization recovery trust account | | 5.5 | | | — | | | — | | | 5.5 | | |
Decommissioning trust funds (a): | | Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | Equity securities | | 16.8 | | | — | | | — | | | 16.8 | |
Debt securities | | Debt securities | | 209.4 | | | 515.7 | | | — | | | 725.1 | |
Common trusts (b) | | Common trusts (b) | | 1,037.2 | |
Storm reserve escrow account | | Storm reserve escrow account | | 293.4 | | | — | | | — | | | 293.4 | |
| Gas hedge contracts | | Gas hedge contracts | | 13.1 | | | 3.4 | | | — | | | 16.5 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 1.1 | | | 1.1 | | Financial transmission rights | | — | | | — | | | 7.3 | | | 7.3 | |
| | $23.1 | | | $— | | | $1.1 | | | $24.2 | | | | $539.0 | | | $519.1 | | | $7.3 | | | $2,102.6 | |
| Liabilities: | | |
Gas hedge contracts | | $0.4 | | | $— | | | $— | | | $0.4 | | |
| |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $42.8 | | | $— | | | $— | | | $42.8 | |
Securitization recovery trust account | | 2.0 | | | — | | | — | | | 2.0 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.1 | | | 0.1 | |
| | $44.8 | | | $— | | | $0.1 | | | $44.9 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $0.5 | | | $— | | | $— | | | $0.5 | |
Entergy Mississippi
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $10.3 | | | $— | | | $— | | | $10.3 | |
Storm reserve escrow account | | 34.7 | | | — | | | — | | | 34.7 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 1.1 | | | 1.1 | |
| | $45.0 | | | $— | | | $1.1 | | | $46.1 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $7.1 | | | $— | | | $— | | | $7.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $17.0 | | | $— | | | $— | | | $17.0 | |
Storm reserve escrow account | | 33.5 | | | — | | | — | | | 33.5 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.6 | | | 0.6 | |
| | $50.5 | | | $— | | | $0.6 | | | $51.1 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $24.0 | | | $— | | | $— | | | $24.0 | |
Entergy Texas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $208.8 | | | $— | | | $— | | | $208.8 | |
Securitization recovery trust account | | 21.9 | | | — | | | — | | | 21.9 | |
| | | | | | | | |
| | $230.7 | | | $— | | | $— | | | $230.7 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Financial transmission rights | | $— | | | $— | | | $0.4 | | | $0.4 | |
New Orleans
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| | | | | | | | |
Securitization recovery trust account | | $26.6 | | | $— | | | $— | | | $26.6 | |
Financial transmission rights | | — | | | — | | | 0.8 | | | 0.8 | |
| | $26.6 | | | $— | | | $0.8 | | | $27.4 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
System Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $194.9 | | | $— | | | $— | | | $194.9 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 2.9 | | | — | | | — | | | 2.9 | |
Debt Securities | | 208.5 | | | 242.2 | | | — | | | 450.7 | |
Common trusts (b) | | | | | | | | 632.7 | |
| | $406.3 | | | $242.2 | | | $— | | | $1,281.2 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $114.4 | | | $— | | | $— | | | $114.4 | |
Securitization recovery trust account | | 5.7 | | | — | | | — | | | 5.7 | |
Storm reserve escrow account | | 77.7 | | | — | | | — | | | 77.7 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 1.3 | | | 1.3 | |
| | $197.8 | | | $— | | | $1.3 | | | $199.1 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $0.3 | | | $— | | | $— | | | $0.3 | |
| | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $4.4 | | | $— | | | $— | | | $4.4 | |
Securitization recovery trust account | | 2.2 | | | — | | | — | | | 2.2 | |
Storm reserve escrow account | | 75.0 | | | — | | | — | | | 75.0 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.8 | | | 0.8 | |
| | $81.6 | | | $— | | | $0.8 | | | $82.4 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $1.5 | | | $— | | | $— | | | $1.5 | |
Entergy Texas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $249.6 | | | $— | | | $— | | | $249.6 | |
Securitization recovery trust account | | 12.3 | | | — | | | — | | | 12.3 | |
Financial transmission rights | | — | | | — | | | 3.3 | | | 3.3 | |
| | $261.9 | | | $— | | | $3.3 | | | $265.2 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $3.0 | | | $— | | | $— | | | $3.0 | |
Securitization recovery trust account | | 10.9 | | | — | | | — | | | 10.9 | |
Financial transmission rights | | — | | | — | | | 0.1 | | | 0.1 | |
| | $13.9 | | | $— | | | $0.1 | | | $14.0 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
System Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $94.5 | | | $— | | | $— | | | $94.5 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 4.1 | | | — | | | — | | | 4.1 | |
Debt securities | | 195.5 | | | 257.3 | | | — | | | 452.8 | |
Common trusts (b) | | | | | | | | 762.3 | |
| | $294.1 | | | $257.3 | | | $— | | | $1,313.7 | |
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 September 30, 2022.2023.
| | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | | (In Millions) |
Balance as of July 1, | Balance as of July 1, | $4.4 | | | $4.7 | | | $0.5 | | | $0.6 | | | $1.5 | | Balance as of July 1, | $19.6 | | | $16.7 | | | $1.2 | | | $1.5 | | | $1.2 | |
| Gains (losses) included as a regulatory liability/asset | Gains (losses) included as a regulatory liability/asset | 17.6 | | | 14.9 | | | 5.8 | | | 1.1 | | | 0.4 | | Gains (losses) included as a regulatory liability/asset | 2.2 | | | 16.3 | | | 6.5 | | | 2.2 | | | 12.5 | |
Settlements | Settlements | (12.4) | | | (10.2) | | | (4.8) | | | (0.6) | | | (2.3) | | Settlements | (10.2) | | | (18.3) | | | (6.6) | | | (2.4) | | | (10.4) | |
Balance as of September 30, | Balance as of September 30, | $9.6 | | | $9.4 | | | $1.5 | | | $1.1 | | | ($0.4) | | Balance as of September 30, | $11.6 | | | $14.7 | | | $1.1 | | | $1.3 | | | $3.3 | |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 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 Millions) | | (In Millions) |
Balance as of July 1, | Balance as of July 1, | $3.8 | | | $4.8 | | | $2.1 | | | $0.6 | | | $3.8 | | Balance as of July 1, | $4.4 | | | $4.7 | | | $0.5 | | | $0.6 | | | $1.5 | |
| Gains (losses) included as a regulatory liability/asset | Gains (losses) included as a regulatory liability/asset | 3.1 | | | 6.5 | | | — | | | 0.3 | | | 0.5 | | Gains (losses) included as a regulatory liability/asset | 17.6 | | | 14.9 | | | 5.8 | | | 1.1 | | | 0.4 | |
Settlements | Settlements | (4.5) | | | (8.7) | | | (1.5) | | | (0.6) | | | (2.6) | | Settlements | (12.4) | | | (10.2) | | | (4.8) | | | (0.6) | | | (2.3) | |
Balance as of September 30, | Balance as of September 30, | $2.4 | | | $2.6 | | | $0.6 | | | $0.3 | | | $1.7 | | Balance as of September 30, | $9.6 | | | $9.4 | | | $1.5 | | | $1.1 | | | ($0.4) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 nine months ended September 30, 2022.2023.
| | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | | (In Millions) |
Balance as of January 1, | Balance as of January 1, | $2.3 | | | $0.6 | | | $0.3 | | | $0.1 | | | $0.8 | | Balance as of January 1, | $10.3 | | | $7.3 | | | $0.6 | | | $0.8 | | | $0.1 | |
Issuances of financial transmission rights | Issuances of financial transmission rights | 5.4 | | | 5.3 | | | 0.8 | | | 0.8 | | | 3.9 | | Issuances of financial transmission rights | 20.6 | | | 18.1 | | | 1.4 | | | 1.4 | | | 0.2 | |
Gains (losses) included as a regulatory liability/asset | Gains (losses) included as a regulatory liability/asset | 37.7 | | | 39.2 | | | 8.4 | | | 3.2 | | | 2.1 | | Gains (losses) included as a regulatory liability/asset | (1.1) | | | 36.0 | | | 10.2 | | | 3.9 | | | 17.5 | |
Settlements | Settlements | (35.8) | | | (35.7) | | | (8.0) | | | (3.0) | | | (7.2) | | Settlements | (18.2) | | | (46.7) | | | (11.1) | | | (4.8) | | | (14.5) | |
Balance as of September 30, | Balance as of September 30, | $9.6 | | | $9.4 | | | $1.5 | | | $1.1 | | | ($0.4) | | Balance as of September 30, | $11.6 | | | $14.7 | | | $1.1 | | | $1.3 | | | $3.3 | |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 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 Millions) | | (In Millions) |
Balance as of January 1, | Balance as of January 1, | $2.7 | | | $4.2 | | | $0.6 | | | $0.1 | | | $1.6 | | Balance as of January 1, | $2.3 | | | $0.6 | | | $0.3 | | | $0.1 | | | $0.8 | |
Issuances of financial transmission rights | Issuances of financial transmission rights | 2.8 | | | 4.1 | | | 1.7 | | | 0.4 | | | 2.7 | | Issuances of financial transmission rights | 5.4 | | | 5.3 | | | 0.8 | | | 0.8 | | | 3.9 | |
Gains (losses) included as a regulatory liability/asset | Gains (losses) included as a regulatory liability/asset | 30.9 | | | 21.1 | | | 7.7 | | | 2.4 | | | 82.7 | | Gains (losses) included as a regulatory liability/asset | 37.7 | | | 39.2 | | | 8.4 | | | 3.2 | | | 2.1 | |
Settlements | Settlements | (34.0) | | | (26.8) | | | (9.4) | | | (2.6) | | | (85.3) | | Settlements | (35.8) | | | (35.7) | | | (8.0) | | | (3.0) | | | (7.2) | |
Balance as of September 30, | Balance as of September 30, | $2.4 | | | $2.6 | | | $0.6 | | | $0.3 | | | $1.7 | | Balance as of September 30, | $9.6 | | | $9.4 | | | $1.5 | | | $1.1 | | | ($0.4) | |
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, and Grand Gulf. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
As discussed in Note 14 to the financial statements herein, 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.
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 CommoditiesPalisades non-utility nuclear plantsplant 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 and nine months ended September 30, 20222023 on equity securities still held as of September 30, 20222023 were ($120)99) million and ($767)$272 million, respectively. 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 September 30, 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 | | $1,660 | | | $1 | | | $222 | |
| 2022 | 2022 | | 2022 | |
Debt Securities | Debt Securities | | $1,626 | | | $2 | | | $232 | | Debt Securities | | $1,655 | | | $4 | | | $201 | |
| 2021 | | |
Debt Securities | | $2,177 | | | $65 | | | $12 | | |
The unrealized gains/(losses) above are reported before deferred taxes of $2 million as of December 31, 2021 for debt securities. As of September 30, 2023 and December 31, 2022, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $1,856$1,881 million as of September 30, 20222023 and $2,125$1,852 million as of December 31, 2021.2022. As of September 30, 2022,2023, available-for-sale debt securities had an average coupon rate of approximately 2.98%3.37%, an average duration of approximately 6.316.30 years, and an average maturity of approximately 10.3810.71 years.
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 September 30, 20222023 and December 31, 2021:2022:
| | | September 30, 2022 | | December 31, 2021 | | September 30, 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 | | $1,211 | | | $165 | | | $770 | | | $8 | | Less than 12 months | | $585 | | | $30 | | | $840 | | | $63 | |
More than 12 months | More than 12 months | | 339 | | | 67 | | | 99 | | | 4 | | More than 12 months | | 1,010 | | | 192 | | | 666 | | | 138 | |
Total | Total | | $1,550 | | | $232 | | | $869 | | | $12 | | Total | | $1,595 | | | $222 | | | $1,506 | | | $201 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 20222023 and December 31, 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Less than 1 year | Less than 1 year | $77 | | | $— | | Less than 1 year | $80 | | | $62 | |
1 year - 5 years | 1 year - 5 years | 526 | | | 473 | | 1 year - 5 years | 499 | | | 520 | |
5 years - 10 years | 5 years - 10 years | 456 | | | 655 | | 5 years - 10 years | 477 | | | 461 | |
10 years - 15 years | 10 years - 15 years | 111 | | | 389 | | 10 years - 15 years | 108 | | | 117 | |
15 years - 20 years | 15 years - 20 years | 139 | | | 130 | | 15 years - 20 years | 155 | | | 161 | |
20 years+ | 20 years+ | 317 | | | 530 | | 20 years+ | 341 | | | 334 | |
Total | Total | $1,626 | | | $2,177 | | Total | $1,660 | | | $1,655 | |
During the three months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $119$226 million and $354$119 million, respectively. During the three months ended September 30, 2023, there were no gross gains and $11 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2022, and 2021,there were gross gains of $0.2 million and $8 million, respectively, and gross losses of $8 million and $2 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $755$486 million and $1,151$755 million, respectively. During the nine months ended September 30, 2023, there were $1 million in gross gains and $28 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the nine months ended September 30, 2022, and 2021,there were gross gains of $2 million and $24 million, respectively, and gross losses of $36 million and $15 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 Palisades decommissioning trust fund as of December 31, 2021 was $576 million. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Entergy Arkansas
Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of September 30, 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 | | $470.9 | | | $0.1 | | | $78.1 | |
| 2022 | 2022 | | 2022 | |
Debt Securities | Debt Securities | | $461.1 | | | $— | | | $73.7 | | Debt Securities | | $470.7 | | | $0.2 | | | $69.3 | |
| 2021 | | |
Debt Securities | | $526.3 | | | $11.4 | | | $4.7 | | |
The amortized cost of available-for-sale debt securities was $534.8$548.9 million as of September 30, 20222023 and $519.6$539.8 million as of December 31, 2021.2022. As of September 30, 2022,2023, the available-for-sale debt securities had an average coupon rate of approximately 2.22%2.58%, an average duration of approximately 5.815.78 years, and an average maturity of approximately 7.167.35 years.
The unrealized gains/(losses) recognized during the three and nine months ended September 30, 20222023 on equity securities still held as of September 30, 20222023 were ($35.3)29.3) million and ($229.2)$80 million, respectively. The
Entergy Corporation and Subsidiaries
Notes to Financial Statements
equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 20222023 and December 31, 2021:2022:
| | | September 30, 2022 | | December 31, 2021 | | September 30, 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 | | $288.3 | | | $40.5 | | | $183.8 | | | $2.9 | | Less than 12 months | | $68.8 | | | $4.3 | | | $197.6 | | | $18.8 | |
More than 12 months | More than 12 months | | 159.8 | | | 33.2 | | | 39.5 | | | 1.8 | | More than 12 months | | 391.8 | | | 73.8 | | | 260.1 | | | 50.5 | |
Total | Total | | $448.1 | | | $73.7 | | | $223.3 | | | $4.7 | | Total | | $460.6 | | | $78.1 | | | $457.7 | | | $69.3 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 20222023 and December 31, 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Less than 1 year | Less than 1 year | $40.5 | | | $— | | Less than 1 year | $45.6 | | | $21.2 | |
1 year - 5 years | 1 year - 5 years | 156.7 | | | 91.7 | | 1 year - 5 years | 135.8 | | | 159.7 | |
5 years - 10 years | 5 years - 10 years | 180.1 | | | 217.4 | | 5 years - 10 years | 189.8 | | | 191.7 | |
10 years - 15 years | 10 years - 15 years | 34.5 | | | 146.0 | | 10 years - 15 years | 38.9 | | | 38.0 | |
15 years - 20 years | 15 years - 20 years | 30.8 | | | 35.7 | | 15 years - 20 years | 42.2 | | | 42.6 | |
20 years+ | 20 years+ | 18.5 | | | 35.5 | | 20 years+ | 18.6 | | | 17.5 | |
Total | Total | $461.1 | | | $526.3 | | Total | $470.9 | | | $470.7 | |
During the three months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $17.2$1.8 million and $20.6$17.2 million, respectively. During the three months ended September 30, 2022,2023, there were no gross gains related to available-for-sale securities reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2021,and $0.1 million in gross gains of $0.7 million related to available-for-sale securities werelosses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2022, there were no gross gains and 2021, gross losses of $2 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $33.1$18.4 million and $46.7$33.1 million, respectively. During the nine months ended September 30, 2023, there were no gross gains and $1.8 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the nine months ended September 30, 2022, and 2021,there were gross gains of $0.1 million and $2.3 million, respectively, and gross losses of $2.5 million and $0.3 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of September 30, 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 | | $736.8 | | | $1.3 | | | $74.5 | |
| 2022 | 2022 | | 2022 | |
Debt Securities | Debt Securities | | $714.7 | | | $1.8 | | | $86.6 | | Debt Securities | | $725.1 | | | $3.5 | | | $67.5 | |
| 2021 | | |
Debt Securities | | $794.2 | | | $31.3 | | | $3.3 | | |
The amortized cost of available-for-sale debt securities was $799.5$809.9 million as of September 30, 20222023 and $766.3$789.1 million as of December 31, 2021.2022. As of September 30, 2022,2023, the available-for-sale debt securities had an average coupon rate of approximately 3.67%3.87%, an average duration of approximately 6.656.72 years, and an average maturity of approximately 12.5713.11 years.
The unrealized gains/(losses) recognized during the three and nine months ended September 30, 20222023 on equity securities still held as of September 30, 20222023 were ($51.6)42.3) million and ($322.9)$117.2 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
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 September 30, 20222023 and December 31, 2021:2022:
| | | September 30, 2022 | | December 31, 2021 | | September 30, 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 | | $579.8 | | | $68.8 | | | $206.9 | | | $1.4 | | Less than 12 months | | $339.7 | | | $14.9 | | | $409.9 | | | $24.6 | |
More than 12 months | More than 12 months | | 76.5 | | | 17.8 | | | 42.9 | | | 1.9 | | More than 12 months | | 354.9 | | | 59.6 | | | 207.5 | | | 42.9 | |
Total | Total | | $656.3 | | | $86.6 | | | $249.8 | | | $3.3 | | Total | | $694.6 | | | $74.5 | | | $617.4 | | | $67.5 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 20222023 and December 31, 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Less than 1 year | Less than 1 year | $29.3 | | | $— | | Less than 1 year | $31.9 | | | $33.6 | |
1 year - 5 years | 1 year - 5 years | 184.7 | | | 157.8 | | 1 year - 5 years | 164.6 | | | 159.1 | |
5 years - 10 years | 5 years - 10 years | 152.6 | | | 173.0 | | 5 years - 10 years | 169.2 | | | 161.7 | |
10 years - 15 years | 10 years - 15 years | 67.9 | | | 123.0 | | 10 years - 15 years | 64.2 | | | 67.1 | |
15 years - 20 years | 15 years - 20 years | 80.5 | | | 80.2 | | 15 years - 20 years | 79.4 | | | 83.3 | |
20 years+ | 20 years+ | 199.7 | | | 260.2 | | 20 years+ | 227.5 | | | 220.3 | |
Total | Total | $714.7 | | | $794.2 | | Total | $736.8 | | | $725.1 | |
During the three months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale securities amounted to $47.6$148.1 million and $20.5$47.6 million, respectively. During the three months ended September 30, 2023, there were no gross gains and gross losses of $8.6 million reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2022, and 2021,there were gross gains of $0.2 million and $0.9 million, respectively, and gross losses of $2.8 million and $23.5 thousand, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $288.5$280.7 million and $191.4$288.5 million, respectively. During the nine months ended September 30, 2023, there were gross gains of $0.5 million and gross losses of $17.6 million reclassified out of other regulatory liabilities/assets into earnings. During the nine months ended September 30, 2022, and 2021,there were gross gains of $1.3 million and $5.6 million, respectively, and gross losses of $15 million and $3.4 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 September 30, 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 | | $452.8 | | | $0.1 | | | $69.8 | |
| 2022 | 2022 | | 2022 | |
Debt Securities | Debt Securities | | $450.7 | | | $0.1 | | | $71.2 | | Debt Securities | | $459.7 | | | $0.7 | | | $63.7 | |
| 2021 | | |
Debt Securities | | $524.5 | | | $11.8 | | | $2.9 | | |
The amortized cost of available-for-sale debt securities was $521.8$522.6 million as of September 30, 20222023 and $515.6$522.7 million as of December 31, 2021.2022. As of September 30, 2022,2023, the available-for-sale debt securities had an average coupon rate of approximately 2.67%3.36%, an average duration of approximately 6.306.15 years, and an average maturity of approximately 10.2210.26 years.
The unrealized gains/(losses) recognized during the three and nine months ended September 30, 20222023 on equity securities still held as of September 30, 20222023 were ($33.2)27.5) million and ($215)$75.2 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 20222023 and December 31, 2021:2022:
| | | September 30, 2022 | | December 31, 2021 | | September 30, 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 | | $342.7 | | | $55.2 | | | $276.6 | | | $2.3 | | Less than 12 months | | $176.1 | | | $11.0 | | | $231.9 | | | $19.2 | |
More than 12 months | More than 12 months | | 102.2 | | | 16.0 | | | 11.3 | | | 0.6 | | More than 12 months | | 263.0 | | | 58.8 | | | 198.0 | | | 44.5 | |
Total | Total | | $444.9 | | | $71.2 | | | $287.9 | | | $2.9 | | Total | | $439.1 | | | $69.8 | | | $429.9 | | | $63.7 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 20222023 and December 31, 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Less than 1 year | Less than 1 year | $7.7 | | | $— | | Less than 1 year | $2.7 | | | $6.8 | |
1 year - 5 years | 1 year - 5 years | 184.4 | | | 156.8 | | 1 year - 5 years | 198.9 | | | 201.7 | |
5 years - 10 years | 5 years - 10 years | 123.6 | | | 161.8 | | 5 years - 10 years | 118.4 | | | 107.1 | |
10 years - 15 years | 10 years - 15 years | 9.0 | | | 58.6 | | 10 years - 15 years | 4.7 | | | 11.7 | |
15 years - 20 years | 15 years - 20 years | 27.6 | | | 1.9 | | 15 years - 20 years | 33.1 | | | 35.0 | |
20 years+ | 20 years+ | 98.4 | | | 145.4 | | 20 years+ | 95.0 | | | 97.4 | |
Total | Total | $450.7 | | | $524.5 | | Total | $452.8 | | | $459.7 | |
During the three months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $54.6$76.2 million and $292.8$54.6 million, respectively. During the three months ended September 30, 2023, there were no gross gains and $2.7 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2022, and 2021,there were gross gains of $0.02 million and $5.9 million, respectively, and gross losses of $3 million and $2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $158.6$187.3 million and $468.5$158.6 million, respectively. During the nine months ended September 30, 2023, there were no gross gains and $9.1 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the nine months ended September 30, 2022, and 2021,there were gross gains of $0.2 million and $9 million, respectively, and gross losses of $8.3 million and $3.8 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 September 30, 2022, Entergy did not have an allowance for expected credit losses related to available-for-sale securities. Assecurities as of September 30, 2023 and December 31, 2021, Entergy’s allowance2022. Entergy did not record any impairments of available-
Entergy Corporation and Subsidiaries
Notes to Financial Statements
for-sale debt securities for expected credit losses related to available-for-sale securities was $0.4 million.the three and nine months ended September 30, 2023. Entergy did not record any impairments of available-for-sale debt securities for the three months ended September 30, 2022. Entergy recorded $1.5 million in impairments
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of available-for-sale debt securities for the nine months ended September 30, 2022. Entergy did not record any impairments of available-for-sale debt securities for the three and nine months ended September 30, 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 for Entergy or the Registrant Subsidiaries for the three months ended September 30, 2023 or for the nine months ended September 30, 2023. For the three months ended September 30, 2022, the return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In Millions) |
Entergy | $16 | | | $17 | | | $50 | | | $72 | |
Entergy Arkansas | $— | | | $— | | | $— | | | $8 | |
Entergy Louisiana | $6 | | | $8 | | | $25 | | | $24 | |
| | | | | | | |
Entergy New Orleans | $— | | | $— | | | $1 | | | $— | |
Entergy Texas | $10 | | | $9 | | | $24 | | | $22 | |
System Energy | $— | | | $— | | | $— | | | $18 | |
by $16 million for Entergy, including $6 million for Entergy Louisiana and $10 million for Entergy Texas. For the nine months ended September 30, 2022, the return of unprotected excess accumulated deferred income taxes reduced the regulatory liability for income taxes by $50 million for Entergy, including $25 million for Entergy Louisiana, $1 million for Entergy New Orleans, and $24 million for Entergy Texas.
Income Tax Audits
Entergy and the Registrant Subsidiaries anticipate the resolution of the IRS 2016-2018 audit and expect to record the effects of the adjustments associated with such audit in the fourth quarter of 2023. As described more fully in Note 3 to the financial statements in the Form 10-K, the resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the fourth quarter of 2023.
In 2018, Entergy Arkansas adopted a resultnew method of accounting for income tax return purposes in which nuclear decommissioning liabilities are treated as production costs of electricity includable in cost of goods sold. Entergy Arkansas anticipates that the position will be resolved with the IRS upon conclusion of the audit. Entergy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans anticipate resolving with the IRS the mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements. Also included in this IRS audit adjustments proposed byis the income tax treatment of the 2018 restructuring of Entergy Arkansas. Entergy Arkansas Departmentanticipates resolving this tax treatment with the IRS upon conclusion of Finance and Administration, an Entergy Wholesale Commodities subsidiary recorded a provision in third quarter 2022 for uncertain tax positions of approximately $21 million, which includes interest expense.the audit.
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.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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 in second quarter 2022 of approximately $290$133 million, after taking into account a
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 $283$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 secondfirst quarter 20222023 a $224$103 million ($16576 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 cost securitization.
Arkansas Corporate Income Tax Rate Changes
In April 2023, Arkansas Act 532 reduced the Arkansas corporate income tax rate from 5.3% to 5.1%. As a result of the rate reduction, Entergy Arkansas accrued a regulatory liability for income taxes of approximately $8 million in second quarter 2023, including a gross-up for the treatment of income taxes in Entergy Arkansas’s retail and wholesale ratemaking formulas.
In September 2023, Arkansas Act 6 reduced the Arkansas corporate income tax rate from 5.1% to 4.8%, which will be effective January 1, 2024. As a result of the rate reduction, Entergy Arkansas accrued an additional regulatory liability for income taxes of approximately $14 million in third quarter 2023, including a gross-up for the treatment of income taxes in Entergy Arkansas’s retail and wholesale ratemaking formulas.
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Accrued Construction Expenditures in Accounts Payable
ConstructionAccrued construction expenditures included in accounts payable at September 30, 20222023 were $354$447 million for Entergy, $62.2$62 million for Entergy Arkansas, $155.6$111.3 million for Entergy Louisiana, $22.6$31.2 million for Entergy Mississippi, $6.7$4.7 million for Entergy New Orleans, $37.8$178.7 million for Entergy Texas, and $29.9$16.7 million for System Energy. ConstructionAccrued construction expenditures included in accounts payable at December 31, 20212022 were $723$462 million for Entergy, $35.6$93.2 million for Entergy Arkansas, $507.9$156.7 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.
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.entities (VIEs). See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities, commercial paper borrowings, and long-term debt.
Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, is a variable interest entity and Entergy Texas is the primary beneficiary. In April 2022, Entergy Texas Restoration Funding II issued senior secured system restoration bonds (securitization bonds) to finance Entergy Texas’s Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration costs. 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. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse See Note 6 to the assets or revenues of Entergy Texas Restoration Funding II, includingfinancial statements in the transition property,Form 10-K 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 charges. See Note 43 to the financial statements herein for additional details regarding the securitization bonds.discussion of noncontrolling interests.
Restoration Law Trust I (the storm trust)trust I), a trust consolidated by Entergy Louisiana, is a variableVIE and Entergy Louisiana is the primary beneficiary. As of September 30, 2023 and December 31, 2022, the primary asset held by
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the storm trust I was $3 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 sheets of Entergy Louisiana. The LURC’s 1% beneficial interest entityin the storm trust I is presented as noncontrolling interest on the consolidated balance sheets of Entergy and Entergy Louisiana, with balances of $32.1 million as of September 30, 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 VIE and Entergy Louisiana is the primary beneficiary. The storm trust II was established as part of the March 2023 Act 293 securitization of Entergy Louisiana’s Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm UriIda restoration costs, as well as to establish a storm reserve to fund a portion ofless Hurricane Ida storm restoration costs.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.trust II. As of September 30, 2022,2023, the primary asset held by the storm trust II is the $3.2$1.5 billion of outstanding Entergy Finance Company preferred membership interests, which is reflected as an investment in
Entergy Corporation and Subsidiaries
Notes to Financial Statements
affiliate preferred membership interests on the consolidated balance sheetsheets of Entergy Louisiana. The storm trust II’s investment in affiliate preferred membership interests was purchased with the net bond proceeds of the securitization bonds issued by the LCDA. After the securitization bonds were issued, the LCDA loaned the net bond proceeds to the LURC, and pursuant to Act 293, the LURC contributed the net bond proceeds to the storm trust II. 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 inon the consolidated balance sheets of Entergy and Entergy Louisiana.Louisiana, with a balance of $15.1 million as of September 30, 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 $17.2 million in each of the nine months ended September 30, 20222023 and the nine months ended September 30, 2021.2022.
AR Searcy Partnership, LLC is a tax equity partnership that qualifies as a variable interest entity,VIE, 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 discussion on the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC. As of September 30, 2022,2023, AR Searcy Partnership, LLC recorded assets equal to $136$135.4 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $108.8$110.6 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,VIE, which Entergy Mississippi is required to consolidate as it is the primary beneficiary. See Note 14 to the financial statements herein for additional discussion on the establishment of MS Sunflower Partnership, LLC and the acquisition of the Sunflower Solar facility. The entity is a VIE because the membership interests do not give Entergy Mississippi or the third party tax equity investor substantive kick out rights typical of equity owners. Entergy Mississippi 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 discussion of the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC which is the basis for treatment of Entergy Mississippi’s investment in MS Sunflower Partnership, LLC. As of September 30, 2022,2023, MS Sunflower Partnership, LLC recorded assets equal to $105.2$164 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately $104.9$127.2 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 Mississippi’s ownership interest in the partnership was approximately $117.2 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | | | | | | | | | | | | | |
| | | 2023 | | 2022 | |
| | (In Thousands) | | | (In Thousands) | |
Utility: | Utility: | | | Utility: | | |
Residential | Residential | | $1,570,940 | | | $1,291,645 | | | Residential | | $1,602,496 | | | $1,570,940 | | |
Commercial | Commercial | | 940,604 | | | 756,903 | | | Commercial | | 884,585 | | | 940,604 | | |
Industrial | Industrial | | 1,109,245 | | | 814,685 | | | Industrial | | 797,982 | | | 1,109,245 | | |
Governmental | Governmental | | 84,649 | | | 66,167 | | | Governmental | | 73,846 | | | 84,649 | | |
Total billed retail | Total billed retail | | 3,705,438 | | | 2,929,400 | | | Total billed retail | | 3,358,909 | | | 3,705,438 | | |
| Sales for resale (a) | Sales for resale (a) | | 311,479 | | | 135,220 | | | Sales for resale (a) | | 86,505 | | | 311,479 | | |
Other electric revenues (b) | Other electric revenues (b) | | 83,679 | | | 81,343 | | | Other electric revenues (b) | | 66,211 | | | 83,679 | | |
Revenues from contracts with customers | Revenues from contracts with customers | | 4,100,596 | | | 3,145,963 | | | Revenues from contracts with customers | | 3,511,625 | | | 4,100,596 | | |
Other revenues (c) | | 9,462 | | | 14,006 | | | |
Total electric revenues | | 4,110,058 | | | 3,159,969 | | | |
Other Utility revenues (c) | | Other Utility revenues (c) | | 15,310 | | | 9,462 | | |
Electric revenues | | Electric revenues | | 3,526,935 | | | 4,110,058 | | |
| Natural gas | | 46,548 | | | 31,254 | | | |
Natural gas revenues | | Natural gas revenues | | 32,305 | | | 46,548 | | |
| Entergy Wholesale Commodities: | | | |
Competitive businesses sales from contracts with customers (a) | | 61,898 | | | 158,608 | | | |
Other revenues (c) | | 111 | | | 3,701 | | | |
Total competitive businesses revenues | | 62,009 | | | 162,309 | | | |
Other revenues (d) | | Other revenues (d) | | 36,282 | | | 62,009 | | |
| Total operating revenues | Total operating revenues | | $4,218,615 | | | $3,353,532 | | | Total operating revenues | | $3,595,522 | | | $4,218,615 | | |
Entergy’s total revenues for the nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | |
| | 2023 | | 2022 |
| | (In Thousands) |
Utility: | | | | |
Residential | | $3,595,378 | | | $3,592,025 | |
Commercial | | 2,291,673 | | | 2,290,893 | |
Industrial | | 2,411,882 | | | 2,731,075 | |
Governmental | | 204,999 | | | 209,044 | |
Total billed retail | | 8,503,932 | | | 8,823,037 | |
| | | | |
Sales for resale (a) | | 262,714 | | | 689,473 | |
Other electric revenues (b) | | 358,000 | | | 420,710 | |
Revenues from contracts with customers | | 9,124,646 | | | 9,933,220 | |
Other Utility revenues (c) | | 70,942 | | | 90,869 | |
Electric revenues | | 9,195,588 | | | 10,024,089 | |
| | | | |
Natural gas revenues | | 130,389 | | | 166,917 | |
| | | | |
Other revenues (d) | | 96,630 | | | 300,731 | |
| | | | |
Total operating revenues | | $9,422,607 | | | $10,491,737 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s total revenues for the nine months ended September 30, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | |
| | 2022 | | 2021 |
| | (In Thousands) |
Utility: | | | | |
Residential | | $3,592,025 | | | $3,114,084 | |
Commercial | | 2,290,893 | | | 1,958,284 | |
Industrial | | 2,731,075 | | | 2,169,295 | |
Governmental | | 209,044 | | | 184,576 | |
Total billed retail | | 8,823,037 | | | 7,426,239 | |
| | | | |
Sales for resale (a) | | 689,473 | | | 459,425 | |
Other electric revenues (b) | | 420,710 | | | 348,683 | |
Revenues from contracts with customers | | 9,933,220 | | | 8,234,347 | |
Other revenues (c) | | 90,869 | | | 105,417 | |
Total electric revenues | | 10,024,089 | | | 8,339,764 | |
| | | | |
Natural gas | | 166,917 | | | 121,420 | |
| | | | |
Entergy Wholesale Commodities: | | | | |
Competitive businesses sales from contracts with customers (a) | | 294,432 | | | 537,402 | |
Other revenues (c) | | 6,299 | | | 21,854 | |
Total competitive businesses revenues | | 300,731 | | | 559,256 | |
| | | | |
Total operating revenues | | $10,491,737 | | | $9,020,440 | |
The Utility operating companies’ total revenues for the three months ended September 30, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $323,767 | | | $618,056 | | | $206,708 | | | $116,968 | | | $305,441 | |
Commercial | | 165,609 | | | 402,027 | | | 150,137 | | | 75,083 | | | 147,748 | |
Industrial | | 175,304 | | | 693,445 | | | 50,931 | | | 10,973 | | | 178,592 | |
Governmental | | 6,104 | | | 28,022 | | | 14,837 | | | 27,406 | | | 8,280 | |
Total billed retail | | 670,784 | | | 1,741,550 | | | 422,613 | | | 230,430 | | | 640,061 | |
Sales for resale (a) | | 157,008 | | | 191,664 | | | 56,162 | | | 33,158 | | | 9,149 | |
Other electric revenues (b) | | 35,478 | | | 61,549 | | | (21,997) | | | (900) | | | 10,895 | |
Revenues from contracts with customers | | 863,270 | | | 1,994,763 | | | 456,778 | | | 262,688 | | | 660,105 | |
Other revenues (c) | | 1,232 | | | 8,246 | | | 2,354 | | | 216 | | | (549) | |
Total electric revenues | | 864,502 | | | 2,003,009 | | | 459,132 | | | 262,904 | | | 659,556 | |
Natural gas | | — | | | 17,789 | | | — | | | 28,759 | | | — | |
Total operating revenues | | $864,502 | | | $2,020,798 | | | $459,132 | | | $291,663 | | | $659,556 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $294,797 | | | $477,025 | | | $184,479 | | | $85,974 | | | $249,370 | |
Commercial | | 149,952 | | | 300,255 | | | 131,472 | | | 57,563 | | | 117,661 | |
Industrial | | 155,714 | | | 477,439 | | | 40,671 | | | 8,574 | | | 132,287 | |
Governmental | | 5,747 | | | 21,448 | | | 13,110 | | | 20,016 | | | 5,846 | |
Total billed retail | | 606,210 | | | 1,276,167 | | | 369,732 | | | 172,127 | | | 505,164 | |
Sales for resale (a) | | 76,576 | | | 98,830 | | | 35,199 | | | 23,290 | | | 25,329 | |
Other electric revenues (b) | | 33,120 | | | 27,790 | | | 13,689 | | | (3,258) | | | 11,355 | |
Revenues from contracts with customers | | 715,906 | | | 1,402,787 | | | 418,620 | | | 192,159 | | | 541,848 | |
Other revenues (c) | | 6,777 | | | 4,950 | | | 1,699 | | | 787 | | | (216) | |
Total electric revenues | | 722,683 | | | 1,407,737 | | | 420,319 | | | 192,946 | | | 541,632 | |
Natural gas | | — | | | 12,971 | | | — | | | 18,283 | | | — | |
Total operating revenues | | $722,683 | | | $1,420,708 | | | $420,319 | | | $211,229 | | | $541,632 | |
The Utility operating companies’ total revenues for the nine months ended September 30, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $750,762 | | | $1,372,538 | | | $503,351 | | | $256,110 | | | $709,264 | |
Commercial | | 406,078 | | | 949,680 | | | 379,075 | | | 179,456 | | | 376,604 | |
Industrial | | 420,788 | | | 1,681,628 | | | 133,826 | | | 26,462 | | | 468,371 | |
Governmental | | 15,702 | | | 68,880 | | | 39,449 | | | 62,617 | | | 22,396 | |
Total billed retail | | 1,593,330 | | | 4,072,726 | | | 1,055,701 | | | 524,645 | | | 1,576,635 | |
Sales for resale (a) | | 384,175 | | | 422,596 | | | 121,328 | | | 96,523 | | | 44,927 | |
Other electric revenues (b) | | 136,870 | | | 185,405 | | | 29,665 | | | 17,936 | | | 54,874 | |
Revenues from contracts with customers | | 2,114,375 | | | 4,680,727 | | | 1,206,694 | | | 639,104 | | | 1,676,436 | |
Other revenues (c) | | 6,022 | | | 57,461 | | | 6,926 | | | 2,530 | | | 20,193 | |
Total electric revenues | | 2,120,397 | | | 4,738,188 | | | 1,213,620 | | | 641,634 | | | 1,696,629 | |
Natural gas | | — | | | 64,367 | | | — | | | 102,550 | | | — | |
Total operating revenues | | $2,120,397 | | | $4,802,555 | | | $1,213,620 | | | $744,184 | | | $1,696,629 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2021 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | |
| | (In Thousands) | |
2023 | | 2023 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | | (In Thousands) |
Residential | Residential | | $703,081 | | | $1,153,428 | | | $449,576 | | | $212,586 | | | $595,413 | | Residential | | $346,454 | | | $547,485 | | | $257,241 | | | $120,311 | | | $331,005 | |
Commercial | Commercial | | 367,556 | | | 787,255 | | | 331,052 | | | 156,454 | | | 315,967 | | Commercial | | 183,352 | | | 313,112 | | | 184,164 | | | 69,927 | | | 134,030 | |
Industrial | Industrial | | 373,410 | | | 1,299,633 | | | 111,195 | | | 23,391 | | | 361,666 | | Industrial | | 194,284 | | | 393,172 | | | 58,253 | | | 9,163 | | | 143,110 | |
Governmental | Governmental | | 14,538 | | | 61,611 | | | 34,526 | | | 54,708 | | | 19,193 | | Governmental | | 5,895 | | | 20,936 | | | 17,226 | | | 22,358 | | | 7,431 | |
Total billed retail | Total billed retail | | 1,458,585 | | | 3,301,927 | | | 926,349 | | | 447,139 | | | 1,292,239 | | Total billed retail | | 729,985 | | | 1,274,705 | | | 516,884 | | | 221,759 | | | 615,576 | |
Sales for resale (a) | Sales for resale (a) | | 256,411 | | | 253,600 | | | 119,559 | | | 40,796 | | | 118,944 | | Sales for resale (a) | | 73,081 | | | 95,257 | | | 17,403 | | | 13,007 | | | 3,426 | |
Other electric revenues (b) | Other electric revenues (b) | | 125,912 | | | 127,444 | | | 54,029 | | | 2,894 | | | 42,461 | | Other electric revenues (b) | | 25,922 | | | 43,094 | | | 2,086 | | | (1,474) | | | (2,074) | |
Revenues from contracts with customers | Revenues from contracts with customers | | 1,840,908 | | | 3,682,971 | | | 1,099,937 | | | 490,829 | | | 1,453,644 | | Revenues from contracts with customers | | 828,988 | | | 1,413,056 | | | 536,373 | | | 233,292 | | | 616,928 | |
Other revenues (c) | Other revenues (c) | | 15,435 | | | 59,008 | | | 6,041 | | | 1,026 | | | (1,358) | | Other revenues (c) | | 2,671 | | | 8,542 | | | 2,442 | | | 1,988 | | | (333) | |
Total electric revenues | | 1,856,343 | | | 3,741,979 | | | 1,105,978 | | | 491,855 | | | 1,452,286 | | |
Natural gas | | — | | | 53,971 | | | — | | | 67,449 | | | — | | |
Electric revenues | | Electric revenues | | 831,659 | | | 1,421,598 | | | 538,815 | | | 235,280 | | | 616,595 | |
| Natural gas revenues | | Natural gas revenues | | — | | | 13,269 | | | — | | | 19,036 | | | — | |
Total operating revenues | Total operating revenues | | $1,856,343 | | | $3,795,950 | | | $1,105,978 | | | $559,304 | | | $1,452,286 | | Total operating revenues | | $831,659 | | | $1,434,867 | | | $538,815 | | | $254,316 | | | $616,595 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
Residential | | $323,767 | | | $618,056 | | | $206,708 | | | $116,968 | | | $305,441 | |
Commercial | | 165,609 | | | 402,027 | | | 150,137 | | | 75,083 | | | 147,748 | |
Industrial | | 175,304 | | | 693,445 | | | 50,931 | | | 10,973 | | | 178,592 | |
Governmental | | 6,104 | | | 28,022 | | | 14,837 | | | 27,406 | | | 8,280 | |
Total billed retail | | 670,784 | | | 1,741,550 | | | 422,613 | | | 230,430 | | | 640,061 | |
Sales for resale (a) | | 157,008 | | | 191,664 | | | 56,162 | | | 33,158 | | | 9,149 | |
Other electric revenues (b) | | 35,478 | | | 61,549 | | | (21,997) | | | (900) | | | 10,895 | |
Revenues from contracts with customers | | 863,270 | | | 1,994,763 | | | 456,778 | | | 262,688 | | | 660,105 | |
Other revenues (c) | | 1,232 | | | 8,246 | | | 2,354 | | | 216 | | | (549) | |
Electric revenues | | 864,502 | | | 2,003,009 | | | 459,132 | | | 262,904 | | | 659,556 | |
| | | | | | | | | | |
Natural gas revenues | | — | | | 17,789 | | | — | | | 28,759 | | | — | |
Total operating revenues | | $864,502 | | | $2,020,798 | | | $459,132 | | | $291,663 | | | $659,556 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Utility operating companies’ total revenues for the nine months ended September 30, 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
Residential | | $790,760 | | | $1,242,378 | | | $589,630 | | | $252,412 | | | $720,198 | |
Commercial | | 445,279 | | | 844,655 | | | 460,836 | | | 180,091 | | | 360,812 | |
Industrial | | 479,337 | | | 1,310,121 | | | 164,406 | | | 24,138 | | | 433,880 | |
Governmental | | 15,500 | | | 63,417 | | | 46,080 | | | 58,052 | | | 21,950 | |
Total billed retail | | 1,730,876 | | | 3,460,571 | | | 1,260,952 | | | 514,693 | | | 1,536,840 | |
Sales for resale (a) | | 187,365 | | | 258,741 | | | 82,219 | | | 48,992 | | | 7,857 | |
Other electric revenues (b) | | 105,446 | | | 161,033 | | | 45,926 | | | 4,611 | | | 45,011 | |
Revenues from contracts with customers | | 2,023,687 | | | 3,880,345 | | | 1,389,097 | | | 568,296 | | | 1,589,708 | |
Other revenues (c) | | 7,068 | | | 52,914 | | | 7,276 | | | 4,895 | | | (1,177) | |
Electric revenues | | 2,030,755 | | | 3,933,259 | | | 1,396,373 | | | 573,191 | | | 1,588,531 | |
| | | | | | | | | | |
Natural gas revenues | | — | | | 52,428 | | | — | | | 77,961 | | | — | |
Total operating revenues | | $2,030,755 | | | $3,985,687 | | | $1,396,373 | | | $651,152 | | | $1,588,531 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
Residential | | $750,762 | | | $1,372,538 | | | $503,351 | | | $256,110 | | | $709,264 | |
Commercial | | 406,078 | | | 949,680 | | | 379,075 | | | 179,456 | | | 376,604 | |
Industrial | | 420,788 | | | 1,681,628 | | | 133,826 | | | 26,462 | | | 468,371 | |
Governmental | | 15,702 | | | 68,880 | | | 39,449 | | | 62,617 | | | 22,396 | |
Total billed retail | | 1,593,330 | | | 4,072,726 | | | 1,055,701 | | | 524,645 | | | 1,576,635 | |
Sales for resale (a) | | 384,175 | | | 422,596 | | | 121,328 | | | 96,523 | | | 44,927 | |
Other electric revenues (b) | | 136,870 | | | 185,405 | | | 29,665 | | | 17,936 | | | 54,874 | |
Revenues from contracts with customers | | 2,114,375 | | | 4,680,727 | | | 1,206,694 | | | 639,104 | | | 1,676,436 | |
Other revenues (c) | | 6,022 | | | 57,461 | | | 6,926 | | | 2,530 | | | 20,193 | |
Electric revenues | | 2,120,397 | | | 4,738,188 | | | 1,213,620 | | | 641,634 | | | 1,696,629 | |
| | | | | | | | | | |
Natural gas revenues | | — | | | 64,367 | | | — | | | 102,550 | | | — | |
Total operating revenues | | $2,120,397 | | | $4,802,555 | | | $1,213,620 | | | $744,184 | | | $1,696,629 | |
(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.
