UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| (Mark One) | |
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20232024
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from ____________ to ____________ |
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Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | |
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. |
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| 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 |
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| 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 |
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| 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 |
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| 1-31508 | ENTERGY MISSISSIPPI, LLC | | | |
| (a Texas limited liability company) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 | | | |
| 83-1950019 | | | |
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Securities registered pursuant to Section 12(b) of the Act:
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| Registrant | Title of Class | Trading
Symbol | Name of Each Exchange
on Which Registered |
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| Entergy Corporation | Common Stock, $0.01 Par Value | ETR | New York Stock Exchange |
| Common Stock, $0.01 Par Value | ETR | NYSE Chicago, Inc. |
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| Entergy Arkansas, LLC | Mortgage Bonds, 4.875% Series due September 2066 | EAI | New York Stock Exchange |
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| Entergy Louisiana, LLC | Mortgage Bonds, 4.875% Series due September 2066 | ELC | New York Stock Exchange |
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| Entergy Mississippi, LLC | Mortgage Bonds, 4.90% Series due October 2066 | EMP | New York Stock Exchange |
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| 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 |
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| 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.Act.
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| 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 ☑
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| Common Stock Outstanding | | Outstanding at April 28, 202330, 2024 |
| Entergy Corporation | ($0.01 par value) | 211,446,651213,536,936 |
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, 2022,2023, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
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| Part I. Financial Information |
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| Entergy Corporation and Subsidiaries | |
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| Notes to Financial Statements | |
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| Entergy Arkansas, LLC and Subsidiaries | |
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| Entergy Louisiana, LLC and Subsidiaries | |
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| Entergy Mississippi, LLC and Subsidiaries | |
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Entergy Mississippi,New Orleans, LLC and Subsidiaries | |
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Entergy New Orleans, LLC and Subsidiaries | |
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| Entergy Texas, Inc. and Subsidiaries | |
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| System Energy Resources, Inc. | |
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| Part II. Other Information |
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FORWARD-LOOKING INFORMATION
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, 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, each 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, market design 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, delays in developing or interconnecting new generation or other resources or other adverse effects arising from the volume of requests in the MISO transmission interconnection queue, 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);
FORWARD-LOOKING INFORMATION (Continued)
•the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s utility system, including its 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, particularly given the recent and ongoing significant growth in liquified natural gas exports and the associated significantly increased demand for natural gas and resulting increase in natural gas prices, 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, waste management and disposal, 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, including as a result of prolonged litigation over proposed legislation or regulatory 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, wildfires, or other weather events and the recovery of costs associated with restoration, including accessingthe ability to access 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, drought 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 by completing projects timely and within budget, to obtain the anticipated performance or other benefits of such capital projects, and to manage its capital and operation and maintenance costs;
•the effects of supply chain disruptions, including those originating during the COVID-19 global pandemic or driven by geopolitical developments or 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;
FORWARD-LOOKING INFORMATION (Continued)
•changes to federal income tax laws, regulations, and interpretive guidance, including the Inflation Reduction Act of 2022 and the continued impact of the Tax Cuts and Jobs Act of 2017, and any related intended or unintended consequences on financial results and future cash flows;
•the effects of Entergy’s strategies to reduce tax payments;
FORWARD-LOOKING INFORMATION (Concluded)
•the effect of increased interest rates and other 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;
•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 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 assess, implement, and manage new or emerging technologies, including its ability to maintain and protect personally identifiable information while doing so, (ii) the emergence of artificial intelligence (including machine learning), which may present ethical, security, legal, operational, or regulatory challenges, (iii) 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)(iv) 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 increase its carbon-free energy capacity and 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-attackscyber 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;
•impacts of perceived or actual cybersecurity or data security threats or events on Entergy and its subsidiaries, its vendors, suppliers or other third parties interconnected through the grid, which could, among other things, result in disruptions to its operations, including but not limited to, the loss of operational control, temporary or extended outages, or loss of data, including but not limited to, sensitive customer, employee, financial or operations data;
•the effects of a catastrophe, pandemic (or other health-related event), or a global or geopolitical event or pandemic, such as the ongoing COVID-19 global pandemic and the military activities between Russia and Ukraine, or Israel and Hamas, including resultant economic and societal disruptions; fuel procurement 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, 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;
FORWARD-LOOKING INFORMATION (Concluded)
•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 benefits 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:
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| Abbreviation or Acronym | Term |
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| ALJ | Administrative Law Judge |
| ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas |
| APSC | Arkansas Public Service Commission |
| ASU | Accounting Standards Update issued by the FASB |
| Board | Board of Directors of Entergy Corporation |
| Cajun | Cajun Electric Power Cooperative, Inc. |
| capacity factor | Actual plant output divided by maximum potential plant output for the period |
| City Council | Council of the City of New Orleans, Louisiana |
| 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 |
| 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 | Prior to January 1, 2023, one of Entergy’s reportable business segments consisting of non-utility business activities 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. In 2022 Entergy completed its multi-year strategy to exit the merchant nuclear power business and upon completion of all transition activities, effective January 1, 2023, Entergy Wholesale Commodifies is no longer a reportable segment.customers |
| EPA | United States Environmental Protection Agency |
| FASB | Financial Accounting Standards Board |
| FERC | Federal Energy Regulatory Commission |
GAAP | Generally Accepted Accounting Principles |
| Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, 20222023, 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 |
| Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), previously owned as part of Entergy’s non-utility business, which ceased power production in April 2020 and was sold in May 2021 |
DEFINITIONS (Continued)
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| Abbreviation or Acronym | Term |
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GWhIndian Point 3 | Gigawatt-hour(s)Unit 3 of Indian Point Energy Center (nuclear), previously owned as part of Entergy’s non-utility business, 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,ceased power production in April 2021 and 7% by Entergy Power, LLCwas 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) |
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 EAM 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 as part of Entergy’s non-utility business, which ceased power production in May 2022 and was sold in June 2022 |
| Parent & Other | The portions of Entergy not included in the Utility segment, primarily consisting of the activities of the parent company, Entergy Corporation, and other business activity, including Entergy’s non-utility operations business which owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers and also provides decommissioning services to nuclear power plants owned by non-affiliated entities in the United States |
| PPA | Purchased power agreement or power purchase agreement |
| PUCT | Public Utility Commission of Texas |
| Registrant Subsidiaries | Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. |
| River Bend | River Bend Station (nuclear), owned by Entergy Louisiana |
| SEC | Securities and Exchange Commission |
| System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016. |
| System Energy | System Energy Resources, Inc. |
| 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)
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Abbreviation or AcronymUtility | Term |
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Utility | Entergy’s businessreportable 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 as a part of Entergy’s non-utility business, which ceased power production in December 2014 and was disposed of in January 2019 |
DEFINITIONS (Concluded)
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| Abbreviation or Acronym | Term |
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| 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 |
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ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through a single reportable segment, Utility. The Utility 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 in portions of Louisiana.
See “
As discussed in Note 13 to the financial statements” in the Form 10-K for discussion of the planned sale of the Entergy completed its multi-year strategy to exit the merchant nuclear power business in 2022New Orleans 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 first quarter 2022 to reflect the change in reportable segments. The change in reportable segments had no effect on Entergy’s consolidated financial statements or historical segment financial information for the Utility reportable segment. Louisiana gas distribution businesses.
See Note 7 to the financial statements herein for discussion of and financial information regarding Entergy’s business segments.segment.
Results of Operations
First Quarter 20232024 Compared to First Quarter 20222023
Following are income statement variances for Utility, Parent & Other, and Entergy comparing the first quarter 20232024 to the first quarter 20222023 showing how much the line item increased or (decreased) in comparison to the prior period:period.
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Utility | | | |
Utility | | Parent &
Other (a) | |
Entergy |
| | (In Thousands) | | | | (In Thousands) |
| 2023 Net Income (Loss) Attributable to Entergy Corporation | |
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Utility | | Parent &
Other (a) | |
Entergy |
| | (In Thousands) |
| 2022 Net Income (Loss) Attributable to Entergy Corporation | | $340,462 | | | ($64,062) | | | $276,400 | |
| | Operating revenues | |
| Operating revenues | |
| Operating revenues | Operating revenues | | 219,836 | | | (116,702) | | | 103,134 | |
| Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | 247,680 | | | (16,234) | | | 231,446 | |
| Purchased power | Purchased power | | (36,976) | | | 5,638 | | | (31,338) | |
| Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | 52,098 | | | — | | | 52,098 | |
| Other operation and maintenance | Other operation and maintenance | | (8,723) | | | (38,563) | | | (47,286) | |
| Asset write-offs, impairments, and related charges (credits) | | — | | | (744) | | | (744) | |
| Asset write-offs, impairments, and related charges | |
| Taxes other than income taxes | Taxes other than income taxes | | 14,132 | | | (8,843) | | | 5,289 | |
| Depreciation and amortization | Depreciation and amortization | | 22,152 | | | (7,208) | | | 14,944 | |
| | Other income | | 10,763 | | | 4,634 | | | 15,397 | |
| Other income (deductions) | |
| Other income (deductions) | |
| Other income (deductions) | |
| Interest expense | Interest expense | | 19,004 | | | 5,208 | | | 24,212 | |
| Other expenses | Other expenses | | 7,706 | | | (25,030) | | | (17,324) | |
| Income taxes | Income taxes | | (141,485) | | | (3,987) | | | (145,472) | |
| Preferred dividend requirements of subsidiaries and noncontrolling interests | Preferred dividend requirements of subsidiaries and noncontrolling interests | | (1,829) | | | — | | | (1,829) | |
| | 2023 Net Income (Loss) Attributable to Entergy Corporation | | $397,302 | | | ($86,367) | | | $310,935 | |
| 2024 Net Income (Loss) Attributable to Entergy Corporation | |
| 2024 Net Income (Loss) Attributable to Entergy Corporation | |
| 2024 Net Income (Loss) Attributable to Entergy Corporation | |
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
First quarter 2024 results of operations include: (1) a $132 million ($97 million net-of-tax) charge, recorded at Utility, to reflect the write-off of a previously recorded regulatory asset as a result of an adverse decision in the Entergy Arkansas opportunity sales proceeding in March 2024; and (2) a $78 million ($57 million net-of-tax) regulatory charge, recorded at Utility in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS audit. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. See Note 10 to the financial
Entergy Corporation and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
statements herein for discussion of the April 2024 settlement in principle and Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
First quarter 2023 results of operations include a $129 million reduction in income tax expense as a result of the Hurricane Ida securitization in March 2023, which also resulted in a $103 million ($76 million net-of-tax) regulatory charge, recorded at Utility, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued as part of the securitization regulatory proceeding. See NoteNotes 2 and 3 to the financial statements hereinin the Form 10-K for further discussion of the Entergy Louisiana March 2023 storm cost securitization.
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $2,7282,948 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 161 (223) | |
Retail electric price | 86 | |
| Storm restoration carrying costs | 31 (31) | |
Return of unprotected excess accumulated deferred income taxes to customers | 17 | |
| Volume/weather | (75)19 | |
2023Retail electric price | 59 | |
| 2024 operating revenues | $2,9482,772 | |
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.
Storm restoration carrying costs represent the equity component of storm restoration carrying costs recognized by Entergy Louisiana as part of its March 2023 storm cost securitization. See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Louisiana March 2023 storm cost securitization.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales, partially offset by a decrease in commercial and industrial usage. The decrease in industrial usage is primarily due to a decrease in demand from cogeneration customers.
The retail electric price variance is primarily due to:
•an increase in Entergy Arkansas’s formula rate plan rates effective January 2023;2024;
•an increase in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2022;2023;
•increasesan increase in Entergy Mississippi’s formula rate plan rates effective April 20222023; and August 2022;
•an increase in Entergy New Orleans’s formula rate planTexas’s base rates effective September 2022; and
•an increase in the transmission cost recovery factor rider effective March 2022 at Entergy Texas.June 2023.
See Note 2 to the financial statements in the Form 10-K for further discussion of the regulatory proceedings discussed above.
Storm restoration carrying costs represents the $31 million equity component of storm restoration carrying costs at Entergy Louisiana, recorded in first quarter 2023, recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization.
The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In the first quarter of 2022, $17 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes for Entergy or the Registrant Subsidiaries for the three
Entergy Corporation and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
months ended March 31, 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 volume/weather variance is primarily due to the effect of less favorable weather on residential sales.
Total electric energy sales for Utility for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 7,276 | | | 8,454 | | | (14) | |
| Commercial | Commercial | 6,248 | | | 6,271 | | | — | |
| Industrial | Industrial | 12,740 | | | 12,496 | | | 2 | |
| Governmental | Governmental | 577 | | | 584 | | | (1) | |
| Total retail | Total retail | 26,841 | | | 27,805 | | | (3) | |
| Sales for resale | Sales for resale | 4,502 | | | 3,641 | | | 24 | |
| Total | Total | 31,343 | | | 31,446 | | | — | |
See Note 1312 to the financial statements herein for additional discussion of operating revenues.
Other Income Statement Items
Utility
Other operation and maintenance expenses decreasedincreased from $628 million for the first quarter 2022 to $620 million for the first quarter 2023 to $681 million for the first quarter 2024 primarily due to:
•an increase of $10 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•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 included the reimbursement of approximately $10 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation;
•an increase of $9 million in power delivery expenses primarily due to higher vegetation maintenance costs due to timing and higher readiness and response costs;
•an increase of $9 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $7 million in non-nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2024 as compared to 2023; and
•several individually insignificant items.
Asset write-offs, impairments, and related charges includes a $132 million ($97 million net-of-tax) charge to reflect the write-off, at Entergy Arkansas, of a previously recorded regulatory asset as a result of an adverse decision in the Entergy Arkansas opportunity sales proceeding in March 2024. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to:
•additions to plant in service;
•the recognition of $14 million in depreciation expense in first quarter 2024 at Entergy Texas for the 2022 base rate case relate back period, effective over six months beginning January 2024. The recognition of
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
depreciation expense for the relate back period is effective over the same period as collections from the relate back surcharge rider and results in no effect on net income; and
•an increase in depreciation rates at Entergy Texas, effective June 2023.
The increase was partially offset by a reduction in depreciation expense 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 in the Form 10-K for discussion of the Unit Power Sales Agreement depreciation amendment proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case at Entergy Texas.
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 in the Form 10-K for discussion of the Entergy Louisiana March 2023 storm cost securitization; and
•a regulatory charge of $78 million, recorded by Entergy New Orleans in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS audit.See Note 10 to the financial statements herein for discussion of the April 2024 settlement in principle and Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
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 increased primarily due to:
•changes in decommissioning trust fund activity, including portfolio rebalancing of decommissioning trust funds in first quarter 2024;
•an increase of $24 million in intercompany dividend income from affiliated preferred membership interests related to storm 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;
•a decrease of $17 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation expense in the first quarter 2023, lower healthcare claims activity in 2023, and a decrease in net periodic pension and other postretirement benefitsnon-service costs as a result of an increasepension settlement charges recorded in first quarter 2023 and a reduction in the discount rates usedamortization of deferred pension losses as a result of an amendment to valuea qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the benefit liabilities.amortization period for deferred losses. 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 $12$15 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs; and
•the effects of recording a final judgment in 2023 to resolve claims in the ANO damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $10 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.
The decrease was partially offset by:
•an increase of $18 million in insurance expenses primarily due to lower nuclear insurance refunds;
•an increase of $5 million in nuclear generation expenses primarily due to a higher scope of work performed in 2023 as compared to prior year and higher nuclear labor costs; and
•an increase of $5 million in power delivery expenses primarily due to higher reliability costs and higher metering costs, partially offset by lower vegetation maintenance costs.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in franchise taxes, partially offset by decreases in employment taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service and updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement, effective March 1, 2022, subject to refund. See Note 2 to the financial statements in the Form 10-K for further discussion of the Unit Power Sales Agreement.
Other regulatory charges (credits) - net includes a regulatory charge, of $103 million, recorded by Entergy Louisiana in first quarter 2023, to reflect its obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization. In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.
Other income increased primarily due to:
•an increase of $24 million in intercompany dividend income. The increase in intercompany dividend income results from the May 2022 Entergy Louisiana storm trust I investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary; and
•an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023.