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market, unbilled revenue, and 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 include competitive business sales including day-ahead sales 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 nine months ended September 30, 20222023 and 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of December 31, 2022 | $30.9 | | | $6.5 | | | $7.6 | | | $2.5 | | | $11.9 | | | $2.4 | |
Provisions | 29.3 | | | 5.4 | | | 12.2 | | | 3.8 | | | 3.6 | | | 4.3 | |
Write-offs | (64.9) | | | (16.5) | | | (25.9) | | | (5.7) | | | (8.6) | | | (8.2) | |
Recoveries | 32.5 | | | 10.2 | | | 13.7 | | | 2.4 | | | 2.3 | | | 3.9 | |
Balance as of September 30, 2023 | $27.8 | | | $5.6 | | | $7.6 | | | $3.0 | | | $9.2 | | | $2.4 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of December 31, 2021 | $68.6 | | | $13.1 | | | $29.2 | | | $7.2 | | | $13.3 | | | $5.8 | |
Provisions (a) | 28.8 | | | 12.1 | | | 8.3 | | | 1.5 | | | 4.0 | | | 2.9 | |
Write-offs | (95.1) | | | (27.3) | | | (38.1) | | | (9.8) | | | (11.7) | | | (8.2) | |
Recoveries | 28.4 | | | 8.4 | | | 10.5 | | | 3.2 | | | 3.8 | | | 2.5 | |
Balance as of September 30, 2022 | $30.7 | | | $6.3 | | | $9.9 | | | $2.1 | | | $9.4 | | | $3.0 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of December 31, 2020 | $117.7 | | | $18.3 | | | $45.7 | | | $19.5 | | | $17.4 | | | $16.8 | |
Provisions (b) | 43.4 | | | 20.0 | | | 17.7 | | | 2.1 | | | 2.0 | | | 1.6 | |
Write-offs | (72.5) | | | (21.4) | | | (28.3) | | | (11.8) | | | (1.3) | | | (9.7) | |
Recoveries | 7.5 | | | 2.1 | | | 3.0 | | | 1.6 | | | 0.5 | | | 0.3 | |
Balance as of September 30, 2021 | $96.1 | | | $19.0 | | | $38.1 | | | $11.4 | | | $18.6 | | | $9.0 | |
(a)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of ($6.4) million for Entergy, $6.4 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.
(b)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of $23.8 million for Entergy, $14.0 million for Entergy Arkansas, $10.4 million for Entergy Louisiana, ($0.1) million for Entergy Mississippi, and ($0.5) million for Entergy New Orleans 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.
NOTE 14. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation and Entergy Mississippi)
Acquisitions
Sunflower Solar
In November 2018, Entergy Mississippi entered into an agreement for the purchase of an approximately 100 MW solar photovoltaic facility to be sited on approximately 1,000 acres in Sunflower County, Mississippi. The project, Sunflower Solar facility, was being built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, LLC. In December 2018, Entergy Mississippi filed a joint petition with Sunflower County Solar Project with the MPSC for Sunflower County Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility. In March 2020, Entergy Mississippi filed supplemental testimony addressing questions and observations raised in August 2019 by consultants retained by the Mississippi Public Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar facility, subject to certain conditions, including: (i) that Entergy Mississippi pursue a 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 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. Pursuant to the MPSC’s April 2020 order, MS Sunflower Partnership, LLC was formed for the tax equity partnership with Entergy Mississippi as its managing member. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that
Entergy Corporation and Subsidiaries
Notes to Financial Statements
were then used to make an initial payment of $105 million for acquisition of the facility. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022.
Dispositions
Palisades
In July 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. The NRC issued an order approving the application in December 2021. Palisades was shut down in May 2022 and defueled in June 2022. The Palisades transaction closed in June 2022 for a purchase price of $1,000 (subject to adjustment for net liabilities and other amounts). The sale included the transfer of the Palisades nuclear decommissioning trust and the asset retirement obligation for spent fuel management and plant decommissioning. The transaction resulted in a gain of $166 million ($130 million net-of-tax) in the second quarter 2022. The disposition-date fair value of the nuclear decommissioning trust fund was approximately $552 million and the disposition-date fair value of the asset retirement obligation was approximately $708 million. The transaction also included property, plant, and equipment with a net book value of zero and materials and supplies.
NOTE 15.14. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. The following are updatesis an update to that discussion.
Nuclear Plant Decommissioning
In the third quarter 2022, System Energy2023, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Grand GulfRiver Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $5.4$10.8 million reductionincrease in its decommissioning cost liability, along with a corresponding reductionincrease in the related asset retirement obligation cost asset that will be depreciated over the remaining life of the unit.
Coal Combustion Residuals
In the third quarter 2022, revisions to the Big Cajun 2 coal combustion residuals asset retirement obligations were made as a result of revised closure and post-closure cost estimates. The revised estimates resulted in increases of $2.8 million at Entergy Louisiana and $2.1 million at Entergy Texas in decommissioning cost liabilities, along with corresponding increases in related asset retirement obligations cost assets that will be depreciated over the remaining useful life of the unit.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods
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 the “Market and Credit Risk Sensitive Instruments” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of September 30, 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 ControlsControl 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 September 30, 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
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income decreased $5.5$50.2 million primarily due to write-offs of $78.4 million ($58.8 million net-of-tax) recorded as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. In addition, the decrease was also driven by higher other operation and maintenance expensesinterest expense, lower volume/weather, and higher depreciation and amortization expenses, partially offset by higher retail electric price and higher volume/weather.lower other operation and maintenance expenses. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and the October 2023 commitment to the APSC.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Net income decreased $26.5$52.5 million primarily due to write-offs of $78.4 million ($58.8 million net-of-tax) recorded as a result of a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. In addition, the decrease was also driven by lower volume/weather, higher other operation and maintenance expenses, the reversal in 2021 of the remaining $38.8 million regulatory liability for the formula rate plan 2019 historical year netting adjustment,interest expense, and higher depreciation and amortization expenses, partially offset by higher retail electric price, lower other operation and maintenance expenses, and higher volume/weather.other income. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and the October 2023 commitment to the APSC.
Operating Revenues
Third Quarter 20222023 Compared to Third Quarter 20212022
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $722.7864.5 | |
Fuel, rider, and other revenues that do not significantly affect net income | 110.2 (52.7) | |
Volume/weather | (5.4) | |
Retail electric price | 19.225.3 | |
| |
Volume/weather | 12.4 | |
20222023 operating revenues | $864.5831.7 | |
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 retail electric price variance is primarily due to an increase in formula rate plan rates effective January 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2021 formula rate plan filing.
The volume/weather variance is primarily due to a decrease in weather-adjusted residential usage, partially offset by an increase in industrial usage and the effect of more favorable weather on residential and commercial sales partially offset by a decrease in weather-adjusted residential usage.
. The increase
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
in industrial usage was primarily due to an increase in demand from expansion projects, primarily in the primary metals industry, and an increase in demand from small industrial customers. The increased usage from these industrial 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 an increase in formula rate plan rates effective January 2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2022 formula rate plan filing.
Total electric energy sales for Entergy Arkansas for the three months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 2,395 | | | 2,298 | | | 4 | | Residential | 2,336 | | | 2,395 | | | (2) | |
Commercial | Commercial | 1,709 | | | 1,649 | | | 4 | | Commercial | 1,680 | | | 1,709 | | | (2) | |
Industrial | Industrial | 2,361 | | | 2,391 | | | (1) | | Industrial | 2,530 | | | 2,361 | | | 7 | |
Governmental | Governmental | 65 | | | 66 | | | (2) | | Governmental | 60 | | | 65 | | | (8) | |
Total retail | Total retail | 6,530 | | | 6,404 | | | 2 | | Total retail | 6,606 | | | 6,530 | | | 1 | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 482 | | | 642 | | | (25) | | Associated companies | 607 | | | 482 | | | 26 | |
Non-associated companies | Non-associated companies | 1,938 | | | 1,569 | | | 24 | | Non-associated companies | 1,792 | | | 1,938 | | | (8) | |
Total | Total | 8,950 | | | 8,615 | | | 4 | | Total | 9,005 | | | 8,950 | | | 1 | |
See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 20222023 to the nine months ended September 30, 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $1,856.32,120.4 | |
Fuel, rider, and other revenues that do not significantly affect net income | 172.1 (117.5) | |
Volume/weather | (35.4) | |
Retail electric price | 56.563.3 | |
Volume/weather | 27.5 | |
Return of unprotected excess accumulated deferred income taxes to customers | 8.0 | |
20222023 operating revenues | $2,120.42,030.8 | |
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 retail electric price variance is primarily due to increases in formula rate plan rates effective May 2021 and January 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2020 formula rate plan filing and the 2021 formula rate plan filing.
The volume/weather variance is primarily due to a decrease in weather-adjusted residential usage and the effect of moreless favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage was primarily due to an increase in demand from expansion projects, primarily in the primary metals industry, and an increase in demand charges as a result of a new contract with anfrom small industrial customer in the primary metals industry, partially offset by a decrease in weather-adjusted residentialcustomers. The increased usage.
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. For the nine months ended September 30, 2021, $8 million was returned to customers. There is no effect on netthese
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
income as the reduction inindustrial customers has a relatively smaller effect on operating revenues was offset bybecause a reductionlarger portion of the revenues from those customers comes from fixed charges.
The retail electric price variance is primarily due to an increase in income tax expense.formula rate plan rates effective January 2023. 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.2022 formula rate plan filing.
Total electric energy sales for Entergy Arkansas for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 6,307 | | | 6,241 | | | 1 | | Residential | 5,905 | | | 6,307 | | | (6) | |
Commercial | Commercial | 4,398 | | | 4,284 | | | 3 | | Commercial | 4,293 | | | 4,398 | | | (2) | |
Industrial | Industrial | 6,468 | | | 6,463 | | | — | | Industrial | 6,806 | | | 6,468 | | | 5 | |
Governmental | Governmental | 175 | | | 176 | | | (1) | | Governmental | 156 | | | 175 | | | (11) | |
Total retail | Total retail | 17,348 | | | 17,164 | | | 1 | | Total retail | 17,160 | | | 17,348 | | | (1) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 1,418 | | | 1,763 | | | (20) | | Associated companies | 1,683 | | | 1,418 | | | 19 | |
Non-associated companies | Non-associated companies | 5,339 | | | 5,300 | | | 1 | | Non-associated companies | 4,171 | | | 5,339 | | | (22) | |
Total | Total | 24,105 | | | 24,227 | | | (1) | | Total | 23,014 | | | 24,105 | | | (5) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Other Income Statement Variances
Third Quarter 20222023 Compared to Third Quarter 20212022
Other operation and maintenance expenses increaseddecreased primarily due to:
•an increasea decrease of $12.3$7.1 million in power delivery expenses primarily due to higherlower vegetation maintenance costscosts; and higher reliability costs;
•an increasea decrease of $6.2 million in nuclear generation expenses primarily due to higher nuclear labor costs and a higher scope of work performed in 2022 as compared to 2021;
•an increase of $5.7$2.8 million in compensation and benefits costs primarily due to lower healthcare claims activity in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the timingdiscount rates used to value the benefits 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 incentive-based compensation accruals as compared to prior year;pension and other postretirement benefits costs.
•
Asset write-offs includes an increasethe effects of $2.8a commitment, made in October 2023, by Entergy Arkansas to the APSC to make a filing seeking to forgo recovery of identified costs resulting from the 2013 ANO stator incident. In third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million and the undepreciated balance of $9.5 million in energy efficiency expenses primarily duecapital costs related to the timingANO stator incident. See Note 1 to the financial statements herein for further discussion of recovery from customers, partially offset by lower energy efficiency costs.the ANO stator incident and the October 2023 commitment to the APSC.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Searcy Solar facility, which was placed in service in December 2021.service.
Other regulatory charges (credits) - net includes a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.
Other income decreasedInterest expense increased primarily due to changesthe issuance of $425 million of 5.15% Series mortgage bonds in decommissioning trust fund activity, including portfolio rebalancing of the ANO 1 and ANO 2 decommissioning trust funds in 2021.
Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas recorded a regulatory charge of $0.8 million in third quarter 2022 to defer the difference betweenJanuary 2023.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Other operation and maintenance expenses decreased primarily due to:
•a decrease of $13.1 million in compensation and benefits costs primarily due toa decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the losses allocateddiscount rates used to value the benefits liabilities, lower health and welfare costs as a result of higher prescription drug rebates in second quarter 2023, and a revision to estimated incentive compensation expense in the first quarter 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the tax equity partner under the HLBV method of accountingfinancial statements herein, and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 111 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs;
•the effects of recording a final judgment in first quarter 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 HLBV methodspent nuclear fuel litigation;
•a decrease of accounting.$8.2 million in transmission costs allocated by MISO; and
•a decrease of $5.8 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Other operation and maintenance expenses increased primarily due to:The decrease was partially offset by:
•an increase of $12.7$7.6 million in nuclear generationinsurance expenses primarily due to a higher scope of work performedlower nuclear insurance refunds received in 2022 as compared to 2021 and higher nuclear labor costs;2023;
•an increase of $11.7$2.9 million in power delivery expenses primarily due to higher reliability costs, higher vegetation maintenance costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
•an increase of $7.1 million in non-nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2022 as compared to 2021;
•an increase of $5.9 million in energy efficiency expenses due to the timing of recovery from customers, partially offset by lower energy efficiency costs;
•an increase of $5 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•an increase of $4 million in customer service center support costs primarily due to higher contract costs.several individually insignificant items.
Taxes other than income taxes increasedAsset write-offs includes the effects primarily dueof a commitment, made in October 2023, by Entergy Arkansas to increases in franchise taxes, increases in employment taxes, and increases in ad valorem taxesthe APSC to make a filing seeking to forgo recovery of identified costs resulting from higher assessments.the 2013 ANO stator incident. In third quarter 2023, Entergy Arkansas recorded write-offs of its regulatory asset for deferred fuel of $68.9 million and the undepreciated balance of $9.5 million in capital costs related to the ANO stator incident. See Note 1 to the financial statements herein for further discussion of the ANO stator incident and the October 2023 commitment to the APSC.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Searcy Solar facility, which was placed in service in December 2021.service.
Other regulatory charges (credits)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;
•higher interest earned on money pool investments; and
•a decrease in charitable donations in 2023 as compared to the same period in 2022.
The increase was partially offset by an increase in net periodic pension non-service costs as a result of a non-qualified pension settlement charge recorded in third quarter 2023. See “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-related expensespension and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.
other postretirement benefits costs.
Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the ANO 1 and ANO 2 decommissioning trust funds in 2021.
Interest expense increased primarily due to the issuance of $200$425 million of 4.20%5.15% Series mortgage bonds in March 2022 and the issuance of $400 million of 3.35% Series mortgage bonds in March 2021, partially offset by the repayment of $350 million of 3.75% Series mortgage bonds in February 2021.
Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas recorded a regulatory charge of $3 million for the nine months ended September 30, 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.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate was 23.4% for the third quarter 2023. The difference in the effective income tax rate for the third quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 21.2% for the nine months ended September 30, 2023. The difference in the effective income tax rate for the nine months ended September 30, 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items and amortization of state accumulated deferred income taxes as a result of tax rate changes.
The effective income tax rates were 24.4% for the third quarter 2022 and 23.4% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 24.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain bookIncome Tax Legislation and tax differences related to utility plant items.Regulation
The effective income tax rate was 21.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 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 and the amortization of excess accumulated deferred income taxes. 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 effectsInflation Reduction Act of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation
2022. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 675,357 | | | 453,077 | | Operating activities | 762,386 | | | 675,357 | |
Investing activities | Investing activities | (579,122) | | | (546,953) | | Investing activities | (822,851) | | | (579,122) | |
Financing activities | Financing activities | (30,019) | | | (915) | | Financing activities | 168,586 | | | (30,019) | |
Net increase (decrease) in cash and cash equivalents | 66,216 | | | (94,791) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 108,121 | | | 66,216 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $79,131 | | | $97,337 | | Cash and cash equivalents at end of period | $113,399 | | | $79,131 | |
Operating Activities
Net cash flow provided by operating activities increased $222.3$87 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•higher collections from customers;
•lower fuel costs and the timing of recovery of fuel 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 decrease in spending of $25.7 million on nuclear refueling outages in 2022; andhigher collections from customers;
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•a decreasethe refund of $20.4$41.7 millionreceived 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. The refund was subsequently applied to the under-recovered deferred fuel balance. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and the related proceedings; and
•$23.2 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.
The increase was partially offset by:
•the timing of payments to vendors;
•an increase in spending of $24.3 million on nuclear refueling outages in 2023;
•an increase of $24 million in interest paid in 2023 as compared to 2022;
•an increase of $15.1 million in storm spending in 2023 as compared to 2022; and
•an increase of $10.2 million in pension contributions in 2022.2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
The increase was partially offset by payments to vendors, including timing and increase in cost of operations.
Investing Activities
Net cash flow used in investing activities increased $32.2$243.7 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•an increase of $55.9$124.8 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 20222023 and increased investment in the reliability and infrastructure of Entergy Arkansas’s distribution system, partially offset by lower spending in 2022 on advanced metering infrastructure; andsystem;
•an increase of $13.4$78.7 million in decommissioning trust fundtransmission construction expenditures primarily due to increased investment activity.in the reliability and infrastructure of Entergy Arkansas’s transmission system;
•
Thean increase was partially offset by a decrease of $36.5$41.1 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.cycle; and
•an increase of $19.8 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2023.
The increase was partially offset by $17.9 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously recorded as plant. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.
Financing Activities
Net cash flow used inEntergy Arkansas’s financing activities increased $29.1provided $168.6 million of cash for the nine months ended September 30, 2023 compared to using $30 million of cash for the nine months ended September 30, 2022 comparedprimarily due to the nine months ended September 30, 2021 primarily due to:following activity:
•the issuance of $400$425 million of 3.35%5.15% Series mortgage bonds in March 2021;January 2023;
•the issuance of $300 million of 5.30% Series mortgage bonds in August 2023;
•money pool activity;
•an increase of $61$56 million in common equity distributions paid in 2022 as compared to 20212023 in order to maintain Entergy Arkansas’s capital structure; and
•lower prepaid deposits of $41.3 million related to contributions-in-aid-of-construction reimbursement agreements in 2022 as compared to 2021.
The increase was partially offset by:
•the repayment, at maturity, of $350 million of 3.75% Series mortgage bonds in February 2021;
•the issuance of $200 million of 4.20% Series mortgage bonds in March 2022; and
•the repayment, at maturity, of $45$250 million of 2.375%3.05% Series governmentalmortgage bonds in January 2021.June 2023.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 nine months ended September 30, 2023 compared to decreasing by $139.9 million for the nine months ended September 30, 2022. The money pool is an inter-companyintercompany 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.
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 net issuance of long-term debt in 2023.
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 52.6 | % | | 52.6 | % | Debt to capital | 54.7 | % | | 52.5 | % |
Effect of subtracting cash | Effect of subtracting cash | (0.5 | %) | | — | % | Effect of subtracting cash | (0.6 | %) | | — | % |
Net debt to net capital | 52.1 | % | | 52.6 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 54.1 | % | | 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. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy Arkansas is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $3.8$3.7 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Arkansas’s portfolio, including Walnut Bend Solar, West Memphis Solar, and Driver Solar; investments in ANO 1 and 2; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
While Entergy Arkansas is still assessing the effect on its planned solar projects, the 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 exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
$1,808 | | ($139,904) | | $7,301 | | $3,110 |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
$11,104 | | ($180,795) | | $1,808 | | ($139,904) |
Entergy Arkansas, 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 Arkansas has a credit facility in the amount of $150 million scheduled to expire in June 2027.2028. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2023.2024. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
capacity of the facility. As of September 30, 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 September 30, 2022, $5.62023, $7.8 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 2025. As of September 30, 2022, there2023, $10.6 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.
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.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 obtained or a tax equity partnership is no longer sought. Closing was expected to occur in 2022. The counter-party notified Entergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations are ongoing,were conducted, including with respect to cost and schedule and to updates arising as a result of the Inflation Reduction Act of 2022,2022. 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 APSC. In June 2023, Entergy Arkansas, the APSC general staff, and the updates would require additionalArkansas Attorney General filed a unanimous settlement supporting that the approval of the Walnut Bend Solar facility is in the public interest based on the terms in the settlement, which relate in part to certain treatment for the production tax credits associated with the facility. In July 2023, after requesting further testimony and purporting to modify several terms in the settlement and upon rehearing, the APSC approval. At this timeapproved the settlement largely on the terms submitted, including a 30-year amortization period for the production tax credits. The project is currently expected to achieve commercial operation in 2024.
West Memphis Solar
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. Closing had been expected to occur in 2023. TheIn March 2022 the counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, includingIn January 2023, Entergy Arkansas filed a supplemental application with respectthe APSC seeking approval for a change in the transmission route and updates to updates arising as a result of the Inflation Reduction Act of 2022,cost and schedule that were previously approved by the updates would require additionalAPSC. In March 2023 the APSC approval. At this time theapproved Entergy Arkansas’s supplemental application. The project is currently expected to achieve commercial operation in 2024.
Driver Solar
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 interestLLC and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022, but the parties later agreed to waive the hearingSubsidiaries
Management's Financial Discussion and submit the matter to the APSC for a decision consistent with the filed record. In August 2022 the APSC granted Entergy Arkansas’s petition and approved the acquisition of Driver Solar and cost recovery through the formula rate plan rider. In addition, the APSC directed Entergy Arkansas to inform the APSC as to the status of a tax equity partnership once construction is commenced. The parties are evaluating the effects of certain matters related to the Inflation Reduction Act of 2022, including with respect to the viability of a tax equity partnership. The facility is expected to be in service by the end of 2024.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.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Retail Rates
20222023 Formula Rate Plan Filing
In July 2022,2023, Entergy Arkansas filed with the APSC its 20222023 formula rate plan filing to set its formula rate for the 20232024 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 20232024 and a netting adjustment for the historical year 2021.2022. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 20232024 projected year is 7.40%8.11% resulting in a revenue deficiency of $104.8$80.5 million. The earned rate of return on common equity for the 20212022 historical year was 8.38%7.29% resulting in a $15.2$49.8 million netting adjustment. The total proposed revenue change for the 20232024 projected year and 20212022 historical year netting adjustment is $119.9$130.3 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the resulting increase iswas limited to $79.3$88.6 million. In October 2022 other partiesThe APSC general staff and intervenors filed their testimony recommending variouserrors and objections in October 2023, proposing certain adjustments, including the APSC general staff’s update to Entergy Arkansas’s overall proposed revenue deficiency, andannual filing year revenues which lowers the constraint to $87.7 million. Entergy Arkansas filed a response including an update to actual revenues through August 2022, which raised the constraint to $79.8 million.its rebuttal in October 2023. In November 2022,October 2023, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues in the proceeding. Asproceeding, none of which affected Entergy Arkansas’s requested recovery up to the cap constraint of $87.7 million. The settlement agreement is pending the APSC’s approval.
Fuel and purchased power cost recovery
See Note 1 to the financial statements herein for discussion of the write-off in third quarter 2023 of Entergy Arkansas’s $68.9 million regulatory asset for deferred fuel related to the ANO stator incident as a result of a commitment, made in October 2023, by Entergy Arkansas to the settlement agreement,APSC to make a filing to forgo its opportunity to seek recovery of the total proposed revenue change is $102.8 million, including a $87.7 million increase forincremental fuel and purchased energy expense resulting from the 2023 projected year and a $15.2 million netting adjustment. Because Entergy Arkansas’s revenue requirement exceeded the constraint, the resulting increase is limited to $79.8 million. The APSC will rule on the settlement at a later date. A hearing is currently scheduled for November 2022.ANO stator incident.
Energy Cost Recovery Rider
As discussed in the Form 10-K, in March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. In February 2023 the APSC issued orders initiating proceedings with the utilities under its jurisdiction to address the prudence of costs incurred and appropriate cost allocation of the February 2021 winter storms. With respect to any prudence review of Entergy Arkansas fuel costs, as part of the APSC’s draft report issued in its February 2021 winter storms investigation docket, the APSC included findings that the load shedding plans of the investor-owned utilities and some cooperatives were appropriate and comprehensive, and, further, that Entergy Arkansas’s emergency plan was comprehensive and had a multilayered approach supported by a system-wide response plan, which is considered an industry standard. In September 2023 the APSC issued an order in Entergy Arkansas's company-specific proceeding and found that Entergy Arkansas’s practices during the winter storms were prudent.
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-recovered balance as a result of higher natural gas prices in 2022 and a $32 million deferral related to the February 2021 particularly in the fourth quarter 2021. At the request ofwinter storms consistent with the APSC general staff, staff’s request in 2022. The under-recovered balance included in the filing was partially offset by the proceeds of the $41.7 million
Entergy Arkansas, deferred its request for recovery of $32 million from the under-recoveryLLC and Subsidiaries
Management's Financial Discussion and Analysis
refund that System Energy made to Entergy Arkansas in January 2023 related to the 2021 February winter storms untilsale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the 2023 energy cost rate redetermination, unless a request for an interim adjustment to the energy cost recovery rider is necessary. This resulted in aFERC. 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.
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, 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. 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 February 2023. In June 2022, Entergy Arkansas filed a motion asserting that it is entitled to summary judgment because Entergy Arkansas’s position that the APSC’s order is pre-empted by the filed rate doctrine and violates the Dormant Commerce Clause is premised on facts that are not subject to genuine dispute. In July 2022,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 hold Entergy Arkansas’sstay 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 summary judgmentthe Eighth District to stay the proceedings pending the appeal, which also was denied. The trial was held in abeyance pending a ruling onFebruary 2023. Following the motion to intervene.trial, Entergy Arkansas filed a consolidated oppositionmotion with the United States Court of Appeals for the Eighth District to both motions.expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The United States Court of Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments were held in June 2023. In August 20222023 the APSC filed aUnited States Court of Appeals for the Eighth District denied Arkansas Electric Energy Consumers, Inc.’s motion for summary judgement arguing that thereto intervene. An order from the district court is no genuine issue as to any material fact and the APSC is entitled to judgement as a matter of law. In September 2022, Entergy Arkansas filed an opposition to the motion. In October 2022 the APSC filed a motion asking the court to hold further proceedings in abeyance pending a decision on the motions for summary judgment filed by Entergy Arkansas and the APSC. Also in October 2022, Entergy Arkansas filed an opposition to the motion, and the APSC filed a reply in support of its motion for summary judgment.pending.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 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 appeal, although other appeals of the September 2020 APSC order remained before the court. In May 2022 the court issued an order affirming the APSC’s decision in part and reversing in part. In June 2022 the APSC sought rehearing from the court with respect to the 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 SeptemberAugust 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
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
authority to extend the grandfathering period, and the hearing was held in October 2022. AlsoIn 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.
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. Responses to the utility and cooperative filings are duewere filed in January 2023, and utilities filed their further responses in February 2023.
Green Promise Renewable TariffAn 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 2023 to close the current APSC docket related to potential cost shifting in light of the new law, and the APSC also canceled the remaining procedural schedule in this docket in April 2023. Because of the new law, in May 2023, the APSC also closed the grandfathering rulemaking that it opened in August 2022. Under the new law, the APSC must approve revisions to the utilities’ tariffs to conform to the new law no later than December 2023. The APSC opened a new rulemaking in April 2023 to consider implementation of the new law and tariffs. In October 2023 the APSC issued new net metering rules to conform to the new law, and utilities, including Entergy Arkansas, filed revised net metering tariffs to comply with the new rules on October 16, 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. In its 2023 formula rate plan filing, Entergy Arkansas proposed to amortize the COVID-19 regulatory asset over a ten-year period. No party opposed Entergy Arkansas’s request. As of September 30, 2023, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.
Power Through Program
As discussed in the Form 10-K, in JulyAugust 2021, Entergy Arkansas filed with the APSC an application seeking authority for a proposed green tariff designedPower Through offering to help participating customers meet their renewable and sustainability goals anddeploy natural gas-fired distributed generation. In December 2021 the APSC general staff requested briefing, which Entergy Arkansas opposed. In January 2022, Entergy Arkansas filed to enhance economic development effortssupport the establishment of a procedural schedule with a hearing in Arkansas. The total proposed amount of solar capacity requested to be available under this tariff was up to 200 MW. In MayApril 2022. Also in January 2022, the APSC foundgranted the general staff’s request for briefing but on an expedited schedule; briefing concluded in February 2022. A paper hearing was held in August and September 2022 with Entergy Arkansas’s proposal forArkansas responding to several written commissioner questions. In May 2023 the tariff to be just and reasonable for an initialAPSC approved the Power Through offering of 100 MW of solar capacity,with some modifications, and in June 20222023, Entergy Arkansas sought rehearing or clarification of several issues. In August 2023 the APSC approveddenied Entergy Arkansas’s compliancerehearing petition. Entergy Arkansas is developing tariff filing.revisions to comply with the APSC’s order and working with the APSC general staff to propose a streamlined approval process to be filed in November 2023 for the individual Power Through generators. See “Property and Other Generation Resources -Other Generation Resources - Power Through Programs” in Part I, Item 1 in the Form 10-K for further discussion related to this program.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
COVID-19 OrdersRemaining Useful Lives Review
As discussed in the Form 10-K, in response to 2021 legislation, in December 2021 the APSC opened a proceeding to establish a procedure to evaluate life extensions of all utility generation units and in December 2022 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 in the separate docket. In June 2023 the APSC also closed the general proceeding because of the new law. 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 of APSC orders issued in light of the COVID-19 pandemic. As of September 30, 2022, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.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. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.
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 and Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | $864,502 | | | $722,683 | | | $2,120,397 | | | $1,856,343 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 210,099 | | | 94,580 | | | 499,119 | | | 295,317 | |
Purchased power | | 74,941 | | | 74,579 | | | 182,621 | | | 206,248 | |
Nuclear refueling outage expenses | | 14,259 | | | 13,207 | | | 42,539 | | | 39,389 | |
Other operation and maintenance | | 204,199 | | | 175,236 | | | 548,775 | | | 503,242 | |
Decommissioning | | 20,731 | | | 19,567 | | | 61,288 | | | 57,847 | |
Taxes other than income taxes | | 39,545 | | | 36,892 | | | 104,819 | | | 96,741 | |
Depreciation and amortization | | 96,746 | | | 90,887 | | | 288,904 | | | 269,442 | |
Other regulatory charges (credits) - net | | (27,054) | | | 31,988 | | | (69,114) | | | (27,649) | |
TOTAL | | 633,466 | | | 536,936 | | | 1,658,951 | | | 1,440,577 | |
| | | | | | | | |
OPERATING INCOME | | 231,036 | | | 185,747 | | | 461,446 | | | 415,766 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | 4,811 | | | 4,113 | | | 11,786 | | | 10,714 | |
Interest and investment income | | 4,284 | | | 53,661 | | | 13,444 | | | 78,809 | |
Miscellaneous - net | | (6,356) | | | (4,805) | | | (16,640) | | | (15,968) | |
TOTAL | | 2,739 | | | 52,969 | | | 8,590 | | | 73,555 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 38,123 | | | 35,452 | | | 111,622 | | | 104,862 | |
Allowance for borrowed funds used during construction | | (1,912) | | | (1,793) | | | (4,684) | | | (4,655) | |
TOTAL | | 36,211 | | | 33,659 | | | 106,938 | | | 100,207 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 197,564 | | | 205,057 | | | 363,098 | | | 389,114 | |
| | | | | | | | |
Income taxes | | 48,217 | | | 50,166 | | | 85,074 | | | 84,593 | |
| | | | | | | | |
NET INCOME | | 149,347 | | | 154,891 | | | 278,024 | | | 304,521 | |
| | | | | | | | |
Net loss attributable to noncontrolling interest | | (724) | | | — | | | (2,640) | | | — | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $150,071 | | | $154,891 | | | $280,664 | | | $304,521 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | $831,659 | | | $864,502 | | | $2,030,755 | | | $2,120,397 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 156,778 | | | 210,099 | | | 372,637 | | | 499,119 | |
Purchased power | | 74,837 | | | 74,941 | | | 197,236 | | | 182,621 | |
Nuclear refueling outage expenses | | 14,772 | | | 14,259 | | | 45,617 | | | 42,539 | |
Other operation and maintenance | | 196,408 | | | 204,199 | | | 531,271 | | | 548,775 | |
Asset write-offs | | 78,434 | | | — | | | 78,434 | | | — | |
Decommissioning | | 21,989 | | | 20,731 | | | 65,006 | | | 61,288 | |
Taxes other than income taxes | | 40,157 | | | 39,545 | | | 107,251 | | | 104,819 | |
Depreciation and amortization | | 101,957 | | | 96,746 | | | 298,105 | | | 288,904 | |
Other regulatory charges (credits) - net | | (26,380) | | | (27,054) | | | (66,409) | | | (69,114) | |
TOTAL | | 658,952 | | | 633,466 | | | 1,629,148 | | | 1,658,951 | |
| | | | | | | | |
OPERATING INCOME | | 172,707 | | | 231,036 | | | 401,607 | | | 461,446 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | 5,579 | | | 4,811 | | | 15,822 | | | 11,786 | |
Interest and investment income | | 4,627 | | | 4,284 | | | 17,833 | | | 13,444 | |
Miscellaneous - net | | (8,030) | | | (6,356) | | | (16,370) | | | (16,640) | |
TOTAL | | 2,176 | | | 2,739 | | | 17,285 | | | 8,590 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 47,648 | | | 38,123 | | | 139,053 | | | 111,622 | |
Allowance for borrowed funds used during construction | | (2,241) | | | (1,912) | | | (6,355) | | | (4,684) | |
TOTAL | | 45,407 | | | 36,211 | | | 132,698 | | | 106,938 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 129,476 | | | 197,564 | | | 286,194 | | | 363,098 | |
| | | | | | | | |
Income taxes | | 30,307 | | | 48,217 | | | 60,681 | | | 85,074 | |
| | | | | | | | |
NET INCOME | | 99,169 | | | 149,347 | | | 225,513 | | | 278,024 | |
| | | | | | | | |
Net loss attributable to noncontrolling interest | | (791) | | | (724) | | | (3,426) | | | (2,640) | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $99,960 | | | $150,071 | | | $228,939 | | | $280,664 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| 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 Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $278,024 | | | $304,521 | | Net income | | $225,513 | | | $278,024 | |
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 | | 403,929 | | | 380,481 | | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 413,018 | | | 403,929 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 85,012 | | | 105,147 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 59,931 | | | 85,012 | |
Asset write-offs | | Asset write-offs | | 78,434 | | | — | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (129,679) | | | (107,075) | | Receivables | | (45,742) | | | (129,679) | |
Fuel inventory | Fuel inventory | | 7,430 | | | 26,521 | | Fuel inventory | | 8,001 | | | 7,430 | |
Accounts payable | Accounts payable | | 77,849 | | | 15,485 | | Accounts payable | | (71,533) | | | 77,849 | |
Taxes accrued | Taxes accrued | | (4,838) | | | (19,899) | | Taxes accrued | | 15,033 | | | (4,838) | |
Interest accrued | Interest accrued | | 32,360 | | | 25,616 | | Interest accrued | | 35,534 | | | 32,360 | |
Deferred fuel costs | Deferred fuel costs | | (27,724) | | | (113,004) | | Deferred fuel costs | | 165,982 | | | (27,724) | |
Other working capital accounts | Other working capital accounts | | 13,963 | | | (26,618) | | Other working capital accounts | | (12,517) | | | 13,963 | |
Provisions for estimated losses | Provisions for estimated losses | | (1,840) | | | (1,266) | | Provisions for estimated losses | | (24,356) | | | (1,840) | |
Other regulatory assets | | (54,449) | | | 74,022 | | |
Regulatory assets | | Regulatory assets | | (455) | | | (54,449) | |
Other regulatory liabilities | Other regulatory liabilities | | (305,972) | | | (46,061) | | Other regulatory liabilities | | 68,475 | | | (305,972) | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (58,966) | | | (81,913) | | Pension and other postretirement liabilities | | (55,944) | | | (58,966) | |
Other assets and liabilities | Other assets and liabilities | | 360,258 | | | (82,880) | | Other assets and liabilities | | (96,988) | | | 360,258 | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 675,357 | | | 453,077 | | Net cash flow provided by operating activities | | 762,386 | | | 675,357 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (552,919) | | | (495,203) | | Construction expenditures | | (768,243) | | | (552,919) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 11,786 | | | 10,714 | | Allowance for equity funds used during construction | | 15,822 | | | 11,786 | |
Payment for purchase of assets | Payment for purchase of assets | | (1,044) | | | — | | Payment for purchase of assets | | — | | | (1,044) | |
Nuclear fuel purchases | Nuclear fuel purchases | | (56,984) | | | (72,528) | | Nuclear fuel purchases | | (93,775) | | | (56,984) | |
Proceeds from sale of nuclear fuel | Proceeds from sale of nuclear fuel | | 37,198 | | | 16,239 | | Proceeds from sale of nuclear fuel | | 32,880 | | | 37,198 | |
Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 174,893 | | | 434,674 | | Proceeds from nuclear decommissioning trust fund sales | | 87,878 | | | 174,893 | |
Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (190,244) | | | (436,658) | | Investment in nuclear decommissioning trust funds | | (104,348) | | | (190,244) | |
Changes in money pool receivable - net | Changes in money pool receivable - net | | (1,808) | | | (4,191) | | Changes in money pool receivable - net | | (11,104) | | | (1,808) | |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 17,933 | | | — | |
| Decrease in other investments | | Decrease in other investments | | 106 | | | — | |
Net cash flow used in investing activities | Net cash flow used in investing activities | | (579,122) | | | (546,953) | | Net cash flow used in investing activities | | (822,851) | | | (579,122) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 225,625 | | | 708,126 | | Proceeds from the issuance of long-term debt | | 991,606 | | | 225,625 | |
| Retirement of long-term debt | Retirement of long-term debt | | (21,316) | | | (717,214) | | Retirement of long-term debt | | (515,615) | | | (21,316) | |
| Distributions to noncontrolling interest | | (480) | | | — | | |
| Change in money pool payable - net | | (139,904) | | | — | | |
| Changes in money pool payable - net | | Changes in money pool payable - net | | (180,795) | | | (139,904) | |
| Common equity distributions paid | Common equity distributions paid | | (86,000) | | | (25,000) | | Common equity distributions paid | | (142,000) | | | (86,000) | |
| Other | Other | | (7,944) | | | 33,173 | | Other | | 15,390 | | | (8,424) | |
Net cash flow used in financing activities | | (30,019) | | | (915) | | |
Net cash flow provided by (used in) financing activities | | Net cash flow provided by (used in) financing activities | | 168,586 | | | (30,019) | |
| Net increase (decrease) in cash and cash equivalents | | 66,216 | | | (94,791) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | | 108,121 | | | 66,216 | |
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 | | $79,131 | | | $97,337 | | Cash and cash equivalents at end of period | | $113,399 | | | $79,131 | |
| 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 | | $77,625 | | | $77,434 | | Interest - net of amount capitalized | | $101,616 | | | $77,625 | |
| | 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 |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $2,237 | | | $8,155 | | Cash | | $3,137 | | | $1,911 | |
Temporary cash investments | Temporary cash investments | | 76,894 | | | 4,760 | | Temporary cash investments | | 110,262 | | | 3,367 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 79,131 | | | 12,915 | | Total cash and cash equivalents | | 113,399 | | | 5,278 | |
| Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | | | |
Customer | Customer | | 182,061 | | | 154,412 | | Customer | | 220,508 | | | 140,513 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (6,328) | | | (13,072) | | Allowance for doubtful accounts | | (5,599) | | | (6,528) | |
Associated companies | Associated companies | | 49,565 | | | 29,587 | | Associated companies | | 48,283 | | | 45,336 | |
Other | Other | | 100,389 | | | 51,064 | | Other | | 64,642 | | | 101,096 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 129,454 | | | 101,663 | | Accrued unbilled revenues | | 126,245 | | | 116,816 | |
Total accounts receivable | Total accounts receivable | | 455,141 | | | 323,654 | | Total accounts receivable | | 454,079 | | | 397,233 | |
| Deferred fuel costs | Deferred fuel costs | | 136,454 | | | 108,862 | | Deferred fuel costs | | — | | | 139,739 | |
Fuel inventory - at average cost | Fuel inventory - at average cost | | 43,462 | | | 50,892 | | Fuel inventory - at average cost | | 43,143 | | | 51,144 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 275,879 | | | 247,980 | | Materials and supplies - at average cost | | 331,099 | | | 288,260 | |
Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 30,985 | | | 65,318 | | Deferred nuclear refueling outage costs | | 49,373 | | | 56,443 | |
| Prepayments and other | Prepayments and other | | 28,604 | | | 14,863 | | Prepayments and other | | 43,694 | | | 26,576 | |
TOTAL | TOTAL | | 1,049,656 | | | 824,484 | | TOTAL | | 1,034,787 | | | 964,673 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Decommissioning trust funds | Decommissioning trust funds | | 1,141,672 | | | 1,438,416 | | Decommissioning trust funds | | 1,285,583 | | | 1,199,860 | |
| Other | Other | | 789 | | | 947 | | Other | | 2,305 | | | 2,414 | |
TOTAL | TOTAL | | 1,142,461 | | | 1,439,363 | | TOTAL | | 1,287,888 | | | 1,202,274 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 13,834,015 | | | 13,578,297 | | Electric | | 14,614,754 | | | 14,077,844 | |
| Construction work in progress | Construction work in progress | | 458,037 | | | 241,127 | | Construction work in progress | | 479,889 | | | 417,244 | |
Nuclear fuel | Nuclear fuel | | 147,202 | | | 182,055 | | Nuclear fuel | | 162,397 | | | 176,174 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 14,439,254 | | | 14,001,479 | | TOTAL UTILITY PLANT | | 15,257,040 | | | 14,671,262 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 5,682,785 | | | 5,472,296 | | Less - accumulated depreciation and amortization | | 5,953,948 | | | 5,729,304 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 8,756,469 | | | 8,529,183 | | UTILITY PLANT - NET | | 9,303,092 | | | 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 | | 1,744,127 | | | 1,689,678 | | Other regulatory assets | | 1,879,619 | | | 1,810,281 | |
Deferred fuel costs | Deferred fuel costs | | 68,883 | | | 68,751 | | Deferred fuel costs | | — | | | 68,883 | |
Other | Other | | 15,581 | | | 13,660 | | Other | | 16,194 | | | 18,507 | |
TOTAL | TOTAL | | 1,828,591 | | | 1,772,089 | | TOTAL | | 1,895,813 | | | 1,897,671 | |
| TOTAL ASSETS | TOTAL ASSETS | | $12,777,177 | | | $12,565,119 | | TOTAL ASSETS | | $13,521,580 | | | $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 |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $250,000 | | | $— | | Currently maturing long-term debt | | $415,000 | | | $290,000 | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | 101,051 | | | 217,310 | | Associated companies | | 69,666 | | | 276,362 | |
Other | Other | | 299,400 | | | 190,476 | | Other | | 219,357 | | | 310,339 | |
Customer deposits | Customer deposits | | 100,085 | | | 92,511 | | Customer deposits | | 109,719 | | | 102,799 | |
Taxes accrued | Taxes accrued | | 84,752 | | | 89,590 | | Taxes accrued | | 115,559 | | | 100,526 | |
| Interest accrued | Interest accrued | | 49,468 | | | 17,108 | | Interest accrued | | 54,350 | | | 18,816 | |
| Deferred fuel costs | | Deferred fuel costs | | 26,243 | | | — | |
| Other | Other | | 53,134 | | | 38,901 | | Other | | 69,429 | | | 43,394 | |
TOTAL | TOTAL | | 937,890 | | | 645,896 | | TOTAL | | 1,079,323 | | | 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 | | 1,506,970 | | | 1,416,201 | | Accumulated deferred income taxes and taxes accrued | | 1,561,460 | | | 1,498,234 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 28,398 | | | 29,299 | | Accumulated deferred investment tax credits | | 27,571 | | | 28,472 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 436,733 | | | 431,655 | | Regulatory liability for income taxes - net | | 433,687 | | | 435,157 | |
Other regulatory liabilities | Other regulatory liabilities | | 432,264 | | | 743,314 | | Other regulatory liabilities | | 545,703 | | | 475,758 | |
Decommissioning | Decommissioning | | 1,451,698 | | | 1,390,410 | | Decommissioning | | 1,537,742 | | | 1,472,736 | |
Accumulated provisions | Accumulated provisions | | 75,244 | | | 77,084 | | Accumulated provisions | | 55,642 | | | 79,998 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 126,722 | | | 185,789 | | Pension and other postretirement liabilities | | 61,984 | | | 118,020 | |
Long-term debt | Long-term debt | | 3,914,866 | | | 3,958,862 | | Long-term debt | | 4,235,501 | | | 3,876,500 | |
Other | Other | | 98,993 | | | 110,754 | | Other | | 118,362 | | | 97,650 | |
TOTAL | TOTAL | | 8,071,888 | | | 8,343,368 | | TOTAL | | 8,577,652 | | | 8,082,525 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| | EQUITY | EQUITY | | EQUITY | |
Member's equity | Member's equity | | 3,737,409 | | | 3,542,745 | | Member's equity | | 3,840,930 | | | 3,753,990 | |
Noncontrolling interest | Noncontrolling interest | | 29,990 | | | 33,110 | | Noncontrolling interest | | 23,675 | | | 27,825 | |
TOTAL | TOTAL | | 3,767,399 | | | 3,575,855 | | TOTAL | | 3,864,605 | | | 3,781,815 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $12,777,177 | | | $12,565,119 | | TOTAL LIABILITIES AND EQUITY | | $13,521,580 | | | $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 EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | | Noncontrolling Interest | | Member's Equity | | Total |
| 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 | | |
| Net income | — | | | 56,593 | | | 56,593 | | |
| Balance at June 30, 2021 | — | | | 3,425,799 | | | 3,425,799 | | |
| Net income | — | | | 154,891 | | | 154,891 | | |
Common equity distributions | — | | | (25,000) | | | (25,000) | | |
| Balance at September 30, 2021 | $— | | | $3,555,690 | | | $3,555,690 | | |
| | | | | | | | (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 | |
| Net income (loss) | | Net income (loss) | (529) | | | 63,639 | | | 63,110 | |
Common equity distributions | | Common equity distributions | — | | | (36,000) | | | (36,000) | |
| Balance at March 31, 2022 | 31,723 | | | 3,609,699 | | | 3,641,422 | | |
Distributions to noncontrolling interest | | Distributions to noncontrolling interest | (190) | | | — | | | (190) | |
Balance at June 30, 2022 | | Balance at June 30, 2022 | 31,004 | | | 3,637,338 | | | 3,668,342 | |
| Net income (loss) | | Net income (loss) | (724) | | | 150,071 | | | 149,347 | |
Common equity distributions | | Common equity distributions | — | | | (50,000) | | | (50,000) | |
| Distributions to noncontrolling interest | | Distributions to noncontrolling interest | (290) | | | — | | | (290) | |
Balance at September 30, 2022 | | Balance at September 30, 2022 | $29,990 | | | $3,737,409 | | | $3,767,399 | |
| | Balance at December 31, 2022 | | Balance at December 31, 2022 | $27,825 | | | $3,753,990 | | | $3,781,815 | |
| Net income (loss) | Net income (loss) | (529) | | | 63,639 | | | 63,110 | | Net income (loss) | (1,629) | | | 61,026 | | | 59,397 | |
| Common equity distributions | Common equity distributions | — | | | (36,000) | | | (36,000) | | Common equity distributions | — | | | (80,000) | | | (80,000) | |
| Distributions to noncontrolling interest | Distributions to noncontrolling interest | (190) | | | — | | | (190) | | Distributions to noncontrolling interest | (104) | | | — | | | (104) | |
Balance at June 30, 2022 | 31,004 | | | 3,637,338 | | | 3,668,342 | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | 26,092 | | | 3,735,016 | | | 3,761,108 | |
| Net income (loss) | Net income (loss) | (724) | | | 150,071 | | | 149,347 | | Net income (loss) | (1,006) | | | 67,954 | | | 66,948 | |
| Common equity distributions | Common equity distributions | — | | | (50,000) | | | (50,000) | | Common equity distributions | — | | | (9,000) | | | (9,000) | |
| Distributions to noncontrolling interest | Distributions to noncontrolling interest | (290) | | | — | | | (290) | | Distributions to noncontrolling interest | (113) | | | — | | | (113) | |
Balance at September 30, 2022 | $29,990 | | | $3,737,409 | | | $3,767,399 | | |
Balance at June 30, 2023 | | Balance at June 30, 2023 | 24,973 | | | 3,793,970 | | | 3,818,943 | |
| Net income (loss) | | Net income (loss) | (791) | | | 99,960 | | | 99,169 | |
| Common equity distributions | | Common equity distributions | — | | | (53,000) | | | (53,000) | |
| Distributions to noncontrolling interest | | Distributions to noncontrolling interest | (507) | | | — | | | (507) | |
Balance at September 30, 2023 | | Balance at September 30, 2023 | $23,675 | | | $3,840,930 | | | $3,864,605 | |
| 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
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income increased $49.9$84.9 million primarilyprimarily due to higher volume/weather, higher retail electric price, and higher other income, partially offset by higherlower other operation and maintenance expenses, higher other income, higher volume/weather, and higher retail electric price. The increase was partially offset by higher depreciation and amortization expenses, and higher interest expense.expenses.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Net income increased $206.9$124.7 million primarily due to the net effects of Entergy Louisiana’s storm cost securitization in March 2023, including a $133.4 million reduction in income tax expense, partially offset by 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, higher retail electric price, higher other income, lower other operation and maintenance expenses, and higher volume/weather. The net income increase was partially offset by the net effects of Entergy Louisiana’s storm cost securitization in May 2022, including a $290 million reduction in income tax expense, partially offset by a $224.4 million ($165.4 million net-of-tax) regulatory charge to reflect its obligation to share the benefits of the securitization with customers. Also contributing to the net income increase was higher volume/weather and higher retail electric price, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, higher interest expense, and higher taxes other than income taxes.expenses. See Note 2 to the financial statements herein and Note 2 and Note 3 in the Form 10-K for further discussion of the securitization.storm cost securitizations.
Operating Revenues
Third Quarter 20222023 Compared to Third Quarter 20212022
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $1,420.72,020.8 | |
Fuel, rider, and other revenues that do not significantly affect net income | 509.3 (693.2) | |
Volume/weatherReturn of unprotected excess accumulated deferred income taxes to customers | 51.66.1 | |
| |
Retail electric price | 39.218.4 | |
Volume/weather | 82.8 | |
20222023 operating revenues | $2,020.81,434.9 | |
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 volume/weather variance is primarily duereturn of unprotected excess accumulated deferred income taxes to an increasecustomers resulted from the return of 1,587 GWh, or 11%, in electricity usage across all customer classes, including the effects of Hurricane Ida in third quarter 2021. The increase in industrial usage was primarily due to an increase in demand from expansion projects, primarilyunprotected excess accumulated deferred income taxes through changes in the chemicals, petroleum refining, and transportation industries, an increase in demand from small industrial customers, and an increase in demand from cogeneration customers. The increase was partially offset by a decrease in demand from existing customers, primarily in the chemicals industry as a result of supply issues and in the petroleum refining industry as aformula rate plan effective May
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
result of a permanent plant shutdown due to Hurricane Ida. The increase2018 in weather-adjusted commercial usage was primarily dueresponse to the effectenactment of the COVID-19 pandemic on businesses inTax Cuts and Jobs Act. In third quarter 2021. The increased usage from these industrial and commercial2022, $6.1 million was returned to customers has a relatively smallerthrough reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for third quarter 2023. There was no effect on net income as the reductions in operating revenues because a larger portionwere offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the revenues from those customers comes from fixed charges.Tax Cuts and Jobs Act.
The retail electric price variance is primarily due to increasesan increase in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 20212022 and September 2022.2023. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.
Total electric energy sales for Entergy Louisiana for the three months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 4,284 | | | 3,904 | | | 10 | | Residential | 5,049 | | | 4,284 | | | 18 | |
Commercial | Commercial | 3,186 | | | 2,802 | | | 14 | | Commercial | 3,395 | | | 3,186 | | | 7 | |
Industrial | Industrial | 8,265 | | | 7,470 | | | 11 | | Industrial | 8,016 | | | 8,265 | | | (3) | |
Governmental | Governmental | 220 | | | 192 | | | 15 | | Governmental | 216 | | | 220 | | | (2) | |
Total retail | Total retail | 15,955 | | | 14,368 | | | 11 | | Total retail | 16,676 | | | 15,955 | | | 5 | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 1,449 | | | 1,397 | | | 4 | | Associated companies | 1,584 | | | 1,449 | | | 9 | |
Non-associated companies | Non-associated companies | 1,310 | | | 803 | | | 63 | | Non-associated companies | 435 | | | 1,310 | | | (67) | |
Total | Total | 18,714 | | | 16,568 | | | 13 | | Total | 18,695 | | | 18,714 | | | — | |
See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 20222023 to the nine months ended September 30, 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $3,795.94,802.6 | |
Fuel, rider, and other revenues that do not significantly affect net income | 798.2 | |
Volume/weather | 96.1 | |
Retail electric price | 74.9 (994.3) | |
Storm restoration carrying costs | 37.5 (6.9) | |
Return of unprotected excess accumulated deferred income taxes to customers | 24.6 | |
2022Volume/weather | 53.4 | |
Retail electric price | 106.3 | |
2023 operating revenues | $4,802.63,985.7 | |
Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 an increase of 3,057 GWh, or 7.4%, in electricity usage across all customer classes, including the effect of more favorable weather on residential sales.Storm The increase in
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in 2021. The increase in industrial usage was primarily due to an increase in demand from expansion projects, primarily in the chemicals, petroleum refining, and transportation industries, an increase in demand from cogeneration customers, an increase in demand from small industrial customers, and 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, partially offset by a decrease in demand in the petroleum refining industry as a result of a permanent plant shutdown due to Hurricane Ida. The increased usage from these industrial 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 increases in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.
Storm restoration carrying costs represent the equity component of storm restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida restoration costs in May 2022, partially offset by 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 and in the Form 10-K for discussion of the storm cost securitizations.
The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the nine months ended September 30, 2022, $24.6 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 nine months ended September 30, 2023. There was 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 discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.
The retail electric price variance is primarily due to an increase in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2022. See Note 2 to the financial statements hereinin the Form 10-K for afurther discussion of the securitization.formula rate plan proceeding.
Total electric energy sales for Entergy Louisiana for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 11,177 | | | 10,500 | | | 6 | | Residential | 11,428 | | | 11,177 | | | 2 | |
Commercial | Commercial | 8,486 | | | 7,838 | | | 8 | | Commercial | 8,643 | | | 8,486 | | | 2 | |
Industrial | Industrial | 24,018 | | | 22,314 | | | 8 | | Industrial | 23,862 | | | 24,018 | | | (1) | |
Governmental | Governmental | 619 | | | 591 | | | 5 | | Governmental | 617 | | | 619 | | | — | |
Total retail | Total retail | 44,300 | | | 41,243 | | | 7 | | Total retail | 44,550 | | | 44,300 | | | 1 | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 4,105 | | | 3,523 | | | 17 | | Associated companies | 3,250 | | | 4,105 | | | (21) | |
Non-associated companies | Non-associated companies | 2,632 | | | 1,741 | | | 51 | | Non-associated companies | 1,123 | | | 2,632 | | | (57) | |
Total | Total | 51,037 | | | 46,507 | | | 10 | | Total | 48,923 | | | 51,037 | | | (4) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Other Income Statement Variances
Third Quarter 2022 Compared to Third Quarter 2021
Other operation and maintenance expenses increased primarily due to:
•a gain of $14.8 million, recorded in the third quarter 2021, on the sale of a pipeline;
•an increase of $12.8 million in nuclear generation expenses primarily due to a higher scope of work performed in 2022 as compared to prior year and higher nuclear labor costs;
•an increase of $9.1 million in power delivery expenses primarily due to higher reliability costs and higher vegetation maintenance costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Variances
Third Quarter 2023 Compared to Third Quarter 2022
Other operation and maintenance expenses decreased primarily due to:
•an increasea decrease of $8.5$5.7 million in 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;
•a decrease of $4.7 million in compensation and benefits costs primarily due to the timinglower healthcare claims activity in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of incentive-based compensation accruals as compared to prior year;
•an increase of $6.1 million in bad debt expense, including the deferraldiscount rates used to value the benefits liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in 2021 of bad debt expense resulting from the COVID-19 pandemic. SeeForm 10-K, Note 26 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of regulatory activity associated with the COVID-19 pandemic;pension and other postretirement benefits costs; and
•several individually insignificant items.a decrease of $2.7 million in bad debt expense.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income increased primarily due to an increase of $23.5$25.6 million in affiliated dividend income resulting from the storm trust’s 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 ofrelated to storm restoration costs.cost securitizations. The increase was partially offset by changes in decommissioning trust fund activity. See Note 2 to the financial statements herein for discussion of the securitization.
Interest expense increased primarily due to the issuance of $500 million of 4.75% Series mortgage bonds in August 2022 and the issuance of $1 billion of 0.95% Series mortgage bonds in October 2021.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Other operation and maintenance expenses increased primarily due to:by:
•an increase of $25.6 million in power delivery expenses primarily due to higher vegetation maintenancenet periodic pension non-service costs higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of a non-qualified pension settlement charge recorded in third quarter 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the deploymentForm 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;
•an increase of $17.5 million in nuclear generation expenses primarily due to a higher scope of work performedpension and higher nuclear labor costs in 2022, partially offset by spending in 2021 on sanitation and social distancing protocols as a result of the COVID-19 pandemic;other postretirement benefits costs;
•a gaindecrease of $14.8$3.7 million recordeddue to the recognition of storm restoration carrying costs in the third quarter 2021, on the sale of a pipeline;2022, primarily related to Hurricane Ida; and
•an increase of $9.0 millionchanges in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. decommissioning trust fund activity.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;storm cost securitizations.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Other operation and maintenance expenses decreased primarily due to:
•an increasea decrease of $8.4$22.8 million in compensation and benefits costs primarily due to the timinglower health and welfare costs as a result of incentive-based compensation accrualshigher prescription drug rebates in second quarter 2023, a decrease in net periodic pension and other postretirement benefits service costs as compared to prior year;
•a result of an increase in the discount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first 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 $6.6 million in customer service center support costs primarily due to higher contractpension and other postretirement benefits costs;
•an increasea decrease of $3.6$18.7 million in energy efficiency expenses duetransmission costs allocated by MISO. See Note 2 to the timingfinancial statements in the Form 10-K for further information on the recovery of recovery from customers, partially offset by lower energy efficiencythese costs;
•an increase of $2.3 million in loss provisions; and
•several individually insignificant items.
The increase was partially offset by a decrease of $2.7$8.9 million in non-nuclear generation expenses primarily due to a lower scope of work, performedincluding during plant outages, performed in 20222023 as compared to the same period in 2021.prior year;
•
Taxes other than income taxes increaseda decrease of $8.9 million in nuclear generation expenses primarily due to increaseslower nuclear labor costs and lower costs associated with materials and supplies in ad valorem taxes resulting from higher assessments, increases2023 as compared to 2022; and
•a decrease of $7.8 million in franchise taxes, and increases in employment taxes.
Depreciation and amortizationpower delivery expenses increased primarily due to additions to plant in service.lower transmission and distribution management overhead costs, lower lighting costs, and lower transmission repairs and maintenance costs.
Other regulatory charges (credits) - net includes a regulatory charge of $224 million, recorded in second quarter 2022, to reflect Entergy Louisiana’s obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta,
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes:
•a regulatory charge of $103.4 million, recorded in first quarter 2023, to reflect 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 cost securitization; and
•a regulatory charge of $224.4 million, recorded in second quarter 2022, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the May 2022 storm cost securitization.
In addition, Entergy Louisiana records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.
Other income increased primarily due to:
•an increase of $34.8$87.8 million in affiliated dividend income resulting from the storm trust’s 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; and
•an increase of $12.1 million due to the recognition of storm restoration carrying costs, primarily related to Hurricane Ida.
The increase was partially offset by:
storm cost securitizations;
•a $31.6 million charge, recorded in second quarter 2022, for the LURC’s 1% beneficial interest in the storm trust I established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization; and
•changesMay 2022 storm cost securitization as compared to a $14.6 million charge, recorded in decommissioningfirst quarter 2023, for the LURC’s 1% beneficial interest in the storm trust fund activity, including portfolio rebalancingII established as part of the Waterford 3 decommissioning trust fund in the first quarter of 2021 partially offset by portfolio rebalancing of the River Bend decommissioning trust fund in the second quarter of 2022.
March 2023 Hurricane Ida storm cost securitization. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the securitization.
Interest expense increased primarily due to:
•the issuance of $1 billion of 0.95% Series mortgage bonds in October 2021;
•the $1.2 billion unsecured term loan proceeds received in January 2022. The term loan was repaid in June 2022;
•the issuances of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;storm cost securitizations; and
•an increase in the issuance of $500 million of 4.75% Series mortgage bondsallowance for equity funds used during construction due to higher construction work in August 2022.progress in 2023.
The increase was partially offset byby:
•a decrease of $16.9 million in the repaymentamount of $200 millionstorm restoration carrying costs recognized in 2023 as compared to 2022, primarily related to Hurricane Ida; and
•an increase in net periodic pension non-service costs as a result of 4.8% Series mortgage bondsa non-qualified pension settlement charge recorded in May 2021.third 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.
Income Taxes
The effective income tax rate was 22.4% for the third quarter 2023. The difference in the effective income tax rate for the third quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by book and tax differences related to the non-taxable income distributions earned on preferred membership interests.
The effective income tax rate was 6.6% for the nine months ended September 30, 2023. The difference in the effective income tax rate for the nine months ended September 30, 2023 versus the federal statutory rate of 21% was 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
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of a tax rate change. See Notes 2 and 10 to the financial statements herein for a discussion of the March 2023 storm cost securitization under Act 293.
The effective income tax rate was 20.7% for the third quarter 2022. The difference in the effective income tax rate for the third 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 the accrual for 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 (38.2%) for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida 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, the amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes. See Notes 2 and 10 to the financial statements herein for a discussion of the securitization under Act 293. See Note 102 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation and Regulation
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. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein and Notes 2 and 3for updates to the financialdiscussion of income tax legislation and regulation.
Planned Sale of Gas Distribution Business
See the “Planned Sale of Gas Distribution Businesses” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for discussion of the purchase and sale agreement for the sale of Entergy Louisiana’s gas distribution business.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 rates were 20.1% for the third quarter 2021 and 18.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and 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.
Income Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Inflation Reduction Act of 2022.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 621,457 | | | 1,047,987 | | Operating activities | 1,368,788 | | | 621,457 | |
Investing activities | Investing activities | (4,197,993) | | | (2,224,730) | | Investing activities | (2,734,954) | | | (4,197,993) | |
Financing activities | Financing activities | 3,753,660 | | | 715,416 | | Financing activities | 2,102,833 | | | 3,753,660 | |
Net increase (decrease) in cash and cash equivalents | 177,124 | | | (461,327) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 736,667 | | | 177,124 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $195,697 | | | $266,693 | | Cash and cash equivalents at end of period | $793,280 | | | $195,697 | |
Operating Activities
Net cash flow provided by operating activities decreased $426.5increased $747.3 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•increased fuel costs. See Note 2the timing of payments to the financial statements herein for a discussion of fuel and purchased power cost recovery;vendors;
•an increasea decrease of $100.7$231.9 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022, partially offset by Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration efforts in 2021;2022;
•an increasethe refund of $18.6$27.8 million received from System Energy in interest paidJanuary 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in 2022 as comparedSystem Energy’s January 2023 compliance report filed with the FERC. See Note 2 to 2021;the financial statements herein and in the Form 10-K for further discussion of these refunds and related proceedings;
•an increaselower fuel costs and the timing of $18.5recovery of fuel 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; and
•a decrease of $16.4 million in spending on nuclear refueling outages; and
•payments to vendors, including timing and increase in cost of operations.outages.
The decreaseincrease was partially offset by higherlower collections from customers, an increase of $22.5 million in interest paid in 2023 as compared to 2022, and a decreasean increase of $35.1$20.2 million in pension contributions in 2022.2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Accounting Estimates” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
Investing Activities
Net cash flow used in investing activities increased $1,973.3decreased $1,463 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•an increase in investmentsinvestment in affiliates in 2022 due to the $3,164$3,163.6 million purchase by the storm trust I of preferred membership interests issued by an Entergy affiliate, partially offset by the $1,391$1,390.6 million redemption of preferred membership interests. See Note 2 to the financial statements hereinin the Form 10-K for a discussion of the May 2022 storm cost securitization;
•an increasea decrease of $291.2$699.9 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023;
•a decrease of $280.7 million in net payments to storm reserve escrow accounts;
•an increase of $94.7 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022 and higher capital expenditures for storm restoration in 2022;
•an increase of $64.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022, higher capital expenditures as a result of increased development in Entergy Louisiana’s service area, and increased investment in the reliability and infrastructure of Entergy Louisiana’s distribution system, partially offset by lower spending in 2022 on advanced metering infrastructure;
•an increase of $27.2 million in non-nuclear generation construction expenditures primarily due to a higher scope of work on projects performed in 2022 as compared to 2021, including during plant outages;
•an increase of $21.5 million in information technology capital expenditures primarily due to increased spending on various technology projects in 2022; and
•the sale of a pipeline for $15 million in 2021.
The increase was partially offset by:127
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•a decrease of $239.7$233.9 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2022. The decrease2023 and decreased spending on various transmission projects in storm restoration spending is primarily due to Hurricane Laura restoration efforts in 2021;2023; and
•a decrease$124.4 million of $29.7 millionredemptions in nuclear decommissioning2023 of preferred membership interests held by the storm trust fund activityI, as a resultpart of a lump sum contributionperiodic redemptions that are expected to occur, subject to certain conditions, for the preferred membership interests that were issued in 2021 for amounts collected over a 17-month period.connection with the May 2022 storm cost securitization. See Note 2 to the financial statements in the Form 10-K for a discussion of nuclear decommissioning expense recovery;the May 2022 storm cost securitization and the storm trust I’s investment in preferred membership interests.
The decrease was partially offset by:
•an increase in investment in affiliates in 2023 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 the financial statements herein for a discussion of the March 2023 storm cost securitization and the storm trust II’s investment in preferred membership interests;
•money pool activity; and
•a decreasean increase of $15.2$72.7 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.cycle; and
•an increase of $58.8 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2023.
DecreasesIncreases in Entergy Louisiana’s receivables from the money pool are a sourceuse of cash flow, and Entergy Louisiana’s receivable from the money pool decreasedincreased $79.1 million for the nine months ended September 30, 2023 compared to decreasing by $9.8 million for the nine months ended September 30, 2022 compared to increasing by $6.6 million for the nine months ended September 30, 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 $3,038.2decreased $1,650.8 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•proceeds from securitization of $3.2$1.5 billion received by the storm trust;
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•a capital contribution of $1$3.2 billion received indirectly from Entergy Corporation in May 2022 to finance the establishment ofby the storm escrow account for Hurricane Ida costs;trust I in 2022;
•the issuance of $500 million of 4.75% Series mortgage bonds in August 2022;
•the repayment, at maturity, of $200$325 million of 4.80%4.05% Series mortgage bonds in May 2021;
•the repayment, at maturity, of Entergy Louisiana Waterford VIE’s $40 million of 3.92% Series H secured notes in February 2021;September 2023; and
•higher prepaid deposits of $27.9 million related to contributions-in-aid-of-construction reimbursement agreements in 2022 as compared to 2021.money pool activity.
The increasedecrease was partially offset by:
•a capital contribution of approximately $1.5 billion in 2023 as compared to a capital contribution of approximately $1 billion in 2022, both received indirectly from Entergy Corporation and related to the issuance of $500 million of 2.35% Series mortgage bondsMarch 2023 storm cost securitization and $500 million of 3.10% Series mortgage bonds, each in March 2021;the May 2022 storm cost securitization, respectively;
•the repayment, prior to maturity, in May 2022 of $435 million, a portion of the outstanding principal, of 0.62% Series mortgage bonds due November 2023;
•an increasethe issuance of $314.5$70 million of 5.94% Series J notes by the Entergy Louisiana Waterford variable interest entity in common equity distributions in 2022 primarily to return to Entergy Corporation the $125 million capital contribution received in December 2021 to assist in paying for costs associated with Hurricane Ida and to maintain Entergy Louisiana’s targeted capital structure;September 2023;
•net repaymentsa decrease of $125$75 million in 20222023 in net repayments on Entergy Louisiana’s revolving credit facility; and
•a decrease of $56.5 million in net long-term borrowingscommon equity distributions paid in 2023 in order to maintain Entergy Louisiana’s capital structure.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased $226.1 million onfor the nuclear fuel company variable interest entities’ credit facilities.nine months ended September 30, 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. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the securitization.storm cost securitizations.
Capital Structure
Entergy Louisiana’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Louisiana is primarily due to the $1.0$1.5 billion capital contribution received indirectly from Entergy Corporation in May 2022.March 2023.
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 53.2 | % | | 57.2 | % | Debt to capital | 47.5 | % | | 53.0 | % |
| Effect of subtracting cash | Effect of subtracting cash | (0.5 | %) | | 0.0 | % | Effect of subtracting cash | (2.0 | %) | | (0.1 | %) |
Net debt to net capital | 52.7 | % | | 57.2 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 45.5 | % | | 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 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. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $5.6$7.5 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Louisiana’s portfolio, including St. Jacques Louisiana Solar;portfolio; investments in River Bend and Waterford 3; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion;expansion and customer growth; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Louisiana, is still assessing the effect on its planned solar projects, the investigation by the U.S. Department of Commerce into potential circumvention of dutiesLLC and tariffs may result in increased duties or tariffs on imported solar panelsSubsidiaries
Management's Financial Discussion and has exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.Analysis
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
$4,782 | | $14,539 | | $20,061 | | $13,426 |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
$79,136 | | ($226,114) | | $4,782 | | $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 2027.2028. 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 September 30, 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 September 30, 2022, $212023, $11.2 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 2025. As of September 30, 2022, $15.12023, $57.1 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of September 30, 2022, $72.22023, $13.9 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.
Entergy Louisiana had $291.2 million in its storm reserve escrow account at September 30, 2022.
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). These resources, all of which would be constructed in Louisiana, include (i) Vacherie Solar Energy Center, a 150 megawatt resource in St. James Parish; (ii) Sunlight Road Solar, a 50 megawatt resource in Washington Parish; (iii) St. Jacques Louisiana Solar, a 150 megawatt resource in St. James Parish; and (iv) Elizabeth Solar facility, a 125 megawatt resource in Allen Parish. St. Jacques Louisiana Solar would be acquired through a build-own-transfer agreement; the remaining resources involve power purchase
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
agreements. Sunlight Road Solar and Elizabeth Solar facility have estimated in service dates in 2024, and Vacherie Solar Energy Center and St. Jacques Louisiana Solar have estimated in service dates in 2025. 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 complied with applicable LPSC orders. The LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022 the LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Entergy Louisiana filed rebuttal testimony in June 2022. In August 2022 the parties reached a settlement certifying the 2021 Solar Portfolio and approving implementation of Rider GGO. In September 2022 the LPSC approved the settlement.
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 soughtwas 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
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application at 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 for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
After filing of testimony by2022 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 intervenors, which generally supported or did not opposeeligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s requestsplans to securitize these costs, net of the $1 billion in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida,funds withdrawn from the storm escrow account described 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
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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,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 $1.942 billion from utility plantwere reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to other regulatory assets.
In May 2022authorize the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana.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 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 approved inLegislature’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 III (the storm trust)trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 31,635,718.722114,576,757.48 Class AB 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, 20222023 on the preferred membership interests issued to the storm trust.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.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%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 June 2022April 2023 and the system restoration charge is expected to remain in place for 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
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 distributed $1.4loaned approximately $1.5 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy, which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 andwas indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.
Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.
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 $290$133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million.$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 $224$103 million ($16576 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 secondfirst quarter 2022,2023, Entergy Louisiana recorded a charge of $31.6$14.6 million in other income to reflect the LURC’s beneficial interest in the trust.storm trust II.
In AprilSystem Resilience and Storm Hardening
As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacementseeking a public interest finding regarding Phase I of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimatedFuture Ready resilience plan and approval of a rider mechanism to berecover the program’s costs. Phase I reflects the first five years of a ten-year resilience plan and includes investment of approximately $2.54$5 billion, including approximately $1.96 billionhardening 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 staff and certain intervenors filed direct testimony in capital costsAugust, September, and approximately $586 millionOctober 2023. The LPSC staff filed cross-answering testimony in non-capital costs. Including carrying costsOctober 2023. The testimony largely supports implementation of $57 millionsome level of accelerated investment in resilience but raises various issues related to the magnitude of the investment, the cost recovery mechanism applicable to the investment, and the ratemaking for the investment.
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 contemplated adoption of a final rule in October 2023, but this did not occur, and a new date has not been set.
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 December 2022,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 an LPSC determination that $2.60 billion was prudently incurred and, therefore, isto 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 from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million in costs associatedaccordance 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 exclusiveterms of the requested $3 million in carrying costs through December 2022. In total, Entergyformula 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 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 account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In 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 October 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 plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above.underway. A procedural schedule has been established with a hearing scheduled for December 2023,
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
and settlement negotiations are ongoing. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources- Uses of Capital - 2021 Solar Certification and the Geaux Green Option” in December 2022.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, was 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 procedural schedule was established in May 2023 with a hearing scheduled for March 2024. In October 2023 the LPSC staff and intervenors filed testimony, with the LPSC staff supporting the amount of solar resources to be acquired and the alternative RFP process. The LPSC staff also supported, subject to certain recommendations, the proposed framework for evaluation and certification of the solar resources by the LPSC and the proposed tariff.
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 to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. In May 2023, Entergy Louisiana filed an application with the FERC for transaction authorization pursuant to Section 203 of the Federal Power Act. In June 2023 the LPSC filed a notice to intervene in the proceeding. Entergy Louisiana is evaluating the effect of the transaction on its results of operations, cash flows, and financial condition, but at this time does not expect the effect to be material.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates - Electric
20212022 Formula Rate Plan Filing
In May 2022,2023, Entergy Louisiana filed its formula rate plan evaluation report for its 20212022 calendar year operations. The 20212022 test year evaluation report produced an earned return on common equity of 8.33%, withrequiring an approximately $70.7 million increase to base rider revenue. Due to a cap for the 2021 and 2022 test years, however, base rider formula rate plan revenues are only being increased by approximately $4.9 million, leaving an ongoing revenue increasedeficiency of $65.3 million.approximately $65.9 million and providing for prospective return on common equity opportunity of approximately 8.38%. Other increaseschanges in formula rate plan revenue driven by reductionsincreases in Tax Cut and Jobs Act credits andcapacity costs, primarily legacy capacity costs, additions to transmission and distribution plant in service reflectedeligible for recovery through the transmission recovery mechanism and distribution recovery mechanism, and higher sales during the test period are partly offset by anreductions in net MISO costs as well as credits for FERC-ordered refunds. Also included in the 2022 test year distribution recovery mechanism revenue requirement is a $6 million credit relating to the distribution recovery mechanism performance accountability standards and requirements. In total, the net increase in formula rate plan revenues, including base formula rate plan revenues inside the formula rate plan bandwidth and subject to the cap, as well as other formula
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
in net MISO revenues, leading to a net increase in formula rate plan revenue of $152.9 million. The effects of the changes to total formula rate plan revenue are different for each legacy company, primarily due to differences in the legacy companies’ capacity cost changes, including the effect of true-ups. Legacy Entergy Louisiana formula rate plan revenues will increase by $86 million and legacy Entergy Gulf States Louisiana formula rate plan revenues will increase by $66.9outside of the bandwidth, is $85.2 million. In August 20222023 the LPSC staff filed a list of objections/reservations, including outstanding issues from the test years 2017-20202017-2021 formula rate plan filings, utilizing the extraordinary cost mechanismcalculation of certain refunds from System Energy, and certain calculations relating to address one-time changes such as statethe tax rate changes, and failing to include anreform adjustment for revenues not received as a result of Hurricane Ida.mechanism. Subject to refund and LPSC review, the resulting changes tonet increase in formula rate plan revenues of $85.2 million became effective for bills rendered during the first billing cycle of September 2022.2023.
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
In August 2023, Entergy Louisiana filed an application for approval of a regulatory blueprint necessary for it to strengthen the electric grid for the State of Louisiana, which contains a dual-path request to update rates through either: (1) extension of Entergy Louisiana’s current formula rate plan (with certain modifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of rates resulting from a cost-of-service study (the Rate Case path). The application complies with Entergy Louisiana’s previous formula rate plan extension order requiring that for Entergy Louisiana to obtain another extension of its formula rate plan that included a rate reset, Entergy Louisiana would need to submit a full cost-of-service/rate case. Entergy Louisiana’s filing supports the need to extend Entergy Louisiana’s formula rate plan with credit supportive mechanisms needed to facilitate investment in the distribution, transmission, and generation functions.
The Rate Case path proposes a 2024-2026 test year formula rate plan with an initial revenue requirement increase, net of $17 million of one-time credits, of $430 million and a return on common equity of 10.5%. Depreciation rates would be updated for all asset classes. The Rate Mitigation Proposal proposes a 2023-2025 test year formula rate plan with an expected initial revenue requirement increase, also net of $17 million of one-time credits, of $173 million and a return on common equity of 10.0%. Depreciation rates would be updated only for nuclear assets and would be phased in over three years.
Under both paths, Entergy Louisiana’s filing proposes removing the cap on amounts allowed to be recovered through the distribution recovery mechanism and continuing the distribution recovery mechanism performance accountability targets, which tie Entergy Louisiana’s ability to fully recover its distribution recovery mechanism investments to its reliability performance. Entergy Louisiana’s filing also includes new customer-centric programs specifically focused on affordability, such as reducing late fees and certain other fees assessed to customers, lowering additional facilities charge rates, providing eligible low-income seniors with monthly discounts on their electric bill, and adding new voluntary customer options to support new transportation electrification technologies. A status conference was held in October 2023 at which a procedural schedule was adopted that includes a hearing date of August 2024.
2017-2021 Formula Rate Plan Filings
In October 2023, Entergy Louisiana and the LPSC staff jointly filed an uncontested stipulated settlement agreement for consideration by the LPSC that would resolve the evaluation of Entergy Louisiana’s formula rate plan for test years 2017, 2018, and 2019 and resolve certain disputed issues for test years 2020 and 2021. If approved by the LPSC, the settlement would result in a one-time cost of service credit to customers of $5.8 million, would allow Entergy Louisiana to retain approximately $6.2 million of excess securitization collection as recovery of a regulatory asset associated with late fees related to the 2016 Baton Rouge flood, and would result in the reversal of a regulatory liability for excess accumulated deferred income taxes recognized in 2017 as a result of the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for further discussion of the Tax Cuts and Jobs Act. It is anticipated that the settlement will be considered by the LPSC in November 2023.
Fuel and purchased power recovery
As discussed in the Form 10-K, in February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months beginning in April 2021. In April 2022 the LPSC staff issued a draft audit report regarding Entergy Louisiana’s fuel adjustment clause charges in February 2021 that did not recommend any financial disallowances, but included several prospective recommendations. Responsive testimony was filed by one intervenor and the parties agreed to suspend any procedural schedule and move toward settlement discussions to close the matter.