The increase was partially offset by:
•a $15 million charge at Entergy Louisiana for the LURC’s 1% beneficial interest in the storm trust II established as part of the Entergy Louisiana March 2023 storm securitization; andcost securitization.
•an increase in net periodic pension and other postretirement benefits non-service pension costs primarily due to settlement charges recorded in 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 pension and other postretirement benefits costs.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Entergy Louisiana securitizations.March 2023 storm cost securitization.
Interest expense increased primarily due to:
•the issuance by Entergy Arkansas of $425 million of 5.15% Series mortgage bonds in January 2023;
•the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022; and
•to the issuance by Entergy Texas of $325$350 million of 5.00%5.80% Series mortgage bonds in August 2022.2023.
Entergy Corporation and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Parent and Other
Operating revenuesOther income 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 expenses from Palisades, after it was shut down in May 2022.
Taxes other than income taxes decreased primarily due to decreases in employment taxes primarily 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 increased primarily due to losses on Palisades decommissioning trust fund investments in 2022, higher non-service pension income, and lower charitable contributions in 2023, substantially offset by the elimination for consolidation purposes of intercompany dividend income of $24 million from affiliated preferred membership interests, as discussed above.
Interest expense increased primarily due to higher commercial paper balances. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 64 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.
Other expenses decreased primarily due to the absence of decommissioning expense and nuclear refueling outage expense as a result of the sale of Palisades in June 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.Entergy’s commercial paper program.
Income Taxes
The effective income tax rate was 21.5% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of 21% was primarily due to the amortization of state accumulated deferred income taxes as a result of tax rate changes, a provision for uncertain tax positions, and 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 rate was (33.8%) for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. See Notes 2 and 10 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm securitization under Act 293.
The effective income tax rate was 19.2% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.Entergy Louisiana March 2023 storm cost securitization under Act 293.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” in the Form 10-K for discussion of income tax legislation and regulation. The following is an update to that discussion.
Entergy Arkansas, Entergy Louisiana, and System Energy have the potential to generate zero-emission nuclear power production tax credits for electricity generated by their respective nuclear power facilities. Based on guidance provided by the United States Treasury Department and the IRS, the production tax credits will be calculated by multiplying the kWh of qualifying electricity by $0.003, with the value of the credits decreasing ratably, or phasing out, once the annual gross receipts from the sale of nuclear power exceed a certain threshold. If certain prevailing wage requirements are satisfied, the calculation of the credit, as described in the preceding sentence, is multiplied by a factor of five. Additional guidance is needed from the United States Treasury Department and/or the IRS to determine how the value of these credits will be calculated for power generated from nuclear facilities of rate-regulated utilities. Due to the uncertainty of value, if any, of credits Entergy Arkansas, Entergy Louisiana, or System Energy may receive, no credits have been recognized for the nuclear power produced during first quarter 2024. If credits are recognized in future periods, the value of such credits is expected to be shared with customers. As such, recognition of production tax credits is not expected to have a material effect on the results of operations of Entergy, Entergy Arkansas, Entergy Louisiana, or System Energy.
Entergy Wholesale Commodities Exit from the Merchant Power Business
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K for discussion of the Inflation Reduction Act of 2022.exit from the merchant power business.
Entergy Corporation and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Planned Sale of Gas Distribution Businesses
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Planned Sale of Gas Distribution Businesses” in the Form 10-K for discussion of the planned sale of Entergy New Orleans’s and Entergy Louisiana’s gas distribution businesses.
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.
Capital Structure and Resources
Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2023 is primarily due to the net issuance of debt in 2023.2024.
| | March 31,
2023 | | December 31,
2022 |
| March 31,
2024 | | | March 31,
2024 | | December 31,
2023 |
| Debt to capital | Debt to capital | 67.4 | % | | 66.9 | % | Debt to capital | 65.8 | % | | 63.8 | % |
| Effect of excluding securitization bonds | Effect of excluding securitization bonds | (0.2 | %) | | (0.3 | %) | Effect of excluding securitization bonds | (0.2 | %) | | (0.3 | %) |
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 67.2 | % | | 66.6 | % | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 65.6 | % | | 63.5 | % |
| Effect of subtracting cash | Effect of subtracting cash | (1.7 | %) | | (0.1 | %) | Effect of subtracting cash | (1.1 | %) | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 65.5 | % | | 66.5 | % | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 64.5 | % | | 63.4 | % |
(a)Calculation excludes the New Orleans and Texas securitization bonds, which are non-recourse to Entergy New Orleans and Entergy Texas, respectively.
As of March 31, 2023, 18.2%2024, 20.8% of the debt outstanding is at the parent company, Entergy Corporation, and 81.3%78.7% is at the Utility. The remaining 0.5% of the debt outstanding relates to the Vermont Yankee credit facility, as discussed in Note 4 to the financial statements herein. Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
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 average interest rateAs there were no borrowings under the facility for the three months ended March 31, 2023 was 6.12% on2024, the drawn portion of the facility. Asestimated interest rate as of March 31, 2023,2024 that would have been applied to outstanding borrowings under the facility was 6.93%. The following is a summary of the amounts outstanding and capacity available under the $3.5 billion credit facility are:as of March 31, 2024:
| | 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 | | $— | | $4 | | $3,496 |
A covenant in Entergy Corporation’s credit facility requiresincludes a covenant requiring Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Registrant 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 Registrant Subsidiaries’ credit facilities.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31, 2023,2024, Entergy Corporation had $865.6$1,913.5 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20232024 was 4.93%5.69%.
Equity Issuances and Equity Distribution Program
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - SourceSources of Capital - Equity Issuances and Equity Distribution Program” in the Form 10-K and Note 3 to the financial statements herein for a discussion of 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.
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 were 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 was seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, eligible for recovery from customers. 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 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. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in December 2022. The settlement agreement contains the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
following key terms: $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 $59.2 million were recoverable; and Entergy Louisiana was authorized to finance $1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. In January 2023, the LPSC approved the stipulated settlement subject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a reduction of the 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 were reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to authorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to issue the bonds authorized in the LPSC’s financing order.
In March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to the damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of April 2023 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions. In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.
As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust II as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $15 million in other income to reflect the LURC’s beneficial interest in the storm trust II.
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 Entergy’s planned construction and other capital investments for 20232024 through 2025. Following2026. The following are updates to that discussion.
Renewables
Sunflower Solar
As discussed in the Form 10-K, in April 2020 the MPSC issued an order approving certification of the Sunflower Solar facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain conditions. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 the final payment of $30.4 million for acquisition of the facility was made. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi’s investment in the Sunflower Solar facility.
Walnut Bend Solar
As discussed in the Form 10-K, in July 2021, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purpose of acquiring the Walnut Bend Solar facility. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is 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 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. The project, if approved, 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. In March 2022 the counter-party notified Entergy Arkansas 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. 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
InAs discussed in the Form 10-K, in March 2023, Entergy Louisiana made the first phase of a bifurcated filing to seek approval from the LPSC for an alternative to the requests for proposals (RFP) process that would enable the acquisition of up to 3 GW of solar resources on a faster timeline than the current RFP and certification process allows. The initial phase of the filing established the need for the acquisition of additional resources and the need for an alternative to the RFP process. The second phase of the filing, which contains the details of the proposal for the alternative competitive procurement process and the information necessary to support certification, will bewas 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, Rider Geaux ZERO. Several parties have intervened, and a status conference
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
procedural schedule was established in May 2023 with a hearing scheduled for March 2024. In March 2024 the hearing in this matter was rescheduled to June 2024.
Other Generation
Bayou Power Station
In March 2024, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Bayou Power Station, a 112 MW aggregated capacity floating natural gas power station with black-start capability in Leeville, Louisiana and an associated microgrid that would serve nearby areas, including Port Fourchon, Golden Meadow, Leeville, and Grand Isle. The current estimated cost of the Bayou Power Station is $411 million, including estimated costs of transmission interconnection and other related costs. Subject to timely approval by the LPSC and receipt of other permits and approvals, commercial operation is expected to occur by the end of 2028. No procedural schedule has been set for May 2023 at which time a procedural schedule is expected to be established.this time.
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 reflectsin the December 2022 application reflected the first five years of a ten-year resilience plan and includesincluded investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement. 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. In April 20232024 the LPSC approved a procedural schedule was established withframework which includes an initial five-year resilience plan providing for an investment of approximately $1.9 billion and a hearing scheduledrider to recover the associated costs. The plan is subject to specified reporting requirements and includes a performance review of the hardened assets. Entergy Louisiana is permitted to make future filings for January 2024.additional investments.
The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of electric utility infrastructure. In April 2023 the LPSC staff issued a draft rule in the rulemaking proceeding related to a requirement to file a grid resilience plan. The procedural schedule entered in the rulemaking proceeding contemplates adoption of a final rule in September 2023.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 preliminary 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 in April 2023 containing a narrowed list of proposed hardening projects, with final comments on that filing due July 2023.projects. 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 February 2024 the City Council approved a resolution authorizing Entergy New Orleans to implement a resilience project to be partially funded by $55 million of matching funding through the DOE’s Grid Resilience and Innovation Partnerships program. The resolution also requires Entergy New Orleans to submit, no later than July 2024, a revised resilience plan consisting of projects over a three-year period. In March 2024, Entergy New Orleans filed the requested three-year resilience plan, which includes $168 million in hardening projects. The three-year resilience plan is in addition to the previously authorized resilience project to be partially
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
funded by the DOE’s Grid Resilience and Innovation Partnerships program. The filing requests an expedited technical conference in May 2024, which request is pending.
Dividends
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its April 20232024 meeting, the Board declared a dividend of $1.07$1.13 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2022.2023.
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Millions) |
| 2024 | | | 2024 | | 2023 |
| (In Millions) | | | (In Millions) |
| Cash and cash equivalents at beginning of period | 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): | Net cash provided by (used in): | | | | | | |
| Operating activities | Operating activities | 960 | | | 538 | |
| Investing activities | Investing activities | (1,283) | | | (1,551) | |
| Financing activities | Financing activities | 2,070 | | | 1,272 | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | 1,747 | | | 259 | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $1,971 | | | $702 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Operating Activities
Net cash flow provided by operating activities increased $422decreased $439 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:
•to higherlower collections from Utility customers;
•a decreasecustomers, including the effect of $162 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022. See Note 2 to the financial statements in the Form 10-K for discussion of Hurricane Ida; and
•a decrease of $35 million in pension contributionshigher deferred fuel collections in 2023, as comparedand timing of payments to the same period in 2022. See “vendors.MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 11 to the financial statements in the Form 10-K, and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The increase was partially offset by $51 million in proceeds received in 2022 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed and an increase of $29 million in interest paid. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Investing Activities
Net cash flow used in investing activities decreased $268increased $5 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:to the initial payment of approximately $170 million in February 2024 for the purchase of the Walnut Bend Solar facility by Entergy Arkansas. The increase was partially offset by:
•a decrease of $379$79 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by higher construction expenditures2024 and a lower scope of work on projects in 2024 as a result of increased investment in the reliability and infrastructure of Entergy’s distribution system incompared to 2023; and
•a decrease of $33 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023.
The decrease was partially offset by:
•an increase of $50$70 million in nuclear construction expenditures primarily due to increaseddecreased spending on various nuclear projects in 2023;2024.
•an increase of $44 million in non-nuclear generation construction expenditures primarily due to higher spending on the Orange County Advanced Power Station and a higher scope of work on projects performed in 2023 as compared to 2022, including during plant outages; and
•$32 million in proceeds received from the DOE in 2022 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 814 to the financial statements in the Form 10-Kherein for discussion of the spent nuclear fuel litigation.Walnut Bend Solar facility purchase.
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities increased $798decreased $141 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to proceeds from securitization of $1,458 million$1.5 billion received by the storm trust II in theat Entergy Louisiana Marchin 2023, storm securitization. The increase was partially offset by long-term debt activity providing approximately $780 millionby:
•an increase of cash in 2023 compared to providing approximately $1,329 million of cash in 2022 and a decrease of $104$737 million in net issuances of commercial paper in 20232024 compared to 2022. 2023; and
•long-term debt activity providing approximately $1,371 million of cash in 2024 compared to providing approximately $780 million of cash in 2023.
See Note 2 to the financial statements hereinin the Form 10-K for a discussion of the Entergy Louisiana March 2023 storm cost securitization. See Note 4 to the financial statements herein and Notes 4 and 5 to the financial statements in the Form 10-K for details of Entergy’s commercial paper program and long-term debt.
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. FollowingThe following is an update to that discussion.
Some of the agreements to sell the power produced by Entergy’sthe non-utility operations business contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. Cash and letters of credit are also acceptable forms of credit support. At March 31, 2023,2024, based on power prices at that time, Entergy had liquidity exposure of $10$3 million under the guarantees in place supporting Entergy’sits non-utility operations business transactions and $9$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
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
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.
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. In December 2023, River Bend successfully completed the inspection of the high pressure core spray system issue and in February 2024, River Bend completed the supplemental inspection of the radiation monitor calibration issue, each in accordance with the NRC’s inspection policies for nuclear plants in Column 2. The NRC issued its inspection report on both issues in March 2024 and River Bend was returned to Column 1.
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. The following is an update to that discussion.
In March 2024 the SEC issued final rules that require registrants to provide certain climate-related disclosures in annual reports and registration statements in order to enhance and standardize climate-related disclosures for investors. The final rules require a registrant to disclose, among other things: material climate-related risks; activities to mitigate or adapt to such risks; information about the registrant’s board of directors’ oversight of climate-related risks and management’s role in managing material climate-related risks; and information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition. In addition, the final rules require disclosure of Scope 1 and/or Scope 2 greenhouse gas emissions on a phased-in basis by certain larger registrants when those emissions are material; the filing of an attestation report covering the required disclosure of such registrants’ Scope 1 and/or Scope 2 emissions, also on a phased-in basis; and disclosure of the financial statement effects of severe weather events and other natural conditions. The phase-in compliance period is effective for Entergy beginning with its annual report for the fiscal year ending December 31, 2025. In April 2024 the SEC stayed the final rules, pending judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit. Entergy is evaluating the impact the final rules will have on its disclosures and will continue to monitor developments related to the SEC’s stay of the rules and the litigation challenging such rules.