In May 2022 the LPSC staff issuedprovided notice of an audit report regardingof Entergy Louisiana’s purchased gas adjustment charges in February 2021 that did not propose any financial disallowances.clause filings covering the period January 2018 through December 2020. The LPSC staff and
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. In August 2023 the LPSC submitted a joint report on theits audit report and draft order tofound that materially all costs recovered through the LPSC concluding that Entergy Louisiana’spurchased gas distribution operationsadjustment filings were reasonable and fuel costs were not significantly adversely affected byeligible for recovery through the February 2021 winter storms and the resulting increase in naturalpurchased gas prices. The LPSC issued an order approving the joint report in October 2022.
To mitigate high electric bills, primarily driven by high summer usage and elevated gas prices, Entergy Louisiana has deferred approximately $225 million of fuel expense incurred in April, May, June, July, August, and September 2022 (as reflected on June, July, August, September, October, and November 2022 bills). These deferrals were included in the over/under calculation of the fuel adjustment clause, which is intended to recover the full amount of the costs included on a rolling twelve-month basis.clause.
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 LPSC review and approval,utilize approximately $1.6 billion in certain low interest debt to generate earnings to apply toward the reduction of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. Utilities seeking to recover the regulatory asset, must formally petitionas well as to conduct additional outside right-of-way vegetation management activities and to apply to the minor storm reserve account.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.The LPSC approved Entergy Louisiana’s requested relief in June 2023 and a subsequent filing will be required to permit 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 September 30, 2022,2023, Entergy Louisiana had a regulatory asset of $47.8 million for costs associated with the COVID-19COVID-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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. Following is an update to that discussion.
NRC Reactor Oversight Process
As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. River BendWaterford 3 is currently in Column 1, and Waterford 3River Bend is currently in Column 2.
In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until2022 and also corrected a
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
subsequent radiation monitor calibration issue. In May 2023 the NRC conductscompleted a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.2 and Waterford 3 was returned to Column 1.
In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. In August 2023 the NRC issued a finding and notice of violation related to a radiation monitor calibration issue at River Bend. River Bend will remain in Column 2 pending successful completion of supplemental inspections related to both issues.
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. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.
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 | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2022 and 2021 | |
For the Three and Nine Months Ended September 30, 2023 and 2022 | | For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | OPERATING REVENUES | | OPERATING REVENUES | |
Electric | Electric | | $2,003,009 | | | $1,407,737 | | | $4,738,188 | | | $3,741,979 | | Electric | | $1,421,598 | | | $2,003,009 | | | $3,933,259 | | | $4,738,188 | |
Natural gas | Natural gas | | 17,789 | | | 12,971 | | | 64,367 | | | 53,971 | | Natural gas | | 13,269 | | | 17,789 | | | 52,428 | | | 64,367 | |
TOTAL | TOTAL | | 2,020,798 | | | 1,420,708 | | | 4,802,555 | | | 3,795,950 | | TOTAL | | 1,434,867 | | | 2,020,798 | | | 3,985,687 | | | 4,802,555 | |
| 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 | | 833,885 | | | 421,464 | | | 1,449,464 | | | 922,060 | | Fuel, fuel-related expenses, and gas purchased for resale | | 242,886 | | | 833,885 | | | 848,521 | | | 1,449,464 | |
Purchased power | Purchased power | | 251,582 | | | 176,473 | | | 848,328 | | | 573,030 | | Purchased power | | 162,934 | | | 251,582 | | | 491,244 | | | 848,328 | |
Nuclear refueling outage expenses | Nuclear refueling outage expenses | | 18,966 | | | 11,932 | | | 40,942 | | | 37,407 | | Nuclear refueling outage expenses | | 17,569 | | | 18,966 | | | 45,430 | | | 40,942 | |
Other operation and maintenance | Other operation and maintenance | | 298,710 | | | 239,132 | | | 846,457 | | | 752,214 | | Other operation and maintenance | | 285,251 | | | 298,710 | | | 781,339 | | | 846,457 | |
Decommissioning | Decommissioning | | 18,137 | | | 17,250 | | | 53,736 | | | 51,108 | | Decommissioning | | 19,138 | | | 18,137 | | | 56,544 | | | 53,736 | |
Taxes other than income taxes | Taxes other than income taxes | | 60,346 | | | 63,428 | | | 180,527 | | | 167,880 | | Taxes other than income taxes | | 60,360 | | | 60,346 | | | 185,978 | | | 180,527 | |
Depreciation and amortization | Depreciation and amortization | | 176,403 | | | 165,469 | | | 517,205 | | | 489,343 | | Depreciation and amortization | | 184,188 | | | 176,403 | | | 541,530 | | | 517,205 | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | (9,959) | | | (1,920) | | | 172,605 | | | 7,560 | | Other regulatory charges (credits) - net | | (21,470) | | | (9,959) | | | 27,759 | | | 172,605 | |
TOTAL | TOTAL | | 1,648,070 | | | 1,093,228 | | | 4,109,264 | | | 3,000,602 | | TOTAL | | 950,856 | | | 1,648,070 | | | 2,978,345 | | | 4,109,264 | |
| OPERATING INCOME | OPERATING INCOME | | 372,728 | | | 327,480 | | | 693,291 | | | 795,348 | | OPERATING INCOME | | 484,011 | | | 372,728 | | | 1,007,342 | | | 693,291 | |
| OTHER INCOME | OTHER INCOME | | OTHER INCOME | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 8,280 | | | 7,247 | | | 17,865 | | | 20,183 | | Allowance for equity funds used during construction | | 6,945 | | | 8,280 | | | 24,660 | | | 17,865 | |
Interest and investment income (loss) | Interest and investment income (loss) | | (8,861) | | | 7,327 | | | (93,241) | | | 75,502 | | Interest and investment income (loss) | | (11,482) | | | (8,861) | | | 49,241 | | | (93,241) | |
Interest and investment income - affiliated | Interest and investment income - affiliated | | 55,363 | | | 31,898 | | | 130,464 | | | 95,695 | | Interest and investment income - affiliated | | 80,971 | | | 55,363 | | | 218,274 | | | 130,464 | |
Miscellaneous - net | Miscellaneous - net | | 6,835 | | | (8,924) | | | 59,338 | | | (79,595) | | Miscellaneous - net | | (6,411) | | | 6,835 | | | (97,079) | | | 59,338 | |
TOTAL | TOTAL | | 61,617 | | | 37,548 | | | 114,426 | | | 111,785 | | TOTAL | | 70,023 | | | 61,617 | | | 195,096 | | | 114,426 | |
| INTEREST EXPENSE | INTEREST EXPENSE | | INTEREST EXPENSE | |
Interest expense | Interest expense | | 92,020 | | | 87,295 | | | 278,559 | | | 260,731 | | Interest expense | | 93,857 | | | 92,020 | | | 285,959 | | | 278,559 | |
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | (3,518) | | | (3,278) | | | (7,762) | | | (9,105) | | Allowance for borrowed funds used during construction | | (3,019) | | | (3,518) | | | (11,733) | | | (7,762) | |
TOTAL | TOTAL | | 88,502 | | | 84,017 | | | 270,797 | | | 251,626 | | TOTAL | | 90,838 | | | 88,502 | | | 274,226 | | | 270,797 | |
| INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | 345,843 | | | 281,011 | | | 536,920 | | | 655,507 | | INCOME BEFORE INCOME TAXES | | 463,196 | | | 345,843 | | | 928,212 | | | 536,920 | |
| Income taxes | Income taxes | | 71,453 | | | 56,536 | | | (204,989) | | | 120,479 | | Income taxes | | 103,889 | | | 71,453 | | | 61,621 | | | (204,989) | |
| NET INCOME | NET INCOME | | 274,390 | | | 224,475 | | | 741,909 | | | 535,028 | | NET INCOME | | 359,307 | | | 274,390 | | | 866,591 | | | 741,909 | |
| Net income attributable to noncontrolling interest | | 554 | | | — | | | 812 | | | — | | |
Net income attributable to noncontrolling interests | | Net income attributable to noncontrolling interests | | 810 | | | 554 | | | 2,183 | | | 812 | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $273,836 | | | $224,475 | | | $741,097 | | | $535,028 | | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $358,497 | | | $273,836 | | | $864,408 | | | $741,097 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three and Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | | | | | | |
| Three Months Ended | | Nine Months Ended |
| | | |
| | | |
| 2022 | | 2021 | | 2022 | | 2021 |
| (In Thousands) | | (In Thousands) |
| | | | | | | |
Net Income | $274,390 | | | $224,475 | | | $741,909 | | | $535,028 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Pension and other postretirement liabilities (net of tax expense (benefit) of $109, ($46), ($298), and $18) | 295 | | | (131) | | | (809) | | | 50 | |
Other comprehensive income (loss) | 295 | | | (131) | | | (809) | | | 50 | |
| | | | | | | |
Comprehensive Income | 274,685 | | | 224,344 | | | 741,100 | | | 535,078 | |
Net income attributable to noncontrolling interest | 554 | | | — | | | 812 | | | — | |
Comprehensive Income Applicable to Member’s Equity | $274,131 | | | $224,344 | | | $740,288 | | | $535,078 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| Three Months Ended | | Nine Months Ended |
| | | |
| | | |
| 2023 | | 2022 | | 2023 | | 2022 |
| (In Thousands) | | (In Thousands) |
| | | | | | | |
Net Income | $359,307 | | | $274,390 | | | $866,591 | | | $741,909 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Pension and other postretirement liabilities (net of tax expense (benefit) of ($674), $109, ($1,617), and ($298)) | (1,829) | | | 295 | | | (4,388) | | | (809) | |
Other comprehensive income (loss) | (1,829) | | | 295 | | | (4,388) | | | (809) | |
| | | | | | | |
Comprehensive Income | 357,478 | | | 274,685 | | | 862,203 | | | 741,100 | |
Net income attributable to noncontrolling interests | 810 | | | 554 | | | 2,183 | | | 812 | |
Comprehensive Income Applicable to Member’s Equity | $356,668 | | | $274,131 | | | $860,020 | | | $740,288 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $741,909 | | | $535,028 | | Net income | | $866,591 | | | $741,909 | |
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 | | 633,124 | | | 607,299 | | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 650,800 | | | 633,124 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | (84,719) | | | 159,723 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 127,074 | | | (84,719) | |
Changes in working capital: | Changes in working capital: | | Changes in working capital: | |
Receivables | Receivables | | (193,374) | | | (91,771) | | Receivables | | (54,518) | | | (193,374) | |
Fuel inventory | Fuel inventory | | 1,920 | | | 5,763 | | Fuel inventory | | (19,194) | | | 1,920 | |
Accounts payable | Accounts payable | | (117,199) | | | 450,064 | | Accounts payable | | (153,749) | | | (117,199) | |
Taxes accrued | Taxes accrued | | (9,415) | | | 94,751 | | Taxes accrued | | 57,979 | | | (9,415) | |
Interest accrued | Interest accrued | | 3,244 | | | 4,464 | | Interest accrued | | (9,687) | | | 3,244 | |
Deferred fuel costs | Deferred fuel costs | | (272,259) | | | (49,786) | | Deferred fuel costs | | 133,090 | | | (272,259) | |
Other working capital accounts | Other working capital accounts | | (161,058) | | | (41,769) | | Other working capital accounts | | (262,001) | | | (161,058) | |
Changes in provisions for estimated losses | Changes in provisions for estimated losses | | 292,013 | | | (764) | | Changes in provisions for estimated losses | | 7,249 | | | 292,013 | |
Changes in other regulatory assets | Changes in other regulatory assets | | 741,131 | | | (938,646) | | Changes in other regulatory assets | | 390,864 | | | 741,131 | |
Changes in other regulatory liabilities | Changes in other regulatory liabilities | | (92,554) | | | 92,138 | | Changes in other regulatory liabilities | | 200,267 | | | (92,554) | |
Effect of securitization on regulatory asset | Effect of securitization on regulatory asset | | (1,190,338) | | | — | | Effect of securitization on regulatory asset | | (491,150) | | | (1,190,338) | |
| | Changes in pension and other postretirement liabilities | Changes in pension and other postretirement liabilities | | (29,538) | | | (68,132) | | Changes in pension and other postretirement liabilities | | (43,909) | | | (29,538) | |
Other | Other | | 358,570 | | | 289,625 | | Other | | (30,918) | | | 358,570 | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 621,457 | | | 1,047,987 | | Net cash flow provided by operating activities | | 1,368,788 | | | 621,457 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | | | | |
Construction expenditures | Construction expenditures | | (2,099,909) | | | (2,147,096) | | Construction expenditures | | (1,194,315) | | | (2,099,909) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 17,865 | | | 20,183 | | Allowance for equity funds used during construction | | 24,660 | | | 17,865 | |
| Proceeds from sale of assets | | — | | | 15,000 | | |
| Nuclear fuel purchases | Nuclear fuel purchases | | (84,606) | | | (75,349) | | Nuclear fuel purchases | | (136,357) | | | (84,606) | |
Proceeds from the sale of nuclear fuel | | 37,634 | | | 13,201 | | |
Proceeds from sale of nuclear fuel | | Proceeds from sale of nuclear fuel | | 16,733 | | | 37,634 | |
Receipts from storm reserve escrow account | Receipts from storm reserve escrow account | | 1,000,228 | | | — | | Receipts from storm reserve escrow account | | — | | | 1,000,228 | |
| Payments to storm reserve escrow account | Payments to storm reserve escrow account | | (1,291,431) | | | — | | Payments to storm reserve escrow account | | (10,463) | | | (1,291,431) | |
Purchase of preferred membership interests of affiliate | Purchase of preferred membership interests of affiliate | | (3,163,572) | | | — | | Purchase of preferred membership interests of affiliate | | (1,457,676) | | | (3,163,572) | |
Redemption of preferred membership interests of affiliate | Redemption of preferred membership interests of affiliate | | 1,390,587 | | | — | | Redemption of preferred membership interests of affiliate | | 124,364 | | | 1,390,587 | |
Changes to securitization account | | — | | | (2,815) | | |
| Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 520,412 | | | 505,840 | | Proceeds from nuclear decommissioning trust fund sales | | 473,394 | | | 520,412 | |
Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (540,653) | | | (555,749) | | Investment in nuclear decommissioning trust funds | | (516,047) | | | (540,653) | |
Changes in money pool receivable - net | Changes in money pool receivable - net | | 9,757 | | | (6,635) | | Changes in money pool receivable - net | | (79,136) | | | 9,757 | |
| Litigation proceeds from settlement agreement | Litigation proceeds from settlement agreement | | 5,695 | | | — | | Litigation proceeds from settlement agreement | | — | | | 5,695 | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — | | | 8,690 | | |
| Insurance proceeds received for property damages | | Insurance proceeds received for property damages | | 19,493 | | | — | |
Decrease in other investments | | Decrease in other investments | | 396 | | | — | |
Net cash flow used in investing activities | | Net cash flow used in investing activities | | (2,734,954) | | | (4,197,993) | |
FINANCING ACTIVITIES | | FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of long-term debt | | Proceeds from the issuance of long-term debt | | 1,196,927 | | | 2,673,246 | |
Retirement of long-term debt | | Retirement of long-term debt | | (1,505,325) | | | (2,734,524) | |
Proceeds received by storm trust related to securitization | | Proceeds received by storm trust related to securitization | | 1,457,676 | | | 3,163,572 | |
Capital contributions from parent | | Capital contributions from parent | | 1,457,676 | | | 1,000,000 | |
| Net cash flow used in investing activities | | (4,197,993) | | | (2,224,730) | | |
| FINANCING ACTIVITIES | | |
Proceeds from the issuance of long-term debt | | 2,673,246 | | | 2,404,102 | | |
Retirement of long-term debt | | (2,734,524) | | | (1,628,383) | | |
Proceeds from trust related to securitization | | 3,163,572 | | | — | | |
Capital contribution from parent | | 1,000,000 | | | — | | |
| Change in money pool payable - net | | Change in money pool payable - net | | (226,114) | | | — | |
| Common equity distributions paid | Common equity distributions paid | | (374,500) | | | (60,000) | | Common equity distributions paid | | (318,000) | | | (374,500) | |
| Other | Other | | 25,866 | | | (303) | | Other | | 39,993 | | | 25,866 | |
Net cash flow provided by financing activities | Net cash flow provided by financing activities | | 3,753,660 | | | 715,416 | | Net cash flow provided by financing activities | | 2,102,833 | | | 3,753,660 | |
| Net increase (decrease) in cash and cash equivalents | | 177,124 | | | (461,327) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | | 736,667 | | | 177,124 | |
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 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $195,697 | | | $266,693 | | Cash and cash equivalents at end of period | | $793,280 | | | $195,697 | |
| 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 (received) during the period for: | | Cash paid (received) during the period for: | |
Interest - net of amount capitalized | Interest - net of amount capitalized | | $266,522 | | | $247,878 | | Interest - net of amount capitalized | | $288,987 | | | $266,522 | |
| Income taxes | | Income taxes | | ($6,037) | | | $— | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $390 | | | $195 | | Cash | | $27,521 | | | $50,318 | |
Temporary cash investments | Temporary cash investments | | 195,307 | | | 18,378 | | Temporary cash investments | | 765,759 | | | 6,295 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 195,697 | | | 18,573 | | Total cash and cash equivalents | | 793,280 | | | 56,613 | |
| Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | | | |
Customer | Customer | | 435,725 | | | 355,265 | | Customer | | 361,830 | | | 339,291 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (9,945) | | | (29,231) | | Allowance for doubtful accounts | | (7,569) | | | (7,595) | |
Associated companies | Associated companies | | 120,203 | | | 96,539 | | Associated companies | | 166,841 | | | 88,896 | |
Other | Other | | 50,104 | | | 36,674 | | Other | | 51,549 | | | 53,241 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 221,545 | | | 174,768 | | Accrued unbilled revenues | | 233,913 | | | 199,077 | |
Total accounts receivable | Total accounts receivable | | 817,632 | | | 634,015 | | Total accounts receivable | | 806,564 | | | 672,910 | |
| Deferred fuel costs | Deferred fuel costs | | 317,633 | | | 45,374 | | Deferred fuel costs | | 26,093 | | | 159,183 | |
Fuel inventory | Fuel inventory | | 41,038 | | | 42,958 | | Fuel inventory | | 61,053 | | | 41,859 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 531,444 | | | 485,325 | | Materials and supplies - at average cost | | 641,041 | | | 555,860 | |
Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 69,738 | | | 39,582 | | Deferred nuclear refueling outage costs | | 62,394 | | | 53,833 | |
| Prepayments and other | Prepayments and other | | 148,498 | | | 44,187 | | Prepayments and other | | 291,656 | | | 76,646 | |
TOTAL | TOTAL | | 2,121,680 | | | 1,310,014 | | TOTAL | | 2,682,081 | | | 1,616,904 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Investment in affiliate preferred membership interests | Investment in affiliate preferred membership interests | | 3,163,572 | | | 1,390,587 | | Investment in affiliate preferred membership interests | | 4,496,884 | | | 3,163,572 | |
Decommissioning trust funds | Decommissioning trust funds | | 1,682,479 | | | 2,114,523 | | Decommissioning trust funds | | 1,912,924 | | | 1,779,090 | |
Storm reserve escrow account | Storm reserve escrow account | | 291,203 | | | — | | Storm reserve escrow account | | 303,869 | | | 293,406 | |
Non-utility property - at cost (less accumulated depreciation) | Non-utility property - at cost (less accumulated depreciation) | | 344,935 | | | 337,247 | | Non-utility property - at cost (less accumulated depreciation) | | 404,720 | | | 350,723 | |
| Other | Other | | 14,098 | | | 13,744 | | Other | | 14,349 | | | 19,679 | |
TOTAL | TOTAL | | 5,496,287 | | | 3,856,101 | | TOTAL | | 7,132,746 | | | 5,606,470 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 27,323,620 | | | 28,055,038 | | Electric | | 27,482,440 | | | 27,498,136 | |
| Natural gas | Natural gas | | 297,638 | | | 285,006 | | Natural gas | | 311,565 | | | 301,719 | |
| Construction work in progress | Construction work in progress | | 785,673 | | | 847,924 | | Construction work in progress | | 587,658 | | | 736,969 | |
Nuclear fuel | Nuclear fuel | | 191,908 | | | 209,418 | | Nuclear fuel | | 305,492 | | | 212,941 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 28,598,839 | | | 29,397,386 | | TOTAL UTILITY PLANT | | 28,687,155 | | | 28,749,765 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 10,204,546 | | | 9,860,252 | | Less - accumulated depreciation and amortization | | 10,382,412 | | | 10,087,942 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 18,394,293 | | | 19,537,134 | | UTILITY PLANT - NET | | 18,304,743 | | | 18,661,823 | |
| 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 | | 2,035,535 | | | 2,776,666 | | Other regulatory assets | | 1,665,315 | | | 2,056,179 | |
Deferred fuel costs | Deferred fuel costs | | 168,122 | | | 168,122 | | Deferred fuel costs | | 168,122 | | | 168,122 | |
Other | Other | | 35,811 | | | 27,801 | | Other | | 38,984 | | | 35,057 | |
TOTAL | TOTAL | | 2,239,468 | | | 2,972,589 | | TOTAL | | 1,872,421 | | | 2,259,358 | |
| TOTAL ASSETS | TOTAL ASSETS | | $28,251,728 | | | $27,675,838 | | TOTAL ASSETS | | $29,991,991 | | | $28,144,555 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $525,000 | | | $200,000 | | Currently maturing long-term debt | | $685,000 | | | $1,010,000 | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | 146,002 | | | 183,172 | | Associated companies | | 104,903 | | | 356,688 | |
Other | Other | | 680,238 | | | 1,481,902 | | Other | | 411,363 | | | 589,355 | |
Customer deposits | Customer deposits | | 158,440 | | | 150,697 | | Customer deposits | | 167,586 | | | 161,666 | |
Taxes accrued | Taxes accrued | | 54,833 | | | 64,248 | | Taxes accrued | | 93,983 | | | 36,004 | |
| Interest accrued | Interest accrued | | 96,296 | | | 93,052 | | Interest accrued | | 91,649 | | | 101,336 | |
| Current portion of unprotected excess accumulated deferred income taxes | | — | | | 24,291 | | |
| Other | Other | | 81,448 | | | 68,995 | | Other | | 125,059 | | | 72,525 | |
TOTAL | TOTAL | | 1,742,257 | | | 2,266,357 | | TOTAL | | 1,679,543 | | | 2,327,574 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 2,363,961 | | | 2,433,854 | | Accumulated deferred income taxes and taxes accrued | | 2,504,547 | | | 2,374,878 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 99,048 | | | 102,588 | | Accumulated deferred investment tax credits | | 94,399 | | | 97,868 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 302,760 | | | 313,693 | | Regulatory liability for income taxes - net | | 323,956 | | | 337,836 | |
| Other regulatory liabilities | Other regulatory liabilities | | 985,267 | | | 1,042,597 | | Other regulatory liabilities | | 1,252,109 | | | 1,037,962 | |
Decommissioning | Decommissioning | | 1,718,635 | | | 1,653,198 | | Decommissioning | | 1,813,564 | | | 1,736,801 | |
Accumulated provisions | Accumulated provisions | | 316,503 | | | 24,490 | | Accumulated provisions | | 323,563 | | | 316,314 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 498,744 | | | 528,213 | | Pension and other postretirement liabilities | | 346,126 | | | 389,631 | |
Long-term debt | Long-term debt | | 10,335,595 | | | 10,714,346 | | Long-term debt | | 9,714,014 | | | 9,688,922 | |
| Other | Other | | 310,188 | | | 415,930 | | Other | | 431,572 | | | 343,321 | |
TOTAL | TOTAL | | 16,930,701 | | | 17,228,909 | | TOTAL | | 16,803,850 | | | 16,323,533 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| EQUITY | EQUITY | | EQUITY | |
| Member's equity | Member's equity | | 9,538,853 | | | 8,172,294 | | Member's equity | | 11,410,402 | | | 9,406,343 | |
Accumulated other comprehensive income | Accumulated other comprehensive income | | 7,469 | | | 8,278 | | Accumulated other comprehensive income | | 50,982 | | | 55,370 | |
Noncontrolling interest | | 32,448 | | | — | | |
Noncontrolling interests | | Noncontrolling interests | | 47,214 | | | 31,735 | |
TOTAL | TOTAL | | 9,578,770 | | | 8,180,572 | | TOTAL | | 11,508,598 | | | 9,493,448 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $28,251,728 | | | $27,675,838 | | TOTAL LIABILITIES AND EQUITY | | $29,991,991 | | | $28,144,555 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Noncontrolling Interest | | Member’s Equity | | Accumulated Other Comprehensive Income | | Total | | | Noncontrolling Interests | | Member’s Equity | | Accumulated Other Comprehensive Income | | Total |
| | (In Thousands) | | | (In Thousands) |
| Balance at December 31, 2020 | $— | | | $7,453,361 | | | $4,327 | | | $7,457,688 | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | | $— | | | $8,172,294 | | | $8,278 | | | $8,180,572 | |
| Net income | Net income | — | | | 166,626 | | | — | | | 166,626 | | Net income | | — | | | 150,860 | | | — | | | 150,860 | |
Other comprehensive loss | Other comprehensive loss | — | | | — | | | (407) | | | (407) | | Other comprehensive loss | | — | | | — | | | (613) | | | (613) | |
| Other | — | | | (16) | | | — | | | (16) | | |
Balance at March 31, 2021 | — | | | 7,619,971 | | | 3,920 | | | 7,623,891 | | |
| Net income | — | | | 143,927 | | | — | | | 143,927 | | |
Other comprehensive income | — | | | — | | | 588 | | | 588 | | |
| Other | — | | | (12) | | | — | | | (12) | | |
Balance at June 30, 2021 | — | | | 7,763,886 | | | 4,508 | | | 7,768,394 | | |
| Net income | — | | | 224,475 | | | — | | | 224,475 | | |
Other comprehensive loss | — | | | — | | | (131) | | | (131) | | |
| Distributions declared on common equity | — | | | (60,000) | | | — | | | (60,000) | | |
| Other | — | | | (11) | | | — | | | (11) | | |
Balance at September 30, 2021 | $— | | | $7,928,350 | | | $4,377 | | | $7,932,727 | | |
| Balance at December 31, 2021 | $— | | | $8,172,294 | | | $8,278 | | | $8,180,572 | | |
| Net income | — | | | 150,860 | | | — | | | 150,860 | | |
Other comprehensive loss | — | | | — | | | (613) | | | (613) | | |
| Common equity distributions | Common equity distributions | — | | | (125,000) | | | — | | | (125,000) | | Common equity distributions | | — | | | (125,000) | | | — | | | (125,000) | |
| Other | Other | — | | | (13) | | | — | | | (13) | | Other | | — | | | (13) | | | — | | | (13) | |
Balance at March 31, 2022 | Balance at March 31, 2022 | — | | | 8,198,141 | | | 7,665 | | | 8,205,806 | | Balance at March 31, 2022 | | — | | | 8,198,141 | | | 7,665 | | | 8,205,806 | |
| Net income | Net income | 258 | | | 316,401 | | | — | | | 316,659 | | Net income | | 258 | | | 316,401 | | | — | | | 316,659 | |
Other comprehensive loss | Other comprehensive loss | — | | | — | | | (491) | | | (491) | | Other comprehensive loss | | — | | | — | | | (491) | | | (491) | |
| Capital contribution from parent | — | | | 1,000,000 | | | — | | | 1,000,000 | | |
| Contributions from parent | | Contributions from parent | | — | | | 1,000,000 | | | — | | | 1,000,000 | |
| Beneficial interest in storm trust | Beneficial interest in storm trust | 31,636 | | | — | | | — | | | 31,636 | | Beneficial interest in storm trust | | 31,636 | | | — | | | — | | | 31,636 | |
Other | Other | — | | | (13) | | | — | | | (13) | | Other | | — | | | (13) | | | — | | | (13) | |
Balance at June 30, 2022 | Balance at June 30, 2022 | 31,894 | | | 9,514,529 | | | 7,174 | | | 9,553,597 | | Balance at June 30, 2022 | | 31,894 | | | 9,514,529 | | | 7,174 | | | 9,553,597 | |
| Net income | Net income | 554 | | | 273,836 | | | — | | | 274,390 | | Net income | | 554 | | | 273,836 | | | — | | | 274,390 | |
Other comprehensive income | Other comprehensive income | — | | | — | | | 295 | | | 295 | | Other comprehensive income | | — | | | — | | | 295 | | | 295 | |
| Common equity distributions | | Common equity distributions | | — | | | (249,500) | | | — | | | (249,500) | |
| Common equity distributions | — | | | (249,500) | | | — | | | (249,500) | | |
| Other | Other | — | | | (12) | | | — | | | (12) | | Other | | — | | | (12) | | | — | | | (12) | |
Balance at September 30, 2022 | Balance at September 30, 2022 | $32,448 | | | $9,538,853 | | | $7,469 | | | $9,578,770 | | Balance at September 30, 2022 | | $32,448 | | | $9,538,853 | | | $7,469 | | | $9,578,770 | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | | $31,735 | | | $9,406,343 | | | $55,370 | | | $9,493,448 | |
| Net income | | Net income | | 554 | | | 243,470 | | | — | | | 244,024 | |
Other comprehensive loss | | Other comprehensive loss | | — | | | — | | | (786) | | | (786) | |
| Contributions from parent | | Contributions from parent | | — | | | 1,457,676 | | | — | | | 1,457,676 | |
Common equity distributions | | Common equity distributions | | — | | | (160,250) | | | — | | | (160,250) | |
| Beneficial interest in storm trust | | Beneficial interest in storm trust | | 14,577 | | | — | | | — | | | 14,577 | |
Distribution to LURC | | Distribution to LURC | | (470) | | | — | | | — | | | (470) | |
Other | | Other | | — | | | (28) | | | — | | | (28) | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | | 46,396 | | | 10,947,211 | | | 54,584 | | | 11,048,191 | |
| Net income | | Net income | | 819 | | | 262,441 | | | — | | | 263,260 | |
Other comprehensive loss | | Other comprehensive loss | | — | | | — | | | (1,773) | | | (1,773) | |
| Other | | Other | | — | | | 15 | | | — | | | 15 | |
Balance at June 30, 2023 | | Balance at June 30, 2023 | | 47,215 | | | 11,209,667 | | | 52,811 | | | 11,309,693 | |
| Net income | | Net income | | 810 | | | 358,497 | | | — | | | 359,307 | |
Other comprehensive loss | | Other comprehensive loss | | — | | | — | | | (1,829) | | | (1,829) | |
| Common equity distributions | | Common equity distributions | | — | | | (157,750) | | | — | | | (157,750) | |
Distribution to LURC | | Distribution to LURC | | (811) | | | — | | | — | | | (811) | |
| Other | | Other | | — | | | (12) | | | — | | | (12) | |
Balance at September 30, 2023 | | Balance at September 30, 2023 | | $47,214 | | | $11,410,402 | | | $50,982 | | | $11,508,598 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net IncomeEarnings Applicable to Member’s Equity
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income increased $12.3Earnings remained relatively unchanged, increasing $0.4 million, primarily due to higher retail electric price and higher volume/weather offset by regulatory credits recorded in the third quarter 2022 to reflect the effects of the joint stipulation reached in the 2022 formula rate plan proceeding and higher retail electric price, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense.expenses.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Net incomeEarnings increased $14.2$6 million primarily due to higher retail electric price regulatory credits recorded in the third quarter 2022 to reflect the effects of the joint stipulation reached in the 2022 formula rate plan proceeding, and higher volume/weather,lower operation and maintenance expenses. The increase was partially offset by regulatory credits recorded in the second quarter 2021 to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding, higher depreciation and amortization expenses, higher interest expense, lower volume/weather, and lower other operation and maintenance expenses, and higher interest expense.income.
Operating Revenues
Third Quarter 20222023 Compared to Third Quarter 20212022
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $420.3459.1 | |
Fuel, rider, and other revenues that do not significantly affect net income | 57.9 | |
Retail electric price | 17.3 | |
Volume/weather | 0.314.3 | |
Retail one-time bill credit | (36.7)36.7 | |
Retail electric price | 14.8 | |
Volume/weather | 13.9 | |
2023 operating revenues | $538.8 | |
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 one-time bill credit represents the disbursement of settlement proceeds, in third quarter 2022, in the form of a one-time bill credit provided to retail customers during the September 2022 billing cycle as a result of the System Energy settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The retail electric price variance is primarily due to increases in formula rate plan rates effective April 2023 and July 2023. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.
Total electric energy sales for Entergy Mississippi for the three months ended September 30, 2023 and 2022 are as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | % Change |
| (GWh) | | |
Residential | 1,925 | | | 1,766 | | | 9 | |
Commercial | 1,436 | | | 1,352 | | | 6 | |
Industrial | 647 | | | 654 | | | (1) | |
Governmental | 119 | | | 119 | | | — | |
Total retail | 4,127 | | | 3,891 | | | 6 | |
Sales for resale: | | | | | |
Non-associated companies | 961 | | | 936 | | | 3 | |
Total | 5,088 | | | 4,827 | | | 5 | |
See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2023 to the nine months ended September 30, 2022:
| | | | | |
| Amount |
| (In Millions) |
2022 operating revenues | $459.11,213.6 | |
Fuel, rider, and other revenues that do not significantly affect net income | 105.9 | |
Retail electric price | 48.7 | |
Retail one-time bill credit | 36.7 | |
Volume/weather | (8.5) | |
| |
2023 operating revenues | $1,396.4 | |
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 August 2022, April 20222023, and August 2022.July 2023. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.
The volume/weather varianceretail one-time bill credit represents the disbursement of settlement proceeds, in third quarter 2022, in the form of a one-time bill credit provided to retail customers during the September 2022 billing cycle as a result of the System Energy settlement agreement with the MPSC. There is insignificant and primarily due to an increaseno effect on net income as the reduction in industrial usage. The increase in industrial usage was primarily due to an increase in demand from small industrial customers.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.
Total electric energy sales for Entergy Mississippi for the three months ended September 30, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | % Change |
| (GWh) | | |
Residential | 1,766 | | | 1,725 | | | 2 | |
Commercial | 1,352 | | | 1,337 | | | 1 | |
Industrial | 654 | | | 631 | | | 4 | |
Governmental | 119 | | | 118 | | | 1 | |
Total retail | 3,891 | | | 3,811 | | | 2 | |
Sales for resale: | | | | | |
Non-associated companies | 936 | | | 1,134 | | | (17) | |
Total | 4,827 | | | 4,945 | | | (2) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
| | | | | |
| Amount |
| (In Millions) |
2021 operating revenues | $1,106.0 | |
Fuel, rider, and other revenues that do not significantly affect net income | 89.5 | |
Retail electric price | 44.2 | |
Volume/weather | 10.6 | |
Retail one-time bill credit | (36.7) | |
2022 operating revenues | $1,213.6 | |
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 2021, July 2021, April 2022, and August 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales, partially offset by a decrease in weather-adjusted residential usage.
The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for discussion of the partial settlement agreementusage and the MPSC directive related to the disbursementeffect of settlement proceeds.less favorable weather on residential sales.
Total electric energy sales for Entergy Mississippi for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 4,480 | | | 4,355 | | | 3 | | Residential | 4,336 | | | 4,480 | | | (3) | |
Commercial | Commercial | 3,539 | | | 3,449 | | | 3 | | Commercial | 3,556 | | | 3,539 | | | — | |
Industrial | Industrial | 1,808 | | | 1,742 | | | 4 | | Industrial | 1,779 | | | 1,808 | | | (2) | |
Governmental | Governmental | 320 | | | 315 | | | 2 | | Governmental | 311 | | | 320 | | | (3) | |
Total retail | Total retail | 10,147 | | | 9,861 | | | 3 | | Total retail | 9,982 | | | 10,147 | | | (2) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Non-associated companies | Non-associated companies | 2,148 | | | 4,230 | | | (49) | | Non-associated companies | 3,734 | | | 2,148 | | | 74 | |
Total | Total | 12,295 | | | 14,091 | | | (13) | | Total | 13,716 | | | 12,295 | | | 12 | |
See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Third Quarter 20222023 Compared to Third Quarter 20212022
Other operation and maintenance expenses increaseddecreased primarily due to:
•to an increasea decrease of $3.8$4.0 million in power deliverynon-nuclear generation expenses primarily due to higher vegetation maintenance costs;
•$2.2 milliona lower scope of work, including during plant outages, performed in amortization of the bad debt expense deferral resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $1.4 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals2023 as compared to prior year;
•an increase of $1.4 million in energy efficiency expenses primarily due to higher energy efficiency costs; and
•several individually insignificant items.2022.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and millage rate increases.increases in franchise taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service.service, including the Sunflower Solar facility, which was placed in service in September 2022.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Other regulatory charges (credits) - net includes:
•a regulatory credit of $36.7 million, recorded in the third quarter 2022, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill2022 billing cycle. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and
•regulatory credits of $22.6 million, recorded in third quarter 2022, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the 2022 formula rate plan filing.
Other income decreased primarily due to lower interest income from carrying costs related to the deferred fuel balance.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Interest expense increased primarily due to the issuance of $200$300 million of 2.55%5.0% Series mortgage bonds in November 2021,May 2023, partially offset by the $150repayment of $250 million unsecured term loan proceeds receivedof 3.10% Series mortgage bonds in June 2022, and borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility.2023.
Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $1.6 million in third quarter 2023 as compared to $9 million in third quarter 2022, to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/losslosses 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.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Other operation and maintenance expenses increaseddecreased primarily due to:
•$2.2 million in amortizationa decrease of the bad debt expense deferral resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $2.1 million in customer service center support costs primarily due to higher contract costs;
•an increase of $2 million in energy efficiency expenses primarily due to higher energy efficiency costs;
•an increase of $1.8$5.1 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in second quarter 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the timingdiscount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first quarter of incentive-based compensation accruals as compared2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to prior year;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 $4.7 million in transmission costs allocated by MISO; and
•an increase of $1.4 million in power delivery expenses primarily due to higher vegetation maintenance costs.
The increase was partially offset by a decrease of $1.9$2.5 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 20222023 as compared to prior year.2022 and lower non-nuclear labor costs, partially offset by higher long term service agreement expenses.
The decrease was partially offset by an increase of $2.5 million in bad debt expense and several individually insignificant items.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and millage rate increases.increases in franchise taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service.service, including the Sunflower Solar facility, which was placed in service in September 2022.
Other regulatory charges (credits) - net includes:
•a regulatory credit of $36.7 million, recorded in the third quarter 2022, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenuesrevenue from the bill credits provided to customers in the September bill2022 billing cycle. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•regulatory credits of $22.6 million, recorded in third quarter 2022, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the 2022 formula rate plan filing; and
•regulatory credits of $19.9 million, recorded in the second quarter 2021, to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2021 formula rate plan filing.
Other income increaseddecreased primarily due to higherlower interest income from carrying costs related to the deferred fuel balance.balance and an increase in net periodic pension non-service costs as a result of a non-qualified pension
Interest expense increased primarily146
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
settlement charge recorded in third quarter 2023. The decrease was partially offset by an increase in the allowance for equity funds used during construction due to:
•to higher construction work in progress in 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the issuance of $200 million of 2.55% Series mortgage bonds in November 2021;
•the issuance of $200 million of 3.50% Series mortgage bonds in March 2021;
•the $150 million unsecured term loan proceeds received in June 2022; and
•the borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility.
Net loss attributable to noncontrolling interest reflects the earnings or losses attributableForm 10-K, Note 6 to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $9 million for the nine months ended September 30, 2022 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accountingfinancial statements herein, and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 111 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs.
Interest expense increased primarily due to the HLBV methodissuance of accounting.$300 million of 5.0% Series mortgage bonds in May 2023 and the $150 million unsecured term loan drawn in June 2022. The increase was partially offset by the repayment of $250 million of 3.10% Series mortgage bonds in June 2023.
Income Taxes
The effective income tax rates were 24.2% for the third quarter 2023 and 24.5% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rates were 23.8% for the third quarter 2022 and 22.6% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rates were 22.9% for the third quarter 2021 and 22.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.
Income Tax Legislation and Regulation
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. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 101,591 | | | 249,768 | | Operating activities | 408,904 | | | 101,591 | |
Investing activities | Investing activities | (428,776) | | | (468,198) | | Investing activities | (433,505) | | | (428,776) | |
Financing activities | Financing activities | 282,455 | | | 218,440 | | Financing activities | 17,938 | | | 282,455 | |
Net increase (decrease) in cash and cash equivalents | (44,730) | | | 10 | | |
Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | (6,663) | | | (44,730) | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $2,897 | | | $28 | | Cash and cash equivalents at end of period | $10,316 | | | $2,897 | |
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreased $148.2increased $307.3 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•increasedhigher collections from customers;
•lower fuel costs and the timing of recovery of fuel 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;
•recoverypayments to vendors, including timing and increase in cost of operations;;
•a one-time bill credit in 2022 for the disbursement of settlement proceeds as directed by the MPSC. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the partial settlement agreement and the MPSC directive;directive related to the disbursement of settlement proceeds; and
•income tax refundsthe timing of $8 million received in 2021 in accordance with an intercompany income tax allocation agreement.payments to vendors.
The decreaseincrease was partially offset by higher collections from customers and a decreasean increase of $16.5$10.6 million in storm spending in 2022, primarily due to Winter Storm Uri restoration efforts in 2021.interest paid.
Investing Activities
Net cash flow used in investing activities decreased $39.4increased $4.7 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•a decreasean increase of $90.1$40.8 million in transmission construction expenditures primarily due to increased spending on various transmission projects in 2023;
•an increase of $39.6 million in distribution construction expenditures primarily due to a lower scope of work performed in 2022 as compared to 2021, lowerhigher capital expenditures for storm restoration in 2022,2023; and lower spending in 2022 on advanced metering infrastructure;
•money pool activity; and
•a decrease of $35.4 million in transmission construction expenditures primarily due to a lower scope of work performed in 2022 as compared to 2021.activity.