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | | |
| | | |
| | | | | 2024 | | 2023 |
| | | | | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | | |
| Electric | | | | | $2,706,506 | | | $2,883,411 | |
| Natural gas | | | | | 65,667 | | | 64,581 | |
| Other | | | | | 22,455 | | | 33,067 | |
| TOTAL | | | | | 2,794,628 | | | 2,981,059 | |
| | | | | | | |
| OPERATING EXPENSES | | | | | | | |
| Operation and Maintenance: | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | 616,617 | | | 898,384 | |
| Purchased power | | | | | 228,142 | | | 238,288 | |
| Nuclear refueling outage expenses | | | | | 38,263 | | | 37,233 | |
| Other operation and maintenance | | | | | 687,031 | | | 631,526 | |
| Asset write-offs, impairments, and related charges | | | | | 131,775 | | | — | |
| Decommissioning | | | | | 53,382 | | | 50,493 | |
| Taxes other than income taxes | | | | | 192,429 | | | 185,437 | |
| Depreciation and amortization | | | | | 499,661 | | | 453,916 | |
| Other regulatory charges (credits) - net | | | | | 109,346 | | | 23,673 | |
| TOTAL | | | | | 2,556,646 | | | 2,518,950 | |
| | | | | | | |
| OPERATING INCOME | | | | | 237,982 | | | 462,109 | |
| | | | | | | |
| OTHER INCOME | | | | | | | |
| Allowance for equity funds used during construction | | | | | 26,794 | | | 23,146 | |
| Interest and investment income | | | | | 150,697 | | | 48,259 | |
| Miscellaneous - net | | | | | (50,743) | | | (54,452) | |
| TOTAL | | | | | 126,748 | | | 16,953 | |
| | | | | | | |
| INTEREST EXPENSE | | | | | | | |
| Interest expense | | | | | 277,743 | | | 255,329 | |
| Allowance for borrowed funds used during construction | | | | | (10,543) | | | (9,591) | |
| TOTAL | | | | | 267,200 | | | 245,738 | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | | | | 97,530 | | | 233,324 | |
| | | | | | | |
| Income taxes | | | | | 20,994 | | | (78,975) | |
| | | | | | | |
| CONSOLIDATED NET INCOME | | | | | 76,536 | | | 312,299 | |
| | | | | | | |
| Preferred dividend requirements of subsidiaries and noncontrolling interests | | | | | 1,255 | | | 1,364 | |
| | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | | | | $75,281 | | | $310,935 | |
| | | | | | | |
| Earnings per average common share: | | | | | | | |
| Basic | | | | | $0.35 | | | $1.47 | |
| Diluted | | | | | $0.35 | | | $1.47 | |
| | | | | | | |
| Basic average number of common shares outstanding | | | | | 213,143,719 | | | 211,350,705 | |
| Diluted average number of common shares outstanding | | | | | 213,873,128 | | | 212,146,507 | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | | | | |
| | | |
| | | | | 2024 | | 2023 |
| | | | | (In Thousands) |
| | | | | | | |
| Net Income | | | | | $76,536 | | | $312,299 | |
| | | | | | | |
| Other comprehensive income (loss) | | | | | | | |
| Pension and other postretirement adjustment (net of tax expense (benefit) of ($1,202) and $731) | | | | | (3,668) | | | 2,027 | |
| Other comprehensive income (loss) | | | | | (3,668) | | | 2,027 | |
| | | | | | | |
| Comprehensive Income | | | | | 72,868 | | | 314,326 | |
| Preferred dividend requirements of subsidiaries and noncontrolling interests | | | | | 1,255 | | | 1,364 | |
| Comprehensive Income Attributable to Entergy Corporation | | | | | $71,613 | | | $312,962 | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | | |
| | | |
| 2023 | | 2022 | | | | |
| (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | | |
| Electric | $2,883,411 | | | $2,655,776 | | | | | |
| Natural gas | 64,581 | | | 72,361 | | | | | |
| Other | 33,067 | | | 149,788 | | | | | |
| TOTAL | 2,981,059 | | | 2,877,925 | | | | | |
| | | | | | | |
| OPERATING EXPENSES | | | | | | | |
| Operation and Maintenance: | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 898,384 | | | 666,938 | | | | | |
| Purchased power | 238,288 | | | 269,626 | | | | | |
| Nuclear refueling outage expenses | 37,233 | | | 43,002 | | | | | |
| Other operation and maintenance | 631,526 | | | 678,812 | | | | | |
| Asset write-offs, impairments, and related charges | — | | | 744 | | | | | |
| Decommissioning | 50,493 | | | 62,048 | | | | | |
| Taxes other than income taxes | 185,437 | | | 180,148 | | | | | |
| Depreciation and amortization | 453,916 | | | 438,972 | | | | | |
| Other regulatory charges (credits) - net | 23,673 | | | (28,425) | | | | | |
| TOTAL | 2,518,950 | | | 2,311,865 | | | | | |
| | | | | | | |
| OPERATING INCOME | 462,109 | | | 566,060 | | | | | |
| | | | | | | |
| OTHER INCOME | | | | | | | |
| Allowance for equity funds used during construction | 23,146 | | | 15,871 | | | | | |
| Interest and investment income (loss) | 48,259 | | | (21,918) | | | | | |
| Miscellaneous - net | (54,452) | | | 7,603 | | | | | |
| TOTAL | 16,953 | | | 1,556 | | | | | |
| | | | | | | |
| INTEREST EXPENSE | | | | | | | |
| Interest expense | 255,329 | | | 227,622 | | | | | |
| Allowance for borrowed funds used during construction | (9,591) | | | (6,096) | | | | | |
| TOTAL | 245,738 | | | 221,526 | | | | | |
| | | | | | | |
| INCOME BEFORE INCOME TAXES | 233,324 | | | 346,090 | | | | | |
| | | | | | | |
| Income taxes | (78,975) | | | 66,497 | | | | | |
| | | | | | | |
| CONSOLIDATED NET INCOME | 312,299 | | | 279,593 | | | | | |
| | | | | | | |
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 1,364 | | | 3,193 | | | | | |
| | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $310,935 | | | $276,400 | | | | | |
| | | | | | | |
| Earnings per average common share: | | | | | | | |
| Basic | $1.47 | | | $1.36 | | | | | |
| Diluted | $1.47 | | | $1.36 | | | | | |
| | | | | | | |
| Basic average number of common shares outstanding | 211,350,705 | | | 202,943,628 | | | | | |
| Diluted average number of common shares outstanding | 212,146,507 | | | 203,888,483 | | | | | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | | $76,536 | | | $312,299 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 600,412 | | | 553,224 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (20,656) | | | (98,244) | |
| Asset write-offs, impairments, and related charges | | 131,775 | | | — | |
| Changes in working capital: | | | | |
| Receivables | | 107,921 | | | 272,533 | |
| Fuel inventory | | 5,387 | | | (29,484) | |
| Accounts payable | | (287,418) | | | (339,963) | |
| Taxes accrued | | (64,085) | | | (66,717) | |
| Interest accrued | | 29,615 | | | 30,627 | |
| Deferred fuel costs | | 92,685 | | | 442,598 | |
| Other working capital accounts | | (73,315) | | | (67,971) | |
| Changes in provisions for estimated losses | | 9,283 | | | 25 | |
| Changes in regulatory assets | | 237,098 | | | 542,694 | |
| Changes in other regulatory liabilities | | 205,587 | | | 136,685 | |
| Effect of securitization on regulatory asset | | — | | | (491,150) | |
| Changes in pension and other postretirement funded status | | (76,343) | | | (64,088) | |
| Other | | (453,390) | | | (173,525) | |
Net cash flow provided by operating activities | | 521,092 | | | 959,543 | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (961,152) | | | (1,175,657) | |
| Allowance for equity funds used during construction | | 26,794 | | | 23,146 | |
| Nuclear fuel purchases | | (133,315) | | | (90,809) | |
| Payment for purchase of plant and assets | | (172,614) | | | — | |
| | | | |
| | | | |
| | | | |
| Changes in securitization account | | (8,934) | | | (3,904) | |
| Payments to storm reserve escrow accounts | | (5,269) | | | (4,196) | |
| | | | |
| Increase in other investments | | (1,562) | | | (3,462) | |
| | | | |
| Proceeds from nuclear decommissioning trust fund sales | | 489,417 | | | 204,128 | |
| Investment in nuclear decommissioning trust funds | | (521,237) | | | (232,837) | |
| Net cash flow used in investing activities | | (1,287,872) | | | (1,283,591) | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
| | | | | | | |
| (In Thousands) |
| | | | | | | |
| Net Income | $312,299 | | | $279,593 | | | | | |
| | | | | | | |
| Other comprehensive income (loss) | | | | | | | |
| Cash flow hedges net unrealized gain (net of tax benefit of $— and $—) | — | | | 24 | | | | | |
| Pension and other postretirement liabilities (net of tax expense of $731 and $2,542) | 2,027 | | | 8,328 | | | | | |
| Net unrealized investment loss (net of tax benefit of $— and $7,221) | — | | | (12,402) | | | | | |
| Other comprehensive income (loss) | 2,027 | | | (4,050) | | | | | |
| | | | | | | |
| Comprehensive Income | 314,326 | | | 275,543 | | | | | |
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 1,364 | | | 3,193 | | | | | |
| Comprehensive Income Attributable to Entergy Corporation | $312,962 | | | $272,350 | | | | | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 2,206,338 | | | 1,614,522 | |
| | | | |
| Treasury stock | | 6,759 | | | 4,017 | |
| | | | |
| Retirement of long-term debt | | (835,740) | | | (834,530) | |
| | | | |
| | | | |
| Changes in commercial paper - net | | 775,333 | | | 37,995 | |
| | | | |
| Proceeds received by storm trust related to securitization | | — | | | 1,457,676 | |
| Other | | 21,940 | | | 21,490 | |
| Dividends paid: | | | | |
| Common stock | | (240,959) | | | (226,194) | |
| Preferred stock | | (4,580) | | | (4,580) | |
| Net cash flow provided by financing activities | | 1,929,091 | | | 2,070,396 | |
| | | | |
| Net increase in cash and cash equivalents | | 1,162,311 | | | 1,746,348 | |
| | | | |
| Cash and cash equivalents at beginning of period | | 132,548 | | | 224,164 | |
| | | | |
| Cash and cash equivalents at end of period | | $1,294,859 | | | $1,970,512 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | | $237,931 | | | $215,082 | |
| Income taxes | | ($316) | | | ($5,352) | |
| Noncash investing activities: | | | | |
| Accrued construction expenditures | | $509,046 | | | $428,459 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | | $312,299 | | | $279,593 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 553,224 | | | 561,731 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (98,244) | | | 70,780 | |
| Asset write-offs, impairments, and related charges | | — | | | 744 | |
| | | | |
| Changes in working capital: | | | | |
| Receivables | | 272,533 | | | 122,987 | |
| Fuel inventory | | (29,484) | | | 14,795 | |
| Accounts payable | | (339,963) | | | (283,175) | |
| Taxes accrued | | (66,717) | | | (79,941) | |
| Interest accrued | | 30,627 | | | 32,862 | |
| Deferred fuel costs | | 442,598 | | | (58,932) | |
| Other working capital accounts | | (67,971) | | | (95,033) | |
| Changes in provisions for estimated losses | | 25 | | | 8,206 | |
| Changes in other regulatory assets | | 542,694 | | | (1,424,270) | |
| Changes in other regulatory liabilities | | 136,685 | | | (250,358) | |
| Effect of securitization on regulatory asset | | (491,150) | | | 1,491,942 | |
| | | | |
| Changes in pension and other postretirement liabilities | | (64,088) | | | (101,641) | |
| Other | | (173,525) | | | 247,676 | |
Net cash flow provided by operating activities | | 959,543 | | | 537,966 | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (1,175,657) | | | (1,501,578) | |
| Allowance for equity funds used during construction | | 23,146 | | | 15,871 | |
| Nuclear fuel purchases | | (90,809) | | | (83,326) | |
| | | | |
| | | | |
| Litigation proceeds from settlement agreement | | — | | | 9,829 | |
| Changes in securitization account | | (3,904) | | | 13,532 | |
| Payments to storm reserve escrow account | | (4,196) | | | — | |
| | | | |
| Increase in other investments | | (3,462) | | | (11,862) | |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — | | | 32,367 | |
| Proceeds from nuclear decommissioning trust fund sales | | 204,128 | | | 479,937 | |
| Investment in nuclear decommissioning trust funds | | (232,837) | | | (505,989) | |
| Net cash flow used in investing activities | | (1,283,591) | | | (1,551,219) | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $64,949 | | | $71,609 | |
| Temporary cash investments | | 1,229,910 | | | 60,939 | |
| Total cash and cash equivalents | | 1,294,859 | | | 132,548 | |
| Accounts receivable: | | | | |
| Customer | | 670,812 | | | 699,411 | |
| Allowance for doubtful accounts | | (21,889) | | | (25,905) | |
| Other | | 209,929 | | | 225,334 | |
| Accrued unbilled revenues | | 426,682 | | | 494,615 | |
| Total accounts receivable | | 1,285,534 | | | 1,393,455 | |
| Deferred fuel costs | | 123,796 | | | 169,967 | |
| Fuel inventory - at average cost | | 187,412 | | | 192,799 | |
| Materials and supplies - at average cost | | 1,495,201 | | | 1,418,969 | |
| Deferred nuclear refueling outage costs | | 139,801 | | | 140,115 | |
| Prepayments and other | | 231,163 | | | 213,016 | |
| TOTAL | | 4,757,766 | | | 3,660,869 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 5,165,779 | | | 4,863,710 | |
| Non-utility property - at cost (less accumulated depreciation) | | 417,730 | | | 418,546 | |
| Storm reserve escrow accounts | | 328,475 | | | 323,206 | |
| Other | | 70,281 | | | 69,494 | |
| TOTAL | | 5,982,265 | | | 5,674,956 | |
| | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 67,626,345 | | | 66,850,474 | |
| Natural gas | | 724,113 | | | 717,503 | |
| Construction work in progress | | 2,281,938 | | | 2,109,703 | |
| Nuclear fuel | | 707,034 | | | 707,852 | |
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 71,339,430 | | | 70,385,532 | |
| Less - accumulated depreciation and amortization | | 26,837,531 | | | 26,551,203 | |
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 44,501,899 | | | 43,834,329 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets (includes securitization property of $244,804 as of March 31, 2024 and $250,830 as of December 31, 2023) | | 5,432,306 | | | 5,669,404 | |
| Deferred fuel costs | | 172,201 | | | 172,201 | |
| Goodwill | | 374,099 | | | 374,099 | |
| Accumulated deferred income taxes | | 13,622 | | | 16,367 | |
| Other | | 395,698 | | | 301,171 | |
| TOTAL | | 6,387,926 | | | 6,533,242 | |
| | | | |
| TOTAL ASSETS | | $61,629,856 | | | $59,703,396 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 1,614,522 | | | 2,553,369 | |
| | | | |
| Treasury stock | | 4,017 | | | 9,629 | |
| | | | |
| Retirement of long-term debt | | (834,530) | | | (1,224,091) | |
| | | | |
| | | | |
| Changes in credit borrowings and commercial paper - net | | 37,995 | | | 141,634 | |
| | | | |
| Proceeds from trust related to securitization | | 1,457,676 | | | — | |
| Other | | 21,490 | | | 1,382 | |
| Dividends paid: | | | | |
| Common stock | | (226,194) | | | (205,058) | |
| Preferred stock | | (4,580) | | | (4,580) | |
| Net cash flow provided by financing activities | | 2,070,396 | | | 1,272,285 | |
| | | | |
| | | | |
| | | | |
| Net increase in cash and cash equivalents | | 1,746,348 | | | 259,032 | |
| | | | |
| Cash and cash equivalents at beginning of period | | 224,164 | | | 442,559 | |
| | | | |
| Cash and cash equivalents at end of period | | $1,970,512 | | | $701,591 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | | $215,082 | | | $186,269 | |
| Income taxes | | ($5,352) | | | ($11,505) | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | | $2,177,072 | | | $2,099,057 | |
| Notes payable and commercial paper | | 1,913,504 | | | 1,138,171 | |
| Accounts payable | | 1,187,454 | | | 1,566,745 | |
| Customer deposits | | 455,707 | | | 446,146 | |
| Taxes accrued | | 370,128 | | | 434,213 | |
| Interest accrued | | 243,812 | | | 214,197 | |
| Deferred fuel costs | | 265,442 | | | 218,927 | |
| Pension and other postretirement liabilities | | 57,390 | | | 59,508 | |
| Other | | 214,018 | | | 219,528 | |
| TOTAL | | 6,884,527 | | | 6,396,492 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 4,236,410 | | | 4,245,982 | |
| Accumulated deferred investment tax credits | | 201,910 | | | 205,973 | |
| Regulatory liability for income taxes - net | | 1,021,395 | | | 1,033,242 | |
| Other regulatory liabilities | | 3,334,360 | | | 3,116,926 | |
| Decommissioning and asset retirement cost liabilities | | 4,575,811 | | | 4,505,782 | |
| Accumulated provisions | | 471,853 | | | 462,570 | |
| Pension and other postretirement liabilities | | 574,188 | | | 648,413 | |
| Long-term debt (includes securitization bonds of $263,159 as of March 31, 2024 and $263,007 as of December 31, 2023) | | 24,309,439 | | | 23,008,839 | |
| Other | | 1,226,187 | | | 1,116,661 | |
| TOTAL | | 39,951,553 | | | 38,344,388 | |
| | | | |
| 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 2024 and 2023; issued shares in 2024 and 2023 - none | | — | | | — | |
| Common stock, $0.01 par value, authorized 499,000,000 shares in 2024 and 2023; issued 280,975,348 shares in 2024 and 2023 | | 2,810 | | | 2,810 | |
| Paid-in capital | | 7,769,569 | | | 7,795,411 | |
| Retained earnings | | 11,774,706 | | | 11,940,384 | |
| Accumulated other comprehensive loss | | (166,128) | | | (162,460) | |
| Less - treasury stock, at cost (67,701,927 shares in 2024 and 68,126,778 shares in 2023) | | 4,922,617 | | | 4,953,498 | |
Total shareholders’ equity | | 14,458,340 | | | 14,622,647 | |
Subsidiaries’ preferred stock without sinking fund and noncontrolling interests | | 116,026 | | | 120,459 | |
| TOTAL | | 14,574,366 | | | 14,743,106 | |
| | | | |
| TOTAL LIABILITIES AND EQUITY | | $61,629,856 | | | $59,703,396 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $62,724 | | | $115,290 | |
| Temporary cash investments | | 1,907,788 | | | 108,874 | |
| Total cash and cash equivalents | | 1,970,512 | | | 224,164 | |
| Accounts receivable: | | | | |
| Customer | | 629,700 | | | 788,552 | |
| Allowance for doubtful accounts | | (23,338) | | | (30,856) | |
| Other | | 197,554 | | | 241,702 | |
| Accrued unbilled revenues | | 436,741 | | | 495,859 | |
| Total accounts receivable | | 1,240,657 | | | 1,495,257 | |
| Deferred fuel costs | | 282,429 | | | 710,401 | |
| Fuel inventory - at average cost | | 177,116 | | | 147,632 | |
| Materials and supplies - at average cost | | 1,233,487 | | | 1,183,308 | |
| Deferred nuclear refueling outage costs | | 155,688 | | | 143,653 | |
| Prepayments and other | | 206,353 | | | 190,611 | |
| TOTAL | | 5,266,242 | | | 4,095,026 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
| Decommissioning trust funds | | 4,349,892 | | | 4,121,864 | |
| Non-utility property - at cost (less accumulated depreciation) | | 400,579 | | | 366,405 | |
| Storm reserve escrow account | | 406,150 | | | 401,955 | |
| Other | | 101,498 | | | 102,259 | |
| TOTAL | | 5,258,119 | | | 4,992,483 | |
| | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 64,249,378 | | | 64,646,911 | |
| | | | |
| Natural gas | | 697,771 | | | 691,970 | |
| Construction work in progress | | 2,157,341 | | | 1,844,171 | |
| Nuclear fuel | | 587,956 | | | 582,119 | |
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 67,692,446 | | | 67,765,171 | |
| Less - accumulated depreciation and amortization | | 25,570,360 | | | 25,288,047 | |
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 42,122,086 | | | 42,477,124 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| | | | |
| Other regulatory assets (includes securitization property of $273,181 as of March 31, 2023 and $282,886 as of December 31, 2022) | | 5,493,703 | | | 6,036,397 | |
| Deferred fuel costs | | 241,085 | | | 241,085 | |
| Goodwill | | 377,172 | | | 377,172 | |
| Accumulated deferred income taxes | | 82,529 | | | 84,100 | |
| Other | | 362,340 | | | 291,804 | |
| TOTAL | | 6,556,829 | | | 7,030,558 | |
| | | | |
| TOTAL ASSETS | | $59,203,276 | | | $58,595,191 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | | |
| | | 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 | |
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| Balance at December 31, 2023 | $120,459 | | | $2,810 | | | ($4,953,498) | | | $7,795,411 | | | $11,940,384 | | | ($162,460) | | | $14,743,106 | |
| | | | | | | | | | | | | |
| Consolidated net income (a) | 1,255 | | | — | | | — | | | — | | | 75,281 | | | — | | | 76,536 | |
| Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (3,668) | | | (3,668) | |
| Common stock issuances related to stock plans | — | | | — | | | 30,881 | | | (25,842) | | | — | | | — | | | 5,039 | |
| Common stock dividends declared | — | | | — | | | — | | | — | | | (240,959) | | | — | | | (240,959) | |
| | | | | | | | | | | | | |
| Distributions to noncontrolling interests | (1,108) | | | — | | | — | | | — | | | — | | | — | | | (1,108) | |
| Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
| Balance at March 31, 2024 | $116,026 | | | $2,810 | | | ($4,922,617) | | | $7,769,569 | | | $11,774,706 | | | ($166,128) | | | $14,574,366 | |
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| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2024 and first quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
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| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | | $2,259,046 | | | $2,309,037 | |
| Notes payable and commercial paper | | 865,616 | | | 827,621 | |
| Accounts payable | | 1,385,949 | | | 1,777,590 | |
| Customer deposits | | 429,211 | | | 424,723 | |
| Taxes accrued | | 357,374 | | | 424,091 | |
| Interest accrued | | 225,891 | | | 195,264 | |
| Deferred fuel costs | | 14,626 | | | — | |
| | | | |
| Pension and other postretirement liabilities | | 87,588 | | | 104,845 | |
| | | | |
| Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
| Other | | 200,028 | | | 202,779 | |
| TOTAL | | 5,825,329 | | | 6,369,447 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 4,738,377 | | | 4,818,837 | |
| Accumulated deferred investment tax credits | | 209,128 | | | 211,220 | |
| | | | |
| Regulatory liability for income taxes - net | | 1,234,992 | | | 1,258,276 | |
| Other regulatory liabilities | | 2,588,056 | | | 2,324,590 | |
| Decommissioning and asset retirement cost liabilities | | 4,325,106 | | | 4,271,531 | |
| Accumulated provisions | | 531,226 | | | 531,201 | |
| Pension and other postretirement liabilities | | 1,166,724 | | | 1,213,555 | |
| Long-term debt (includes securitization bonds of $292,912 as of March 31, 2023 and $292,760 as of December 31, 2022) | | 24,464,263 | | | 23,623,512 | |
| Other | | 733,737 | | | 688,720 | |
| TOTAL | | 39,991,609 | | | 38,941,442 | |
| | | | |
| Commitments and Contingencies | | | | |
| | | | |
| Subsidiaries' preferred stock without sinking fund | | 219,410 | | | 219,410 | |
| | | | |
| EQUITY | | | | |
| Preferred stock, no par value, authorized 1,000,000 shares in 2023 and 2022; issued shares in 2023 and 2022 - none | | — | | | — | |
| Common stock, $.01 par value, authorized 499,000,000 shares in 2023 and 2022; issued 279,653,929 shares in 2023 and 2022 | | 2,797 | | | 2,797 | |
| Paid-in capital | | 7,617,777 | | | 7,632,895 | |
| Retained earnings | | 10,586,782 | | | 10,502,041 | |
| Accumulated other comprehensive loss | | (189,727) | | | (191,754) | |
| Less - treasury stock, at cost (68,207,883 shares in 2023 and 68,477,429 shares in 2022) | | 4,959,395 | | | 4,978,994 | |
| Total common shareholders' equity | | 13,058,234 | | | 12,966,985 | |
| Subsidiaries' preferred stock without sinking fund and noncontrolling interests | | 108,694 | | | 97,907 | |
| TOTAL | | 13,166,928 | | | 13,064,892 | |
| | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $59,203,276 | | | $58,595,191 | |
| | | | |
| See Notes to Financial Statements. | | | | |
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ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2023 and 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) |
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| Balance at December 31, 2021 | $68,110 | | | $2,720 | | | ($5,039,699) | | | $6,766,239 | | | $10,240,552 | | | ($332,528) | | | $11,705,394 | |
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| 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 | |
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| Balance at December 31, 2022 | $97,907 | | | $2,797 | | | ($4,978,994) | | | $7,632,895 | | | $10,502,041 | | | ($191,754) | | | $13,064,892 |
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| 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 | |
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| See Notes to Financial Statements. | | | | | | | | | | | | | |
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| (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023 and first quarter 2022 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory authorities, and governmental agencies in the ordinary course of business. While management is unable to predict with certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report. Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.
Vidalia Purchased Power Agreement
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
ANO Damage, Outage, and NRC Reviews
See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
Spent Nuclear Fuel Litigation
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.
In 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 capitalized, $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.
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)
Entergy Louisiana is a partnerSee Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Nelson Industrial Steam Company (NISCO) partnership which owns two petroleum coke generating units. In April 2023 these generating units suspended operations in the MISO market, and Entergy Louisiana currently is working with the partners to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. Entergy Louisiana is evaluating the effect of this on its financial condition, results of operations, and cash flows but at this time does not expect the effects to be material.partnership.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Fuel and purchased power cost recovery
Entergy Arkansas
Energy Cost Recovery Rider
In March 2023,2024 Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increasea decrease in the rate from $0.01639$0.01883 per kWh to $0.01883$0.00882 per kWh. Due to a change in law in the state of Arkansas, the annual redetermination included $9 million, recorded as a credit to fuel expense in first quarter 2024, for recovery attributed to net metering costs in 2023. The primary reason for the rate increasedecrease is a large under-recoveredover-recovered balance as a result of higherlower natural gas prices in 2022 and a $32 million deferral related to2023. To mitigate the 2021 February winter storms consistent with APSC general staff’s requesteffect of projected increases in 2022. The under-recoverednatural gas prices in 2024, Entergy Arkansas adjusted the over-recovered balance included in the March 2024 annual redetermination filing was partially offset by $43.7 million. This adjustment is expected to reduce the proceeds ofrate change that will be reflected in 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.2025 energy cost rate redetermination. The redetermined rate of $0.01883$0.00882 per kWh became effective with the first billing cycle in April 20232024 through the normal operation of the tariff. See Note 2 to the financial statements in the Form 10-K for information on the 2021 February winter storm investigation proceeding.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
As discussed in the Form 10-K, in September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. In November 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2023 municipal intervenors filed testimony proposing a $5.2 million disallowance for fuel purchased during Winter Storm Uri.PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023 and a hearing on the merits is set for May 2023. A PUCT decision is expected in September 2023.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that discussion.
Filings with the APSC (Entergy Arkansas)
COVID-19 Orders
See Note 2 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of March 31, 2023, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.
Filings with the LPSC (Entergy Louisiana)
COVID-19 OrdersRetail Rates - Electric
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
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 AprilAugust 2023, Entergy Louisiana filed an application proposingfor approval of a regulatory blueprint necessary for it to utilize approximately $1.6 billion instrengthen 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 low interest debt to generate earnings to apply toward the reductionmodifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of the COVID-19 regulatory asset. Inrates 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 filing,for Entergy Louisiana proposed to delay repaymentobtain another extension of certain shorter-term first mortgage bonds that were issued to finance storm restoration costs until the costs could be securitized, and to invest the funds that otherwise would be used to repay those bonds in the money pool to take advantage of the spread between prevailing interest rates on investments in the money pool and the interest rates on the bonds. In the event the LPSC approves Entergy Louisiana’s requested relief, subsequent filings will be required to permit the LPSC to review the COVID-19 regulatory asset. As of March 31, 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 yearthat included a rate reset, Entergy Louisiana would need to submit a full cost-of-service/rate case. Entergy Louisiana’s filing and 2022 look-back filing showingsupports the need to extend 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 theLouisiana’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
formula rate plan with credit supportive mechanisms needed to facilitate investment in the distribution, transmission, and generation functions.
A status conference was held in October 2023 at which a procedural schedule was adopted that included three technical conferences and a hearing date of August 2024. In March 2024 the parties agreed to an eight week extension of all deadlines to allow for continuation of settlement negotiations, and the ALJ issued an order with an amended procedural schedule that includes hearing dates commencing in October 2024.
Filings with the MPSC (Entergy Mississippi)
Retail Rates
2024 Formula Rate Plan Filing
In March 2024, Entergy Mississippi submitted its formula rate plan 2024 test year filing and 2023 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 2023 calendar year to be within the formula rate plan bandwidth and projected earned return for the 2024 calendar year to be below the formula rate plan bandwidth.The 20232024 test year filing showsshowed a $39.8$63.4 million rate increase iswas necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 6.67%7.10%, within the formula rate plan bandwidth.The 20222023 look-back filing comparescompared actual 20222023 results to the approved benchmark return on rate base and reflects the need for a $19.8 million temporary increasereflected no change 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.revenues. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $27.9$32.6 million interim rate increase, reflecting a cap equal to 2% of 20222023 retail revenues, effective April 2024. A final order is expected in Aprilsecond quarter 2024, with the resulting rates, including amounts above the 2% cap of 2023 retail revenues, effective July 2024.
In December 2014 the MPSC ordered Entergy Mississippi to file an updated depreciation study at least once every four years. Pursuant to this order and Entergy Mississippi’s filing cycle, Entergy Mississippi would have filed an updated depreciation report with its formula rate plan filing in 2023. However, in July 2022 the MPSC directed Entergy Mississippi to file its next depreciation study in connection with its 2024 formula rate plan filing notwithstanding the MPSC’s prior order. Accordingly, Entergy Mississippi filed a depreciation study in February 2024. The study showed a need for an increase in annual depreciation expense of $55.2 million. The calculated increase in annual depreciation expense was excluded from Entergy Mississippi’s 2024 formula rate plan revenue increase request as the $63.4 million rate increase determined in the formula rate plan 2024 test year filing was just lower than the cap on changes to formula rate plan revenues, set at 4% of retail revenues. Entergy Mississippi expects to engage in further discussions with the MPSC regarding the timing of implementing changes to depreciation rates and for recovery of the depreciation expense.
Filings with the City Council (Entergy New Orleans)
Retail Rates
20232024 Formula Rate Plan Filing
In April 2023,2024, Entergy New Orleans submitted to the City Council its formula rate plan 20222023 test year filing. The 2022Without the requested rate change in 2024, the 2023 test year evaluation report produced an electric earned return on equity of 7.34%8.66% and a gas earned return on equity of 3.52%5.87% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $25.6$12.6 million rate increase based on the formula set in the 2018 rate case, which was approved again by the City Council in the 2018 rate case.2023. The formula results in an increase in authorized electric revenues of $17.4$7.0 million and an increase in authorized gas revenues of $8.2$5.6 million. Entergy New Orleans also seeks to commence collecting $3.4 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. The filing is subject to review by the City Council and other parties over a 75-day review period, followed by a 25-day period to resolve any disputes among the parties. Resulting rates will be effective with the first billing cycle of September 2023
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2024 pursuant to the formula rate plan tariff. For any disputed rate adjustments, however, the City Council would set a procedural schedule that would extend the process for City Council approval of disputed rate adjustments.
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
Generation Cost Recovery Rider
As discussed in the Form 10-K, in August 2022 the PUCT approved a unanimous settlement agreement adjusting Entergy Texas’s generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility, and rates became effective. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect. In April 2023 the PUCT approved Entergy Texas’s as-filed request.
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022. As of
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March 31, 2023, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic.
Entergy Arkansas Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in January 2023,September 2020, Entergy Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a notice of appeal ofcomplaint in the U.S. District Court for the Eastern District of Arkansas’s order denying its motionArkansas challenging the APSC’s denial of recovery of $135 million of payments to interveneother Utility operating companies in December 2018 relating to off-system sales of electricity from 2002-2009, as ordered by the FERC. The complaint also involved a challenge to the United States Court$13.7 million, plus interest, of Appeals forrelated refunds ordered by the Eighth CircuitAPSC and a motion with the district court to stay the proceedings pending the appeal, which was denied. In February 2023,paid by Entergy Arkansas Electric Energy Consumers, Inc. filed a motion with the United States Court of Appeals for the Eighth District to stay the proceedings pending the appeal, which also was denied.in August 2020. The trial was held in February 2023. Following the trial, Entergy Arkansas filed a motion with the United States Court of Appeals for the Eighth District to expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The courtUnited States Court of Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments are scheduledwere held in June 2023. In August 2023 the United States Court of Appeals for June 2023.the Eighth District affirmed the order of the court denying Arkansas Electric Energy Consumers, Inc.’s motion to intervene.
In March 2024 the U.S. District Court for the Eastern District of Arkansas issued a judgment in favor of the APSC and against Entergy Arkansas. In March 2024 Entergy Arkansas filed a notice of appeal and a motion to expedite oral arguments with the United States Court of Appeals for the Eighth District and the court granted the motion to expedite and issued an order establishing that the briefing will occur in May 2024 through July 2024. As a result of the adverse decision by the U.S. District Court for the Eastern District of Arkansas, Entergy Arkansas concluded that it could no longer support the recognition of its $131.8 million regulatory asset reflecting the previously-expected recovery of a portion of the costs at issue in the opportunity sales proceeding and recorded a $131.8 million ($99.1 million net-of-tax) charge to earnings in first quarter 2024.