The decreaseincrease was partially offset by by:
•the initial payment of approximately $105.1 million in May 2022 as compared to the substantial completion payment of approximately $30.4 million in April 2023 for the purchase of the Sunflower Solar facility by a consolidated tax equity partnershippartnership. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase; and an increase
•a decrease of $9.2$11.1 million in information technology capital expenditures primarily due to increaseddecreased spending on various technology projects in 2022. See Note 14 to the financial statements herein for discussion of the Sunflower Solar facility purchase.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 $26.9 million for the nine months ended September 30, 2023 compared to decreasing by $40.5 million for the nine months ended September 30, 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 increased $64decreased $264.5 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•the repayment, prior to maturity, of $250 million of 3.10% Series mortgage bonds in June 2023;
•proceeds received in June 2022 from a $150 million unsecured term loan due December 2023;
•borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility;
•the repayment, prior to maturity, in May 2023, of $50 million of an unsecured term loan due December 2023; and
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•$40 million in common equity distributions paid in 2023 in order to maintain Entergy Mississippi’s capital structure.
The decrease was partially offset by:
•the issuance of $300 million of 5.0% Series mortgage bonds in May 2023; and
•a capital contributioncontributions of $25.7 million received in April 2023 as compared to $9.6 million received in May 2022, both from the noncontrolling tax equity investor in MS Sunflower Partnership, LLC and used by the partnership for the initial paymentpayments in the acquisition of the Sunflower Solar facility. See Note 14 to the financial statements hereinin the Form 10-K for discussion of the Sunflower Solar facility purchase.
The increase was partially offset by the issuance of $200 million of 3.50% Series mortgage bonds in March 2021.
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. The decrease in the debt to capital ratio for Entergy Mississippi is primarily due to net income in 2023.
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 54.9 | % | | 54.3 | % | Debt to capital | 51.8 | % | | 53.4 | % |
Effect of subtracting cash | Effect of subtracting cash | — | % | | (0.5 | %) | Effect of subtracting cash | (0.1 | %) | | (0.2 | %) |
Net debt to net capital | 54.9 | % | | 53.8 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 51.7 | % | | 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.
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. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy Mississippi is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $1.6$2.6 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Mississippi’s portfolio; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
($19,319) | | $40,456 | | ($34,603) | | ($16,516) |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
($23,893) | | $26,879 | | ($19,319) | | $40,456 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has three separate credit facilities in the aggregate amount of $95 million scheduled to expire in April 2023. As of September 30, 2022, there were no cash borrowings outstanding under these credit facilities. Also, Entergy Mississippi has a credit facility in the amount of $150 million scheduled to expire in July 2024.2025. As of September 30, 2022,2023, there was $100 million inwere no 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 September 30, 2022, $9.72023, $6.7 million in MISO letters of credit and $1$1.0 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 had $33.3 million in its storm reserve escrow account at September 30, 2022.
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. In July 2022, pursuant to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filing to the MPSC with updated calculations of the impact of the Sunflower Solar facility on rate base and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022 the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorized the recovery of the costs of the Sunflower Solar facility through the interim capacity rate adjustment mechanism in the formula rate plan with rates effective in December 2022. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 both Entergy Mississippi and the tax equity investor made additional capital contributions to the tax equity partnership that were then used to make the substantial completion payment of $30.4 million for acquisition of the facility. The final payment of $4.7 million for acquisition of the facility was made in October 2023. See Note 14 to the financial statements hereinin the Form 10-K for a discussion of Entergy Mississippi’s purchase of the Sunflower Solar facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Fuel and purchased power cost recoveryRetail Rates
2023 Formula Rate Plan Filing
See “
Complaints Against System Energy - System Energy Settlement
In March 2023, Entergy Mississippi submitted its formula rate plan 2023 test year filing and 2022 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 2022 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2023 calendar year to be below the formula rate plan bandwidth. The 2023 test year filing shows a $39.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 6.67%, within the formula rate plan bandwidth. The 2022 look-back filing compares actual 2022 results to the approved benchmark return on rate base and reflects the need for a $19.8 million temporary increase in formula rate plan 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 2022, Entergy Mississippi recorded a regulatory asset of $18.2 million in connection with the MPSC” in Note 2 to the financial statements herein for discussionlook-back feature of the partial settlement agreement filedformula rate plan to reflect that the 2022 estimated earned return was below the formula rate plan bandwidth. In accordance with the FERCprovisions of the formula rate plan, Entergy Mississippi implemented a $27.9 million interim rate increase, reflecting a cap equal to 2% of 2022 retail revenues, effective in June 2022. The settlement, which is contingent upon FERC approval, provides for a refund of $235 million from SystemApril 2023.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Energy to Entergy Mississippi. In July 2022 the MPSC directed the disbursement of settlement proceeds, ordering Entergy Mississippi to provide a one-time $80 bill credit to each of its approximately 460,000 retail customers to be effective during the September 2022 billing cycle, and to apply the remaining proceeds to Entergy Mississippi’s under-recovered deferred fuel balance. System Energy requested an order from the FERC by November 2022.
Entergy Mississippi had a deferred fuel balance of approximately $291.7 million under the energy cost recovery rider as of July 31, 2022, along with an over-recovery balance of $51.1 million under the power management rider. Without further action, Entergy Mississippi anticipated a year-end deferred fuel balance of approximately $200 million after application of a portion of the System Energy settlement proceeds, as discussed above. In September 2022, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider. Entergy Mississippi proposed five monthly incremental adjustments to the net energy cost factor designed to collect the under-recovered fuel balance as of July 31, 2022 and to reflect the recovery of a higher natural gas price. Entergy Mississippi also proposed five monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance as of July 31, 2022. In October 2022 the MPSC approved modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider. The MPSC approved dividing the energy cost recovery rider interim adjustment into two components that would allow Entergy Mississippi to 1) recover a natural gas fuel rate that is better aligned with current prices and 2) recover the estimated under-recovered deferred fuel balance as of September 30, 2022 over a period of 20 months. The MPSC approved six monthly incremental adjustments to the net energy cost factor designed to reflect the recovery of a higher natural gas price. The MPSC also approved six monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance. Entergy Mississippi will not file its annual redetermination of the energy cost recovery rider or the power management rider in November 2022. Entergy Mississippi’s NovemberMay 2023, annual redetermination will not reflect any part of the estimated under-recovered deferred fuel balance as of September 30, 2022; it will only reflect any over/under recovery that accumulates after September 2022. The November 2024 annual redetermination will include the total deferred fuel balance, including any over- or under-recovery of the deferred fuel balance as of September 30, 2022.
Retail Rates
2022 Formula Rate Plan Filing
In March 2022, Entergy Mississippi submitted its formula rate plan 2022 test year filing and 2021 look-back filing showing Entergy Mississippi’s earned return for the historical 2021 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2022 calendar year to be below the formula rate plan bandwidth. The 2022 test year filing shows a $69 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.70% return on rate base, 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 2021 look-back filing compares actual 2021 results to the approved benchmark return on rate base and reflects the need for a $34.5 million interim increase in formula rate plan revenues. In fourth quarter 2021, Entergy Mississippi recorded a regulatory asset of $19 million to reflect the then-current estimate in connection with the look-back feature of the formula rate plan. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2021 retail revenues, effective in April 2022.
In June 2022, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2022a 2023 test year filing that resultedresulting in a total raterevenue increase of $48.6 million.$26.5 million for 2023. Pursuant to the joint stipulation, Entergy Mississippi’s 20212022 look-back filing reflected an earned return on rate base of 5.99%6.10% in calendar year 2021,2022, which is below the look-back bandwidth, resulting in a $34.3$19.0 million increase in the formula rate plan revenues on an interim basis through June 2023.2024. Entergy Mississippi recorded a regulatory credit of $0.8 million in June 2023 to reflect the increase in the look-back regulatory asset. In July 2022addition, certain long-term service agreement and conductor handling costs were authorized for realignment from the formula rate plan to the annual power management and grid modernization riders effective January 2023, resulting in regulatory credits recorded in June 2023 of $4.1 million and $4.3 million, respectively. Also, the amortization of Entergy Mississippi’s COVID-19 bad debt deferral was suspended for calendar year 2023 and will resume in 2024. In June 2023 the MPSC approved the joint stipulation with rates effective in August 2022. In July 2022, Entergy Mississippi recorded regulatory credits of $22.6 million to reflect the effects of the joint stipulation. In August 2022 an intervenor filed a statutorily-authorized direct appeal to the2023.
161Fuel and purchased power recovery
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Mississippi Supreme Court seeking review ofIn June 2023 the MPSC’s July 2022 order approvingMPSC approved the joint stipulation confirmingagreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 20222023 formula rate plan filing. The rates that went into effectstipulation directed Entergy Mississippi to make a compliance filing to revise its power management cost adjustment factor, to revise its grid modernization cost adjustment factor, and to include a revision to reduce the net energy cost factor to a level necessary to reflect an average natural gas price of $4.50 per MMBtu. The MPSC approved the compliance filing in August 2022 are not stayed or otherwise impacted whileJune 2023, effective for July 2023 bills. See “Retail Rates - 2023 Formula Rate Plan Filing” above for further discussion of the appeal is pending.2023 formula rate plan filing and the joint stipulation agreement.
RenewABLE Community Option
In July 2022 the MPSC directed Entergy Mississippi to flow $14.1 million of the power management rider over-recovery balance to customers beginning in August 2022 through December 2022 to mitigate the bill impact of the increase in formula rate plan revenues.
Net Metering Rulemaking
Pursuant to a mandatory reopener provision in its net metering rule, the MPSC opened a docket to review the efficacy and fairness of its existing net metering rule. In July 2022 the MPSC issued an order adopting revisions to its net metering rule. Among other things, the amended rule requires utilities to calculate avoided cost using daytime energy production, grandfathers a 2.5 cents per kWh distributed generation benefits adder for 25 years, and expands eligibility for the 2 cents per kWh low-income benefits adder to households up to 250% of the federal poverty level and grandfathers that adder for 25 years. The amended rule expands meter aggregation to include systems up to 3 MW alternating current and to any additional meters within the same electric utility service territory. The amended rule also increases the 3% net metering participation cap to 4% and requires that utilities seek MPSC approval prior to refusing additional net generation requests. The MPSC also directs utilities to make rate filings implementing rebates for distributed generation facilities. Because of the size and number of customers eligible under this new rule, there is a risk of loss of load and the shifting of costs to customers. In AugustJanuary 2022, Entergy Mississippi filed a motionits RenewABLE Community Option (Schedule RCO), an offering for rehearing on the proposed net metering rule, which thequalifying non-residential customers to subscribe to renewable resource capacity to satisfy their environmental, sustainability, and governance goals. The MPSC granted. A hearing on the proposed rule was heldapproved Schedule RCO in SeptemberDecember 2022. In October 2022 the MPSC adopted an amended rule, which will now be known as the Distributed Generation Rule. In the Distributed Generation Rule, all provisions permitting meter aggregation were struck. The Distributed Generation Rule maintains the 3% net metering participation cap. The Distributed Generation Rule grandfathers a 2.5 cents per kWh distributed generation benefits adder for 25 years, and expands eligibilityRegistration for the 2 cents per kWh low-income benefits adder to households up to 225% of the federal poverty levelSchedule RCO launched in May 2023 and grandfathers that adder for 25 years. The Distributed Generation Rule also directs utilities to make rate filings implementing up-front incentives for distributed generating systems and demand response battery systems, and to establish a public K-12 solar for schools program.
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. Entergy Mississippi began recovery of the bad debt expense deferral resulting from the COVID-19 pandemic over a three-year period with implementation of the interim formula rate plan rates in April 2022. Assubscriptions as of September 30, 2022, Entergy Mississippi had a remaining regulatory asset2023 totaled 17 MW of $10.9 million for costs associated with the COVID-19 pandemic.40 MW available.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy 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. See “
Qualified Pension
Entergy Mississippi, LLC and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s
Management's Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.
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 AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2022 and 2021 | |
For the Three and Nine Months Ended September 30, 2023 and 2022 | | For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | OPERATING REVENUES | | OPERATING REVENUES | |
Electric | Electric | | $459,132 | | | $420,319 | | | $1,213,620 | | | $1,105,978 | | Electric | | $538,815 | | | $459,132 | | | $1,396,373 | | | $1,213,620 | |
| 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 | | 86,145 | | | 54,505 | | | 197,093 | | | 180,315 | | Fuel, fuel-related expenses, and gas purchased for resale | | 151,755 | | | 86,145 | | | 453,570 | | | 197,093 | |
Purchased power | Purchased power | | 84,653 | | | 85,247 | | | 235,211 | | | 217,730 | | Purchased power | | 89,465 | | | 84,653 | | | 212,419 | | | 235,211 | |
Other operation and maintenance | Other operation and maintenance | | 82,698 | | | 72,523 | | | 223,407 | | | 214,253 | | Other operation and maintenance | | 78,959 | | | 82,698 | | | 217,377 | | | 223,407 | |
| Taxes other than income taxes | Taxes other than income taxes | | 37,045 | | | 25,911 | | | 102,259 | | | 78,886 | | Taxes other than income taxes | | 42,374 | | | 37,045 | | | 113,409 | | | 102,259 | |
Depreciation and amortization | Depreciation and amortization | | 61,921 | | | 57,130 | | | 182,623 | | | 168,324 | | Depreciation and amortization | | 66,760 | | | 61,921 | | | 196,135 | | | 182,623 | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | (11,470) | | | 25,810 | | | 16,290 | | | 12,309 | | Other regulatory charges (credits) - net | | (25,470) | | | (11,470) | | | (84,260) | | | 16,290 | |
TOTAL | TOTAL | | 340,992 | | | 321,126 | | | 956,883 | | | 871,817 | | TOTAL | | 403,843 | | | 340,992 | | | 1,108,650 | | | 956,883 | |
| OPERATING INCOME | OPERATING INCOME | | 118,140 | | | 99,193 | | | 256,737 | | | 234,161 | | OPERATING INCOME | | 134,972 | | | 118,140 | | | 287,723 | | | 256,737 | |
| OTHER INCOME (DEDUCTIONS) | OTHER INCOME (DEDUCTIONS) | | OTHER INCOME (DEDUCTIONS) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 1,606 | | | 2,006 | | | 4,179 | | | 5,703 | | Allowance for equity funds used during construction | | 2,260 | | | 1,606 | | | 6,313 | | | 4,179 | |
Interest and investment income | Interest and investment income | | 136 | | | 1 | | | 234 | | | 50 | | Interest and investment income | | 107 | | | 136 | | | 1,890 | | | 234 | |
Miscellaneous - net | Miscellaneous - net | | 181 | | | (1,844) | | | 17 | | | (6,362) | | Miscellaneous - net | | (3,828) | | | 181 | | | (9,349) | | | 17 | |
TOTAL | TOTAL | | 1,923 | | | 163 | | | 4,430 | | | (609) | | TOTAL | | (1,461) | | | 1,923 | | | (1,146) | | | 4,430 | |
| INTEREST EXPENSE | INTEREST EXPENSE | | INTEREST EXPENSE | |
Interest expense | Interest expense | | 22,473 | | | 19,024 | | | 63,910 | | | 55,559 | | Interest expense | | 25,257 | | | 22,473 | | | 74,634 | | | 63,910 | |
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | (753) | | | (849) | | | (1,876) | | | (2,378) | | Allowance for borrowed funds used during construction | | (911) | | | (753) | | | (2,596) | | | (1,876) | |
TOTAL | TOTAL | | 21,720 | | | 18,175 | | | 62,034 | | | 53,181 | | TOTAL | | 24,346 | | | 21,720 | | | 72,038 | | | 62,034 | |
| INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | 98,343 | | | 81,181 | | | 199,133 | | | 180,371 | | INCOME BEFORE INCOME TAXES | | 109,165 | | | 98,343 | | | 214,539 | | | 199,133 | |
| Income taxes | Income taxes | | 23,454 | | | 18,586 | | | 44,935 | | | 40,388 | | Income taxes | | 26,428 | | | 23,454 | | | 52,597 | | | 44,935 | |
| NET INCOME | NET INCOME | | 74,889 | | | 62,595 | | | 154,198 | | | 139,983 | | NET INCOME | | 82,737 | | | 74,889 | | | 161,942 | | | 154,198 | |
| Net loss attributable to noncontrolling interest | Net loss attributable to noncontrolling interest | | (9,117) | | | — | | | (9,117) | | | — | | Net loss attributable to noncontrolling interest | | (1,640) | | | (9,117) | | | (7,404) | | | (9,117) | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $84,006 | | | $62,595 | | | $163,315 | | | $139,983 | | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $84,377 | | | $84,006 | | | $169,346 | | | $163,315 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
(Page left blank intentionally)
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $154,198 | | | $139,983 | | Net income | | $161,942 | | | $154,198 | |
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 and amortization | Depreciation and amortization | | 182,623 | | | 168,324 | | Depreciation and amortization | | 196,135 | | | 182,623 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 45,811 | | | 53,629 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 23,405 | | | 45,811 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (50,712) | | | (36,754) | | Receivables | | (52,905) | | | (50,712) | |
Fuel inventory | Fuel inventory | | (2,856) | | | 5,564 | | Fuel inventory | | (1,746) | | | (2,856) | |
Accounts payable | Accounts payable | | 34,776 | | | 48,413 | | Accounts payable | | (56,477) | | | 34,776 | |
Taxes accrued | Taxes accrued | | (12,542) | | | (30,881) | | Taxes accrued | | 14,269 | | | (12,542) | |
Interest accrued | Interest accrued | | 11,171 | | | 4,632 | | Interest accrued | | 11,334 | | | 11,171 | |
Deferred fuel costs | Deferred fuel costs | | (214,459) | | | (95,310) | | Deferred fuel costs | | 215,892 | | | (214,459) | |
Other working capital accounts | Other working capital accounts | | (23,012) | | | (40,911) | | Other working capital accounts | | (24,420) | | | (23,012) | |
Provisions for estimated losses | Provisions for estimated losses | | (461) | | | (8,087) | | Provisions for estimated losses | | 2,627 | | | (461) | |
Other regulatory assets | Other regulatory assets | | (53,830) | | | (15,366) | | Other regulatory assets | | (35,970) | | | (53,830) | |
Other regulatory liabilities | Other regulatory liabilities | | 31,682 | | | 49,036 | | Other regulatory liabilities | | (52,712) | | | 31,682 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (18,489) | | | (17,454) | | Pension and other postretirement liabilities | | (22,529) | | | (18,489) | |
Other assets and liabilities | Other assets and liabilities | | 17,691 | | | 24,950 | | Other assets and liabilities | | 30,059 | | | 17,691 | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 101,591 | | | 249,768 | | Net cash flow provided by operating activities | | 408,904 | | | 101,591 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (368,151) | | | (473,956) | | Construction expenditures | | (435,188) | | | (368,151) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 4,179 | | | 5,703 | | Allowance for equity funds used during construction | | 6,313 | | | 4,179 | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | 40,456 | | | — | | Changes in money pool receivable - net | | 26,879 | | | 40,456 | |
Payment for purchase of assets | Payment for purchase of assets | | (105,149) | | | — | | Payment for purchase of assets | | (30,433) | | | (105,149) | |
| Other | | (111) | | | 55 | | |
Increase in other investments | | Increase in other investments | | (1,076) | | | (111) | |
Net cash flow used in investing activities | Net cash flow used in investing activities | | (428,776) | | | (468,198) | | Net cash flow used in investing activities | | (433,505) | | | (428,776) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 249,298 | | | 200,539 | | Proceeds from the issuance of long-term debt | | 396,853 | | | 249,298 | |
Retirement of long-term debt | | Retirement of long-term debt | | (400,000) | | | — | |
| Capital contribution from noncontrolling interest | | 9,595 | | | — | | |
Capital contributions from noncontrolling interest | | Capital contributions from noncontrolling interest | | 25,708 | | | 9,595 | |
Changes in money pool payable - net | Changes in money pool payable - net | | 19,319 | | | 18,087 | | Changes in money pool payable - net | | 23,893 | | | 19,319 | |
| Common equity distributions paid | | Common equity distributions paid | | (40,000) | | | — | |
| Other | Other | | 4,243 | | | (186) | | Other | | 11,484 | | | 4,243 | |
Net cash flow provided by financing activities | Net cash flow provided by financing activities | | 282,455 | | | 218,440 | | Net cash flow provided by financing activities | | 17,938 | | | 282,455 | |
| Net increase (decrease) in cash and cash equivalents | | (44,730) | | | 10 | | |
Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | | (6,663) | | | (44,730) | |
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 | | $2,897 | | | $28 | | Cash and cash equivalents at end of period | | $10,316 | | | $2,897 | |
| 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 | | $50,719 | | | $49,080 | | Interest - net of amount capitalized | | $61,352 | | | $50,719 | |
Income taxes | | $— | | | ($8,045) | | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $2,896 | | | $29 | | Cash | | $26 | | | $26 | |
Temporary cash investments | Temporary cash investments | | 1 | | | 47,598 | | Temporary cash investments | | 10,290 | | | 16,953 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 2,897 | | | 47,627 | | Total cash and cash equivalents | | 10,316 | | | 16,979 | |
Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | | | |
Customer | Customer | | 91,178 | | | 84,048 | | Customer | | 170,454 | | | 99,504 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (2,069) | | | (7,209) | | Allowance for doubtful accounts | | (3,035) | | | (2,472) | |
Associated companies | Associated companies | | 11,625 | | | 42,994 | | Associated companies | | 10,025 | | | 37,673 | |
Other | Other | | 31,311 | | | 14,609 | | Other | | 18,525 | | | 34,564 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 68,687 | | | 56,034 | | Accrued unbilled revenues | | 72,799 | | | 73,473 | |
Total accounts receivable | Total accounts receivable | | 200,732 | | | 190,476 | | Total accounts receivable | | 268,768 | | | 242,742 | |
Deferred fuel costs | Deferred fuel costs | | 336,337 | | | 121,878 | | Deferred fuel costs | | — | | | 143,211 | |
| Fuel inventory - at average cost | Fuel inventory - at average cost | | 13,167 | | | 10,311 | | Fuel inventory - at average cost | | 17,294 | | | 15,548 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 84,495 | | | 69,639 | | Materials and supplies - at average cost | | 94,877 | | | 84,346 | |
| Prepayments and other | Prepayments and other | | 11,519 | | | 6,394 | | Prepayments and other | | 10,350 | | | 9,603 | |
TOTAL | TOTAL | | 649,147 | | | 446,325 | | TOTAL | | 401,605 | | | 512,429 | |
| 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) | | 4,516 | | | 4,527 | | Non-utility property - at cost (less accumulated depreciation) | | 4,501 | | | 4,512 | |
Escrow accounts | | 41,147 | | | 48,886 | | |
Storm reserve escrow account | | Storm reserve escrow account | | 34,694 | | | 33,549 | |
Other | | Other | | 841 | | | 910 | |
TOTAL | TOTAL | | 45,663 | | | 53,413 | | TOTAL | | 40,036 | | | 38,971 | |
| UTILITY PLANT | UTILITY PLANT | | | | | UTILITY PLANT | | | | |
Electric | Electric | | 6,922,046 | | | 6,613,109 | | Electric | | 7,381,120 | | | 7,079,849 | |
| Construction work in progress | Construction work in progress | | 175,629 | | | 95,452 | | Construction work in progress | | 249,991 | | | 170,191 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 7,097,675 | | | 6,708,561 | | TOTAL UTILITY PLANT | | 7,631,111 | | | 7,250,040 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 2,242,272 | | | 2,127,590 | | Less - accumulated depreciation and amortization | | 2,417,190 | | | 2,264,786 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 4,855,403 | | | 4,580,971 | | UTILITY PLANT - NET | | 5,213,921 | | | 4,985,254 | |
| 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 | | 516,262 | | | 462,432 | | Other regulatory assets | | 555,430 | | | 519,460 | |
Other | Other | | 19,881 | | | 14,248 | | Other | | 25,558 | | | 22,650 | |
TOTAL | TOTAL | | 536,143 | | | 476,680 | | TOTAL | | 580,988 | | | 542,110 | |
| TOTAL ASSETS | TOTAL ASSETS | | $6,086,356 | | | $5,557,389 | | TOTAL ASSETS | | $6,236,550 | | | $6,078,764 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | | | | See Notes to Financial Statements. | | | | |
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $250,000 | | | $— | | Currently maturing long-term debt | | $200,000 | | | $400,000 | |
| Accounts payable: | Accounts payable: | | | | | Accounts payable: | | | | |
Associated companies | Associated companies | | 80,635 | | | 42,929 | | Associated companies | | 60,679 | | | 60,532 | |
Other | Other | | 126,364 | | | 113,000 | | Other | | 115,126 | | | 176,162 | |
Customer deposits | Customer deposits | | 89,084 | | | 86,167 | | Customer deposits | | 91,944 | | | 89,668 | |
Taxes accrued | Taxes accrued | | 93,731 | | | 106,273 | | Taxes accrued | | 139,174 | | | 124,905 | |
| Interest accrued | Interest accrued | | 28,454 | | | 17,283 | | Interest accrued | | 29,542 | | | 18,208 | |
| Deferred fuel costs | | Deferred fuel costs | | 72,681 | | | — | |
| Other | Other | | 23,160 | | | 36,731 | | Other | | 24,747 | | | 38,908 | |
TOTAL | TOTAL | | 691,428 | | | 402,383 | | TOTAL | | 733,893 | | | 908,383 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | | | | NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 773,775 | | | 720,097 | | Accumulated deferred income taxes and taxes accrued | | 812,716 | | | 780,030 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 11,599 | | | 10,913 | | Accumulated deferred investment tax credits | | 14,294 | | | 14,591 | |
| Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 204,353 | | | 212,445 | | Regulatory liability for income taxes - net | | 193,812 | | | 202,058 | |
| Other regulatory liabilities | Other regulatory liabilities | | 89,087 | | | 49,313 | | Other regulatory liabilities | | 35,399 | | | 79,865 | |
Asset retirement cost liabilities | Asset retirement cost liabilities | | 10,750 | | | 10,315 | | Asset retirement cost liabilities | | 8,119 | | | 7,797 | |
Accumulated provisions | Accumulated provisions | | 37,567 | | | 38,028 | | Accumulated provisions | | 40,136 | | | 37,509 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 40,402 | | | 59,065 | | Pension and other postretirement liabilities | | 890 | | | 23,742 | |
Long-term debt | Long-term debt | | 2,180,783 | | | 2,179,989 | | Long-term debt | | 2,129,185 | | | 1,931,096 | |
Other | Other | | 43,250 | | | 35,273 | | Other | | 79,919 | | | 53,156 | |
TOTAL | TOTAL | | 3,391,566 | | | 3,315,438 | | TOTAL | | 3,314,470 | | | 3,129,844 | |
| Commitments and Contingencies | Commitments and Contingencies | | | | | Commitments and Contingencies | | | | |
| | EQUITY | EQUITY | | | | | EQUITY | | | | |
Member's equity | Member's equity | | 2,002,884 | | | 1,839,568 | | Member's equity | | 2,166,536 | | | 2,037,190 | |
Noncontrolling interest | Noncontrolling interest | | 478 | | | — | | Noncontrolling interest | | 21,651 | | | 3,347 | |
TOTAL | TOTAL | | 2,003,362 | | | 1,839,568 | | TOTAL | | 2,188,187 | | | 2,040,537 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $6,086,356 | | | $5,557,389 | | TOTAL LIABILITIES AND EQUITY | | $6,236,550 | | | $6,078,764 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | | | | See Notes to Financial Statements. | | | | |
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | | Noncontrolling Interest | | Member's Equity | | Total |
| Noncontrolling Interest | | Member's Equity | | Total | |
| | | (In Thousands) | | | |
| Balance at December 31, 2020 | $— | | | $1,672,734 | | | $1,672,734 | | |
| Net income | — | | | 25,972 | | | 25,972 | | |
| Balance at March 31, 2021 | — | | | 1,698,706 | | | 1,698,706 | | |
| Net income | — | | | 51,416 | | | 51,416 | | |
| Balance at June 30, 2021 | — | | | 1,750,122 | | | 1,750,122 | | |
| Net income | — | | | 62,595 | | | 62,595 | | |
| Balance at September 30, 2021 | $— | | | $1,812,717 | | | $1,812,717 | | |
| | | | | | | | | | (In Thousands) | | |
| Balance at December 31, 2021 | Balance at December 31, 2021 | $— | | | $1,839,568 | | | $1,839,568 | | Balance at December 31, 2021 | $— | | | $1,839,568 | | | $1,839,568 | |
| Net income | Net income | — | | | 30,355 | | | 30,355 | | Net income | — | | | 30,355 | | | 30,355 | |
| Balance at March 31, 2022 | Balance at March 31, 2022 | — | | | 1,869,923 | | | 1,869,923 | | Balance at March 31, 2022 | — | | | 1,869,923 | | | 1,869,923 | |
| Net income | Net income | — | | | 48,955 | | | 48,955 | | Net income | — | | | 48,955 | | | 48,955 | |
| Capital contribution from noncontrolling interest | Capital contribution from noncontrolling interest | 9,595 | | | — | | | 9,595 | | Capital contribution from noncontrolling interest | 9,595 | | | — | | | 9,595 | |
Balance at June 30, 2022 | Balance at June 30, 2022 | 9,595 | | | 1,918,878 | | | 1,928,473 | | Balance at June 30, 2022 | 9,595 | | | 1,918,878 | | | 1,928,473 | |
| Net income (loss) | Net income (loss) | (9,117) | | | 84,006 | | | 74,889 | | Net income (loss) | (9,117) | | | 84,006 | | | 74,889 | |
| Balance at September 30, 2022 | Balance at September 30, 2022 | $478 | | | $2,002,884 | | | $2,003,362 | | Balance at September 30, 2022 | $478 | | | $2,002,884 | | | $2,003,362 | |
| | Balance at December 31, 2022 | | Balance at December 31, 2022 | $3,347 | | | $2,037,190 | | | $2,040,537 | |
| Net income (loss) | | Net income (loss) | (2,141) | | | 23,081 | | | 20,940 | |
Common equity distributions | | Common equity distributions | — | | | (12,500) | | | (12,500) | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | 1,206 | | | 2,047,771 | | | 2,048,977 | |
| Net income (loss) | | Net income (loss) | (3,623) | | | 61,888 | | | 58,265 | |
| Common equity distributions | | Common equity distributions | — | | | (27,500) | | | (27,500) | |
Capital contribution from noncontrolling interest | | Capital contribution from noncontrolling interest | 25,708 | | | — | | | 25,708 | |
Balance at June 30, 2023 | | Balance at June 30, 2023 | 23,291 | | | 2,082,159 | | | 2,105,450 | |
| Net income (loss) | | Net income (loss) | (1,640) | | | 84,377 | | | 82,737 | |
| Balance at September 30, 2023 | | Balance at September 30, 2023 | $21,651 | | | $2,166,536 | | | $2,188,187 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income increased $10.9$16.6 million primarily due to higher volume/weather and higher retail electric price, partially offset by higher other operation and maintenance expenses and higher taxes other than income taxes.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Net income increased $6 million primarily due to higher retail electric price, higher volume/weather, and higher volume/weather,other income, partially offset by higher taxes other operation and maintenance expenses.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Netthan income increased $39.2 million primarily due totaxes, a higher retail electric price and higher volume/weather, partially offset by higher interest expense,effective income tax rate, higher depreciation and amortization expense,expenses, and higher other operation and maintenance expenses.interest expense.
Operating Revenues
Third Quarter 20222023 Compared to Third Quarter 20212022
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $211.2291.7 | |
Fuel, rider, and other revenues that do not significantly affect net income | 61.4 (66.7) | |
Retail electric price | 13.64.5 | |
Volume/weather | 5.524.8 | |
20222023 operating revenues | $291.7 | |
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 rate increases effective November 2021 and September 2022, each in accordance with the terms of the 2021 and 2022 formula rate plan filings. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.
The volume/weather variance is primarily due to increases in weather-adjusted residential and commercial usage, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in weather-adjusted residential usage was primarily due to the effect of Hurricane Ida in third quarter 2021. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021.
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 September 30, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | % Change |
| (GWh) | |
Residential | 702 | | | 655 | | | 7 | |
Commercial | 561 | | | 545 | | | 3 | |
Industrial | 109 | | | 114 | | | (4) | |
Governmental | 222 | | | 203 | | | 9 | |
Total retail | 1,594 | | | 1,517 | | | 5 | |
Sales for resale: | | | | | |
Non-associated companies | 499 | | | 653 | | | (24) | |
Total | 2,093 | | | 2,170 | | | (4) | |
See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
| | | | | |
| Amount |
| (In Millions) |
2021 operating revenues | $559.3 | |
Fuel, rider, and other revenues that do not significantly affect net income | 129.8 | |
Retail electric price | 33.9 | |
Volume/weather | 21.2 | |
2022 operating revenues | $744.2254.3 | |
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 of 296 GWh, or 19%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales.
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 September 30, 2023 and 2022 are as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | % Change |
| (GWh) | |
Residential | 877 | | | 702 | | | 25 | |
Commercial | 652 | | | 561 | | | 16 | |
Industrial | 129 | | | 109 | | | 18 | |
Governmental | 232 | | | 222 | | | 5 | |
Total retail | 1,890 | | | 1,594 | | | 19 | |
Sales for resale: | | | | | |
Non-associated companies | 600 | | | 499 | | | 20 | |
Total | 2,490 | | | 2,093 | | | 19 | |
See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2023 to the nine months ended September 30, 2022:
| | | | | |
| Amount |
| (In Millions) |
2022 operating revenues | $744.2 | |
Fuel, rider, and other revenues that do not significantly affect net income | (113.0) | |
Volume/weather | 6.4 | |
Retail electric price | 13.6 | |
2023 operating revenues | $651.2 | |
Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to an increase in weather-adjusted residential usage, an increase in commercial usage and the effect of more favorable weather on residentialcommercial sales. The increase in weather-adjusted residentialcommercial usage wasis primarily due to the effect of Hurricane Ida in 2021. Thean increase in commercial usage wascustomers.
The retail electric price variance is primarily due to a rate increase effective September 2022 in accordance with the effectterms of the COVID-19 pandemic on businesses2022 formula rate plan filing. See Note 2 to the financial statements in 2021.the Form 10-K for further discussion of the formula rate plan filing.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy New Orleans for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | (GWh) | |
Residential | Residential | 1,909 | | | 1,755 | | | 9 | | Residential | 1,906 | | | 1,909 | | | — | |
Commercial | Commercial | 1,569 | | | 1,498 | | | 5 | | Commercial | 1,647 | | | 1,569 | | | 5 | |
Industrial | Industrial | 318 | | | 319 | | | — | | Industrial | 325 | | | 318 | | | 2 | |
Governmental | Governmental | 606 | | | 574 | | | 6 | | Governmental | 600 | | | 606 | | | (1) | |
Total retail | Total retail | 4,402 | | | 4,146 | | | 6 | | Total retail | 4,478 | | | 4,402 | | | 2 | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Non-associated companies | Non-associated companies | 1,820 | | | 1,271 | | | 43 | | Non-associated companies | 2,194 | | | 1,820 | | | 21 | |
Total | Total | 6,222 | | | 5,417 | | | 15 | | Total | 6,672 | | | 6,222 | | | 7 | |
See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Third Quarter 20222023 Compared to Third Quarter 20212022
Other operation and maintenance expenses increased primarily due to:
•to an increase of $4.7 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $3.4 million in power delivery expenses primarily due to higher reliability costs and higher vegetation maintenance costs; and
•an increase of $1.9 million in loss provisions.
The increase was partially offset by a decrease of $5 million in non-nuclear generation expenses primarily due toresulting from a lowerhigher scope of work performed in 20222023 as compared to the same period in 2021.2022.
Taxes other than income taxes decreasedincreased primarily due to decreasesincreases in local franchise taxes and increases in ad valorem taxes resulting from lower assessments and decreases in local franchise taxes.
Interest expense 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 assessments.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Other operation and maintenance expenses increasedremained relatively unchanged, increasing by $1.3 million, primarily due to:
•to an increase of $4.9$4.5 million in non-nuclear generation expenses resulting from a higher scope of work performed in 2023 as compared to the same period in 2022. The increase was partially offset by a decrease of $2.6 million in bad debt expense includingand a decrease of $1.9 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in second quarter 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the deferraldiscount rates used to value the benefits liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in 2021 of bad debt expense and increased write-offs of bad debt in 2022, each resulting from the COVID-19 pandemic. SeeForm 10-K, Note 26 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K10-K for further discussion of regulatory activity associated withpension and other postretirement benefits costs.
Taxes other than income taxes increased primarily due to increases in local franchise taxes and increases in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income increased primarily due to higher interest earned on money pool investments, partially offset by an increase in net periodic pension non-service costs as a result of a non-qualified pension settlement charge recorded in third quarter 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the COVID-19 pandemic;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.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•an increase of $4.1 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher safety and training costs, and higher reliability costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems; and
•an increase of $2.8 million in loss provisions.
The increase was partially offset by a decrease of $8 million in non-nuclear generation expenses primarily due to a lower scope of work performed in 2022, including during plant outages, as compared to the same period in 2021 and a decrease of $1.9 million in energy efficiency expenses due to the timing of recovery from customers.
Depreciation and amortization expense increased primarily due to additions to plant in service.
Interest expense increased primarily due to a higher fixed interest rate on its unsecured term loan and interest on the issuance$34 million regulatory liability recorded when Entergy New Orleans received a refund from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation. 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 and in the Form 10-K for further discussion of $90 million of 4.19% Series mortgage bondsthe refund and the issuance of $70 million of 4.51% Series mortgage bonds, each in November 2021.related proceedings.
Income Taxes
The effective income tax rates were 27.3% for the third quarter 2023 and 28.5% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes.
The effective income tax rate was 27.1% for the third quarter 2022. The difference in the effective income tax rate for the third quarter 2022 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 25.1% for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items and the amortization of excess accumulated deferred income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
The effective income tax rates were 26% for third quarter 2021 and 27.1% for the nine months ended September 30, 2021. The differences in the effective income tax rates for third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes and the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items.
Income Tax Legislation and Regulation
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. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of income tax legislation and regulation.
Planned Sale of Gas Distribution Business
See the “Planned Sale of Gas Distribution Businesses” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for discussion of the Inflation Reduction Actpurchase and sale agreement for the sale of 2022.Entergy New Orleans’s gas distribution business.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 96,194 | | | 77,450 | | Operating activities | 185,632 | | | 96,194 | |
Investing activities | Investing activities | (130,584) | | | (59,423) | | Investing activities | 1,914 | | | (130,584) | |
Financing activities | Financing activities | 9,509 | | | 8,335 | | Financing activities | (77,203) | | | 9,509 | |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | (24,881) | | | 26,362 | | Net increase (decrease) in cash and cash equivalents | 110,343 | | | (24,881) | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $17,981 | | | $26,388 | | Cash and cash equivalents at end of period | $114,807 | | | $17,981 | |
Operating Activities
Net cash flow provided by operating activities increased $18.7$89.4 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:
•higher collections from customers; and
•a decrease of $4.5 million in pension contributions in 2022 as compared to prior period. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
The increase was partially offset by:
•increasedlower fuel costs includingand the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery;recovery;
•the timing of payments to vendors, including timing and increase in cost of operations; andvendors;
•an increasethe refund of $11.2$34 million received from System Energy in storm spendingJanuary 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in 2022, primarily due to Hurricane Ida restoration efforts.System Energy’s January 2023 compliance report filed with the FERC. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for afurther discussion of the refund and the related proceedings;
•higher collections from customers; and
•a decrease of $18.4 million in storm spending primarily due to Hurricane Ida restoration efforts.efforts in 2022.
The increase was partially offset by higher receipts from associated companies in 2022.
Investing Activities
Net cash flow used inEntergy New Orleans’s investing activities increased $71.2provided $1.9 million of cash for the nine months ended September 30, 2023 compared to using $130.6 million of cash for the nine months ended September 30, 2022 comparedprimarily due to the nine months ended September 30, 2021 primarily due to:following activity:
•$83 million in receipts from storm reserve escrow accounts in 2021; andmoney pool activity;
•an increasea decrease of $32$34.9 million in distribution construction expenditures primarily due to higher capital expenditures for Hurricane Ida storm restoration efforts in 2022, andpartially offset by increased investment in the reliability and infrastructure of Entergy New Orleans’s distribution system partially offset by lower spending in 2022 on advanced metering infrastructure. The increase in storm restoration spending is primarily due to Hurricane Ida restoration efforts. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K2023; and Note 2 to the financial statements herein for a discussion of storm restoration efforts.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The increase was partially offset by money pool activity and a decrease of $9.7$9 million in non-nuclear generationtransmission construction expenditures primarily due to a lower scopehigher spending in 2023 related to Entergy New Orleans’s construction of work performed during plant outages in 2022.the New Orleans Sewerage and Water Board Sullivan substation.
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 $135.4 million for the nine months ended September 30,
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
2023 compared to decreasing by $36 million for the nine months ended September 30, 2022 compared to increasing by $2 million for the nine months ended September 30, 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 byEntergy New Orleans’s financing activities increased $1.2used $77.2 million of cash for the nine months ended September 30, 2023 compared to providing $9.5 million of cash for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to athe repayment, at maturity, of $100 million of 3.9% Series mortgage bonds in July 2023 and additional borrowings of $15 million advance received in 2022 in anticipation of Entergy New Orleans’s construction of a New Orleans Sewerage and Water Board substation and money pool activity. The increase was partially offset by long-term credit borrowings of $25 million in 2021.
Decreases in Entergy New Orleans’s payableMay 2023 on an unsecured term loan due June 2024. See Note 4 to the money pool are a use of cash flow,financial statements herein and Entergy New Orleans’s payableNote 5 to the money pool decreased $10.2 millionfinancial statements in the Form 10-K for the nine months ended September 30, 2021.more details on long-term debt.
Capital Structure
Entergy New Orleans’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy New Orleans is primarily due an increaseto the net retirement of long-term debt in equity resulting from retained earnings in 2022.2023.
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 52.9 | % | | 55.4 | % | Debt to capital | 47.2 | % | | 52.6 | % |
Effect of excluding securitization bonds | Effect of excluding securitization bonds | (0.7 | %) | | (1.0 | %) | Effect of excluding securitization bonds | (0.4 | %) | | (0.6 | %) |
Debt to capital, excluding securitization bonds (a) | 52.2 | % | | 54.4 | % | |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 46.8 | % | | 52.0 | % |
Effect of subtracting cash | Effect of subtracting cash | (0.6 | %) | | (1.4 | %) | Effect of subtracting cash | (4.6 | %) | | (0.1 | %) |
Net debt to net capital, excluding securitization bonds (a) | 51.6 | % | | 53.0 | % | |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 42.2 | % | | 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.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy New Orleans is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $555$525 million in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy New Orleans’s portfolio; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion;resilience; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
$433 | | $36,410 | | $1,995 | | ($10,190) |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
$11,827 | | $147,254 | | $433 | | $36,410 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in 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 September 30, 2022,2023, there were no cash borrowings and no letters of credit 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 September 30, 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.
Hurricane Zeta
As discussed in the Form 10-K, in October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. In May 2021, Entergy New Orleans filed an application with the City Council requesting approval and certification that its system restoration costs associated with Hurricane Zeta of approximately $36 million, which included $7 million in estimated costs, were reasonable and necessary to enable Entergy New Orleans to restore electric service to its customers and Entergy New Orleans’s electric utility infrastructure. In May 2022 the City Council advisors issued a report recommending that the City Council find that Entergy New Orleans acted prudently in restoring service following Hurricane Zeta and approximately $33 million in storm restoration costs were prudently incurred and recoverable. Additionally, the advisors concluded that approximately $7 million of the $44 million withdrawn from its funded storm reserve was in excess of Entergy New Orleans’s costs and should be considered in Entergy New Orleans’s application for certification of costs related to Hurricane Ida. In September 2022 the City Council issued a resolution finding that Entergy New Orleans’s system restoration costs were reasonable and necessary, and that Entergy New Orleans acted prudently in restoring electricity following Hurricane Zeta. The City Council also found that approximately $33 million in storm costs were recoverable.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Hurricane Ida
As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million.million, which were subsequently included in an addendum to the June 2022 application. Also, Entergy New Orleans is requestingrequested approval that the $39 million withdrawal from its funded storm reserve in September 2021, the $125 million withdrawal from its securitized storm reserve, and $7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms arewere properly applied to Hurricane Ida storm restoration costs,costs.
In August 2023 the application of which reducesCity Council advisors issued a report recommending that the amount to be recovered fromCity Council find that Entergy New Orleans customersprudently incurred approximately $164.1 million in storm restoration costs and $7.5 million in carrying charges and that such costs have already been properly recovered by $46 million.Entergy New Orleans through withdrawals from the storm reserve escrow account. The City Council advisors also recommended that the City Council find that approximately $1.2 million in storm restoration costs had already been recovered through Entergy New Orleans’s base rates and that approximately $0.9 million in unused credits be applied against future storm costs. In August 2023 the City Council hearing officer certified the evidentiary record.
Additionally, asSystem Resilience and Storm Hardening
As discussed in the Form 10-K, in FebruaryOctober 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 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. In August 2022 the City Council’s advisors recommended that the City Council authorizeapproved a single securitization bond issuance to fund Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved by the City Council along with a financing order in October 2022, authorizingrevised procedural schedule requiring Entergy New Orleans to proceedmake a filing containing a
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
narrowed list of proposed hardening projects, with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject tofinal comments on that filing due July 2023. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council reviewapproval of the first phase (five years and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide forapproximately $559 million) of a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 theten-year infrastructure hardening plan totaling approximately $1 billion. Entergy New Orleans also sought, among other relief, City Council adoptedapproval of a procedural schedule regardingrider to recover from customers the certificationcosts of the Hurricane Ida storm restoration costsinfrastructure hardening plan. In July 2023, Entergy New Orleans filed comments in which the hearing officer shall certify the record for City Council consideration no later than August 2023.support of its application.
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 subsequently updated in a July 2022 filing, 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 sought approval of a $42.1$25.6 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula resultswould result in an increase in authorized electric revenues of $34.1$17.4 million and an increase in authorized gas revenues of $3.3$8.2 million. Entergy New Orleans also sought 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. In July 20222023, Entergy New Orleans filed a report to decrease its requested formula rate plan revenues by approximately $0.5 million to account for minor errors discovered after the filing. The City Council’sCouncil advisors issued a report seeking a reduction to Entergy New Orleans’s proposed increasein the requested formula rate plan revenues of approximately $17.1$8.3 million, in totalcombined for electric and gas, revenues.due to alleged errors. The City Council advisors proposed additional rate mitigation in the amount of $12 million through offsets to the formula rate plan rate increase by certain regulatory liabilities. In September 2023 the City Council approved an agreement to settle the 2023 formula rate plan filing. Effective with the first billing cycle of
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
September 2022,2023, Entergy New Orleans implemented rates reflecting an amount agreed upon by Entergy New Orleans and the City Council, including adjustments filed in the City Council’s advisors’ report, per the approved process for formula rate plan implementation. The agreement provides for a total formula rate plan increase implemented was $24.7 million, which includes an increase of $18.2 million in electric revenues $4.7of $10.5 million in previously approved electric revenues, and ana total increase of $1.8 million in gas revenues. Additionally, creditsrevenues of $13.9$6.9 million. The agreement also provides for a minor storm accrual of $0.5 million funded by certain regulatory liabilitiesper year and the distribution of $8.9 million of currently held bycustomer credits to implement the City Council advisors’ mitigation recommendations.
Request for Extension and Modification of Formula Rate Plan
In September 2023, Entergy New Orleans for customers will be issued over an eight-month period beginning September 2022.
COVID-19 Orders
As discussed in the Form 10-K, in May 2020filed a motion seeking City Council approval of a three-year extension of Entergy New Orleans’s electric and gas formula rate plans. In October 2023 the City Council issued an accounting order authorizinggranted Entergy New OrleansOrleans’s request for an extension, subject to establishminor modifications which included a regulatory asset for incremental COVID-19-related expenses. As of September 30, 2022, Entergy New Orleans had a regulatory asset of $13.9 million for costs associated with the COVID-19 pandemic. As part of the agreed-upon terms of its 2022 formula rate plan filing, Entergy New Orleans will recover this regulatory asset over a five-year period beginning September 2023.capital structure not to exceed 55% equity.
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 Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
to the prudence investigation 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 June 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.
Also in August 2022 the City Council approved 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 distribution system, as well as associated penalty mechanisms. In April 2023, Entergy New Orleans filed the compliance filings required by the resolution for calendar year 2023. The first year for which the City Council may assess a penalty for distribution system reliability performance is calendar year 2024.
System ResiliencyIn April 2023 the City Council approved a resolution that established a procedural schedule to allow for the submission of additional evidence regarding the penalty imposed in 2019. In May 2023, Entergy New Orleans filed with the Orleans Civil District Court a petition for judicial review and Storm Hardening(or alternatively) declaratory judgment of, together with a request for injunctive relief from, the City Council’s April 2023 resolution. In June 2023 the City Council filed exceptions requesting the Orleans Civil District Court dismiss the suit as premature, and a hearing date was set on the exceptions. In September 2023, Entergy New Orleans filed an unopposed motion to continue the hearing on the City Council’s exceptions without date, which was granted. Entergy New Orleans expects to file its opposition to the City Council’s exceptions by the applicable deadlines.
Renewable Portfolio Standard Rulemaking
As discussed in the Form 10-K, in OctoberMay 2021 the City Council passed a resolutionapproved the draft rule, as amended, establishing the Renewable 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.Clean Portfolio Standard. In July 2022,May 2023, Entergy New Orleans filed withsubmitted its compliance demonstration report to the City Council a response identifying a plan for storm hardeningthe 2022 compliance year, which describes and resiliency projects, including microgrids, to be implemented over 10 years at an approximate cost of $1.5 billion. In Septemberdemonstrates Entergy New Orleans’s compliance with the Renewable and Clean Portfolio Standard in 2022 and satisfies certain informational requirements. Entergy New Orleans requested, among other things, that the City Council approveddetermine that Entergy New Orleans achieved the target under the portfolio standard for 2022 and remains within the customer protection cost cap, and that the City Council approve a procedural scheduleproposal to recover costs associated with final2022 compliance. In July 2023 intervenors filed comments due Aprilon the compliance demonstration report, and Entergy New Orleans responded to those comments in August 2023.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for further discussion of nuclear matters.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy 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. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.
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 |
CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2022 and 2021 |
(Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2022 | | 2021 | | 2022 | | 2021 |
| | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | $262,904 | | | $192,946 | | | $641,634 | | | $491,855 | |
Natural gas | | 28,759 | | | 18,283 | | | 102,550 | | | 67,449 | |
TOTAL | | 291,663 | | | 211,229 | | | 744,184 | | | 559,304 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 81,847 | | | 34,940 | | | 180,059 | | | 88,462 | |
Purchased power | | 88,103 | | | 75,360 | | | 227,661 | | | 201,207 | |
Other operation and maintenance | | 38,806 | | | 34,483 | | | 116,173 | | | 113,638 | |
Taxes other than income taxes | | 12,920 | | | 15,530 | | | 41,353 | | | 40,380 | |
Depreciation and amortization | | 19,556 | | | 18,444 | | | 57,322 | | | 54,758 | |
Other regulatory charges (credits) - net | | 5,452 | | | 4,126 | | | 14,991 | | | 9,831 | |
TOTAL | | 246,684 | | | 182,883 | | | 637,559 | | | 508,276 | |
| | | | | | | | |
OPERATING INCOME | | 44,979 | | | 28,346 | | | 106,625 | | | 51,028 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | 396 | | | 433 | | | 316 | | | 1,067 | |
Interest and investment income | | 215 | | | 18 | | | 307 | | | 32 | |
Miscellaneous - net | | (184) | | | (205) | | | 766 | | | (711) | |
TOTAL | | 427 | | | 246 | | | 1,389 | | | 388 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 8,683 | | | 7,158 | | | 26,075 | | | 21,149 | |
Allowance for borrowed funds used during construction | | (215) | | | (192) | | | (255) | | | (475) | |
TOTAL | | 8,468 | | | 6,966 | | | 25,820 | | | 20,674 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 36,938 | | | 21,626 | | | 82,194 | | | 30,742 | |
| | | | | | | | |
Income taxes | | 10,023 | | | 5,631 | | | 20,607 | | | 8,345 | |
| | | | | | | | |
NET INCOME | | $26,915 | | | $15,995 | | | $61,587 | | | $22,397 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | $235,280 | | | $262,904 | | | $573,191 | | | $641,634 | |
Natural gas | | 19,036 | | | 28,759 | | | 77,961 | | | 102,550 | |
TOTAL | | 254,316 | | | 291,663 | | | 651,152 | | | 744,184 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 28,922 | | | 81,847 | | | 99,920 | | | 180,059 | |
Purchased power | | 68,115 | | | 88,103 | | | 200,664 | | | 227,661 | |
Other operation and maintenance | | 45,273 | | | 38,806 | | | 117,461 | | | 116,173 | |
Taxes other than income taxes | | 17,251 | | | 12,920 | | | 48,155 | | | 41,353 | |
Depreciation and amortization | | 20,831 | | | 19,556 | | | 60,470 | | | 57,322 | |
Other regulatory charges (credits) - net | | 4,946 | | | 5,452 | | | 6,133 | | | 14,991 | |
TOTAL | | 185,338 | | | 246,684 | | | 532,803 | | | 637,559 | |
| | | | | | | | |
OPERATING INCOME | | 68,978 | | | 44,979 | | | 118,349 | | | 106,625 | |
| | | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | | |
Allowance for equity funds used during construction | | 332 | | | 396 | | | 1,062 | | | 316 | |
Interest and investment income | | 1,535 | | | 215 | | | 5,986 | | | 307 | |
Miscellaneous - net | | (1,943) | | | (184) | | | (2,687) | | | 766 | |
TOTAL | | (76) | | | 427 | | | 4,361 | | | 1,389 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 9,171 | | | 8,683 | | | 28,793 | | | 26,075 | |
Allowance for borrowed funds used during construction | | (161) | | | (215) | | | (516) | | | (255) | |
TOTAL | | 9,010 | | | 8,468 | | | 28,277 | | | 25,820 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 59,892 | | | 36,938 | | | 94,433 | | | 82,194 | |
| | | | | | | | |
Income taxes | | 16,347 | | | 10,023 | | | 26,889 | | | 20,607 | |
| | | | | | | | |
NET INCOME | | $43,545 | | | $26,915 | | | $67,544 | | | $61,587 | |
| | | | | | | | |
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 Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $61,587 | | | $22,397 | | Net income | | $67,544 | | | $61,587 | |
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 and amortization | Depreciation and amortization | | 57,322 | | | 54,758 | | Depreciation and amortization | | 60,470 | | | 57,322 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 22,429 | | | 11,261 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 23,529 | | | 22,429 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (9,022) | | | (24,959) | | Receivables | | 5,119 | | | (9,022) | |
Fuel inventory | Fuel inventory | | (3,245) | | | 79 | | Fuel inventory | | 2,909 | | | (3,245) | |
Accounts payable | Accounts payable | | 3,319 | | | 22,863 | | Accounts payable | | (28,968) | | | 3,319 | |
Taxes accrued | Taxes accrued | | (4,241) | | | (1,699) | | Taxes accrued | | 734 | | | (4,241) | |
Interest accrued | Interest accrued | | (204) | | | (2,796) | | Interest accrued | | 2,195 | | | (204) | |
Deferred fuel costs | Deferred fuel costs | | (33,301) | | | 4,280 | | Deferred fuel costs | | 8,025 | | | (33,301) | |
Other working capital accounts | Other working capital accounts | | (5,973) | | | (7,025) | | Other working capital accounts | | 14,598 | | | (5,973) | |
Provisions for estimated losses | Provisions for estimated losses | | 8,409 | | | (62,293) | | Provisions for estimated losses | | 6,585 | | | 8,409 | |
Other regulatory assets | Other regulatory assets | | 24,449 | | | 18,412 | | Other regulatory assets | | 8,597 | | | 24,449 | |
Other regulatory liabilities | Other regulatory liabilities | | (8,921) | | | 11,757 | | Other regulatory liabilities | | 17,878 | | | (8,921) | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (6,598) | | | (11,220) | | Pension and other postretirement liabilities | | (4,506) | | | (6,598) | |
Other assets and liabilities | Other assets and liabilities | | (9,816) | | | 41,635 | | Other assets and liabilities | | 923 | | | (9,816) | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 96,194 | | | 77,450 | | Net cash flow provided by operating activities | | 185,632 | | | 96,194 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (163,403) | | | (139,153) | | Construction expenditures | | (128,477) | | | (163,403) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 316 | | | 1,067 | | Allowance for equity funds used during construction | | 1,062 | | | 316 | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | 35,977 | | | (1,995) | | Changes in money pool receivable - net | | 135,427 | | | 35,977 | |
Receipts from storm reserve escrow account | | — | | | 83,045 | | |
Payments to storm reserve escrow account | | — | | | (7) | | |
| Changes in securitization account | Changes in securitization account | | (3,474) | | | (2,380) | | Changes in securitization account | | (3,437) | | | (3,474) | |
| Net cash flow used in investing activities | | (130,584) | | | (59,423) | | |
Increase in other investments | | Increase in other investments | | (2,661) | | | — | |
Net cash flow provided by (used in) investing activities | | Net cash flow provided by (used in) investing activities | | 1,914 | | | (130,584) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
| Proceeds from the issuance of long-term debt | | Proceeds from the issuance of long-term debt | | 14,630 | | | — | |
Retirement of long-term debt | Retirement of long-term debt | | — | | | 19,251 | | Retirement of long-term debt | | (106,073) | | | (5,916) | |
| Changes in money pool payable - net | | — | | | (10,190) | | |
| Contributions from customer for construction | | Contributions from customer for construction | | 15,000 | | | 15,000 | |
| Other | Other | | 9,509 | | | (726) | | Other | | (760) | | | 425 | |
Net cash flow provided by financing activities | | 9,509 | | | 8,335 | | |
Net cash flow provided by (used in) financing activities | | Net cash flow provided by (used in) financing activities | | (77,203) | | | 9,509 | |
| Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | | (24,881) | | | 26,362 | | Net increase (decrease) in cash and cash equivalents | | 110,343 | | | (24,881) | |
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 | | $17,981 | | | $26,388 | | Cash and cash equivalents at end of period | | $114,807 | | | $17,981 | |
| 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 | | $25,231 | | | $23,015 | | Interest - net of amount capitalized | | $25,545 | | | $25,231 | |
Income taxes | Income taxes | | $— | | | $324 | | Income taxes | | $1,600 | | | $— | |
| 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 |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $426 | | | $26 | | Cash | | $435 | | | $27 | |
Temporary cash investments | Temporary cash investments | | 17,555 | | | 42,836 | | Temporary cash investments | | 114,372 | | | 4,437 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 17,981 | | | 42,862 | | Total cash and cash equivalents | | 114,807 | | | 4,464 | |
Securitization recovery trust account | Securitization recovery trust account | | 5,473 | | | 1,999 | | Securitization recovery trust account | | 5,672 | | | 2,235 | |
Accounts receivable: | Accounts receivable: | | | Accounts receivable: | | |
Customer | Customer | | 104,201 | | | 69,902 | | Customer | | 91,353 | | | 93,288 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (9,392) | | | (13,282) | | Allowance for doubtful accounts | | (9,213) | | | (11,909) | |
Associated companies | Associated companies | | 2,948 | | | 74,146 | | Associated companies | | 13,531 | | | 149,927 | |
Other | Other | | 6,611 | | | 13,668 | | Other | | 5,415 | | | 6,110 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 38,661 | | | 25,550 | | Accrued unbilled revenues | | 33,068 | | | 37,284 | |
Total accounts receivable | Total accounts receivable | | 143,029 | | | 169,984 | | Total accounts receivable | | 134,154 | | | 274,700 | |
Deferred fuel costs | Deferred fuel costs | | 25,694 | | | — | | Deferred fuel costs | | 2,128 | | | 10,153 | |
Fuel inventory - at average cost | Fuel inventory - at average cost | | 6,190 | | | 2,945 | | Fuel inventory - at average cost | | 2,963 | | | 5,872 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 21,637 | | | 19,216 | | Materials and supplies - at average cost | | 26,998 | | | 22,498 | |
| Prepayments and other | Prepayments and other | | 12,280 | | | 5,428 | | Prepayments and other | | 13,884 | | | 6,312 | |
TOTAL | TOTAL | | 232,284 | | | 242,434 | | TOTAL | | 300,606 | | | 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) | | 1,050 | | | 1,016 | | Non-utility property at cost (less accumulated depreciation) | | 832 | | | 1,050 | |
| Storm reserve escrow account | | Storm reserve escrow account | | 77,712 | | | 75,000 | |
Other | | Other | | 624 | | | 675 | |
TOTAL | TOTAL | | 1,050 | | | 1,016 | | TOTAL | | 79,168 | | | 76,725 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 1,992,727 | | | 1,976,202 | | Electric | | 2,010,846 | | | 1,934,837 | |
Natural gas | Natural gas | | 385,007 | | | 373,983 | | Natural gas | | 400,808 | | | 390,252 | |
Construction work in progress | Construction work in progress | | 45,338 | | | 22,199 | | Construction work in progress | | 31,152 | | | 39,607 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 2,423,072 | | | 2,372,384 | | TOTAL UTILITY PLANT | | 2,442,806 | | | 2,364,696 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 809,858 | | | 774,309 | | Less - accumulated depreciation and amortization | | 842,197 | | | 808,224 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 1,613,214 | | | 1,598,075 | | UTILITY PLANT - NET | | 1,600,609 | | | 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 $16,350 as of September 30, 2022 and $25,761 as of December 31, 2021) | | 224,168 | | | 248,617 | | |
Other regulatory assets (includes securitization property of $3,550 as of September 30, 2023 and $13,363 as of December 31, 2022) | | Other regulatory assets (includes securitization property of $3,550 as of September 30, 2023 and $13,363 as of December 31, 2022) | | 193,515 | | | 202,112 | |
Other | Other | | 63,947 | | | 56,101 | | Other | | 54,278 | | | 46,778 | |
TOTAL | TOTAL | | 292,195 | | | 308,798 | | TOTAL | | 251,873 | | | 252,970 | |
| TOTAL ASSETS | TOTAL ASSETS | | $2,138,743 | | | $2,150,323 | | TOTAL ASSETS | | $2,232,256 | | | $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 |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | | $— | | Currently maturing long-term debt | | $85,000 | | | $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 | | 57,512 | | | 45,057 | | Associated companies | | 40,883 | | | 53,258 | |
Other | Other | | 53,049 | | | 146,921 | | Other | | 34,283 | | | 57,291 | |
Customer deposits | Customer deposits | | 31,020 | | | 28,539 | | Customer deposits | | 32,310 | | | 31,826 | |
Taxes accrued | Taxes accrued | | 144 | | | 4,385 | | Taxes accrued | | 11,042 | | | 10,308 | |
Interest accrued | Interest accrued | | 7,787 | | | 7,991 | | Interest accrued | | 10,275 | | | 8,080 | |
Deferred fuel costs | | — | | | 7,607 | | |
Current portion of unprotected excess accumulated deferred income taxes | | — | | | 1,906 | | |
| Other | Other | | 7,226 | | | 6,204 | | Other | | 32,899 | | | 6,560 | |
TOTAL | TOTAL | | 328,064 | | | 249,936 | | TOTAL | | 247,998 | | | 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 | | 390,806 | | | 365,384 | | Accumulated deferred income taxes and taxes accrued | | 405,836 | | | 385,259 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 16,277 | | | 16,306 | | Accumulated deferred investment tax credits | | 16,463 | | | 16,481 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 39,660 | | | 40,589 | | Regulatory liability for income taxes - net | | 42,028 | | | 39,738 | |
Other regulatory liabilities | | Other regulatory liabilities | | 36,323 | | | 20,735 | |
Asset retirement cost liabilities | Asset retirement cost liabilities | | — | | | 4,032 | | Asset retirement cost liabilities | | 4,539 | | | — | |
Accumulated provisions | Accumulated provisions | | 14,738 | | | 6,329 | | Accumulated provisions | | 93,633 | | | 87,048 | |
| Long-term debt (includes securitization bonds of $23,927 as of September 30, 2022 and $29,661 as of December 31, 2021) | | 602,123 | | | 777,254 | | |
Long-term debt (includes securitization bonds of $11,806 as of September 30, 2023 and $17,697 as of December 31, 2022) | | Long-term debt (includes securitization bonds of $11,806 as of September 30, 2023 and $17,697 as of December 31, 2022) | | 590,417 | | | 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 | | 37,188 | | | 42,193 | | Other | | 16,380 | | | 17,369 | |
TOTAL | TOTAL | | 1,110,377 | | | 1,261,672 | | TOTAL | | 1,213,898 | | | 1,170,956 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| EQUITY | EQUITY | | EQUITY | |
Member's equity | Member's equity | | 700,302 | | | 638,715 | | Member's equity | | 770,360 | | | 702,816 | |
TOTAL | TOTAL | | 700,302 | | | 638,715 | | TOTAL | | 770,360 | | | 702,816 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $2,138,743 | | | $2,150,323 | | TOTAL LIABILITIES AND EQUITY | | $2,232,256 | | | $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 Nine Months Ended September 30, 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 | |
| |
Net income | 4,631 | |
| |
Balance at June 30, 2021 | 613,319 | |
| |
Net income | 15,995 | |
| |
Balance at September 30, 2021 | $629,314 | |
| |
| |
Balance at December 31, 2021 | $638,715 | | |
| | |
Net income | 15,126 | | |
| | |
Balance at March 31, 2022 | 653,841 | | |
| | |
Net income | 19,546 | | |
| | |
Balance at June 30, 2022 | 673,387 | | |
| | |
Net income | 26,915 | | |
| | |
Balance at September 30, 2022 | $700,302 | | |
| | |
| | |
Balance at December 31, 2022 | $702,816 | | |
| | |
Net income | 10,142 | | |
| | |
Balance at March 31, 2023 | 712,958 | | |
| | |
Net income | 13,857 | | |
| | |
Balance at June 30, 2023 | 726,815 | | |
| | |
Net income | 43,545 | | |
| | |
Balance at September 30, 2023 | $770,360 | | |
| | |
See Notes to Financial Statements. | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income increased $23.2$32.1 million primarily due to higher volume/weather and higher retail electric price, partially offset by higher other operationdepreciation and maintenanceamortization expenses.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
Net income increased $76.2$14.3 million primarily due to higher volume/weather, higher retail electric price, lower other operation and maintenance expenses, and higher other income. The increase was partially offset by higher depreciation and amortization expenses, the recognition of the equity component of carrying costs as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022. The increase was partially offset by2022, higher taxes other operation and maintenance expensesthan income taxes, and higher depreciation and amortization expenses.interest expense.
Operating Revenues
Third Quarter 20222023 Compared to Third Quarter 20212022
Following is an analysis of the change in operating revenues comparing the third quarter 20222023 to the third quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $541.6659.6 | |
Fuel, rider, and other revenues that do not significantly affect net income | 85.7 (105.3) | |
Volume/weatherReturn of unprotected excess accumulated deferred income taxes to customers | 21.710.3 | |
Retail electric price | 10.6 | |
2022 operating revenues | $659.6 | |
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 primarily due to the effect of more favorable weather on residential and commercial sales, an increase in weather-adjusted residential and commercial usage, and an increase in industrial usage. The increase in weather-adjusted residential usage was primarily due to an increase in customers. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021. The increase in industrial usage was primarily due to an increase in demand from cogeneration and small industrial customers and an increase in demand from expansion projects, primarily in the chemicals, transportation, and petroleum refining industries.
The retail electric price variance is primarily due to an increase in the transmission cost recovery factor rider effective March 2022 and an increase in the distribution cost recovery factor rider effective January 2022. See
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission and distribution cost recovery factor rider filings.
Total electric energy sales for Entergy Texas for the three months ended September 30, 2022 and 2021 are as follows:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | % Change |
| (GWh) | | |
Residential | 2,125 | | | 1,963 | | | 8 | |
Commercial | 1,416 | | | 1,316 | | | 8 | |
Industrial | 2,538 | | | 2,416 | | | 5 | |
Governmental | 77 | | | 69 | | | 12 | |
Total retail | 6,156 | | | 5,764 | | | 7 | |
Sales for resale: | | | | | |
Associated companies | — | | | 324 | | | (100) | |
Non-associated companies | 127 | | | 191 | | | (34) | |
Total | 6,283 | | | 6,279 | | | — | |
See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
| | | | | |
| Amount |
| (In Millions) |
2021 operating revenues | $1,452.3 | |
Fuel, rider, and other revenues that do not significantly affect net income | 121.325.8 | |
Volume/weather | 62.226.2 | |
Retail electric price | 39.1 | |
System restoration carrying costs | 21.7 | |
20222023 operating revenues | $1,696.6616.6 | |
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 primarily duereturn 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 third quarter 2022, $10.3 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for third quarter 2023. There was no effect of more favorable weather on residential sales, an increasenet income as the reductions in industrial usage, and an increaseoperating revenues were offset by reductions in weather-adjusted residential usage. The increase in industrial usage was primarily dueincome tax expense. See Note 2 to an increase in demand from cogeneration and small industrial customers, an increase in demand from expansion projects, primarilythe financial statements in the transportationForm 10-K for discussion of regulatory activity regarding the Tax Cuts and chemicals industries, and an increase in demand from existing customers, primarily in the transportation industry. The increase in weather-adjusted residential usage was primarily due to an increase in customers.
Jobs Act.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The retail electric price variance is primarily due to:
•increasesto an increase in the annual base rate, including the realignment of the costs previously being collected through the distribution and transmission cost recovery factor rider effective March 2021riders and March 2022;
•an increase in the distribution cost recovery factor rider effective January 2022; and
•the implementation of the generation cost recovery rider which includesto base rates, effective June 2023 on an interim basis and approved by the first-year revenue requirement for the Montgomery County Power Station, effectivePUCT in late January 2021.
August 2023. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission2022 base rate case.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and distribution cost recovery factoran increase in weather-adjusted residential usage. The increase in weather-adjusted residential usage was primarily due to an increase in customers.
Total electric energy sales for Entergy Texas for the three months ended September 30, 2023 and 2022 are as follows:
| | | | | | | | | | | | | | | | | |
| 2023 | | 2022 | | % Change |
| (GWh) | | |
Residential | 2,474 | | | 2,125 | | | 16 | |
Commercial | 1,485 | | | 1,416 | | | 5 | |
Industrial | 2,459 | | | 2,538 | | | (3) | |
Governmental | 73 | | | 77 | | | (5) | |
Total retail | 6,491 | | | 6,156 | | | 5 | |
Sales for resale: | | | | | |
Non-associated companies | 128 | | | 127 | | | 1 | |
Total | 6,619 | | | 6,283 | | | 5 | |
See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2023 to the nine months ended September 30, 2022:
| | | | | |
| Amount |
| (In Millions) |
2022 operating revenues | $1,696.6 | |
Fuel, rider, and other revenues that do not significantly affect net income | (165.5) | |
System restoration carrying costs | (21.7) | |
Volume/weather | 4.8 | |
Return of unprotected excess accumulated deferred income taxes to customers | 24.0 | |
Retail electric price | 50.3 | |
2023 operating revenues | $1,588.5 | |
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 generation cost recovery rider filings.other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
System restoration carrying costs represent the equity component of system restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022. See Note 2 to the financial statements hereinin the Form 10-K for a discussion of the securitization.
The volume/weather variance is primarily due to an increase in residential usage resulting from an increase in customers.
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 nine months ended September 30, 2022, $24 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 nine months ended September 30, 2023. There was 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 discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
The retail electric price variance is primarily due to an increase in the annual base rate, including the realignment of the costs previously being collected through the distribution and transmission cost recovery factor riders and the generation cost recovery rider to base rates, effective June 2023 on an interim basis and approved by the PUCT in August 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case.
Total electric energy sales for Entergy Texas for the nine months ended September 30, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 5,345 | | | 4,844 | | | 10 | | Residential | 5,388 | | | 5,345 | | | 1 | |
Commercial | Commercial | 3,706 | | | 3,420 | | | 8 | | Commercial | 3,726 | | | 3,706 | | | 1 | |
Industrial | Industrial | 7,291 | | | 6,561 | | | 11 | | Industrial | 7,051 | | | 7,291 | | | (3) | |
Governmental | Governmental | 207 | | | 190 | | | 9 | | Governmental | 203 | | | 207 | | | (2) | |
Total retail | Total retail | 16,549 | | | 15,015 | | | 10 | | Total retail | 16,368 | | | 16,549 | | | (1) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 279 | | | 983 | | | (72) | | Associated companies | — | | | 279 | | | (100) | |
Non-associated companies | Non-associated companies | 432 | | | 824 | | | (48) | | Non-associated companies | 367 | | | 432 | | | (15) | |
Total | Total | 17,260 | | | 16,822 | | | 3 | | Total | 16,735 | | | 17,260 | | | (3) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Third Quarter 20222023 Compared to Third Quarter 2021
Other operation and maintenance expenses increased primarily due to:
•an increase of $7.8 million in power delivery expenses primarily due to higher vegetation maintenance costs;
•an increase of $2 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•several individually insignificant items.2022
Depreciation and amortization expenses increased primarily due to an increase in depreciation rates effective with an interim increase in the annual base rate in June 2023, which was approved by the PUCT in August 2023, and additions to plant in service. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case filing.
Interest expense increased primarily due toOther regulatory charges (credits) - net includes the issuancereversal in third quarter 2023 of $290.85$21.9 million of senior secured system restoration bonds in April 2022 andregulatory liabilities to reflect the issuancerecognition of $325 million of 5.00% Series mortgage bonds in August 2022,certain receipts by Entergy Texas under affiliated PPAs that have
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
partially offset by the repayment, prior to maturity, of $545.9 million of senior secured transition bonds as a result of payments made on the remaining principal balance in 2022.
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
Other operation and maintenance expenses increased primarily due to:
•an increase of $11.7 million in power delivery expenses primarily due to higher vegetation maintenance costs and higher reliability costs;
•an increase of $5.8 million in non-nuclear generation expenses primarily due to higher expenses associated with the Hardin County Peaking Facility, which was purchased in June 2021, and a higher scope of work performed in 2022 as comparedbeen resolved. See Note 2 to the same periodfinancial statements herein and in 2021;
•an increasethe Form 10-K for discussion of $2.7 million in customer service center support costs primarily due to higher contract costs;
•an increase of $2.4 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•several individually insignificant items.
Depreciation and amortization expenses increased primarily due to additions to plant in service.2022 base rate case.
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 2022.2023, including the Orange County Advanced Power Station project, and higher interest earned on money pool investments.
Interest expense increased primarily due to the issuance of $290.85$350 million of senior secured system restoration5.80% Series mortgage bonds in AprilAugust 2023 and the issuance of $325 million of 5.00% Series mortgage bonds in August 2022, partially offset by an increase in the repayment,allowance for borrowed funds used during construction due to higher construction work in progress in 2023, including the Orange County Advanced Power Station project.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
Other operation and maintenance expenses decreased primarily due to:
•a decrease of $7.3 million in transmission costs allocated by MISO;
•a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding; and
•a decrease of $4.3 million in non-nuclear generation expenses primarily due to a lower scope of work performed in 2023 as compared to prior year.
Taxes other than income taxes increased primarily due to maturity,increases in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to an increase in depreciation rates effective with an interim increase in the annual base rate in June 2023, which was approved by the PUCT in August 2023, and additions to plant in service. See Note 2 to the financial statements herein and in the Form 10-K for discussion of $545.9the 2022 base rate case filing.
Other regulatory charges (credits) - net includes the reversal in third quarter 2023 of $21.9 million of senior secured transitionregulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case.
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, including the Orange County Advanced Power Station project, 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 as a resultin August 2022 and the issuance of payments made on$350 million of 5.80% Series mortgage bonds in August 2023, partially offset by an increase in the remaining principal balanceallowance for borrowed funds used during construction due to higher construction work in 2022.progress in 2023, including the Orange County Advanced Power Station project.
Income Taxes
The effective income tax rates were 20.1% for the third quarter 2023 and 19.8% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The effective income tax rates were 14.4% for the third quarter 2022 and 13.5% for the nine months ended September 30, 20222022.. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were 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.
The effective income tax rates were 13.7% for the third quarter 2021 and 11.3% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were 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 and Regulation
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. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 224,735 | | | 254,980 | | Operating activities | 498,457 | | | 224,735 | |
Investing activities | Investing activities | (487,729) | | | (479,166) | | Investing activities | (608,945) | | | (487,729) | |
Financing activities | Financing activities | 477,070 | | | (24,385) | | Financing activities | 357,787 | | | 477,070 | |
Net increase (decrease) in cash and cash equivalents | 214,076 | | | (248,571) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 247,299 | | | 214,076 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $214,104 | | | $25 | | Cash and cash equivalents at end of period | $250,796 | | | $214,104 | |
Operating Activities
Net cash flow provided by operating activities decreased $30.2increased $273.7 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to the timing of recovery of fuel and purchased power costs.costs and the timing of payments to vendors. The increase was partially offset by an increase of $29.4 million in income taxes paid in 2023 as a result of higher estimated income tax payments in comparison to 2022. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery. The decrease was partially offset by higher collections from customers, the timing of payments to vendors, and a decrease of $24.7 million in storm spending in 2022, primarily due to Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration efforts in 2021.
Investing Activities
Net cash flow used in investing activities increased $8.6$121.2 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to an increase of $178.7 million in non-nuclear generation construction expenditures primarily due to higher spending on the saleOrange County Advanced Power Station project and an increase of a 7.56% partial interest$51.4 million in transmission construction expenditures primarily due to increased investment in the Montgomery County Power Station in June 2021 for approximately $67.9 millionreliability and cash collateralinfrastructure of $31.2 million posted in 2022 to support Entergy Texas’s obligations to MISO.Texas's transmission system. The increase was partially offset by:
•a decrease of $44.4 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2022, partially offset by higher capital expenditures as a result of increased development in Entergy Texas’s service area. The decrease in storm restoration spending is primarily due to Hurricane Laura and Hurricane Delta restoration efforts in 2021;
•the purchase of the Hardin County Peaking Facility in June 2021 for approximately $36.7 million; and
•a decrease of $26.6 million in non-nuclear generation construction expenditures primarily due to higher spending in 2021 on the Montgomery County Power Station project.
Financing Activities
Entergy Texas’s financing activities provided $477.1 million of cash for the nine months ended September 30, 2022 compared to using $24.4 million for the nine months ended September 30, 2021 primarily due to the following activity:
•the issuance of $325 million of 5.00% Series mortgage bonds in August 2022;
•the issuance of $290.85 million of senior secured system restoration bonds in April 2022;
•the repayment, prior to maturity, of $125 million of 2.55% Series mortgage bonds in May 2021;money pool activity;
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
•cash collateral of $31.2 million posted in 2022 to support Entergy Texas’s obligations to MISO; and
•the repayment, at maturity,partial sale of $75a service center in April 2023 for $11 million as part of an eminent domain proceeding.
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 $73.7 million for the nine months ended September 30, 2023 compared to increasing by $5.1 million for the nine months ended September 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities decreased $119.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 primarily due to the issuance of $325 million of 4.10%5.00% Series mortgage bonds in September 2021;August 2022 and the issuance of $290.85 million of senior secured system restoration bonds in April 2022. The decrease was partially offset by:
•the issuance of $130$350 million of 1.50%5.80% Series mortgage bonds in August 2021;2023;
•money pool activity;
•principal payments of $54.3 million on Entergy Texas’s 4.38% Series senior secured transition bonds in 2022 as compared to principal payments of $8.9 million on Entergy Texas’s 3.051% Series senior secured system restoration bonds in 2023; and
•a capital contributionan increase of $85$17.3 million received from Entergy Corporation in April 2021 in orderprepaid deposits related to maintain Entergy Texas’s capital structure and in anticipation of various upcoming capital expenditures.contributions-in-aid-of-construction for generation interconnection agreements.
Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased $79.6 million for the nine months ended September 30, 2022 compared to increasing by $20.1 million for the nine months ended September 30, 2021. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.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 Texas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of long-term debt in 2022, partially offset by an increase in equity resulting from retained earnings.
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Debt to capital | 51.5 | % | | 48.7 | % |
Effect of excluding the securitization bonds | (2.6 | %) | | (0.5 | %) |
Debt to capital, excluding securitization bonds (a) | 48.9 | % | | 48.2 | % |
Effect of subtracting cash | (2.1 | %) | | — | % |
Net debt to net capital, excluding securitization bonds (a) | 46.8 | % | | 48.2 | % |
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Debt to capital | 52.3 | % | | 52.0 | % |
Effect of excluding securitization bonds | (2.2 | %) | | (2.5 | %) |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | 50.1 | % | | 49.5 | % |
Effect of subtracting cash | (2.2 | %) | | — | % |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 47.9 | % | | 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
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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. FollowingThe following are updates to information provided in the Form 10-K.
Entergy Texas is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $3.4$4.7 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, including Orange County Advanced Power Station; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion;
Entergy Texas, Inc.expansion and Subsidiaries
Management's Financial Discussion and Analysis
customer growth; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, government actions, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
$5,146 | | ($79,594) | | ($20,075) | | $4,601 |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
$25,808 | | $99,468 | | $5,146 | | ($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 2027.2028. 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 September 30, 2022,2023, there were no cash borrowings and $1.1 million ofin letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2022, $9.72023, $12.8 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.
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 testimony opposing the project outright. Also in March 2022 the 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 60 days for the Orange County Advanced Power Station prior to the hearing. In May 2022, Entergy Texas obtained and provided to the parties an updated fixed pricing option of $1.58 billion, available until mid-July 2022. The hearing on the merits was held in June 2022, and post-hearing briefs were submitted in July 2022. In September 2022 the ALJs with the State Office of Administrative Hearings issued a proposal for decision recommending the PUCT approve Entergy Texas’s application for certification of Orange County Advanced Power Station subject to certain conditions, including a cap on cost recovery at $1.37 billion, the exclusion of investment associated with co-firing hydrogen, weatherization requirements, and customer receipt of any contractual benefits associated with the facility’s guaranteed heat rate. In October 2022 the parties in the proceeding filed exceptions and replies to exceptions to the proposal for decision. Also in October 2022, Entergy Texas filed with the PUCT information regarding a new fixed pricing option for an estimated project cost of approximately $1.55 billion associated with Entergy Texas’s issuance of limited notice to proceed by mid-November 2022. A final order by the PUCT is expected in the fourth quarter of 2022. Entergy Texas also is pursuing environmental permitting that is
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 the end of 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.
Retail Rates
2022 Base Rate Case
InAs discussed in the Form 10-K, in July 2022, Entergy Texas filed a base rate case with the PUCT seeking a net increase in base rates of approximately $131.4 million. The base rate case was based on a 12-month test year ending December 31, 2021. Key drivers of the requested increase arewere changes in depreciation rates as the result of a depreciation study and an increase in the return on equity. In addition, Entergy Texas included capital additions placed into service for the period of January 1, 2018 through December 31, 2021, including those additions currently reflected in the distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which would be reset to zero as a result of this proceeding. In July 2022, the PUCT referred the proceeding to the State Office of Administrative Hearings. In October 2022 intervenors filed direct testimony challenging and supporting various aspects of Entergy Texas’s rate case application. The key issues addressed included the appropriate return on equity, generation plant deactivations, depreciation rates, and proposed tariffs related to electric vehicles. In November 2022 the PUCT staff filed direct testimony addressing a similar set of issues and recommending a reduction of $50.7 million to Entergy Texas’s overall cost of service associated with the requested net increase in base rates of approximately $131.4 million. Entergy Texas will file rebuttal testimony in November 2022. A hearing on the merits is scheduled for December 2022. If a settlement is not reached, a final decision by the PUCT is expected in second quarter 2023.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Distribution Cost Recovery Factor (DCRF) Riderin the then-effective distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which have been reset to zero as a result of this proceeding.