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 (or on appeal from the FERC to the United States Court of Appeals for the Fifth Circuit), 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 settlements with the MPSC and the APSC and the settlement in principle with the City Council, described in “System Energy Settlement with the City Council” below, if approved by the FERC, substantially reduce the aggregate amount of exposure resulting from these claims. The following are updates to that discussion.
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the FERC’s Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is
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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 $38$24.8 million, which includes interest through March 31, 2023,2024, and the estimated resulting annual rate reduction would be approximately $31$14.1 million. As a result of the 2022 settlement agreementagreements with the MPSC and the APSC, both the estimated refund and rate reduction exclude Entergy Mississippi's portion.and Entergy Arkansas’s portions. See “System Energy Settlement with the MPSC” in the Form 10-K and see “System Energy Settlement with the APSC” below and in the Form 10-K for discussion of the settlement.settlements. 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.
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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, and in December 2022 the FERC 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 on three 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 paid the refunds of $103.5 million, which included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans. Based on the December 2022 FERC order and analysis of the remaining litigation, management determined that System Energy’s regulatory liability related to complaints against System Energy as of March 31, 2023 is adequate.
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
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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 thea 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 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 Februarythe 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 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 submitted a tarifffiled its compliance filingreport with the FERC to clarify that, consistent with the releases providedas directed in the MPSC settlement, Entergy Mississippi will continue toAugust 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 charged for its allocation of the sale-leaseback renewal costs under the Unit Power Sales Agreement. Seerecouped by System Energy. As discussed below in “System Energy Settlement with the MPSCAPSC,” 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 Form 10-Kcompliance 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.
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 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 discussionthe 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 settlement. 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.
In MarchSeptember 2023 the MPSCLPSC 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
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protest to System Energy’s tariff compliance filing. The MPSC arguesnot doing so. In October 2023 the FERC issued a notice that the settlement didrehearing request has been deemed denied by operation of law. In November 2023 the FERC issued a further notice stating that it would not specifically address post-settlement sale-leaseback renewal costs and thatissue any further order addressing the sale-leaseback renewal costs may not be recovered underrehearing request.Also in November 2023 the Unit Power Sales Agreement. Entergy Mississippi’s allocated sale-leaseback renewal costs are estimated at $5.7 million annuallyLPSC filed with the United States Court of Appeals for the remaining termFifth Circuit a petition for review of the sale-leaseback renewal.FERC’s August 2023 rehearing order and denials of the September 2023 rehearing request.
In December 2023 the United States Court of Appeals for the Fifth Circuit lifted the abeyance on the consolidated System Energy appeals and it also consolidated the LPSC’s appeal with the System Energy appeals. In March 2024, separate petition briefs were filed by System Energy and by the LPSC.Also in March 2024, the City Council filed an intervenor brief supporting the LPSC.Briefing will continue through July 2024.
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
As 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.
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. System Energy filed answering testimony in January 2022. In March 2022 the FERC trial staff filed direct and answering testimony recommending refunds and prospective modifications to the Unit Power Sales Agreement.
In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and to oppose its revised recommendation.
In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The hearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the May 2023 deadline for the initial decision was granted. The initial decision is due in May 2023.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolvesresolved 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 providesprovided that System Energy willwould provide a black-box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provides provided
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that if the APSC, the City Council, or the LPSC agrees to the global settlement System Energy entered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black-box refund amount, then the black-box refund for this settlement agreement shall not be incremental or in addition to the global black-box refund amount. The settlement agreement addressesaddressed other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and
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inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement will bewas 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 should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power Sales Agreement bills. Based on this finding, the initial decision recommended refunds; System Energy estimates that those refunds for Entergy Louisiana and Entergy New Orleans would total approximately $69.7 million plus $94.3 million of interest through March 31, 2024. The initial decision also finds that the Unit Power Sales Agreement should be modified such that a cash working capital allowance of negative $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 which the complainants sought refunds or changes to the Unit Power Sales Agreement, the 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 LPSC, the City Council, and the FERC 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.
LPSC Petition for a Writ of Mandamus
In March 2024 the LPSC filed a petition for a writ of mandamus, requesting that the United States Court of Appeals for the Fifth Circuit direct the FERC to take action on (1) System Energy’s pending compliance filings (and the LPSC’s protests) in response to the FERC’s orders on the uncertain tax position rate base issue, as discussed above; and (2) the ALJ’s pending initial decision in the return on equity and capital structure proceeding, also as discussed above. System Energy filed a notice of intervention in the proceeding.
In March 2024 the United States Court of Appeals for the Fifth Circuit directed the FERC to respond to the LPSC’s petition. Also in March 2024, System Energy filed its response to the LPSC’s petition, in which it opposed the request for action on the compliance filing and took no position on the request for action on the return on equity and capital structure case. Later in March 2024, the FERC responded opposing both parts of the LPSC’s petition, and the LPSC filed an opposed motion for leave to answer and its answer to the FERC’s and System Energy’s responses.
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System Energy Settlement with the APSC
As discussed in the Form 10-K, in October 2023, System Energy, Entergy Arkansas, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the APSC to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” above and in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. System Energy, Entergy Arkansas, additional Entergy parties, and the APSC filed the settlement agreement and supporting materials with the FERC in November 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.
The terms of the settlement with the APSC align with the $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 $49.5 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.”
In addition to the black box refund of $142 million described above, beginning with the November 2023 service month, the settlement 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.
In December 2023 the FERC trial staff and the LPSC filed comments. The FERC trial staff commented that it “believes that the settlement is fair, and in the public interest,” and neither it nor the LPSC oppose the settlement. In December 2023 the $93 million black box refund to Entergy Arkansas was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet. In March 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.”
System Energy Settlement with the City Council
In April 2024, System Energy, Entergy New Orleans, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the City Council to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” above and in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. System Energy, Entergy New Orleans, additional Entergy parties, and the City Council intend to file the settlement agreement and supporting materials with the FERC no later than May 10, 2024. 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. As discussed above and in Note 2 to the financial statements in the Form 10-K, System Energy previously settled with the MPSC and the APSC with respect to these complaints before the FERC. Entergy Mississippi and Entergy Arkansas have nearly 65% of System Energy’s share of Grand Gulf’s output, after purchases from affiliates are considered. The settlements with the APSC, the MPSC, and the City Council represent almost 85% of System Energy’s share of the output of Grand Gulf.
The terms of the settlement with the City Council align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022 and between System Energy and the APSC in November 2023. The settlement provides for Entergy New Orleans to receive a
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black box refund of $116 million from System Energy, inclusive of approximately $18 million already received by Entergy New Orleans from System Energy. In November 2022 the FERC approved the System Energy settlement with the MPSC, and in March 2024 the FERC approved the System Energy settlement with the APSC. In both settlements, the FERC stated that the settlements “appear to be fair and reasonable and in the public interest.” In March 2024 the $98 million black box refund to Entergy New Orleans was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Entergy’s balance sheet.
In addition to the black box refund of $116 million described above, beginning with the June 2024 service month, the settlement provides for Entergy New Orleans’ 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.
System Energy Regulatory Liability for Pending Complaints
As discussed in the Form 10-K, System Energy had recorded a regulatory liability related to complaints against System Energy, which was consistent with the settlement agreements reached with the MPSC and the APSC, taking into account amounts already or expected to be refunded. As discussed above in “Settlement with the City Council,” in first quarter 2024 the $98 million black box refund to Entergy New Orleans was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet. System Energy’s remaining regulatory liability related to complaints against System Energy as of March 31, 2024 is $80 million.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 20212022 Calendar Year Bills
In March 2023,February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC the APSC, and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2021.2022. 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)(2) that all issues in the ongoingpending Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 20212022 bills. The first, third, and fourthThese allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 bills. The formal challenge to the calendar yearand 2021 bills states that the impact of the first allegation is “tens of millions of dollars,” but it does not provide an estimate of the financial impact of the remaining allegations.bills.
In May 2023,March 2024, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.
Storm Cost Recovery Filings with Retail Regulators
See Note 2 to the financial statements in the Form 10-K for discussion regarding storm cost recovery filings. The following is an update to that discussion.
Entergy LouisianaMississippi
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 significantEntergy Mississippi has approval from the MPSC to collect a storm damage to portionsprovision of $1.75 million per month. If Entergy Louisiana’s service area. The storms resulted in widespread outages, significantMississippi’s accumulated storm damage to distribution and transmission infrastructure, andprovision balance exceeds $15 million, 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 portionscollection 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, causingstorm 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. Whenprovision ceases until such time that the ice melted, it affected vegetation and electrical equipment, causing additional outages. In August 2021, Hurricane Ida caused extensiveaccumulated storm damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages.provision becomes less than $10 million.
In April 2022,December 2023, Entergy LouisianaMississippi filed an application witha Notice of Storm Escrow Disbursement and Request for Interim Relief notifying the LPSC relatingMPSC that Entergy Mississippi had requested disbursement of approximately $34.5 million of storm escrow funds from its restricted storm escrow account. The filing also requested authorization from the MPSC, on a temporary basis, that the $34.5 million of storm escrow funds be credited to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida were 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 was seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, eligible for recovery from customers. As part of this filing, Entergy Louisiana also was seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount was exclusive of the requested $3 million in carrying costs through December
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2022. In total, Entergy Louisiana was requesting an LPSC determinationMississippi’s storm damage provision, pending the MPSC’s review of Entergy Mississippi’s storm-related costs, and that $2.64 billion was prudently incurred and, therefore, eligible for recovery from customers. As discussedEntergy Mississippi continue to bill its monthly storm damage provision without suspension in the Form 10-K,event the storm damage provision balance exceeds $15 million, in March 2022 the LPSC approved financinganticipation of a $1 billionsubsequent filing by Entergy Mississippi in this proceeding. The 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 recoverydamage reserve exceeded $15 million upon receipt 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. The parties negotiated and executedfunds. Because the MPSC had not entered an uncontested stipulated settlement which was filed with the LPSC in December 2022. The settlement agreement contains the following key terms: $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 $59.2 million were recoverable; andorder on Entergy Louisiana was authorized to finance $1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. In January 2023 the LPSC approved the stipulated settlement subject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a reduction of the 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 were reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to authorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to issue the bonds authorized in the LPSC’s financing order.
In March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023Mississippi’s filing on the preferred membership interests issuedrequested relief to continue billing this provision, Entergy Mississippi suspended billing the monthly storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana began collecting the system restoration chargedamage provision effective with the first billing cycle of April 2023 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.February 2024 bills.
As discussedIn March 2024, Entergy Mississippi made a combined dual filing which included a Notice of Intent to Make Routine Change in Note 10Rates and Schedules and a Motion for Determination relating to the financial statements herein,above-described Notice of Storm Escrow Disbursement. The Notice of Intent proposed a new storm damage mitigation and restoration rider to supersede both the securitization resultedcurrent storm damage rate schedule and the vegetation management rider schedule, in recognitionwhich the collection of both expenses would be combined. The proposal requests that the MPSC authorize Entergy Mississippi to collect a net reductionstorm damage provision of income tax expense of approximately $133$5.2 million after taking into account aper month. Furthermore, if Entergy Mississippi’s accumulated storm damage 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 $129balance exceeds $70 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, collection of the securitization regulatory proceeding,storm damage provision would cease until such time that the accumulated storm damage provision becomes less than $60 million. The new storm damage mitigation and restoration rider will go into effect July 2024 if the notice is not suspended by the MPSC. Should the proposal not go into effect and the collection of both expenses not be combined, Entergy Louisiana recordedMississippi proposed to collect a storm damage provision of $3.5 million per month, in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.
As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidateswhich the storm trust II as a variable interest entity and the LURC’s 1% beneficial interestdamage reserve balance is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $14.6not to exceed $50 million in other income to reflect the LURC’s beneficial interest in the storm trust II.or become less than $40 million.
NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
| | For the Three Months Ended March 31, |
| 2023 | | 2022 |
| (In Millions, Except Per Share Data) |
| Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Basic earnings per share | |
| For the Three Months Ended March 31, | | | For the Three Months Ended March 31, |
| 2024 | | | 2024 | | 2023 |
| (Dollars In Thousands, Except Per Share Data; Shares in Millions) | | | (Dollars In Thousands, Except Per Share Data; Shares in Millions) |
| | | $/share | | | | | $/share |
| Consolidated net income | |
| Less: Preferred dividend requirements of subsidiaries and noncontrolling interests | |
| Less: Preferred dividend requirements of subsidiaries and noncontrolling interests | |
| Less: Preferred dividend requirements of subsidiaries and noncontrolling interests | |
| Net income attributable to Entergy Corporation | Net income attributable to Entergy Corporation | $310.9 | | | 211.4 | | | $1.47 | | | $276.4 | | | 202.9 | | | $1.36 | |
| Net income attributable to Entergy Corporation | |
| Net income attributable to Entergy Corporation | |
| Basic shares and earnings per average common share | |
| Basic shares and earnings per average common share | |
| Basic shares and earnings per average common share | |
| Average dilutive effect of: | Average dilutive effect of: | |
| Stock options | |
| Stock options | |
| Stock options | Stock options | | 0.3 | | | — | | | 0.5 | | | — | |
| Other equity plans | Other equity plans | | 0.4 | | | — | | | 0.4 | | | — | |
| Equity forwards | Equity forwards | | — | | | — | | | 0.1 | | | — | |
| Diluted earnings per share | $310.9 | | | 212.1 | | | $1.47 | | | $276.4 | | | 203.9 | | | $1.36 | |
| Diluted shares and earnings per average common shares | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.2 million1,141,259 options for the three months ended March 31, 20232024 and approximately 0.9 million1,181,919 options for the three months ended March 31, 2022.2023.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s stock options and other equity compensation plans are discussed in Note 5 to the financial statements herein and in Note 12 to the financial statements in the Form 10-K.
Dividends declared per common share were $1.13 for the three months ended March 31, 2024 and $1.07 for the three months ended March 31, 2023 and $1.01 for the three months ended March 31, 2022.2023.
Equity Distribution Program
In January 2021, Entergy Corporation entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy Corporation 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 Corporation common stock, Entergy Corporation may enter into forward sale agreements for the sale of its common stock. The aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement may not exceed an aggregate gross sales price of $2 billion. As of March 31, 2023, shares at2024, an aggregate gross sales price of approximately $1,077.8 million have$1.6 billion has been sold under the at the market equity distribution program.
InDuring the three months ended March 2022, Entergy entered into a forward sale agreement for 1,538,01031, 2024 and 2023, there were no shares of common stock.stock issued under the at the market equity distribution program.
In March 2024, Entergy Corporation entered into two separate forward sale agreements for 284,922 shares and 1,160,415 shares of common stock, respectively. No amounts werehave been or will be recorded on Entergy’s balance sheet with respect to the equity offeringofferings until settlements of the equity forward sale agreement occurred in November 2022.agreements occur. The forward sale agreement requiredagreements require Entergy Corporation to, at its election prior to September 29, 2023,May 30, 2025, either (i) physically settle the transactions by issuing the total of 1,538,010284,922 shares and 1,160,415 shares, respectively, of its common stock to the forward counterpartycounterparties in exchange for net proceeds at the then-applicable forward sale price specified by the agreementagreements (initially approximately $108.14$101.92 and $101.74 per share)share, respectively) or (ii) net settle the transactiontransactions in whole or in part through the delivery or receipt of cash or shares. TheEach forward sale price wasis 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.agreements. In connection with the forward sale agreement,agreements, the forward seller, or its affiliates, borrowed from third parties and sold 1,538,010284,922 shares and 1,160,415 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $168 million.$29.3 million and $119.2 million, respectively. In connection with the salesales of these shares, Entergy Corporation paid the forward sellers fees of approximately $1.7$0.3 million and $1.2 million, respectively, which have not been deducted from the gross sales price. Entergy Corporation 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, waswill be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’sEntergy Corporation’s common stock is higher than the average forward sales price. For the three months ended March 31, 2022, 1,775,2512024, 1,910,255 shares under the forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive.
In November 2022, Entergy physically settled its obligations under the forward sale agreements by delivering 7,688,419 shares of common stock in exchange for cash proceeds of $853.3 million. See Note 7 to the financial statements in the Form 10-K for discussion of the common stock issued and forward sale agreements settled under the market equity distribution program. There were no shares of common stock issued under the at the market equity distribution program for the three months ended March 31, 2023, and there were no forward sale agreements in place as of March 31, 2023.