As discussed in the Form 10-K, in August 2021,In May 2023, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended rider was 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 then-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 Officebehalf 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 aexcept for issues related to electric vehicle charging infrastructure, and Entergy Texas filed an agreed motion for interim rates, subject to take effectrefund or surcharge to the extent that the interim rates differ from the final approved rates. The unopposed settlement reflected a net base rate increase to be effective and relate back to December 2022 of $54 million, exclusive of, and incremental to, the costs being realigned from the distribution and transmission cost recovery factor riders and the generation cost recovery rider and $4.8 million of rate case expenses to be recovered through a rider over a period of 36 months. The net base rate increase of $54 million includes updated depreciation rates and a total annual revenue requirement of $14.5 million for usage onthe accrual of a self-insured storm reserve and after January 24, 2022. Also, in December 2021,the recovery of the regulatory assets for the pension and postretirement benefits expense deferral, costs associated with the COVID-19 pandemic, and retired non-advanced metering system electric meters. In May 2023 the ALJ with the State Office of Administrative Hearings issued an order grantinggranted the motion for interim rates, which went into effectbecame effective in January 2022, admitting evidence, and remandingJune 2023. Additionally, the ALJ remanded the proceeding, except for the issues related to electric vehicle charging infrastructure, to the PUCT to consider the settlement. In March 2022June 2023 the ALJ issued a proposal for decision related to the electric vehicle charging infrastructure issues and which noted recent legislation enacted which permits electric utilities to own and operate such infrastructure. The ALJ’s proposal for decision deferred to the PUCT regarding whether it is appropriate for any vertically integrated electric utility, or Entergy Texas specifically, to own electric vehicle charging infrastructure, and in the event that the PUCT decided ownership is permissible, the ALJ recommended approval of the proposed tariff to charge host customers for utility-owned and operated electric vehicle charging infrastructure sited on customer premises and denial of the proposed tariff to temporarily adjust billing demand charges for separately metered electric vehicle charging infrastructure, citing cost-shifting concerns. In July 2023 the parties filed exceptions and replies to exceptions to the proposal for decision. In August 2023 the PUCT issued an order approving the settlement.unopposed settlement and also issued an order severing the issues related to electric vehicle charging infrastructure addressed in the ALJ’s proposal for decision to a separate proceeding. Concurrently, Entergy Texas recorded the reversal of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved.
Transmission Cost Recovery Factor (TCRF) Rider
As discussedFollowing the PUCT’s approval of the unopposed settlement in August 2023, Entergy Texas recorded a regulatory liability of $8.9 million, which reflects the Form 10-K,net effects of higher depreciation and amortizations for the relate back period, partially offset by the relate back of base rate revenues that would have been collected had the approved rates been in effect for the period from December 2022 through June 2023, the date the new base rates were implemented on an interim basis. In October 2021,2023, Entergy Texas filed a relate back surcharge rider to collect over six months beginning in January 2024 an additional approximately $24.6 million, which is the revenue requirement associated with the PUCT a request to amend its TCRF rider. The amended rider was designed to collectrelate back of rates from Entergy Texas’s retail customers approximately $66.1 million annually, or $15.1 million in incremental annual revenues beyond Energy Texas’s then-effective TCRF rider based on its capital invested in transmission between September 1, 2020 and July 31, 2021 and changes in approved transmission charges. In JanuaryDecember 2022 through June 2023, including carrying costs, as authorized by the PUCT’s August 2023 order. A final decision by the PUCT referred the proceeding to the State Office of Administrative Hearings. In February 2022 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2022. In February 2022 the ALJ granted the motion for interim rates, admitted evidence, and remanded the case to the PUCT for consideration of a final order at a future open meeting. In June 2022 the PUCT issued an order approving the settlement.is expected by first quarter 2024.
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 the PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request. The PUCT approved the relate-back rider consistent with Entergy Texas’s as-filed request, and rates became effective over a five month period, in August 2022.
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
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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. Concurrently with filing of the unanimous settlement agreement, Entergy Texas submitted an agreed motion to admit evidence and remand the case to the PUCT for review and consideration of the settlement agreement, which motion was granted by the ALJ with the State Office of Administrative Hearings. The PUCT approved the settlement agreementFacility, and rates became effective in August 2022.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 with rates effective over three months beginning in May 2023.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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,Pursuant to the August 2023 PUCT will consider whether each utility's request forapproval of the unopposed settlement in Entergy Texas’s 2022 base rate case proceeding, the base rate increase of $54 million includes an annual revenue requirement of $3.4 million related to recovery of thesethe regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As of September 30, 2022, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic. As partEntergy Texas began recovery of its 2022the regulatory asset with the interim increase in the annual base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022.
Green Pricing Option Tariffs
In January 2022, Entergy Texas filed an application requesting approval to implement two voluntary renewable option tariffs, Rider Small Volume Renewable Option (Rider SVRO) 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 retired on the customer’s behalf. Voluntary participationeffective 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. The PUCT approved the settlement agreement in August 2022.June 2023.
Fuel and purchased power recovery
In May 2022, Entergy Texas filed an application with the PUCT to implement an interim fuel surcharge to collect the cumulative under-recovery of approximately $51.7 million, including interest, of fuel and purchased power costs incurred from May 1, 2020 through December 31, 2021. The under-recovery balance is primarily attributable to the impacts of Winter Storm Uri, including historically high natural gas prices, partially offset by settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas proposed that the interim fuel surcharge be assessed over a period of six months beginning with the first billing cycle after the PUCT issues a final order, but no later than the first billing cycle of September 2022. Also in May 2022, the PUCT referred the proceeding to the State Office of Administrative Hearings. In July 2022, Entergy Texas filed on behalf of the parties an unopposed settlement resolving all issuesAs discussed in the proceeding. In addition, Entergy Texas filed on
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
behalf of the parties a motion to admit evidence, to approve interim rates as requestedForm 10-K, in the initial application, and to remand the proceeding to the PUCT to consider the unopposed settlement. In August 2022 the ALJ with the State Office of Administrative Hearings issued an order granting Entergy Texas’s motion, approving interim rates effective with the first billing cycle of September 2022, and remanding the case to the PUCT for final approval.
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. AIn November 2022 the PUCT decision is expectedreferred 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. The PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023. In May 2023, Entergy Texas filed, and the ALJ with the State Office of Administrative Hearings granted, a joint motion to abate the proceeding to give parties additional time to finalize a settlement and cancelling the hearing on the merits previously scheduled for May 2023. In July 2023, Entergy Texas filed an unopposed settlement, supporting testimony, and an agreed motion to admit evidence and remand the proceeding to the PUCT. Pursuant to the unopposed settlement, Entergy Texas would receive no disallowance of fuel costs incurred over the three-year reconciliation period and retain $9.3 million in margins from off-system sales made during the reconciliation period, resulting in a cumulative under-recovery balance of approximately $99.7 million, including interest, as of the end of the reconciliation period. In July 2023 the ALJ with the State Office of Administrative Hearings granted the motion to admit evidence and remanded the proceeding to the PUCT for consideration of the unopposed settlement. The PUCT approved the settlement in 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.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy 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. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.
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 | ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS |
For the Three and Nine Months Ended September 30, 2022 and 2021 | |
For the Three and Nine Months Ended September 30, 2023 and 2022 | | For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | OPERATING REVENUES | | OPERATING REVENUES | |
Electric | Electric | | $659,556 | | | $541,632 | | | $1,696,629 | | | $1,452,286 | | Electric | | $616,595 | | | $659,556 | | | $1,588,531 | | | $1,696,629 | |
| 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 | | 113,154 | | | 92,843 | | | 247,929 | | | 269,270 | | Fuel, fuel-related expenses, and gas purchased for resale | | 94,099 | | | 113,154 | | | 325,155 | | | 247,929 | |
| Purchased power | Purchased power | | 208,703 | | | 155,723 | | | 564,809 | | | 425,784 | | Purchased power | | 131,927 | | | 208,703 | | | 352,568 | | | 564,809 | |
Other operation and maintenance | Other operation and maintenance | | 83,014 | | | 68,973 | | | 230,580 | | | 202,743 | | Other operation and maintenance | | 85,929 | | | 83,014 | | | 213,430 | | | 230,580 | |
| Taxes other than income taxes | Taxes other than income taxes | | 29,886 | | | 30,479 | | | 73,817 | | | 73,025 | | Taxes other than income taxes | | 28,372 | | | 29,886 | | | 85,085 | | | 73,817 | |
Depreciation and amortization | Depreciation and amortization | | 58,472 | | | 54,711 | | | 171,781 | | | 159,234 | | Depreciation and amortization | | 76,888 | | | 58,472 | | | 202,288 | | | 171,781 | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | 8,072 | | | 10,029 | | | 43,917 | | | 51,122 | | Other regulatory charges (credits) - net | | (5,909) | | | 8,072 | | | 6,541 | | | 43,917 | |
TOTAL | TOTAL | | 501,301 | | | 412,758 | | | 1,332,833 | | | 1,181,178 | | TOTAL | | 411,306 | | | 501,301 | | | 1,185,067 | | | 1,332,833 | |
| OPERATING INCOME | OPERATING INCOME | | 158,255 | | | 128,874 | | | 363,796 | | | 271,108 | | OPERATING INCOME | | 205,289 | | | 158,255 | | | 403,464 | | | 363,796 | |
| OTHER INCOME | OTHER INCOME | | OTHER INCOME | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 3,616 | | | 1,836 | | | 9,375 | | | 6,951 | | Allowance for equity funds used during construction | | 7,244 | | | 3,616 | | | 19,093 | | | 9,375 | |
Interest and investment income | Interest and investment income | | 1,062 | | | 204 | | | 1,597 | | | 632 | | Interest and investment income | | 2,741 | | | 1,062 | | | 5,004 | | | 1,597 | |
Miscellaneous - net | Miscellaneous - net | | (1,655) | | | (507) | | | (1,757) | | | (1,457) | | Miscellaneous - net | | (619) | | | (1,655) | | | (2,121) | | | (1,757) | |
TOTAL | TOTAL | | 3,023 | | | 1,533 | | | 9,215 | | | 6,126 | | TOTAL | | 9,366 | | | 3,023 | | | 21,976 | | | 9,215 | |
| INTEREST EXPENSE | INTEREST EXPENSE | | INTEREST EXPENSE | |
Interest expense | Interest expense | | 24,613 | | | 21,220 | | | 68,626 | | | 66,157 | | Interest expense | | 29,524 | | | 24,613 | | | 83,333 | | | 68,626 | |
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | (1,218) | | | (738) | | | (3,150) | | | (2,797) | | Allowance for borrowed funds used during construction | | (2,714) | | | (1,218) | | | (7,127) | | | (3,150) | |
TOTAL | TOTAL | | 23,395 | | | 20,482 | | | 65,476 | | | 63,360 | | TOTAL | | 26,810 | | | 23,395 | | | 76,206 | | | 65,476 | |
| INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | 137,883 | | | 109,925 | | | 307,535 | | | 213,874 | | INCOME BEFORE INCOME TAXES | | 187,845 | | | 137,883 | | | 349,234 | | | 307,535 | |
| Income taxes | Income taxes | | 19,881 | | | 15,084 | | | 41,645 | | | 24,185 | | Income taxes | | 37,756 | | | 19,881 | | | 69,015 | | | 41,645 | |
| NET INCOME | NET INCOME | | 118,002 | | | 94,841 | | | 265,890 | | | 189,689 | | NET INCOME | | 150,089 | | | 118,002 | | | 280,219 | | | 265,890 | |
| Preferred dividend requirements | Preferred dividend requirements | | 518 | | | 470 | | | 1,554 | | | 1,411 | | Preferred dividend requirements | | 518 | | | 518 | | | 1,554 | | | 1,554 | |
| EARNINGS APPLICABLE TO COMMON STOCK | EARNINGS APPLICABLE TO COMMON STOCK | | $117,484 | | | $94,371 | | | $264,336 | | | $188,278 | | EARNINGS APPLICABLE TO COMMON STOCK | | $149,571 | | | $117,484 | | | $278,665 | | | $264,336 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
(Page left blank intentionally)
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $265,890 | | | $189,689 | | Net income | | $280,219 | | | $265,890 | |
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 and amortization | Depreciation and amortization | | 171,781 | | | 159,234 | | Depreciation and amortization | | 202,288 | | | 171,781 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 57,532�� | | | 31,518 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 57,279 | | | 57,532 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (63,743) | | | (50,538) | | Receivables | | (40,609) | | | (63,743) | |
Fuel inventory | Fuel inventory | | 16,868 | | | 7,232 | | Fuel inventory | | (25,734) | | | 16,868 | |
Accounts payable | Accounts payable | | 77,740 | | | 20,506 | | Accounts payable | | (9,871) | | | 77,740 | |
Taxes accrued | Taxes accrued | | 2,520 | | | 6,003 | | Taxes accrued | | (29,995) | | | 2,520 | |
Interest accrued | Interest accrued | | (4,832) | | | (12,808) | | Interest accrued | | 13,612 | | | (4,832) | |
Deferred fuel costs | Deferred fuel costs | | (273,644) | | | (103,013) | | Deferred fuel costs | | 97,451 | | | (273,644) | |
Other working capital accounts | Other working capital accounts | | (11,927) | | | (19,522) | | Other working capital accounts | | (23,042) | | | (11,927) | |
Provisions for estimated losses | Provisions for estimated losses | | (414) | | | 67 | | Provisions for estimated losses | | 511 | | | (414) | |
Other regulatory assets | Other regulatory assets | | (130,042) | | | 72,760 | | Other regulatory assets | | (17,997) | | | (130,042) | |
Other regulatory liabilities | Other regulatory liabilities | | (23,014) | | | (21,469) | | Other regulatory liabilities | | (13,111) | | | (23,014) | |
System restoration costs approved for securitization recognized as regulatory asset | | 153,383 | | | — | | |
Effect of securitization on regulatory asset | | Effect of securitization on regulatory asset | | — | | | 153,383 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (12,458) | | | (16,489) | | Pension and other postretirement liabilities | | (8,961) | | | (12,458) | |
Other assets and liabilities | Other assets and liabilities | | (905) | | | (8,190) | | Other assets and liabilities | | 16,417 | | | (905) | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 224,735 | | | 254,980 | | Net cash flow provided by operating activities | | 498,457 | | | 224,735 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (469,630) | | | (541,161) | | Construction expenditures | | (711,382) | | | (469,630) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 9,375 | | | 6,951 | | Allowance for equity funds used during construction | | 19,093 | | | 9,375 | |
Proceeds from sale of assets | Proceeds from sale of assets | | — | | | 67,920 | | Proceeds from sale of assets | | 11,000 | | | — | |
Payment for purchase of assets | | — | | | (36,534) | | |
| Litigation proceeds from settlement agreement | Litigation proceeds from settlement agreement | | 4,134 | | | — | | Litigation proceeds from settlement agreement | | — | | | 4,134 | |
Changes in money pool receivable - net | Changes in money pool receivable - net | | (5,146) | | | 4,601 | | Changes in money pool receivable - net | | 73,660 | | | (5,146) | |
Changes in securitization account | Changes in securitization account | | 4,698 | | | 19,057 | | Changes in securitization account | | (1,402) | | | 4,698 | |
Increase in other investments | | (31,160) | | | — | | |
Decrease (increase) in other investments | | Decrease (increase) in other investments | | 86 | | | (31,160) | |
| Net cash flow used in investing activities | Net cash flow used in investing activities | | (487,729) | | | (479,166) | | Net cash flow used in investing activities | | (608,945) | | | (487,729) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 606,444 | | | 127,931 | | Proceeds from the issuance of long-term debt | | 344,966 | | | 606,444 | |
Retirement of long-term debt | Retirement of long-term debt | | (54,257) | | | (269,435) | | Retirement of long-term debt | | (8,856) | | | (54,257) | |
Capital contribution from parent | | — | | | 85,000 | | |
| Changes in money pool payable - net | | (79,594) | | | 20,075 | | |
| Change in money pool payable - net | | Change in money pool payable - net | | — | | | (79,594) | |
| Preferred stock dividends paid | Preferred stock dividends paid | | (1,542) | | | (1,411) | | Preferred stock dividends paid | | (1,554) | | | (1,542) | |
Other | Other | | 6,019 | | | 13,455 | | Other | | 23,231 | | | 6,019 | |
Net cash flow provided by (used in) financing activities | | 477,070 | | | (24,385) | | |
Net cash flow provided by financing activities | | Net cash flow provided by financing activities | | 357,787 | | | 477,070 | |
| Net increase (decrease) in cash and cash equivalents | | 214,076 | | | (248,571) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | | 247,299 | | | 214,076 | |
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 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $214,104 | | | $25 | | Cash and cash equivalents at end of period | | $250,796 | | | $214,104 | |
| 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 | | $71,311 | | | $77,110 | | Interest - net of amount capitalized | | $67,605 | | | $71,311 | |
Income taxes | Income taxes | | $1,085 | | | $11,710 | | Income taxes | | $30,500 | | | $1,085 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
|
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $5,290 | | | $28 | | Cash | | $1,235 | | | $500 | |
Temporary cash investments | Temporary cash investments | | 208,814 | | | — | | Temporary cash investments | | 249,561 | | | 2,997 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 214,104 | | | 28 | | Total cash and cash equivalents | | 250,796 | | | 3,497 | |
Securitization recovery trust account | Securitization recovery trust account | | 21,931 | | | 26,629 | | Securitization recovery trust account | | 12,281 | | | 10,879 | |
Accounts receivable: | Accounts receivable: | | Accounts receivable: | |
Customer | Customer | | 141,972 | | | 83,797 | | Customer | | 141,865 | | | 115,955 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (2,989) | | | (5,814) | | Allowance for doubtful accounts | | (2,397) | | | (2,352) | |
Associated companies | Associated companies | | 17,759 | | | 31,720 | | Associated companies | | 32,915 | | | 115,549 | |
Other | Other | | 17,608 | | | 13,404 | | Other | | 29,145 | | | 21,587 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 79,887 | | | 62,241 | | Accrued unbilled revenues | | 85,368 | | | 69,208 | |
Total accounts receivable | Total accounts receivable | | 254,237 | | | 185,348 | | Total accounts receivable | | 286,896 | | | 319,947 | |
Deferred fuel costs | Deferred fuel costs | | 321,924 | | | 48,280 | | Deferred fuel costs | | 160,664 | | | 258,115 | |
Fuel inventory - at average cost | Fuel inventory - at average cost | | 25,844 | | | 42,712 | | Fuel inventory - at average cost | | 52,484 | | | 26,750 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 82,470 | | | 72,884 | | Materials and supplies - at average cost | | 103,683 | | | 93,031 | |
| Prepayments and other | Prepayments and other | | 57,253 | | | 17,515 | | Prepayments and other | | 30,324 | | | 20,568 | |
TOTAL | TOTAL | | 977,763 | | | 393,396 | | TOTAL | | 897,128 | | | 732,787 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Investments in affiliates - at equity | Investments in affiliates - at equity | | 262 | | | 300 | | Investments in affiliates - at equity | | 225 | | | 250 | |
Non-utility property - at cost (less accumulated depreciation) | Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | | Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | |
Other | Other | | 18,097 | | | 18,128 | | Other | | 17,041 | | | 18,975 | |
TOTAL | TOTAL | | 18,735 | | | 18,804 | | TOTAL | | 17,642 | | | 19,601 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 7,259,010 | | | 7,181,567 | | Electric | | 7,734,635 | | | 7,409,461 | |
Construction work in progress | Construction work in progress | | 285,907 | | | 183,965 | | Construction work in progress | | 784,116 | | | 339,139 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 7,544,917 | | | 7,365,532 | | TOTAL UTILITY PLANT | | 8,518,751 | | | 7,748,600 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 2,121,834 | | | 2,049,750 | | Less - accumulated depreciation and amortization | | 2,310,663 | | | 2,135,400 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 5,423,083 | | | 5,315,782 | | UTILITY PLANT - NET | | 6,208,088 | | | 5,613,200 | |
| DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | | DEFERRED DEBITS AND OTHER ASSETS | |
Regulatory assets: | Regulatory assets: | | Regulatory assets: | |
| Other regulatory assets (includes securitization property of $274,933 as of September 30, 2022 and $23,818 as of December 31, 2021) | | 551,375 | | | 421,333 | | |
Other regulatory assets (includes securitization property of $253,952 as of September 30, 2023 and $269,523 as of December 31, 2022) | | Other regulatory assets (includes securitization property of $253,952 as of September 30, 2023 and $269,523 as of December 31, 2022) | | 596,679 | | | 578,682 | |
| Other | Other | | 126,722 | | | 112,096 | | Other | | 102,743 | | | 99,694 | |
TOTAL | TOTAL | | 678,097 | | | 533,429 | | TOTAL | | 699,422 | | | 678,376 | |
| TOTAL ASSETS | TOTAL ASSETS | | $7,097,678 | | | $6,261,411 | | TOTAL ASSETS | | $7,822,280 | | | $7,043,964 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | | | | See Notes to Financial Statements. | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 2023 and December 31, 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
CURRENT LIABILITIES | CURRENT LIABILITIES | | CURRENT LIABILITIES | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | $73,558 | | | $142,929 | | Associated companies | | $67,665 | | | $70,321 | |
Other | Other | | 197,204 | | | 164,981 | | Other | | 200,767 | | | 201,982 | |
Customer deposits | Customer deposits | | 38,503 | | | 37,271 | | Customer deposits | | 39,459 | | | 38,764 | |
Taxes accrued | Taxes accrued | | 51,538 | | | 49,018 | | Taxes accrued | | 63,038 | | | 93,033 | |
Interest accrued | Interest accrued | | 14,170 | | | 19,002 | | Interest accrued | | 37,540 | | | 23,928 | |
Current portion of unprotected excess accumulated deferred income taxes | | 2,660 | | | 27,188 | | |
| | Other | Other | | 19,107 | | | 16,120 | | Other | | 14,089 | | | 16,963 | |
TOTAL | TOTAL | | 396,740 | | | 456,509 | | TOTAL | | 422,558 | | | 444,991 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 761,897 | | | 692,496 | | Accumulated deferred income taxes and taxes accrued | | 814,181 | | | 744,227 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 8,864 | | | 9,325 | | Accumulated deferred investment tax credits | | 8,150 | | | 8,711 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 133,021 | | | 144,145 | | Regulatory liability for income taxes - net | | 121,472 | | | 132,647 | |
Other regulatory liabilities | Other regulatory liabilities | | 49,698 | | | 37,060 | | Other regulatory liabilities | | 43,311 | | | 45,247 | |
Asset retirement cost liabilities | Asset retirement cost liabilities | | 10,971 | | | 8,520 | | Asset retirement cost liabilities | | 11,584 | | | 11,121 | |
Accumulated provisions | Accumulated provisions | | 7,828 | | | 8,242 | | Accumulated provisions | | 8,104 | | | 7,593 | |
| Long-term debt (includes securitization bonds of $287,229 as of September 30, 2022 and $53,979 as of December 31, 2021) | | 2,907,947 | | | 2,354,148 | | |
Long-term debt (includes securitization bonds of $266,480 as of September 30, 2023 and $275,064 as of December 31, 2022) | | Long-term debt (includes securitization bonds of $266,480 as of September 30, 2023 and $275,064 as of December 31, 2022) | | 3,233,614 | | | 2,895,913 | |
Other | Other | | 73,170 | | | 67,760 | | Other | | 201,180 | | | 74,053 | |
TOTAL | TOTAL | | 3,953,396 | | | 3,321,696 | | TOTAL | | 4,441,596 | | | 3,919,512 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| EQUITY | EQUITY | | 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 | | |
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2023 and 2022 | | 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 | Paid-in capital | | 1,050,125 | | | 1,050,125 | | Paid-in capital | | 1,050,125 | | | 1,050,125 | |
Retained earnings | Retained earnings | | 1,609,215 | | | 1,344,879 | | Retained earnings | | 1,819,799 | | | 1,541,134 | |
Total common shareholder's equity | Total common shareholder's equity | | 2,708,792 | | | 2,444,456 | | Total common shareholder's equity | | 2,919,376 | | | 2,640,711 | |
Preferred stock without sinking fund | Preferred stock without sinking fund | | 38,750 | | | 38,750 | | Preferred stock without sinking fund | | 38,750 | | | 38,750 | |
TOTAL | TOTAL | | 2,747,542 | | | 2,483,206 | | TOTAL | | 2,958,126 | | | 2,679,461 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $7,097,678 | | | $6,261,411 | | TOTAL LIABILITIES AND EQUITY | | $7,822,280 | | | $7,043,964 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Common Equity | | | Common Equity | |
| | Preferred Stock | | Common Stock | | Paid-in Capital | | Retained Earnings | | Total | | Preferred Stock | | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) | | (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 | | |
| Net income | — | | | — | | | — | | | 44,790 | | | 44,790 | | |
Capital contribution from parent | — | | | — | | | 85,000 | | | — | | | 85,000 | | |
Preferred stock dividends | — | | | — | | | — | | | (471) | | | (471) | | |
| Balance at June 30, 2021 | 35,000 | | | 49,452 | | | 1,040,162 | | | 1,211,871 | | | 2,336,485 | | |
| Net income | — | | | — | | | — | | | 94,841 | | | 94,841 | | |
| Preferred stock dividends | — | | | — | | | — | | | (470) | | | (470) | | |
| Balance at September 30, 2021 | $35,000 | | | $49,452 | | | $1,040,162 | | | $1,306,242 | | | $2,430,856 | | |
| | Balance at December 31, 2021 | Balance at December 31, 2021 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,344,879 | | | $2,483,206 | | Balance at December 31, 2021 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,344,879 | | | $2,483,206 | |
| Net income | Net income | — | | | — | | | — | | | 50,403 | | | 50,403 | | Net income | — | | | — | | | — | | | 50,403 | | | 50,403 | |
| Preferred stock dividends | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
Balance at March 31, 2022 | Balance at March 31, 2022 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,394,764 | | | 2,533,091 | | Balance at March 31, 2022 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,394,764 | | | 2,533,091 | |
| Net income | Net income | — | | | — | | | — | | | 97,485 | | | 97,485 | | Net income | — | | | — | | | — | | | 97,485 | | | 97,485 | |
| Preferred stock dividends | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,491,731 | | | 2,630,058 | | Balance at June 30, 2022 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,491,731 | | | 2,630,058 | |
| Net income | Net income | — | | | — | | | — | | | 118,002 | | | 118,002 | | Net income | — | | | — | | | — | | | 118,002 | | | 118,002 | |
| Preferred stock dividends | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at September 30, 2022 | Balance at September 30, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,609,215 | | | $2,747,542 | | Balance at September 30, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,609,215 | | | $2,747,542 | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,541,134 | | | $2,679,461 | |
| Net income | | Net income | — | | | — | | | — | | | 41,673 | | | 41,673 | |
| Preferred stock dividends | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,582,289 | | | 2,720,616 | |
| Net income | | Net income | — | | | — | | | — | | | 88,457 | | | 88,457 | |
| Preferred stock dividends | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | 38,750 | | | 49,452 | | | 1,050,125 | | | 1,670,228 | | | 2,808,555 | |
| Net income | | Net income | — | | | — | | | — | | | 150,089 | | | 150,089 | |
Preferred stock dividends | | Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at September 30, 2023 | | Balance at September 30, 2023 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,819,799 | | | $2,958,126 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | 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 isand the Unit Power Sales Agreement are currently involved inthe subject of several litigation proceedings at the FERC, commenced by the retail regulators of its customers regarding itsincluding challenges with respect to System Energy’s authorized return on equity itsand capital structure, its renewal of theits sale-leaseback of 11.5% of Grand Gulf, thearrangement, treatment of uncertain tax positions, in rate base, the prudencea broader investigation of its operation of Grand Gulf, and the rates it charges under the Unit Power Sales Agreement.Agreement, and two prudence complaints, one challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of Grand Gulf, particularly in the 2016-2020 time period, and the second challenging the operation and management of Grand Gulf in the 2021-2022 time period. 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. The settlement in principle with the APSC described in “Complaints Against System Energy - System Energy Settlement with the APSC” below, if approved by the FERC, will substantially reduce the aggregate amount of this exposure. 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
Third Quarter 20222023 Compared to Third Quarter 20212022
Net income remained relatively unchanged, decreasing $0.1increasing $0.3 million, for the third quarter 20222023 compared to the third quarter 2021.2022. The increase was primarily due to an increase in operating revenues resulting from changes in rate base, substantially offset by 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. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Grand Gulf sale-leaseback renewal complaint.
Nine Months Ended September 30, 20222023 Compared to Nine Months Ended September 30, 20212022
System Energy experienced a net loss of $321.4 million in the nine months ended September 30, 2022 compared tohad net income of $81.7$81 million for the nine months ended September 30, 20212023 compared to a net loss of $321.4 million for the nine months ended September 30, 2022 primarily due to a regulatory charge of $551 million ($413 million net-of-tax) recorded in the second quarter 2022 to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. Partially offsettingThe increase was partially offset by the decreasedisallowance of the recovery of sale-leaseback lease 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. See Note 2 to the financial statements in earnings was an increase in revenues resulting from changes in rate base.the Form 10-K for discussion of the partial settlement agreement. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the partial settlement agreementGrand Gulf sale-leaseback renewal complaint.
System Energy Resources, Inc.
Management's Financial Discussion and offer of settlement.Analysis
Income Taxes
The effective income tax rates were 22.5% for the third quarter 2023 and 22.9% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rates were 11% for the third quarter 2022 and 26.4% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, which included an adjustment to the amortization of state investment tax credits recorded in the third quarter 2022.
The effective income tax rate was 23.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes.Income Tax Legislation and Regulation
The effective income tax rate was 7.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to 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“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the effectsInflation Reduction Act of and regulatory activity regarding the Tax Cuts and Jobs Act.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Income Tax Legislation
2022. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 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 | 177,739 | | | 130,676 | | Operating activities | 155,190 | | | 177,739 | |
Investing activities | Investing activities | (118,663) | | | (75,603) | | Investing activities | (27,165) | | | (118,663) | |
Financing activities | Financing activities | 46,958 | | | (134,400) | | Financing activities | (35,172) | | | 46,958 | |
Net increase (decrease) in cash and cash equivalents | 106,034 | | | (79,327) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 92,853 | | | 106,034 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $195,235 | | | $163,142 | | Cash and cash equivalents at end of period | $95,793 | | | $195,235 | |
Operating Activities
Net cash flow provided by operating activities increased $47.1decreased $22.5 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to income tax paymentsto:
•aggregate refunds of $39.1$103.5 million made in 2021, timing of collections of receivables, and timing of payments to vendors, partially offset by an increase in spending of $36.1 million on nuclear refueling outages in 2022 as compared to the same period in 2021. System Energy had income tax payments in 2021 as a result of the amended Mississippi tax returns filed based on federal adjustmentsJanuary 2023 related to the resolution ofsale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the 2014-2015 IRS audit, as well as a portion of the payments made in accordance with an intercompany income tax allocation agreement.FERC. See Note 32 to the financial statements herein and in the Form 10-K for further discussion of these refunds and the related proceedings; and
•refunds of $19.3 million included in May 2023 service month bills under the Unit Power Sales Agreement to reflect the effects of the partial settlement agreement approved by the FERC in April 2023. See Note 2 to
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
the financial statements herein and in the Form 10-K for discussion of the 2014-2015 IRS audit.Unit Power Sales Agreement complaint.
The decrease was partially offset by a decrease in spending of $36.7 million on nuclear refueling outages in 2023 as compared to the same period in 2022 and the timing of collections of receivables.
Investing Activities
Net cash flow used in investing activities increased $43.1decreased $91.5 million for the nine months ended September 30, 20222023 compared to the nine months ended September 30, 20212022 primarily due to:due:
•an increasea decrease of $66.4$53.1 million in nuclear construction expenditures primarily due to increasedhigher spending on various nuclearin 2022 for Grand Gulf outage projects in 2022; and upgrades;
•an increasea decrease of $52.6$38.2 million as a result of fluctuations in nuclear fuel activity because ofdue to variations from year to year in the timing and pricing of fuel reload requirements, in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.cycle; and
•money pool activity.
The increasedecrease was partially offset by money poola decrease of $12.1 million in decommissioning trust fund investment 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 $85.2 million for the nine months ended September 30, 2023 compared to decreasing by $70.9 million for the nine months ended September 30, 2022 compared to increasing by $8.3 million for the nine months ended September 30, 2021.2022. The money pool is an inter-
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
companyintercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
System Energy’s financing activities providedused $35.2 million of cash for the nine months ended September 30, 2023 compared to providing $47 million of cash for the nine months ended September 30, 2022 compared to using $134.4 million of cash for the nine months ended September 30, 2021 primarily due to:to the following activity:
•the repayment, in February 2021at maturity, of $100$250 million of 3.42%4.10% Series J notes by mortgage bonds in April 2023;
•the System Energyissuance of a $50 million term loan in May 2022, which was repaid, prior to maturity, in March 2023;
•net repayments of $43.4 million in 2023 compared to net long-term borrowings of $47.8 million in 2022 on the nuclear fuel company variable interest entity;entity’s credit facilities;
•the repayment, at maturity, of $50.3 million of 2.5% Series governmental bonds in April 2022; and
•a decreasethe issuance of $74$325 million of 6.00% Series mortgage bonds 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 and in anticipation of the settlement with the MPSC.March 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 increasedecrease in the debt to capital ratio is primarily due to net income in 2023 and the net lossretirement of long-term debt in 2022.2023.
| | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 |
Debt to capital | 42.0 | % | | 45.0 | % |
Effect of subtracting cash | (3.3 | %) | | (0.1 | %) |
Net debt to net capital (non-GAAP) | 38.7 | % | | 44.9 | % |
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
Debt to capital | 50.6 | % | | 40.4 | % |
Effect of subtracting cash | (7.1 | %) | | (3.0 | %) |
Net debt to net capital | 43.5 | % | | 37.4 | % |
193
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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. FollowingThe following are updates to the information provided in the Form 10-K.
System Energy is developing its capital investment plan for 20232024 through 20252026 and currently anticipates making $510$460 million in capital investments during that period. The preliminary estimate includes amounts associated with Grand Gulf investments and initiatives.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
System Energy’s receivables from the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
September 30, 2022 | | December 31, 2021 | | September 30, 2021 | | December 31, 2020 |
(In Thousands) |
$4,802 | | $75,745 | | $12,338 | | $4,004 |
| | | | | | | | | | | | | | | | | | | | |
September 30, 2023 | | December 31, 2022 | | September 30, 2022 | | December 31, 2021 |
(In Thousands) |
$9,772 | | $94,981 | | $4,802 | | $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 2025. As of September 30, 2022, $83.92023, $29.2 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
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. See “System Energy Settlement with the MPSC” below for discussion of a partial settlement agreement and offer of settlement related to the pending proceedings before the FERC.
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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 $62$40 million, which includes interest through September 30, 2022,2023, and the estimated resulting annual rate reduction would be approximately $34$29 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.
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, the APSC, the MPSC, the 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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
LPSC, the APSC, the 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.
In August 2022 the D.C. Circuit Court of Appeals issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found FERC’s use of the Risk Premium model as part of the methodology to be arbitrary and capricious, and remanded the case back to FERC. The remanded case is pending FERC action.
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,issues, 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 renewal of the sale-leaseback arrangements; refunds, if any, for the revenue requirement impact of including 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 Resources, Inc.
Management's Financial Discussion and Analysis
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.
In January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the December 2022 order on sale-leaseback refund issues and future lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the proper 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 December 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 a sixty-day period in which aggrieved parties may petition for federal appellate court review of the underlying FERC orders; however, the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case. In March 2023, System Energy filed in the 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 the 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 to clarify that, consistent with the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its allocation of the 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.
In August 2023 the FERC issued an order addressing arguments raised on rehearing and partially setting aside the prior order (rehearing order). The rehearing order addresses rehearing requests that were filed in January 2023 separately by System Energy and the LPSC, the APSC, and the City Council.
In the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial lease renewal payments,term. With regard to the ALJ determineddepreciation input issue, the rehearing order allows System Energy to offset refunds so that System Energy is recoveringmay collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. The rehearing order further directs System Energy to submit within 60 days of the date of the rehearing order an unjust acquisition premium throughadditional compliance filing to revise the lease renewal payments, and thattotal refunds for these two issues. As discussed above, System Energy’s recovery from customers through rates should be limited toJanuary 2023 compliance filing calculated $103.5 million in total refunds, and 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)refunds were paid in January 2023. In October 2023, System Energy filed its compliance report with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assetsas directed in the cost of service.August 2023 rehearing order. The ALJ did not calculate a valueOctober 2023 compliance report reflected recalculated refunds totaling $35.7 million for the refund expected astwo issues resulting in $67.8 million in refunds that could be recouped by System Energy. As discussed below in “System Energy Settlement with the APSC,” System Energy reached a settlement in principle with the APSC to resolve several pending cases under the FERC’s jurisdiction, including this one, pursuant to which it has agreed not to recoup the $27.3 million calculated for Entergy Arkansas in the compliance filing. Consistent with the compliance filing, in October 2023, Entergy Louisiana and Entergy New Orleans paid recoupment amounts of $18.2 million and $22.3 million, respectively, to System Energy. As a result of this remedy. In addition,the FERC’s rulings on the sale-leaseback and depreciation input issues in the August 2023 rehearing order, in third quarter 2023, System Energy would no longer recoverrecorded a regulatory asset and corresponding regulatory credit of $40 million to reflect the lease paymentsportion of the January 2023 refunds to be recouped from Entergy Louisiana and Entergy New Orleans.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
On the third refund issue identified in rates prospectively. Second, with regard to the liabilities associated withrehearing requests, concerning the decommissioning uncertain tax positions, the ALJ determinedrehearing order denied all rehearing requests, re-affirmed the remedy contained in the December 2022 order, and did not direct System Energy to recalculate refunds or to submit an additional compliance filing. On this issue, as reflected in its January 2023 compliance filing, System Energy believes it has already paid the refunds due under the remedy that the liabilities are accumulated deferred income taxes andFERC outlined for the uncertain tax positions issue in its December 2022 order. In August 2023 the LPSC issued a media release in which it stated that it disagrees with System Energy’s rate base should have been reduceddetermination that the rehearing order requires no further refunds to be made on this issue.
In September 2023, System Energy filed a protective appeal of the rehearing order with the United States Court of Appeals for those liabilities. If the ALJ’s initial decision is upheld,Fifth Circuit. The appeal was consolidated with System Energy’s prior appeal of the estimated refundDecember 2022 order, and both appeals are currently in abeyance.
In September 2023 the LPSC filed with the FERC a request for this issue through September 30, 2022 is approximately $422 million, plus interest, which is approximately $144 million through September 30, 2022.rehearing and clarification of the rehearing order. The ALJ also foundLPSC requests that the FERC reverse its determination in the rehearing order that System Energy should include liabilitiesmay collect an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback, as of the expiration of the initial lease term, as well as its determination in the rehearing order that System Energy may offset the refunds for the depreciation rate input issue and collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. In addition, the LPSC requests that the FERC either confirm the LPSC’s interpretation of the refund associated with the decommissioning 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 shouldor explain why it is 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 $20 million, which includes interest through September 30, 2022.
The ALJ initial decision is an interim step indoing so. In October 2023 the FERC litigation process, and an ALJ’s determinations madeissued a notice that the rehearing request has been deemed denied by operation of law. The deemed denial of the rehearing request initiates the sixty-day period in an initial decision are not controlling onwhich aggrieved parties may petition for federal appellate court review of the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before theunderlying FERC which will review the case and issue an order on the proceeding, andorders; 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 decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.case.
LPSC 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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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, the APSC,recommending refunds and the 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, the APSC, and the 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 of refunds for the accumulated deferred income taxes issues and proposed modifications to the Unit Power Sales Agreement for the executive incentive compensation issues.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 associated with a deemed contract satisfaction and reissuance that occurred190. in 2005. Based on the testimony revisions, the FERC trial staff’s recommended refunds total $106.6 million, exclusive of any tax gross-up or FERC awarded interest. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the changes in 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. The LPSC’s testimony asserts new claims, including that: (1) certain of the sale-leaseback transaction costs may have been imprudently incurred; (2) accumulated deferred income taxes associated with sale-leaseback transaction costs should have been included in rate base; (3) accumulated deferred income taxes associated with federal investment tax credits should have been excluded from rate base; (4) monthly net operating loss accumulated deferred income taxes should have been excluded from rate base; and (5) several categories of proposed rate changes, including executive incentive compensation, air travel, industry dues, and legal costs, also warrant historical refunds. The LPSC’s rebuttal testimony argues that refunds for the alleged tariff violations and other claims must be calculated by rerunning the Unit Power Sales Agreement formula rate; however, it includes estimates of refunds associated with some, but not all, of its claims, totaling $286 million without interest. The City Council’s rebuttal testimony also proposes a new, alternate theory and claim for relief regarding System Energy’s participation in the Entergy System money pool, under which it calculates estimated refunds of approximately $51.7 million. The APSC’s rebuttal testimony agrees with the LPSC’s direct testimony that retained earnings should be adjusted in a comprehensive refund calculation. The testimony quantifies the estimated impacts of three issues: (1) a $1.5 million reduction in the revenue requirement under the Unit Power Sales Agreement if System Energy’s borrowings from the money pool are included in short-term debt; (2) a $1.9 million reduction in the revenue requirement if System Energy’s allocated share of money pool earnings are credited through the Unit Power Sales Agreement; and (3) a $1.9 million reduction in the revenue requirement for every $50 million of refunds ordered in a given year, without interest.
In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony, for the hearing to begin in September 2022, and for the initial decision to be issued in March 2023. In July 2022, System
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Energy filed responsive rebuttal testimony responding toIn May 2022 the new claims inLPSC, the LPSC’sAPSC, and the City Council’sCouncil filed rebuttal testimony.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 JulyDecember 2022, a motion to extend the LPSC filed supplemental rebuttal testimony responding to System Energy’s revised cross-answering testimony,briefing schedule and System Energy filed responsive rebuttal testimony responding to that testimony. In August 2022 the LPSC filed responsive rebuttal testimony to System Energy’s responsive rebuttal testimony. The hearing commenced in September 2022.
LPSC PetitionMay 2023 deadline for Writ of Mandamusthe initial decision was granted.
In AugustNovember 2022, the LPSC filed a petition for a writ of mandamus asking the Fifth Circuit Court of Appeals to order the FERC to act within ninety days on certain pending proceedings, including the Grand Gulf prudence complaint, the return on equity and capital structure complaints, and the Grand Gulf sale-leaseback renewal complaint. In September 2022 the FERC and System Energy filed oppositionsa partial settlement agreement with the APSC, the City Council, and the LPSC that resolved 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 provided that System Energy would 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 provided that if the APSC, the City Council, or the LPSC agrees to the LPSC’s petition, andglobal settlement System Energy entered into with the APSC and MPSC (see “System Energy Settlement with the City CouncilMPSC filed interventions in support of the petition. See Note 2 to the financial statements” in the Form 10-K for further discussion of the complaints.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 addressed 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 was included in the May 2023 service month bills under the Unit Power Sales Agreement.
In May 2023 the presiding ALJ issued an initial decision finding that System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2020 Calendar Year Bills
System Energy’sshould have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power Sales Agreement includes formula rate protocolsbills. Based on this finding, the initial decision recommended refunds; System Energy estimates that providethose refunds for Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans would total approximately $116 million plus $147 million of interest through September 30, 2023. The initial decision also finds that the disclosureUnit Power Sales Agreement should be modified such that a cash working capital allowance of cost inputs, an opportunitynegative $36.4 million is applied prospectively. If the FERC ultimately orders these modifications to cash working capital be implemented, the estimated annual revenue requirement impact is expected to be immaterial. On the other non-settled issues for informal discovery procedures, and a challenge process. In February 2022, pursuantwhich the complainants sought refunds or changes to the protocols procedures,Unit Power Sales Agreement, the LPSC,initial decision ruled against the complainants.
The initial decision is an interim step in the FERC litigation process, and an ALJ’s determination made in an initial decision is not controlling on the FERC. System Energy disagrees with the ALJ’s findings concerning the accumulated deferred income taxes issues and cash working capital. In July 2023, System Energy filed a brief on exceptions to the initial decision’s accumulated deferred income taxes findings. Also in July 2023, the APSC, the MPSC,LPSC, the City Council, and the Mississippi Public Utilities StaffFERC trial staff filed separate briefs on exceptions. The APSC’s brief on exceptions challenges the ALJ’s determinations on the money pool interest and retained earnings issues. The LPSC’s brief on exceptions challenges the ALJ’s determinations regarding the sale-leaseback transaction costs, legal fees, and retained earnings issues. The City Council’s brief on exceptions challenges the ALJ’s determinations on the money pool and cash management issues. The FERC trial staff’s brief on exceptions challenges the ALJ’s determinations on the cash working capital issue as well as certain of the accumulated deferred income taxes issues. In August 2023 all parties filed separate briefs opposing exceptions. System Energy filed a brief opposing the exceptions of the APSC, the LPSC, and the City Council. The APSC, the LPSC, and the City Council filed separate briefs opposing the exceptions raised by System Energy and the FERC trial staff. The FERC trial staff filed its own brief opposing certain exceptions raised by System Energy, the APSC, the LPSC, and the City Council. The case is now pending a decision by the FERC. Refunds, if any, that might be required will become due only after the FERC issues its order reviewing the initial decision.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Grand Gulf Prudence Complaint
As discussed in the Form 10-K, in March 2021, the second of the additional complaints was filed at the FERC by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. In November 2022 the FERC issued an order setting the complaint for settlement and hearing procedures. In February 2023 the FERC issued an order denying rehearing and thereby affirming its order setting the complaint for settlement and hearing procedures. In July 2023 the FERC chief ALJ terminated settlement procedures and appointed a presiding ALJ to oversee hearing procedures. In September 2023 a procedural schedule for hearing procedures was established. Pursuant to that schedule, testimony is due in December 2023 and throughout 2024. The hearing is scheduled to begin in January 2025, with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2020. 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 recording the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made; (3) that the equity ratio chargedpresiding ALJ’s initial decision due in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2020 bills. While System Energy disagrees that any refunds are owed for the 2020 calendar year bills, the formal challenge estimates that the financial impact of the first through fourth allegations is approximately $53 million in refunds, excluding interest which will be calculated after a FERC order is issued; it does not provide an estimate of the financial impact of the fifth allegation.July 2025.
In March 2022,September 2023 the LPSC authorized its staff to file an additional complaint concerning the prudence of System Energy’s operation and management of Grand Gulf in the year 2022. In October 2023 the LPSC, the APSC, and the City Council filed what they styled as an amended and supplemental complaint with the FERC against System Energy, Entergy Services, and Entergy Operations. The amended complaint states that it is being filed an answerfor three primary purposes: (1) to include System Energy’s performance in 2021-2022 in the scope of the hearing; (2) to explicitly allege that System Energy’s inadequate performance, excessive costs, unplanned outages, and costs attributable to safety violations violate the contractual obligation to maintain and operate the plant in accordance with “good utility practice”; and (3) to provide and substantiate allegations concerning the damages attributable to the formal challengealleged breach of contractual obligations. The amended complaint alleges that potentially more than $1 billion in which it requested thatdamages may be due. The current deadline for System Energy and the FERC deny the formal challenge as a matter of law, or else hold the proceedingother named respondents to respond is in abeyance pending the resolution of related dockets.November 2023.
System Energy Settlement with the MPSCAPSC
In June 2022,October 2023, System Energy, Entergy Mississippi,Arkansas, and additional named Entergy parties involved in thirteenmultiple docketed proceedings pending before the FERC filedreached a settlement in principle with the FERC a partial settlement agreement and offer of settlement. The settlement memorializes the Entergy parties’ agreement with the MPSCAPSC to globally resolve all of their actual and potential claims between the Entergy parties and the MPSC associated within those FERC proceedingsdockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement in principle also covers the amended and supplemental complaint, discussed above in “Grand Gulf Prudence Complaint,” filed at the FERC in October 2023. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. System Energy previously settled with the MPSC with respect to these complaints before the FERC. Entergy Mississippi purchases the greatest single amount,has nearly 40% of System Energy’s share of Grand Gulf,Gulf’s output, after its additional purchases from affiliates are considered. The settlement therefore limitssettlements with both the APSC and the MPSC represent almost 65% of System Energy’s overall refund exposure associatedshare of the output of Grand Gulf.
The terms of the settlement in principle align with the identified proceedings because they$588 million global black box settlement reached between System Energy and the MPSC in June 2022 and provide for Entergy Arkansas to receive a black box refund of $142 million from System Energy, inclusive of $50 million already received by Entergy Arkansas from System Energy. In November 2022 the FERC approved the System Energy settlement with the MPSC and stated that the settlement “appears to be fair and reasonable and in the public interest.”
System Energy, Entergy Arkansas, additional Entergy parties, and the APSC intend to file the settlement agreement and supporting materials with the FERC in November 2023. In addition to the black box refund of $142 million described above, beginning with the November 2023 service month, the settlement in principle provides for Entergy Arkansas’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.
If the FERC approves the filed settlement in accordance with its terms, it will be resolved completely as betweenbecome binding upon the Entergy parties and the MPSC.
The FERC proceedings that are resolved as between the Entergy parties and the MPSC include the return on equity and capital structure complaints, the Grand Gulf sale-leaseback renewal complaint and uncertain tax positionAPSC.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
rate base issue, the Unit Power Sales Agreement complaint, and the Grand Gulf prudence complaint, all of which are discussed in Note 2 to the financial statements in the Form 10-K, and updated above. They also include the proceedings concerning System Energy’s return of excess accumulated deferred income taxes after the Tax Cuts and Jobs Act and the proceedings established to address System Energy’s October 2020 and December 2020 Federal Power Act section 205 filings to provide credits to customers related to the IRS’s decision as to the uncertain decommissioning tax position, also as all discussed in Note 2 to the financial statements in the Form 10-K. The settlement also resolves the MPSC’s involvement in the formal challenge filed by the retail regulators of System Energy’s customers in connection with the implementation of the Unit Power Sales Agreement annual formula rate protocols for the 2020 test year, which is discussed above.
The settlement provides for a black-box refund of $235 million from System Energy to Entergy Mississippi, which will be paid within 120 days of the settlement’s effective date (either the date of the FERC approval of the settlement without material modification, or the date that all settling parties agree to accept modifications or otherwise modify the settlement in response to a proposed material modification by the FERC). In addition, beginning with the July 2022 service month, the settlement provides for Entergy Mississippi’s bills from System Energy to be adjusted to reflect: an authorized rate of return on equity of 9.65%, a capital structure not to exceed 52% equity, a rate base reduction for the advance collection of sale-leaseback rental costs, and the exclusion of certain long-term incentive plan performance unit costs from rates.
The settlement is expressly contingent upon the approval of the FERC and the MPSC. It was approved by the MPSC in June 2022. The remaining retail regulators of Entergy’s utility operating company purchasers under the Unit Power Sales Agreement (the APSC, the LPSC, and the City Council) may elect to join the settlement. If all of them elect to do so under the terms of the settlement, then the total black-box refund payment by System Energy would be $588.25 million, and the prospective rate adjustments would apply to all purchasers under the Unit Power Sales Agreement.
If the FERC approves the settlement in accordance with its terms, then it will become binding upon the Entergy parties and the MPSC even if no additional retail regulators elect to join the settlement. The settlement will have no effect on the rights of non-settling parties to the identified FERC proceedings.
System Energy previouslyRegulatory Liability for Pending Complaints
Prior to June 2022, System Energy recorded a provision and associated liability of $37 million for elements of the applicable litigation.complaints against System Energy. In June 2022, as discussed in “System Energy Settlement with the MPSC” in the Form 10-K, System Energy recorded a regulatory charge of $551 million ($413 million net-of-tax), increasing theSystem Energy’s regulatory liability to $588 million, which consistsconsisted of $235 million for the settlement with the MPSC and $353 million for potential future refunds to Entergy Arkansas, Entergy New Orleans, and Entergy Louisiana. The $142 million of refunds for Entergy Arkansas, discussed above in “System Energy Settlement with the APSC” is covered within the $353 million previously recorded. System Energy paid the black-box refund of $235 million to Entergy Mississippi in November 2022. As discussed above in “Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue,” in January 2023 System Energy paid refunds of $103.5 million as a result of the FERC’s order in December 2022 in that proceeding and recouped $40.5 million of the $103.5 million from Entergy Louisiana and Entergy New Orleans.Orleans in October 2023. In August 2022 commentsaddition, as discussed above in “Unit Power Sales Agreement Complaint,” a black-box refund of $18 million was made by System Energy in 2023 in connection with a partial settlement in that proceeding.
Based on analysis of the pending complaints against System Energy and potential future settlement negotiations, in third quarter 2023, System Energy recorded a regulatory charge of $40 million to increase System Energy’s regulatory liability related to complaints against System Energy. System Energy’s remaining regulatory liability related to complaints against System Energy as of September 30, 2023 is approximately $270 million. This regulatory liability is consistent with the settlement were filed byagreements reached with the MPSC and the APSC, as described above, taking into account amounts already refunded.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2021 Calendar Year Bills
In March 2023, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC, the City Council, and the FERC trial staff. The APSC, the LPSC, and the City Council dofiled with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 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 used incorrect inputs for retained earnings that are used to determine the capital structure; (3) that the equity ratio charged in rates was excessive; and (4) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2021 bills. The first, third, and fourth allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 bills. The formal challenge to the calendar year 2021 bills states that the impact of the first allegation is “tens of millions of dollars,” but it does not intendprovide an estimate of the financial impact of the remaining allegations.
In May 2023, System Energy filed an answer to jointhe formal challenge in which it requested that the FERC either deny the formal challenge as a matter of law or hold the proceeding in abeyance pending the resolution of related dockets.
Depreciation Amendment Proceeding
As discussed in Note 2 to the financial statements in the Form 10-K, in December 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to adopt updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses. The proposed amendments would result in higher charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. In February 2022 the FERC accepted System Entergy’s proposed increased depreciation rates with an effective date of March 1, 2022, subject to refund pending the outcome of the settlement but they do not oppose its approval as betweenand/or hearing procedures. In June 2023 System Energy filed with the MPSCFERC an unopposed offer of settlement that it had
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
negotiated with intervenors to the proceeding. In August 2023 the FERC approved the settlement, which resolves the proceeding. In third quarter 2023, System Energy recorded a reduction in depreciation expense of $41 million representing the cumulative difference in depreciation expense resulting from the depreciation rates used from March 2022 through June 2023 and the Entergy parties. The FERC trial staff concludes thatdepreciation rates included in the settlement is fair, reasonable, andfiling approved by the FERC. In October 2023, System Energy filed a refund report with the FERC. The refund provided for in the public interest. Replyrefund report was included in the September 2023 service month bills under the Unit Power Sales Agreement. The deadline for any comments were filed in August 2022.and protests is November 2023.
Pension Costs Amendment Proceeding
In October 2021, System Energy requested an order fromsubmitted to the FERC by November 2022.proposed amendments to the Unit Power Sales Agreement to include in rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Entergy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony will be filed through April 2024, and the hearing is scheduled to begin in May 2024. The presiding ALJ’s initial decision is expected to be due in September 2024.
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.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in 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. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits. The following is an update to that discussion.
In the third quarter 2022, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $5.4 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement obligation cost asset that will be depreciated over the remaining life of the unit.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
| SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
STATEMENTS OF OPERATIONS | STATEMENTS OF OPERATIONS | STATEMENTS OF OPERATIONS |
For the Three and Nine Months Ended September 30, 2022 and 2021 | |
For the Three and Nine Months Ended September 30, 2023 and 2022 | | For the Three and Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
OPERATING REVENUES | OPERATING REVENUES | | OPERATING REVENUES | |
Electric | Electric | | $179,800 | | | $154,319 | | | $485,048 | | | $433,378 | | Electric | | $119,467 | | | $179,800 | | | $429,423 | | | $485,048 | |
| 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 | | 12,125 | | | 15,279 | | | 31,658 | | | 46,211 | | Fuel, fuel-related expenses, and gas purchased for resale | | 18,881 | | | 12,125 | | | 56,511 | | | 31,658 | |
Nuclear refueling outage expenses | Nuclear refueling outage expenses | | 6,483 | | | 6,867 | | | 17,730 | | | 20,377 | | Nuclear refueling outage expenses | | 6,717 | | | 6,483 | | | 20,028 | | | 17,730 | |
Other operation and maintenance | Other operation and maintenance | | 69,719 | | | 54,709 | | | 168,308 | | | 154,716 | | Other operation and maintenance | | 52,623 | | | 69,719 | | | 149,809 | | | 168,308 | |
Decommissioning | Decommissioning | | 10,117 | | | 9,721 | | | 30,050 | | | 28,875 | | Decommissioning | | 10,495 | | | 10,117 | | | 31,173 | | | 30,050 | |
Taxes other than income taxes | Taxes other than income taxes | | 7,430 | | | 7,268 | | | 22,431 | | | 21,061 | | Taxes other than income taxes | | 7,261 | | | 7,430 | | | 22,271 | | | 22,431 | |
Depreciation and amortization | Depreciation and amortization | | 38,742 | | | 25,991 | | | 106,442 | | | 79,953 | | Depreciation and amortization | | (11,597) | | | 38,742 | | | 60,843 | | | 106,442 | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | (8,324) | | | (1,707) | | | 510,667 | | | (7,707) | | Other regulatory charges (credits) - net | | (9,207) | | | (8,324) | | | (48,081) | | | 510,667 | |
TOTAL | TOTAL | | 136,292 | | | 118,128 | | | 887,286 | | | 343,486 | | TOTAL | | 75,173 | | | 136,292 | | | 292,554 | | | 887,286 | |
| OPERATING INCOME (LOSS) | OPERATING INCOME (LOSS) | | 43,508 | | | 36,191 | | | (402,238) | | | 89,892 | | OPERATING INCOME (LOSS) | | 44,294 | | | 43,508 | | | 136,869 | | | (402,238) | |
| OTHER INCOME (DEDUCTIONS) | OTHER INCOME (DEDUCTIONS) | | OTHER INCOME (DEDUCTIONS) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 1,536 | | | 1,546 | | | 6,164 | | | 4,012 | | Allowance for equity funds used during construction | | 1,866 | | | 1,536 | | | 5,289 | | | 6,164 | |
Interest and investment income (loss) | Interest and investment income (loss) | | 3,669 | | | 11,839 | | | (58) | | | 36,871 | | Interest and investment income (loss) | | 2,738 | | | 3,669 | | | 10,140 | | | (58) | |
Miscellaneous - net | Miscellaneous - net | | (9,028) | | | (4,372) | | | (13,408) | | | (14,282) | | Miscellaneous - net | | (1,405) | | | (9,028) | | | (12,096) | | | (13,408) | |
TOTAL | TOTAL | | (3,823) | | | 9,013 | | | (7,302) | | | 26,601 | | TOTAL | | 3,199 | | | (3,823) | | | 3,333 | | | (7,302) | |
| INTEREST EXPENSE | INTEREST EXPENSE | | INTEREST EXPENSE | |
Interest expense | Interest expense | | 9,189 | | | 9,513 | | | 27,782 | | | 28,627 | | Interest expense | | 12,199 | | | 9,189 | | | 36,325 | | | 27,782 | |
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | (246) | | | (261) | | | (982) | | | (678) | | Allowance for borrowed funds used during construction | | (448) | | | (246) | | | (1,239) | | | (982) | |
TOTAL | TOTAL | | 8,943 | | | 9,252 | | | 26,800 | | | 27,949 | | TOTAL | | 11,751 | | | 8,943 | | | 35,086 | | | 26,800 | |
| INCOME (LOSS) BEFORE INCOME TAXES | INCOME (LOSS) BEFORE INCOME TAXES | | 30,742 | | | 35,952 | | | (436,340) | | | 88,544 | | INCOME (LOSS) BEFORE INCOME TAXES | | 35,742 | | | 30,742 | | | 105,116 | | | (436,340) | |
| Income taxes | Income taxes | | 3,385 | | | 8,453 | | | (114,981) | | | 6,851 | | Income taxes | | 8,045 | | | 3,385 | | | 24,115 | | | (114,981) | |
| NET INCOME (LOSS) | NET INCOME (LOSS) | | $27,357 | | | $27,499 | | | ($321,359) | | | $81,693 | | NET INCOME (LOSS) | | $27,697 | | | $27,357 | | | $81,001 | | | ($321,359) | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
(Page left blank intentionally)
| SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS | STATEMENTS OF CASH FLOWS |
For the Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income (loss) | Net income (loss) | | ($321,359) | | | $81,693 | | Net income (loss) | | $81,001 | | | ($321,359) | |
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | | | Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 163,043 | | | 151,345 | | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 141,213 | | | 163,043 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | (129,093) | | | 17,233 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 24,887 | | | (129,093) | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (29,703) | | | (5,216) | | Receivables | | 49,881 | | | (29,703) | |
Accounts payable | Accounts payable | | (7,193) | | | (4,292) | | Accounts payable | | (16,504) | | | (7,193) | |
Taxes accrued | | 9,106 | | | (35,063) | | |
Prepaid taxes and taxes accrued | | Prepaid taxes and taxes accrued | | (5,782) | | | 9,106 | |
Interest accrued | Interest accrued | | (972) | | | (1,557) | | Interest accrued | | 4,571 | | | (972) | |
Other working capital accounts | Other working capital accounts | | (34,961) | | | 5,133 | | Other working capital accounts | | 8,936 | | | (34,961) | |
Other regulatory assets | Other regulatory assets | | (23,107) | | | 71,486 | | Other regulatory assets | | (64,565) | | | (23,107) | |
Other regulatory liabilities | Other regulatory liabilities | | 282,463 | | | 31,909 | | Other regulatory liabilities | | (15,981) | | | 282,463 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (14,704) | | | (20,721) | | Pension and other postretirement liabilities | | (14,484) | | | (14,704) | |
Other assets and liabilities | Other assets and liabilities | | 284,219 | | | (161,274) | | Other assets and liabilities | | (37,983) | | | 284,219 | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 177,739 | | | 130,676 | | Net cash flow provided by operating activities | | 155,190 | | | 177,739 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (132,100) | | | (64,196) | | Construction expenditures | | (80,068) | | | (132,100) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 6,164 | | | 4,012 | | Allowance for equity funds used during construction | | 5,289 | | | 6,164 | |
Nuclear fuel purchases | Nuclear fuel purchases | | (77,707) | | | (27,958) | | Nuclear fuel purchases | | (57,790) | | | (77,707) | |
Proceeds from the sale of nuclear fuel | | 18,845 | | | 21,657 | | |
| Proceeds from sale of nuclear fuel | | Proceeds from sale of nuclear fuel | | 37,104 | | | 18,845 | |
Increase in other investments | | Increase in other investments | | (4) | | | — | |
Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 273,108 | | | 769,979 | | Proceeds from nuclear decommissioning trust fund sales | | 245,386 | | | 273,108 | |
Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (277,916) | | | (770,763) | | Investment in nuclear decommissioning trust funds | | (262,291) | | | (277,916) | |
Changes in money pool receivable - net | Changes in money pool receivable - net | | 70,943 | | | (8,334) | | Changes in money pool receivable - net | | 85,209 | | | 70,943 | |
| Net cash flow used in investing activities | Net cash flow used in investing activities | | (118,663) | | | (75,603) | | Net cash flow used in investing activities | | (27,165) | | | (118,663) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 955,587 | | | 565,610 | | Proceeds from the issuance of long-term debt | | 662,965 | | | 955,587 | |
Retirement of long-term debt | Retirement of long-term debt | | (908,629) | | | (626,010) | | Retirement of long-term debt | | (698,137) | | | (908,629) | |
| Common stock dividends and distributions paid | | — | | | (74,000) | | |
| | Net cash flow provided by (used in) financing activities | Net cash flow provided by (used in) financing activities | | 46,958 | | | (134,400) | | Net cash flow provided by (used in) financing activities | | (35,172) | | | 46,958 | |
| Net increase (decrease) in cash and cash equivalents | | 106,034 | | | (79,327) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | | 92,853 | | | 106,034 | |
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 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $195,235 | | | $163,142 | | Cash and cash equivalents at end of period | | $95,793 | | | $195,235 | |
| 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 | | $30,231 | | | $30,335 | | Interest - net of amount capitalized | | $30,249 | | | $30,231 | |
Income taxes | | $— | | | $39,085 | | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS | BALANCE SHEETS | BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $350 | | | $87 | | Cash | | $1,291 | | | $78 | |
Temporary cash investments | Temporary cash investments | | 194,885 | | | 89,114 | | Temporary cash investments | | 94,502 | | | 2,862 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 195,235 | | | 89,201 | | Total cash and cash equivalents | | 95,793 | | | 2,940 | |
Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | | | |
Associated companies | Associated companies | | 78,528 | | | 118,977 | | Associated companies | | 24,356 | | | 158,601 | |
Other | Other | | 6,212 | | | 7,003 | | Other | | 5,300 | | | 6,145 | |
Total accounts receivable | Total accounts receivable | | 84,740 | | | 125,980 | | Total accounts receivable | | 29,656 | | | 164,746 | |
| Materials and supplies - at average cost | Materials and supplies - at average cost | | 129,376 | | | 127,093 | | Materials and supplies - at average cost | | 160,143 | | | 135,346 | |
Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 40,289 | | | 10,123 | | Deferred nuclear refueling outage costs | | 13,334 | | | 33,377 | |
| Sale-leaseback/depreciation regulatory asset | | Sale-leaseback/depreciation regulatory asset | | 40,267 | | | — | |
Prepayments and other | Prepayments and other | | 4,381 | | | 1,870 | | Prepayments and other | | 5,577 | | | 9,097 | |
TOTAL | TOTAL | | 454,021 | | | 354,267 | | TOTAL | | 344,770 | | | 345,506 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Decommissioning trust funds | Decommissioning trust funds | | 1,086,261 | | | 1,385,254 | | Decommissioning trust funds | | 1,219,196 | | | 1,142,914 | |
TOTAL | TOTAL | | 1,086,261 | | | 1,385,254 | | TOTAL | | 1,219,196 | | | 1,142,914 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 5,413,884 | | | 5,362,494 | | Electric | | 5,479,592 | | | 5,425,449 | |
| Construction work in progress | Construction work in progress | | 94,303 | | | 97,968 | | Construction work in progress | | 105,468 | | | 102,987 | |
Nuclear fuel | Nuclear fuel | | 187,663 | | | 171,438 | | Nuclear fuel | | 138,708 | | | 193,004 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 5,695,850 | | | 5,631,900 | | TOTAL UTILITY PLANT | | 5,723,768 | | | 5,721,440 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 3,419,437 | | | 3,396,136 | | Less - accumulated depreciation and amortization | | 3,467,414 | | | 3,412,257 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 2,276,413 | | | 2,235,764 | | UTILITY PLANT - NET | | 2,256,354 | | | 2,309,183 | |
| 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 | | 418,653 | | | 395,546 | | Other regulatory assets | | 439,419 | | | 415,121 | |
| Other | Other | | 1,773 | | | 1,793 | | Other | | 793 | | | 1,422 | |
TOTAL | TOTAL | | 420,426 | | | 397,339 | | TOTAL | | 440,212 | | | 416,543 | |
| TOTAL ASSETS | TOTAL ASSETS | | $4,237,121 | | | $4,372,624 | | TOTAL ASSETS | | $4,260,532 | | | $4,214,146 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS | BALANCE SHEETS | BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
September 30, 2022 and December 31, 2021 | |
September 30, 2023 and December 31, 2022 | | September 30, 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 | | $250,037 | | | $50,329 | | Currently maturing long-term debt | | $57 | | | $300,037 | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | 25,922 | | | 23,682 | | Associated companies | | 19,125 | | | 21,701 | |
Other | Other | | 59,673 | | | 62,573 | | Other | | 32,022 | | | 58,178 | |
Taxes accrued | Taxes accrued | | 42,024 | | | 32,918 | | Taxes accrued | | 1,815 | | | 7,597 | |
| Interest accrued | Interest accrued | | 10,742 | | | 11,714 | | Interest accrued | | 16,162 | | | 11,591 | |
| Sale-leaseback/depreciation regulatory liability | | Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | Other | | 4,100 | | | 4,101 | | Other | | 4,066 | | | 4,071 | |
TOTAL | TOTAL | | 392,498 | | | 185,317 | | TOTAL | | 73,247 | | | 506,672 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 255,791 | | | 382,931 | | Accumulated deferred income taxes and taxes accrued | | 404,385 | | | 376,070 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 43,614 | | | 43,003 | | Accumulated deferred investment tax credits | | 43,660 | | | 44,692 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 108,662 | | | 113,165 | | Regulatory liability for income taxes - net | | 108,577 | | | 110,840 | |
Other regulatory liabilities | Other regulatory liabilities | | 1,031,910 | | | 744,944 | | Other regulatory liabilities | | 754,803 | | | 665,024 | |
Decommissioning | Decommissioning | | 1,032,276 | | | 1,007,603 | | Decommissioning | | 1,073,634 | | | 1,042,461 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 61,400 | | | 76,104 | | Pension and other postretirement liabilities | | 26,266 | | | 40,750 | |
Long-term debt | Long-term debt | | 538,924 | | | 690,967 | | Long-term debt | | 745,190 | | | 477,868 | |
Other | Other | | 2,045 | | | 37,230 | | Other | | 2 | | | 2 | |
TOTAL | TOTAL | | 3,074,622 | | | 3,095,947 | | TOTAL | | 3,156,517 | | | 2,757,707 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| COMMON EQUITY | COMMON EQUITY | | 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 (accumulated deficit) | | (181,849) | | | 139,510 | | |
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2023 and 2022 | | 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 | | Accumulated deficit | | (56,082) | | | (137,083) | |
TOTAL | TOTAL | | 770,001 | | | 1,091,360 | | TOTAL | | 1,030,768 | | | 949,767 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $4,237,121 | | | $4,372,624 | | TOTAL LIABILITIES AND EQUITY | | $4,260,532 | | | $4,214,146 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | 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 Nine Months Ended September 30, 2022 and 2021 | |
For the Nine Months Ended September 30, 2023 and 2022 | | For the Nine Months Ended September 30, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | Common Equity | | | Common Stock | | Retained Earnings (Accumulated Deficit) | | Total |
| Common Stock | | Retained Earnings (Accumulated Deficit) | | 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 | | |
| Net income | — | | | 30,330 | | | 30,330 | | |
Common stock dividends and distributions | — | | | (5,000) | | | (5,000) | | |
Balance at June 30, 2021 | 951,850 | | | 156,890 | | | 1,108,740 | | |
| Net income | — | | | 27,499 | | | 27,499 | | |
Common stock dividends and distributions | — | | | (48,000) | | | (48,000) | | |
Balance at September 30, 2021 | $951,850 | | | $136,389 | | | $1,088,239 | | |
| | | | | | | | (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 | |
| Net loss | Net loss | — | | | (380,148) | | | (380,148) | | Net loss | — | | | (380,148) | | | (380,148) | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | 951,850 | | | (209,206) | | | 742,644 | | Balance at June 30, 2022 | 951,850 | | | (209,206) | | | 742,644 | |
| Net income | Net income | — | | | 27,357 | | | 27,357 | | Net income | — | | | 27,357 | | | 27,357 | |
| Balance at September 30, 2022 | Balance at September 30, 2022 | $951,850 | | | ($181,849) | | | $770,001 | | Balance at September 30, 2022 | $951,850 | | | ($181,849) | | | $770,001 | |
| | 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 | |
| Net income | | Net income | — | | | 25,759 | | | 25,759 | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | 1,086,850 | | | (83,779) | | | 1,003,071 | |
| Net income | | Net income | — | | | 27,697 | | | 27,697 | |
| Balance at September 30, 2023 | | Balance at September 30, 2023 | $1,086,850 | | | ($56,082) | | | $1,030,768 | |
| 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 factors 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 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.
Recent U.S. tax legislation may materially adversely affect Entergy’s financial condition, results of operations, and cash flows.
The Tax Cuts and Jobs Act of 2017, CARES Act of 2020, and the Inflation Reduction Act of 2022 significantly changed the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, reducing the federal corporate income tax rate, limiting interest deductions, altering the expensing of capital expenditures, enacting a new corporate alternative minimum tax, and expanding federal tax credits for clean energy production. The interpretive guidance issued by the IRS and state tax authorities may be inconsistent with Entergy’s own interpretation and the legislation could be subject to amendments, which could lessen or increase certain impacts of the legislation. In addition, the retail regulatory treatment of the expanded tax credits and corporate alternative minimum tax could materially impact Entergy’s future cash flows, and this legislation could result in unintended consequences not yet identified that could have a material adverse impact on Entergy’s financial results and future cash flows.
The tax rate decrease included in the Tax Cuts and Jobs Act required Entergy to record a regulatory liability for income taxes payable to customers. Such regulatory liability for income taxes is described in Note 3 to the financial statements in the Form 10-K. Depending on the outcome of IRS examinations or tax positions and elections that Entergy may make, Entergy and the Registrant Subsidiaries may be required to record additional charges or credits to income tax expense.
Based on current information and forecasts, Entergy and the Registrant Subsidiaries may be subject to the corporate alternative minimum tax included in the Inflation Reduction Act of 2022 beginning in 2026.
See Note 3 to the financial statements in the Form 10-K for discussion of the effects of the Tax Cuts and Jobs Act on 2019, 2020, and 2021 results of operations and financial condition, the provisions of the Tax Cuts and Jobs Act, and the uncertainties associated with accounting for the Tax Cuts and Jobs Act, and Note 2 to the financial statements in the Form 10-K for discussion of the regulatory proceedings that have considered the effects of the Tax Cuts and Jobs Act. See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the effects of the Inflation Reduction Act of 2022.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition, and liquidity.
Entergy and its subsidiaries make judgments regarding the potential tax effects of various transactions and results of operations to estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use, and employment-related taxes. These judgments include provisions for potential adverse outcomes regarding tax positions that have been taken. Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards for which the benefits have already been reflected in the financial statements. Changes in federal, state, or local tax laws, adverse tax audit results or adverse tax rulings on positions taken by Entergy and its subsidiaries could negatively affect Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition, and liquidity. The intended and unintended consequences of recently enacted legislation could have a material adverse impact on Entergy’s financial results and future cash flows. For further information regarding Entergy’s income taxes, see Note 10 to the financial statements herein and Note 3 to the financial statements in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (a)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | Maximum $Dollar Amount of Shares that May Yet be Purchased Under a Plan (b) |
| | | | | | | | |
7/01/2022-7/2023-7/31/20222023 | | — | | | $— | | | — | | | $350,052,918 | |
8/01/2022-8/2023-8/31/20222023 | | — | | | $— | | | — | | | $350,052,918 | |
9/01/2022-9/2023-9/30/20222023 | | — | | | $— | | | — | | | $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 share repurchase program 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
Rule 10b5-1 Trading Agreements
During the three months ended September 30, 2023, no director or officer of Entergy or any of the Registrant Subsidiaries adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as each term is defined in Item 408(a) of Regulation S-K.
Regulation of the Nuclear Power Industry
Following is an updateThe following are updates to the “Regulation of the Nuclear Power Industry” section of Part I, Item 1 of the Form 10-K.
Nuclear Waste Policy Act of 1982
Nuclear Plant Decommissioning
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.
NRC Reactor Oversight Process
In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until2022 and also corrected a subsequent radiation monitor calibration issue. In May 2023 the NRC conductscompleted a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.2 and Waterford 3 was returned to Column 1.
In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. In August 2023 the NRC issued a finding and notice of violation related to a radiation monitor calibration issue at River Bend. River Bend will remain in Column 2 pending successful completion of supplemental inspections related to both issues.
Environmental Regulation
FollowingThe following are updates 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. FollowingThe following are updates to that discussion.
Hazardous Air Pollutants
TheAs discussed in the Form 10-K, 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 2022April 2023 the EPA issued a regulatory proposal to revise portions of the MATS rule, including a proposed rule revokingreduction to the 2020 ruleemission limit for filterable particulate matter. If finalized, the proposed lower filterable particulate matter emission limitation could require additional capital investment and/or additional other operation and determining, again, that itmaintenance expenditures at Entergy’s coal-fired generating units. Entergy 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 monitorclosely monitoring this situation.rulemaking, in part through its various trade associations.
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 Federal Implementation Plan (FIP), known as the EPA published a ruleGood Neighbor Plan, to address interstate transport for the 2015 ozone NAAQS 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, the ruleThe FIP 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 FIP. 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. Fifteen Entergy-owned units, totaling approximately 9,370 MW of total unit capacity, are identified by the EPA for selective catalytic reduction retrofits. If all of these units were retrofitted as proposed, the EPA estimates that the capital cost is expectedPrior to be approximately $1.6 billion. Additionally, 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 significantly, reaching $40,000 per allowance in late June 2022. Comments on the proposed rule were due in June 2022. MISO, other impacted regional transmission organizations, and various state public service commissions all filed comments expressing reliability concerns if the rule is finalized as proposed. Entergy filed individual comments which assert, in addition to other issues, that the EPA’s proposal represents over-controlissuance of the Entergy unitsFIP, in Arkansas and Mississippi; the EPA should consider an alternative approach or provide flexibility for units with a limited remaining useful life; the EPA should consult with regional transmission organizations to determine the reliability impacts of the proposed rule; and the EPA should consider and incorporate current economic trends, including inflation, into any benefit-costs analysis supporting the rule.
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 prepare State Implementation Plans (SIPs) by July 31, 2021 which the Arkansas Department of Energy and Environment, Division of Environmental Quality (ADEQ) did not meet, but has since submitted it to the EPA for review. 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 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.
In August 2022February 2023 the EPA issued findings of failure to submit regional haze SIPs to 15related State Implementation Plan (SIP) disapprovals for many states, including the four states in which the Utility operating companies operate, and these SIP disapprovals are the subject of many legal challenges, including a petition for review filed by Entergy Louisiana challenging the disapproval of Louisiana’s SIP. Stays of the SIP disapprovals have been granted in all four states in which the Utility operating companies operate, and Mississippi. These findings were effective September 2022 and start the two-year period forGood Neighbor Plan will not go into effect while the EPAstays are in place. Decisions on the merits regarding the SIP disapprovals are not expected until 2024. The final FIP also is subject to either approve a SIP submitted by the state or issue a final federal plan.numerous legal challenges.
Greenhouse Gas Emissions
As discussed in the Form 10-K, in July 2019In May 2023 the EPA released the Affordable Clean Energy Rule (ACE), which applies only to existing coal-fired electric generating units. The ACE determines that heat rate improvements are the best system of emission reductions and lists six candidate technologies for consideration by states at each coal unit. The rule and associated rulemakings by the EPA replace the Obama administration’s Clean Power Plan, which established national emissions performance rates for existing fossil-fuel fired steam electric generating units and combustion turbines. The ACE rule provides states discretion in determining how the best system for emission reductions applies to individual units, including through the consideration of technical feasibility and the remaining useful life of the facility. In January 2021 the U.S. Court of Appeals for the D.C. Circuit vacated ACE. The court held that ACE relied on an incorrect interpretation of the Clean Air Act that the statute expressly forecloses emission reduction approaches, such as emissions trading and generating shifting, that cannot be applied at and to the individual source. The court remanded ACE to the EPA for further consideration and also vacated the repeal of the Clean Power Plan. In March 2021 the D.C. Circuit issued a partial mandate vacating the ACE rule, but withheld the mandate vacating the repeal of the Clean Power Plan pending the EPA’s new rulemaking to regulate greenhouse gas emissions. Thus, there currently is no regulation in place with respect toproposed several rules regulating greenhouse gas emissions from new and existing electric(coal and gas-fired) power plants. If finalized, the proposed requirements for existing “large and frequently used” gas turbine generating units and states are not expected to take further action to develop and submit plans at this time. In October 2021 the United States Supreme Court agreed to hear a challenge to the already vacated ACE rule. In June 2022 the United States Supreme Court held that the EPA could not use generation shifting as the best system ofrequire significant investments in carbon dioxide (CO2) emission reduction under Section 111(d)technologies at certain of Entergy’s existing gas turbine units with a capacity of greater than 300 MW per combustion turbine and which operate at an annual capacity factor of greater than 50 percent. Comments on the Clean Air Act. The EPA does still haveproposed rules were due in August 2023 and Entergy is monitoring the authority to regulate greenhouse gas emissions, but those emissions reductions must be technology based. The EPA has announcedrulemaking, in part through its intent to propose a rule for existing power plants pursuant to the Clean Air Act by March 2023. The ultimate impact of the United States Supreme Court's decision cannot be determined at this time.trade associations.
Federal Jurisdiction of Waters of the United States
InAs discussed in the Form 10-K, in June 2020 the EPA’s revised definition of waters of the United States in the Navigable Waters Protection Rule (NWPR) became effective, narrowing the scope of Clean Water Act jurisdiction, as compared to a 2015 definition which had been stayed by several federal courts. In August 2021 a federal district court vacated and remandedDecember 2022 the NWPR for further consideration. The EPA and the U.S. Army Corps of Engineers (Corps) subsequently issuedreleased a statement that the agencies would revert to pre-2015 regulations pending a new rulemaking. In December 2021, the EPA and the Corps proposed a revisedfinal definition of waters of the United States by repealing(2022 Rule) that replaces the NWPR and codifyingwith a definition that reflectsis consistent with the pre-2015 regulatory regime as interpreted by several United States Supreme Court decisions. The 2022 Rule was subject to multiple legal challenges and was enjoined from implementation or enforcement throughout Entergy’s service territory. In May 2023 the U.S. Supreme Court issued a decision limiting the scope of federal jurisdiction over wetlands and in September the EPA and the Corps issued a final rule incorporating the Supreme Court decision. Most notably, the exclusion for waste treatment systems is retained.
Coal Combustion Residuals
As discussed in the Form 10-K, in April 2015 the EPA published the final coal combustion residuals (CCR) rule. In May 2023 the EPA released a proposed rule establishing management standards for legacy CCR surface impoundments (i.e., inactive surface impoundments at inactive power plants) and establishing a new class of units referred to as CCR management units (i.e., non-containerized CCR located at a regulated CCR facility). Entergy does not have any legacy impoundments; however, the proposed definition of CCR management units appears to regulate on-site areas where CCR was beneficially used. This is contrary to the current CCR rule which exempts beneficial uses that meet certain criteria. Comments on the proposed rule were due in February 2022. In January 2022, despite pendingJuly 2023 and Entergy is monitoring the rulemaking, the United States Supreme Court agreed to hear a case regarding the proper test underin part through its trade associations.
previous Supreme Court decisions for determining jurisdiction of waters of the United States. The EPA intends to complete the rulemaking in two phases: finalize the December 2021 proposal and then issue a subsequent rulemaking that refines the rule as necessary based on the United States Supreme Court’s decision.
Retail Rate Regulation
The following replaces the information provided in footnote (b) to the table providing rate base and other information in the “Retail Rate Regulation” section of Part I, Item 1 of the Form 10-K relating to the Entergy Louisiana (electric) rate base amount of $13.6 billion: (b) Based on December 31, 2020 test year and includes approximately $800 million for the Lake Charles Power Station and excludes $300 million for the Washington Parish Energy Center, included in the capacity rider, $100 million of transmission plant investment, included in the transmission rider, and $300 million of distribution investment, included in the distribution rider.
Item 6. Exhibits
| | | | | | | | |
| 4(a) - | |
| | |
| 4(b) - | |
| | |
| 4(c) - | |
| | |
| 4(d) - | |
| | |
| 4(e) - | Officer’s Certificate No. 20-B-15, dated August 22, 2022,8, 2023, supplemental to Indenture, Deed of Trust and Security Agreement, of Entergy Texas, dated as of October 1, 2008, establishing the termsbetween Entergy Texas and The Bank of Entergy Texas's First Mortgage Bonds, 5.00% SeriesNew York Mellon, as trustee (4.74 to Form 8-K filed August 25, 202211, 2023 in 1-34360). |
| | |
| *10(a) - | |
| | |
| *10(b) - | |
| | |
| *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/ Reginald T. Jackson |
Reginald T. Jackson Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) |
Date: November 3, 20222, 2023