Treasury Stock
During the three months ended March 31, 2023,2024, Entergy Corporation issued 269,546reissued 30,437 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the three months ended March 31, 2023.2024.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Retained Earnings
On April 10, 2023,8, 2024, Entergy Corporation’s Board of Directors declared a common stock dividend of $1.07$1.13 per share, payable on June 1, 20233, 2024 to holders of record as of May 4, 2023.2, 2024.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2024 and 2023:
| | | | | | | | | | | |
| | Pension and Other Postretirement Liabilities | |
| | (In Thousands)
| Beginning balance, January 1, 2023 | ($191,754) | |
| |
| | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | 2,027 | |
| Net other comprehensive income for the period | 2,027 | |
| | | |
| Ending balance, March 31, 2023 | ($189,727) | |
| | | |
| | | |
| | | | | | | | | | | |
| Pension and Other Postretirement Benefit Plans |
| 2024 | | 2023 |
| (In Thousands) |
| Beginning balance, January 1, | ($162,460) | | | ($191,754) | |
| | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | (3,668) | | | 2,027 | |
| Net other comprehensive income (loss) for the period | (3,668) | | | 2,027 | |
| Ending balance, March 31, | ($166,128) | | | ($189,727) | |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 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 | (14) | | | — | | | (15,875) | | | | | (15,889) | |
| Amounts reclassified from accumulated other comprehensive income (loss) | 38 | | | 8,328 | | | 3,473 | | | | | 11,839 | |
| Net other comprehensive income (loss) for the period | 24 | | | 8,328 | | | (12,402) | | | | | (4,050) | |
| | | | | | | | | |
| Ending balance, March 31, 2022 | ($1,011) | | | ($330,319) | | | ($5,248) | | | | | ($336,578) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 20232024 and 2022:
| | | | | | | | | | | | | | |
| | Pension and Other
Postretirement Liabilities |
| | 2023 | | 2022 |
| | (In Thousands) |
| Beginning balance, January 1, | | $55,370 | | | $8,278 | |
| | | | |
| | | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | | (786) | | | (613) | |
| Net other comprehensive income (loss) for the period | | (786) | | | (613) | |
| | | | |
| | | | |
| | | | |
| Ending balance, March 31, | | $54,584 | | | $7,665 | |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2023 and 2022 were as follows:2023:
| | | | | | | | | | | | | | | | | |
| Amounts reclassified
from AOCI | | Income Statement Location |
| 2023 | | 2022 | | |
| (In Thousands) | | |
| Cash flow hedges net unrealized loss | | | | | |
| | | | | |
| Interest rate swaps | $— | | | ($48) | | | Miscellaneous - net |
| Total realized loss on cash flow hedges | — | | | (48) | | | |
| Income taxes | — | | | 10 | | | Income taxes |
| Total realized loss on cash flow hedges (net of tax) | $— | | | ($38) | | | |
| | | | | |
| Pension and other postretirement liabilities | | | | | |
| Amortization of prior-service credit | $3,397 | | | $3,837 | | | (a) |
| Amortization of gain (loss) | 1,661 | | | (13,925) | | | (a) |
| | | | | |
| Settlement loss | (7,816) | | | (782) | | | (a) |
| Total amortization | (2,758) | | | (10,870) | | | |
| Income taxes | 731 | | | 2,542 | | | Income taxes |
| Total amortization (net of tax) | ($2,027) | | | ($8,328) | | | |
| | | | | |
| Net unrealized investment loss | | | | | |
| Realized loss | $— | | | ($5,495) | | | Interest and investment income |
| Income taxes | — | | | 2,022 | | | Income taxes |
| Total realized investment loss (net of tax) | $— | | | ($3,473) | | | |
| | | | | |
| Total reclassifications for the period (net of tax) | ($2,027) | | | ($11,839) | | | |
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. | | | | | | | | | | | | |
| | Pension and Other Postretirement Benefit Plans |
| | 2024 | | 2023 |
| | (In Thousands) |
| Beginning balance, January 1, | | $54,798 | | | $55,370 | |
| | | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | | (2,024) | | | (786) | |
| Net other comprehensive income (loss) for the period | | (2,024) | | | (786) | |
| Ending balance, March 31, | | $52,774 | | | $54,584 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2024 and 2023 and 2022 wereare as follows:
| | Amounts reclassified
from AOCI | | Income Statement Location |
| 2023 | | 2022 | | |
| (In Thousands) | |
| Pension and other postretirement liabilities | |
| Amounts reclassified
from AOCI | | | Amounts reclassified
from AOCI | | Income Statement Location |
| 2024 | |
| (In Thousands) | |
| (In Thousands) | |
| (In Thousands) | |
| Pension and other postretirement benefit plans | |
| Pension and other postretirement benefit plans | |
| Pension and other postretirement benefit plans | |
| Amortization of prior-service credit | Amortization of prior-service credit | | $951 | | | $1,158 | | | (a) |
| Amortization of gain (loss) | | 1,565 | | | (319) | | | (a) |
| Amortization of prior-service credit | |
| Amortization of prior-service credit | | $3,473 | | | $3,397 | | | (a) |
| Amortization of net gain | | Amortization of net gain | 1,397 | | | 1,661 | | | (a) |
| Settlement loss | Settlement loss | | (1,440) | | | — | | | (a) | Settlement loss | — | | | (7,816) | | (7,816) | | | (a) | | (a) |
| Total amortization | | 1,076 | | | 839 | | |
| Total amortization and settlement loss | |
| Income taxes | Income taxes | | (290) | | | (226) | | | Income taxes |
| Total amortization (net of tax) | | 786 | | | 613 | | |
| Income taxes | |
| Income taxes | | (1,202) | | | 731 | | | Income taxes |
| Total amortization and settlement loss (net of tax) | |
| | Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | | $786 | | | $613 | | |
| | Total reclassifications for the period (net of tax) | |
| | Total reclassifications for the period (net of tax) | |
(a)These accumulated other comprehensive income (loss) components wereare included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
Noncontrolling Interests
The dollar valueTotal reclassifications out of noncontrolling interestsaccumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana as offor the three months ended March 31, 2024 and 2023 and December 31, 2022 is presented below:are as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
| Entergy Louisiana Noncontrolling Interests | | | |
| Restoration Law Trust I (a) | $31,813 | | | $31,735 | |
| Restoration Law Trust II (b) | 14,583 | | | — | |
| Total Noncontrolling Interests | $46,396 | | | $31,735 | |
| | | | | | | | | | | | | | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | 2024 | | 2023 | | |
| | (In Thousands) | | |
| Pension and other postretirement benefit plans | | | | | | |
| Amortization of prior-service credit | | $1,136 | | | $951 | | | (a) |
| Amortization of gain | | 1,634 | | | 1,565 | | | (a) |
| Settlement loss | | — | | | (1,440) | | | (a) |
| Total amortization and settlement loss | | 2,770 | | | 1,076 | | | |
| Income taxes | | (746) | | | (290) | | | Income taxes |
| Total amortization and settlement loss (net of tax) | | 2,024 | | | 786 | | | |
| | | | | | |
| Total reclassifications for the period (net of tax) | | $2,024 | | | $786 | | | |
(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 17 to the financial statements in the Form 10-K for discussion of Restoration Law Trust I.
(b)Restoration Law Trust II (the storm trust II) was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Ida storm restoration costs. The storm trust II holds preferred membership interests issued by Entergy Finance Company, and Entergy Finance Company is required to make annual distributions (dividends) on the preferred membership interests. These annual dividends paid on the Entergy Finance Company preferred membership interests will be distributed 1% to the LURC and 99% to Entergy Louisiana. Entergy Louisiana, as the primary beneficiary, consolidates the storm trust II and the LURC’s 1% beneficial interest in noncontrolling interests in the consolidated financial statements for Entergy Louisiana and Entergy. See Note 26 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm securitization.additional details.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in June 2027.2028. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rateAs there were no borrowings under the facility for the three months ended March 31, 2023 was 6.12% on2024, the drawn portion of the facility. Asestimated interest rate as of March 31, 2023,2024 that would have been applied to outstanding borrowings under the facility was 6.93%. The following is a summary of the amounts outstanding and capacity available under the $3.5 billion credit facility are:as of March 31, 2024.
| | 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 | | $— | | $4 | | $3,496 |
Entergy Corporation’s credit facility requiresincludes a covenant requiring 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 March 31, 2023,2024, Entergy Corporation had $865.6$1,913.5 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20232024 was 4.93%5.69%.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 20232024 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Company | | Expiration
Date | | Amount of
Facility | | Interest Rate
(a) | | Amount Drawn
as of
March 31, 20232024 | | Letters of Credit
Outstanding as of
March 31, 20232024 |
| Entergy Arkansas | | April 2023 (e)2024 (d) | | $25 million (b) | | 6.56%7.27% | | $— | | $— |
| Entergy Arkansas | | June 20272028 | | $150 million (c) | | 6.03%6.55% | | $— | | $— |
| Entergy Louisiana | | June 20272028 | | $350 million (c) | | 6.16%6.68% | | $— | | $— |
| Entergy Mississippi | | April 2023 (f) | | $45 million (d) | | 6.41% | | $— | | $— |
Entergy Mississippi | | April 2023 (f) | | $40 million (d) | | 6.41% | | $— | | $— |
Entergy Mississippi | | April 2023 (f) | | $10 million (d) | | 6.41% | | $— | | $— |
Entergy Mississippi | | July 20242025 | | $150 million | | 5.98%6.55% | | $100 million | | $— |
| Entergy New Orleans | | June 2024 | | $25 million (c) | | 6.47%7.05% | | $— | | $— |
| Entergy Texas | | June 20272028 | | $150 million (c) | | 6.16%6.68% | | $— | | $1.1 million |
(a)The interest rate is the estimated interest rate as of March 31, 20232024 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(d)Borrowings under the short-term Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
(e)In April 2023,2024, Entergy Arkansas renewed and extended the expiration of the credit facility to April 2024.
(f)In April 2023, Entergy Mississippi extended the expiration of the credit facilities to July 2023.2026.
The commitment fees on the credit facilities range from 0.075% to 0.375% of the undrawn commitment amount for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas, and of the entire facility amount for Entergy New Orleans. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered intohas an uncommitted standby letter of credit facility as a means to post collateral to support its
Entergy Corporation and Subsidiaries
Notes to Financial Statements
obligations to MISO. FollowingMISO and for other purposes. The following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2023:2024:
| | | | | | | | | | | | | | | | | | | | |
| Company | | Amount of
Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit
Issued as of
March 31, 20232024
(a) (b) |
| Entergy Arkansas | | $25 million | | 0.78% | | $5.62.1 million |
| Entergy Louisiana | | $125 million | | 0.78% | | $2011.8 million |
| Entergy Mississippi | | $65 million | | 0.78% | | $6.727.6 million |
| Entergy New Orleans | | $15 million | | 1.625% | | $10.5 million |
| Entergy Texas | | $80 million | | 0.875%1.250% | | $8.876.5 million |
(a)As of March 31, 2023,2024, letters of credit posted with MISO covered financial transmission rightrights exposure of $0.1$0.6 million for Entergy Arkansas, $0.3$0.5 million for Entergy Louisiana, $0.5 million for Entergy Mississippi, and $0.5$0.2 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of March 31, 2023,2024, the letters of credit issued for Entergy Mississippi include $17.4 million in addition to the $6.7 million MISO letters of credit Entergy Mississippi had $9.2and $10.2 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. As of March 31, 2023, the FERC-authorized short-term borrowing limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas werehave FERC-authorized short-term borrowing limits effective through October 2023.April 2025. The FERC-authorized short-term borrowing limit for System Energy is effective through March 2025. In April 2023, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas received FERC-authorized short-term borrowing limits effective through April 2025. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy Systemsystem money pool and from other internal short-term borrowing arrangements. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and the other internal borrowing arrangements are intercompany borrowing arrangements designed to reduce the Utility subsidiaries’Registrant 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 wereare the FERC-authorized limits for short-term borrowings and the outstanding short-term
Entergy Corporation and Subsidiaries
Notes to Financial Statements
borrowings as of March 31, 20232024 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
| | | | | | | | | | | |
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | $— |
Entergy Louisiana | $450 | | $— |
Entergy Mississippi | $200 | | $— |
Entergy New Orleans | $150 | | $— |
Entergy Texas | $200 | | $— |
System Energy | $200 | | $— |
| | | | | | | | | | | |
| | Authorized | | Borrowings |
| | (In Millions) |
| Entergy Arkansas | $250 | | $— |
| Entergy Louisiana | $450 | | $— |
| Entergy Mississippi | $200 | | $56 |
| Entergy New Orleans | $150 | | $50 |
| Entergy Texas | $200 | | $— |
| System Energy | $200 | | $— |
Vermont Yankee Credit Facility (Entergy Corporation)
In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Entergy Assets Management Operations, LLC (formerly Vermont Yankee Asset Retirement, LLC), Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in December 2023.2024. The commitment fee is currently 0.20% of the undrawn commitment amount. As of March 31, 2023,2024, $139 million in cash borrowings were outstanding under the credit facility. The weighted averageweighted-average interest rate for the three months ended March 31, 20232024 was 6.14%6.97% on the drawn portion of the facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper, details of which follow as of March 31, 2023:2024:
| | Company | Company | | Expiration
Date | | Amount
of
Facility | | Weighted
Average Interest
Rate on
Borrowings (a) | | Amount
Outstanding as of
March 31, 2023 | Company | | Expiration
Date | | Amount
of
Facility | | Weighted-
Average Interest
Rate on
Borrowings (a) | | Amount
Outstanding as of
March 31, 2024 |
| | | | (Dollars in Millions) |
| | | | (Dollars in Millions) | | | | | | (Dollars in Millions) |
| Entergy Arkansas VIE | Entergy Arkansas VIE | | June 2025 | | $80 | | 5.70% | | $31.5 | Entergy Arkansas VIE | | June 2025 | | $80 | | 6.44% | | $— |
| Entergy Louisiana River Bend VIE | Entergy Louisiana River Bend VIE | | June 2025 | | $105 | | 5.67% | | $58.5 | Entergy Louisiana River Bend VIE | | June 2025 | | $105 | | 6.44% | | $38.9 |
| Entergy Louisiana Waterford VIE | Entergy Louisiana Waterford VIE | | June 2025 | | $105 | | 5.59% | | $52.1 | Entergy Louisiana Waterford VIE | | June 2025 | | $105 | | 6.44% | | $31.2 |
| System Energy VIE | System Energy VIE | | June 2025 | | $120 | | 5.59% | | $55.9 | System Energy VIE | | June 2025 | | $120 | | 6.43% | | $113.2 |
(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company VIEs for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company VIE for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
The commitment fees on the credit facilities are 0.100% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization. Each lessee and guarantor is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company VIEs had notes payable that were included in debt on the respective balance sheets as of March 31, 20232024 as follows:
| | | | | | | | | | | | | | |
| Company | | Description | | Amount |
| Entergy Arkansas VIE | | 1.84% Series N due July 2026 | | 3.17% Series M due December 2023 | $4090 million |
| Entergy Arkansas VIE | | 5.54% Series O due May 2029 | | 1.84% Series N due July 2026 | $9070 million |
| Entergy Louisiana River Bend VIE | | 2.51% Series V due June 2027 | | $70 million |
| Entergy Louisiana Waterford VIE | | 5.94% Series J due September 2026 | | 3.22% Series I due December 2023 | $2070 million |
| System Energy VIE | | 2.05% Series K due September 2027 | | $90 million |
In accordance with regulatory treatment, interest on the nuclear fuel company VIEs’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
As of March 31, 2023,2024, Entergy Arkansas and Entergy Louisiana each hadhas obtained financing authorization from the FERC that extendedextends through October 2023 andApril 2025 for issuances by its nuclear fuel company VIEs. System Energy has obtained financing authorization from the FERC that extends through March 2025 for issuances by its nuclear fuel company VIEs. In April 2023, Entergy Arkansas and Entergy Louisiana obtained financing authorizations from the FERC that extend through April 2025.VIE.
Debt Issuances and Retirements
(Entergy Arkansas)Louisiana)
In January 2023,March 2024, Entergy ArkansasLouisiana issued $425$500 million of 5.15%5.35% Series mortgage bonds due January 2033.March 2034 and $700 million of 5.70% Series mortgage bonds due March 2054. Entergy ArkansasLouisiana used a portion of the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
proceeds, together with other funds, to repay in March 2024 debt outstanding under its $350 million long-term revolving credit facility and to repay in April 2024, prior to maturity, its $400 million of 5.40% Series mortgage bonds due November 2024. Entergy Louisiana expects to use the remaining proceeds, together with other funds, to repay, at or prior to maturity, its $1 billion of 0.95% Series mortgage bonds due October 2024, for capital expenditures, and for general corporate purposes.
(Entergy New Orleans)
In April 2024, Entergy New Orleans entered into a bond purchase agreement related to the sale of $150 million of mortgage bonds expected to be issued in May 2024. The bond purchase agreement provides for the issuance of (1) $35 million of 6.25% Series mortgage bonds due June 2029, (2) $65 million of 6.41% Series mortgage bonds due June 2031, and (3) $50 million of 6.54% Series mortgage bonds due June 2034. Entergy New Orleans expects to use the proceeds, together with other funds, to repay, onat or prior to maturity, its $250$85 million of 3.05% Series mortgage bonds due June 2023 and for general corporate purposes.
(System Energy)
In March 2023, System Energy issued $325 million of 6.00% Series mortgage bonds due April 2028. System Energy used the proceeds, together with other funds, to repay, prior to maturity, its $50 millionunsecured term loan due November 2023, and to repay, at maturity, its $250 million of 4.10% Series mortgage bonds due April 2023,June 2024 and 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 March 31, 20232024 were as follows:
| | Book Value
of Long-Term Debt | | Fair Value
of Long-Term Debt (a) |
| (In Thousands) |
| Book Value
of Long-Term Debt | | | Book Value
of Long-Term Debt | | Fair Value
of Long-Term Debt (a) |
| (In Thousands) | | | (In Thousands) |
| Entergy | Entergy | $26,723,309 | | | $24,057,455 | |
| Entergy Arkansas | Entergy Arkansas | $4,620,604 | | | $4,126,440 | |
| Entergy Louisiana | Entergy Louisiana | $10,690,832 | | | $9,718,246 | |
| Entergy Mississippi | Entergy Mississippi | $2,431,365 | | | $2,156,919 | |
| Entergy New Orleans | Entergy New Orleans | $766,242 | | | $711,545 | |
| Entergy Texas | Entergy Texas | $2,896,522 | | | $2,566,690 | |
| System Energy | System Energy | $1,020,211 | | | $979,621 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(a)Fair values were classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein.
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 20222023 were as follows:
| | Book Value
of Long-Term Debt | | Fair Value
of Long-Term Debt (a) |
| (In Thousands) |
| Book Value
of Long-Term Debt | | | Book Value
of Long-Term Debt | | Fair Value
of Long-Term Debt (a) |
| (In Thousands) | | | (In Thousands) |
| Entergy | Entergy | $25,932,549 | | | $22,573,837 | |
| Entergy Arkansas | Entergy Arkansas | $4,166,500 | | | $3,538,930 | |
| Entergy Louisiana | Entergy Louisiana | $10,698,922 | | | $9,444,665 | |
| Entergy Mississippi | Entergy Mississippi | $2,331,096 | | | $1,987,154 | |
| Entergy New Orleans | Entergy New Orleans | $775,632 | | | $707,872 | |
| Entergy Texas | Entergy Texas | $2,895,913 | | | $2,485,705 | |
| System Energy | System Energy | $777,905 | | | $702,473 | |
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.
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
In January 2024 the Board approved and Entergy granted long-term incentive awards in the form of options on 281,874352,199 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 2023 with a fair value of $20.07$18.61 per option. As of March 31, 2023,2024, there were options on 2,985,7883,155,183 shares of common stock outstanding with a weighted-average exercise price of $97.57.$97.98. 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 March 31, 2023.2024. The aggregate intrinsic value of the stock options outstanding as of March 31, 20232024 was $42.8$38.8 million.
The following table includes financial information for outstanding stock options for the three months ended March 31, 20232024 and 2022:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
| Compensation expense included in Entergy’s consolidated net income | $1.1 | | | $1.1 | |
| Tax benefit recognized in Entergy’s consolidated net income | $0.3 | | | $0.3 | |
| Compensation cost capitalized as part of fixed assets and materials and supplies | $0.5 | | | $0.4 | |
| | | | | | | | | | | |
| 2024 | | 2023 |
| (In Millions) |
| Compensation expense included in Entergy’s consolidated net income | $1.1 | | | $1.1 | |
| Tax benefit recognized in Entergy’s consolidated net income | $0.3 | | | $0.3 | |
| Compensation cost capitalized as part of fixed assets and materials and supplies | $0.5 | | | $0.5 | |
Other Equity Awards
In January 20232024 the Board approved and Entergy granted 345,983long-term incentive awards in the form of 409,947 restricted stock awards and 143,212 long-term incentive awards158,176 performance units under the 2019 Omnibus Incentive Plan. The restricted stock awards were made effective on January 26, 202325, 2024 and were valued at $108.47$99.08 per share, which was the closing price of Entergy’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Corporation’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 ofThe 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 cashenvironmental stewardship, specifically of carbon-free generation for the long-term health of its business, a creditand resilience, an environmental achievement measure – adjusted funds from operations/debt ratio – was selected as one of the performance measures for the 2023-20252024-2026 performance period. Performance will be measured based eighty percent on relative total shareholder return and twenty percent on the creditenvironmental achievement measure. The performance units were granted on January 26, 202325, 2024 and eighty percent were valued at $130.65$124.65 per share based on various factors, primarily market conditions; and twenty percent were valued at $108.47$99.08 per share, the closing price of Entergy’sEntergy Corporation’s common stock on that date. Performance units have the same dividend and voting rights as shares of Entergyother common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance unitsvesting, and are expensed ratably over the three-year vesting period, and compensation cost for the portion of the award based on cumulative adjusted earnings per sharethe selected
Entergy Corporation and Subsidiaries
Notes to Financial Statements
environmental achievement measure will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 20232024 and 2022:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
| Compensation expense included in Entergy’s consolidated net income | $7.7 | | | $11.4 | |
| Tax benefit recognized in Entergy’s consolidated net income | $2.0 | | | $2.9 | |
| Compensation cost capitalized as part of fixed assets and materials and supplies | $3.2 | | | $4.4 | |
| | | | | | | | | | | |
| 2024 | | 2023 |
| (In Millions) |
| Compensation expense included in Entergy’s consolidated net income | $9.9 | | | $7.7 | |
| Tax benefit recognized in Entergy’s consolidated net income | $2.5 | | | $2.0 | |
| Compensation cost capitalized as part of fixed assets and materials and supplies | $4.5 | | | $3.2 | |
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Components of Qualified Net Pension Cost
Entergy’s qualified pension costs, including amounts capitalized, for the first quarters ofthree months ended March 31, 2024 and 2023, and 2022, included the following components:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
| Service cost - benefits earned during the period | $25,678 | | | $37,660 | |
| Interest cost on projected benefit obligation | 75,701 | | | 51,119 | |
| Expected return on assets | (98,133) | | | (103,607) | |
| | | |
| Amortization of net loss | 22,347 | | | 60,579 | |
| Settlement charges | 138,427 | | | — | |
| | | |
| Net pension costs | $164,020 | | | $45,751 | |
| | | | | | | | | | | |
| 2024 | | 2023 |
| (In Thousands) |
| Service cost - benefits earned during the period | $23,376 | | | $25,678 | |
| Interest cost on projected benefit obligation | 70,626 | | | 75,701 | |
| Expected return on assets | (95,980) | | | (98,133) | |
| | | |
| Recognized net loss | 15,120 | | | 22,347 | |
| Settlement charges | — | | | 138,427 | |
| | | |
| Net pension cost | $13,142 | | | $164,020 | |
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their current and former employees for the three months ended March 31, 2024 and 2023, included the following components:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | (In Thousands) |
| Service cost - benefits earned during the period | | $4,099 | | | $5,551 | | | $1,284 | | | $440 | | | $961 | | | $1,384 | |
| Interest cost on projected benefit obligation | | 13,217 | | | 13,961 | | | 3,521 | | | 1,569 | | | 2,831 | | | 3,391 | |
| Expected return on assets | | (18,155) | | | (19,447) | | | (5,113) | | | (2,204) | | | (4,077) | | | (4,648) | |
| | | | | | | | | | | | |
| Recognized net loss | | 5,746 | | | 2,602 | | | 1,140 | | | 470 | | | 393 | | | 1,165 | |
| | | | | | | | | | | | |
| Net pension cost | | $4,907 | | | $2,667 | | | $832 | | | $275 | | | $108 | | | $1,292 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their employees for the first quarters of 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 | | $4,749 | | | $6,280 | | | $1,482 | | | $491 | | | $1,107 | | | $1,467 | |
| Interest cost on projected benefit obligation | | 14,280 | | | 15,379 | | | 3,930 | | | 1,715 | | | 3,242 | | | 3,528 | |
| Expected return on assets | | (18,076) | | | (19,233) | | | (4,884) | | | (2,267) | | | (4,152) | | | (4,538) | |
| | | | | | | | | | | | |
| Amortization of net loss | | 6,969 | | | 4,964 | | | 1,765 | | | 513 | | | 990 | | | 1,461 | |
| Settlement charges | | 22,174 | | | 35,999 | | | 11,655 | | | 1,693 | | | 9,678 | | | 4,799 | |
| Net pension cost | | $30,096 | | | $43,389 | | | $13,948 | | | $2,145 | | | $10,865 | | | $6,717 | |
| | 2022 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | (In Thousands) |
| 2023 | | 2023 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | (In Thousands) | | | | (In Thousands) |
| Service cost - benefits earned during the period | Service cost - benefits earned during the period | | $6,858 | | | $9,137 | | | $2,130 | | | $752 | | | $1,632 | | | $2,045 | |
| Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 9,317 | | | 10,499 | | | 2,678 | | | 1,139 | | | 2,175 | | | 2,338 | |
| Expected return on assets | Expected return on assets | | (19,247) | | | (21,133) | | | (5,203) | | | (2,515) | | | (4,937) | | | (4,623) | |
| | Amortization of net loss | | 13,426 | | | 12,597 | | | 3,810 | | | 1,368 | | | 2,555 | | | 3,266 | |
| Recognized net loss | |
| | Recognized net loss | |
| | Recognized net loss | |
| Settlement charges | |
| Net pension cost | Net pension cost | | $10,354 | | | $11,100 | | | $3,415 | | | $744 | | | $1,425 | | | $3,026 | |
Non-Qualified Net Pension Cost
Entergy recognized $9.2$2.7 million and $10.2$9.2 million in pension cost for its non-qualified pension plans infor the first quarters ofthree months ended March 31, 2024 and 2023, and 2022, respectively. Reflected inFor the pension cost for non-qualified pension plans in the first quarters of 2023 and 2022three months ended March 31, 2024, there were no settlement charges of $4.8 million and $5.3 million, respectively, related to the payment of lump sum benefits out of the plan. Included in the pension cost for non-qualified pension plans for the three months ended March 31, 2023 were settlement charges of $4.8 million related to the payment of lump sum benefits out of the plans.
The Registrant Subsidiaries recognized the following pension cost for their current and former employees for their non-qualified pension plans for the first quarters of 2023three months ended March 31, 2024 and 2022:2023:
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas |
| (In Thousands) |
| Entergy
Arkansas | | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas |
| (In Thousands) | | | (In Thousands) |
| 2024 | |
| 2023 | 2023 | $450 | | | $27 | | | $552 | | | $33 | | | $63 | |
| 2022 | $72 | | | $27 | | | $80 | | | $29 | | | $215 | |
Reflected in Entergy Arkansas’ non-qualified pension costs inFor the first quarter of 2023three months ended March 31, 2024, there were no settlement charges of $379 thousandfor the Registrant Subsidiaries related to the payment of lump sum benefits out of the plan. ReflectedIncluded in Entergy Mississippi’sthe non-qualified pension costs inabove for the first quarter ofthree months ended March 31, 2023 were settlement charges of $379 thousand and $453 thousand related to the payment of lump sum benefits out of the plan. Reflected infor Entergy Texas’ non-qualified pension costs in the first quarter of 2022 were settlement charges of $119 thousandArkansas and Entergy Mississippi, respectively, related to the payment of lump sum benefits out of the plan.
Components of Net Other Postretirement Benefits Cost (Income)
Entergy’s other postretirement benefits income, including amounts capitalized, for the three months ended March 31, 2024 and 2023, included the following components:
| | | | | | | | | | | |
| | 2024 | | 2023 |
| | (In Thousands) |
| Service cost - benefits earned during the period | $3,126 | | | $3,664 | |
| Interest cost on accumulated postretirement benefit obligation (APBO) | 9,852 | | | 10,568 | |
| Expected return on assets | (10,569) | | | (9,183) | |
| | | |
| Amortization of prior service credit | (5,720) | | | (5,640) | |
| Recognized net gain | (2,761) | | | (2,862) | |
| Net other postretirement benefits income | ($6,072) | | | ($3,453) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost (Income)
Entergy’s other postretirement benefit income, including amounts capitalized, for the first quarters of 2023 and 2022, included the following components:
| | | | | | | | | | | |
| | 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 benefit income | ($3,453) | | | ($3,149) | |
The Registrant Subsidiaries’ other postretirement benefitbenefits cost (income), including amounts capitalized, for their current and former employees for the first quarters ofthree months ended March 31, 2024 and 2023, and 2022, included the following components:
| | 2023 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | (In Thousands) |
| 2024 | | 2024 | | 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 | | $741 | | | $845 | | | $220 | | | $59 | | | $202 | | | $189 | |
| Interest cost on APBO | Interest cost on APBO | | 2,001 | | | 2,233 | | | 543 | | | 290 | | | 649 | | | 432 | |
| Expected return on assets | Expected return on assets | | (3,778) | | | — | | | (1,179) | | | (1,316) | | | (2,194) | | | (634) | |
| Amortization of prior service cost/(credit) | Amortization of prior service cost/(credit) | | 524 | | | (951) | | | (239) | | | (229) | | | (1,093) | | | (73) | |
| Amortization of net (gain) loss | | 43 | | | (1,764) | | | 21 | | | 117 | | | 229 | | | — | |
| Net other postretirement benefit cost (income) | | ($469) | | | $363 | | | ($634) | | | ($1,079) | | | ($2,207) | | | ($86) | |
| Recognized net (gain)/loss | |
| Net other postretirement benefits income | |
| | 2022 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | (In Thousands) |
| 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 | | $1,114 | | | $1,408 | | | $339 | | | $99 | | | $331 | | | $310 | |
| Interest cost on APBO | Interest cost on APBO | | 1,263 | | | 1,443 | | | 350 | | | 174 | | | 399 | | | 279 | |
| Expected return on assets | Expected return on assets | | (4,483) | | | — | | | (1,394) | | | (1,499) | | | (2,568) | | | (791) | |
| | 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 | | 218 | | | (186) | | | 56 | | | (225) | | | 162 | | | 30 | |
| Net other postretirement benefit cost (income) | | ($1,417) | | | $1,507 | | | ($1,092) | | | ($1,680) | | | ($2,769) | | | ($252) | |
| | Amortization of prior service cost/(credit) | |
| | Amortization of prior service cost/(credit) | |
| Recognized net (gain)/loss | |
| Net other postretirement benefits (income)/cost | |
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 three months ended March 31, 20232024 and 2022:2023:
| | 2023 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) | | |
| 2024 | | 2024 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) | |
| Entergy | Entergy | |
| Entergy | |
| Entergy | |
| Amortization of prior service (cost) credit | |
| Amortization of prior service (cost) credit | |
| Amortization of prior service (cost) credit | Amortization of prior service (cost) credit | | $— | | | $3,510 | | | ($113) | | | $3,397 | |
| Amortization of net gain (loss) | Amortization of net gain (loss) | | (1,040) | | | 2,898 | | | (197) | | | 1,661 | |
| | Settlement loss | | (6,647) | | | — | | | (1,169) | | | (7,816) | |
| | ($7,687) | | | $6,408 | | | ($1,479) | | | ($2,758) | |
| | ($1,138) | |
| | | ($1,138) | |
| | | ($1,138) | |
| Entergy Louisiana | Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | Amortization of prior service credit | | $— | | | $951 | | | $— | | | $951 | |
| Amortization of prior service credit | |
| Amortization of prior service credit | |
| Amortization of net gain (loss) | Amortization of net gain (loss) | | (199) | | | 1,764 | | | — | | | 1,565 | |
| Settlement loss | | (1,440) | | | — | | | — | | | (1,440) | |
| | ($1,639) | | | $2,715 | | | $— | | | $1,076 | |
| | ($104) | |
| | ($104) | |
| | ($104) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost) credit | | $— | | | $4,014 | | | ($177) | | | $3,837 | |
| Amortization of net loss | | (12,910) | | | (596) | | | (419) | | | (13,925) | |
| | | | | | | | |
| Settlement loss | | — | | | — | | | (782) | | | (782) | |
| | ($12,910) | | | $3,418 | | | ($1,378) | | | ($10,870) | |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | | $— | | | $1,158 | | | $— | | | $1,158 | |
| Amortization of net gain (loss) | | (504) | | | 186 | | | (1) | | | (319) | |
| | | | | | | | |
| | ($504) | | | $1,344 | | | ($1) | | | $839 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost) credit | | $— | | | $3,510 | | | ($113) | | | $3,397 | |
| Amortization of net gain (loss) | | (1,040) | | | 2,898 | | | (197) | | | 1,661 | |
| | | | | | | | |
| Settlement loss | | (6,647) | | | — | | | (1,169) | | | (7,816) | |
| | ($7,687) | | | $6,408 | | | ($1,479) | | | ($2,758) | |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | | $— | | | $951 | | | $— | | | $951 | |
| Amortization of net gain (loss) | | (199) | | | 1,764 | | | — | | | 1,565 | |
| Settlement loss | | (1,440) | | | — | | | — | | | (1,440) | |
| | ($1,639) | | | $2,715 | | | $— | | | $1,076 | |
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,”accounting standards, the other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations and are presented by Entergy in miscellaneous - net in other income.
Qualified Pension Settlement Costs
Year-to-dateFirst quarter 2023 lump sum benefit payments from the Entergy Corporation Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees exceeded the sum of the Plans’ 2023 service and interest cost, resulting in settlement costs. In accordance with accounting standards, settlement accounting requires immediate recognition of the portion of previously unrecognized losses associated with the settled portion of the plan’s pension liability. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans, Entergy Texas, and System Energy each participate in one or both of the Entergy Corporation Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees and incurred settlement costs. Similar to other pension costs, the settlement costs were included with employee labor costs and charged to expense and capital in the same manner that labor costs were charged. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans each received regulatory approval to defer the expense portion of the settlement costs, with future amortization of the deferred settlement expense over the period in which the expense otherwise would be recorded had the immediate recognition not occurred.
Entergy Texas Reserve
In September 2020, Entergy Texas elected to establish a reserve, in accordance with PUCT regulations, 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 was includedamounts recorded are evaluated in the baseeach rate case filed by Entergy Texas and an amortization period is determined at that was filed with the PUCT in July 2022. At March 31, 2023, the balance in this reserve was approximately $39.9 million.time.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employer Contributions
Based on current assumptions, Entergy expects to contribute $267$270 million to its qualified pension plans in 2023.2024. As of March 31, 2023,2024, Entergy had contributed $33$58 million to its pension plans. Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their current and former employees in 2023:2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| (In Thousands) |
| Expected 2023 pension contributions | $54,468 | | | $44,565 | | | $21,110 | | | $1,420 | | | $5,314 | | | $15,543 | |
| Pension contributions made through March 2023 | $6,436 | | | $3,169 | | | $2,470 | | | $— | | | $146 | | | $2,191 | |
| Remaining estimated pension contributions to be made in 2023 | $48,032 | | | $41,396 | | | $18,640 | | | $1,420 | | | $5,168 | | | $13,352 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| (In Thousands) |
| Expected 2024 pension contributions | $55,112 | | | $48,401 | | | $14,980 | | | $4,931 | | | $8,272 | | | $16,650 | |
| Pension contributions made through March 2024 | $12,008 | | | $10,349 | | | $4,660 | | | $355 | | | $1,292 | | | $3,338 | |
| Remaining estimated pension contributions to be made in 2024 | $43,104 | | | $38,052 | | | $10,320 | | | $4,576 | | | $6,980 | | | $13,312 | |
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy has a single reportable segment, Utility, which includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, Mississippi, and Texas,including the City of New Orleans; and operation of a small natural gas distribution business in portions of Louisiana. The 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 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.
As discussed in Note 13Entergy’s segment financial information for the first quarters of 2024 and 2023 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility | | Parent & Other | | Eliminations | | Consolidated |
| | (In Thousands) |
| 2024 | | | | | | | | |
| Operating revenues | | $2,772,173 | | | $22,476 | | | ($21) | | | $2,794,628 | |
| Income taxes | | $34,548 | | | ($13,554) | | | $— | | | $20,994 | |
| Consolidated net income (loss) | | $195,980 | | | ($39,883) | | | ($79,561) | | | $76,536 | |
| Total assets as of March 31, 2024 | | $65,760,486 | | | $892,773 | | | ($5,023,403) | | | $61,629,856 | |
| 2023 | | | | | | | | |
| Operating revenues | | $2,947,992 | | | $33,070 | | | ($3) | | | $2,981,059 | |
| Income taxes | | ($66,126) | | | ($12,849) | | | $— | | | ($78,975) | |
| Consolidated net income (loss) | | $398,167 | | | ($30,394) | | | ($55,474) | | | $312,299 | |
| Total assets as of December 31, 2023 | | $63,887,038 | | | $836,598 | | | ($5,020,240) | | | $59,703,396 | |
Eliminations are primarily intersegment activity. All of Entergy’s goodwill is related to the financial statements in the Form 10-K, Entergy completed its multi-year strategy to exit the merchant nuclear power business in 2022 and upon completion of all transition activities, effective January 1, 2023, Entergy Wholesale Commodities is no longer a reportableUtility 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 first quarter 2022 to reflect the change in reportable segments. The change in reportable segments had no effect on Entergy’s consolidated financial statements or historical segment financial information for the Utility reportable segment.
Entergy’s segment financial information for the first quarters of 2023 and 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Utility | | Parent & Other | | Eliminations | | Consolidated |
| | (In Thousands) |
| 2023 | | | | | | | | |
| Operating revenues | | $2,947,992 | | | $33,070 | | | ($3) | | | $2,981,059 | |
| Income taxes | | ($66,126) | | | ($12,849) | | | $— | | | ($78,975) | |
| Consolidated net income (loss) | | $398,167 | | | ($30,394) | | | ($55,474) | | | $312,299 | |
| Total assets as of March 31, 2023 | | $63,443,534 | | | $860,341 | | | ($5,100,599) | | | $59,203,276 | |
| 2022 | | | | | | | | |
| Operating revenues | | $2,728,156 | | | $149,777 | | | ($8) | | | $2,877,925 | |
| Income taxes | | $75,359 | | | ($8,862) | | | $— | | | $66,497 | |
| Consolidated net income (loss) | | $343,156 | | | ($31,617) | | | ($31,946) | | | $279,593 | |
| Total assets as of December 31, 2022 | | $61,399,243 | | | $884,442 | | | ($3,688,494) | | | $58,595,191 | |
Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.
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 are managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results. Management allocates resources and assesses financial performance on a consolidated basis.
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivativecommodity and financial 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.
Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as
Entergy Corporation and Subsidiaries
Notes to Financial Statements
options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and 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
SomeEntergy designates a significant portion of its 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 includeprovisions, including power purchase and sales agreements, fuel purchase agreements, and 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 contractscontracts. Certain derivative instruments do not qualify for designation as normal purchase/normal sale transactions due to manage market risk that may or may not be designated as hedgingtheir financial settlement provisions. See further discussion below regarding the accounting for these derivative instruments.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of March 31, 20232024 is 1 year, each,7 months for Entergy Louisiana and Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of March 31, 20232024 is 28,141,80015,113,600 MMBtu for Entergy including 7,320,000 MMBtu forand Entergy Mississippi. As of March 31, 2024, Entergy Louisiana and 20,821,800 MMBtu for Entergy Mississippi.New Orleans had no outstanding natural gas swaps or options. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.
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’sthe non-utility operations are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of March 31, 20232024 is 24,01625,095 GWh for Entergy, including 5,3516,056 GWh for Entergy Arkansas, 11,04910,928 GWh for Entergy Louisiana, 2,5923,294 GWh for Entergy Mississippi, 1,0541,002 GWh for Entergy New Orleans, and 3,9393,772 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’sthe non-utility operations business is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy’sthe non-utility operations business as of March 31, 20232024 and December 31, 2022.2023. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Mississippi,
Louisiana, Entergy Corporation and Subsidiaries
Notes to Financial Statements
Mississippi, and Entergy Texas as of March 31, 20232024 and for Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of December 31, 2022.2023.
The fair values of Entergy’s derivative instruments not designated as hedging instruments on the consolidated balance sheetsheets as of March 31, 20232024 and December 31, 20222023 are shown in the tablestable below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) |
| | | | (In Millions) |
| 2024 | | | | | | | | |
| Assets: | | | | | | | | |
| Financial transmission rights | | Prepayments and other | | $9 | | $— | | $9 |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Natural gas swaps and options | | Other current liabilities | | $6 | | $— | | $6 |
| | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) |
| | | | (In Millions) |
| | 2023 | 2023 | |
| Assets: | Assets: | |
| | Natural gas swaps and options | | Prepayments and other | | $2 | | $��� | | $2 |
| | Assets: | |
| Assets: | |
| Financial transmission rights | |
| Financial transmission rights | |
| Financial transmission rights | Financial transmission rights | | Prepayments and other | | $8 | | ($1) | | $7 | | Prepayments and other | | $21 | | $— | | $21 |
| | Liabilities: | Liabilities: | |
| | Liabilities: | |
| Liabilities: | |
| Natural gas swaps and options | Natural gas swaps and options | | Other current liabilities | | $22 | | $— | | $22 |
| | Natural gas swaps and options | |
| Natural gas swaps and options | | | Other current liabilities | | $11 | | $— | | $11 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
| | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| 2022 | | | | | | | | |
| Assets: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Natural gas swaps and options | | Prepayments and other | | $13 | | $— | | $13 |
| Natural gas swaps and options | | Other deferred debits and other assets | | $3 | | $— | | $3 |
| Financial transmission rights | | Prepayments and other | | $21 | | ($2) | | $19 |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| 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 Sheets
(d)Excludes cash collateral in the amount of $8 million posted as of December 31, 2022. Also excludes letters of credit in the amount of $1$2 million posted as of March 31, 20232024 and $3 million posted as of December 31, 2022.2023
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 three months ended March 31, 2024 and 2023 and 2022 wereare as follows:
| | | | | | | | | | | | | | |
| Instrument | | Income Statement
location | | Amount of gain (loss)
recorded in the income statement |
| | | | (In Millions) |
20232024 | | | | |
| Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($6) |
| Financial transmission rights | | Purchased power expense | (b) | $53 |
| | | | |
| | | | |
| 2023 | | | | |
| Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($37) |
| Financial transmission rights | | Purchased power expense | (b) | $16 |
| | | | |
| | | | |
2022 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $55 |
Financial transmission rights | | Purchased power expense | (b) | $23 |
| | | | |
(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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on theirthe Registrant Subsidiaries’ balance sheets as of March 31, 2024 and December 31, 2023 are shown in the tabletables below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | Instrument | 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) | |
| 2024 | |
| 2024 | |
| 2024 | |
| Assets: | |
| Assets: | |
| Assets: | |
| | | | | (In Millions) | | |
| Assets: | |
| Natural gas swaps and options | | Prepayments and other | | $2.4 | | $— | | $2.4 | | Entergy Louisiana |
| | Financial transmission rights | |
| | Financial transmission rights | |
| | | | Financial transmission rights | Financial transmission rights | | Prepayments and other | | $4.0 | | $— | | $4.0 | | Entergy Arkansas | | Prepayments and other | | $2.8 | | $— | | $2.8 | | Entergy Arkansas |
| Financial transmission rights | Financial transmission rights | | Prepayments and other | | $2.7 | | ($0.2) | | $2.5 | | Entergy Louisiana | Financial transmission rights | | Prepayments and other | | $4.1 | | $— | | $4.1 | | Entergy Louisiana |
| Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.2 | | $— | | $0.2 | | Entergy Mississippi | Financial transmission rights | | Prepayments and other | | $0.6 | | $— | | $0.6 | | Entergy Mississippi |
| Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.3 | | $— | | $0.3 | | Entergy New Orleans | Financial transmission rights | | Prepayments and other | | $0.5 | | $— | | $0.5 | | Entergy New Orleans |
| Financial transmission rights | | Financial transmission rights | | Prepayments and other | | $1.2 | | $— | | $1.2 | | Entergy Texas |
| | | Liabilities: | |
| Liabilities: | |
| Liabilities: | Liabilities: | |
| | Natural gas swaps | Natural gas swaps | | Other current liabilities | | ($21.8) | | $— | | ($21.8) | | Entergy Mississippi |
| | | Financial transmission rights | | Other current liabilities | | $0.4 | | ($0.5) | | ($0.1) | | Entergy Texas |
| Natural gas swaps | |
| | Natural gas swaps | | | Other current liabilities | | $6.5 | | $— | | $6.5 | | Entergy Mississippi |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | (In Millions) | | |
| 2023 | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Financial transmission rights | | Prepayments and other | | $6.0 | | $— | | $6.0 | | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | | $9.8 | | $— | | $9.8 | | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | | $1.4 | | $— | | $1.4 | | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | | $1.1 | | $— | | $1.1 | | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | | $2.7 | | ($0.3) | | $2.4 | | Entergy Texas |
| | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Natural gas swaps and options | | Other current liabilities | | $0.4 | | $— | | $0.4 | | Entergy Louisiana |
| | | | | | | | | | |
| Natural gas swaps | | Other current liabilities | | $10.1 | | $— | | $10.1 | | Entergy Mississippi |
| Natural gas swaps | | Other current liabilities | | $0.6 | | $— | | $0.6 | | Entergy New Orleans |
(a)Represents the gross amounts of recognized assets/liabilities
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, 2022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | (In Millions) | | |
| Assets: | | | | | | | | | | |
| Natural gas swaps and options | | Prepayments and other | | $13.1 | | $— | | $13.1 | | Entergy Louisiana |
| Natural gas swaps and options | | Other deferred debits and other assets | | $3.4 | | $— | | $3.4 | | Entergy Louisiana |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Financial transmission rights | | Prepayments and other | | $10.3 | | $— | | $10.3 | | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | | $7.7 | | ($0.4) | | $7.3 | | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | | $0.6 | | $— | | $0.6 | | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | | $0.8 | | $— | | $0.8 | | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | | $1.2 | | ($1.1) | | $0.1 | | Entergy Texas |
| | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| Natural gas swaps | | Other current liabilities | | $24.0 | | $— | | $24.0 | | Entergy Mississippi |
| Natural gas swaps | | Other current liabilities | | $1.5 | | $— | | $1.5 | | Entergy New Orleans |
(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of March 31, 2024, letters of credit posted with MISO covered financial transmission rights exposure of $0.6 million for Entergy Arkansas, $0.5 million for Entergy Louisiana, $0.5 million for Entergy Mississippi, and $0.2 million for Entergy Texas. As of December 31, 2023, letters of credit posted with MISO covered financial transmission rights exposure of $0.1$1.2 million for Entergy Arkansas, $0.5 million for Entergy Louisiana, $0.3 million for Entergy Mississippi, and $0.5 million for Entergy Texas. As of December 31, 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 $2.4$0.1 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 theirthe Registrant Subsidiaries’ income statements for the three months ended March 31, 2024 and 2023 and 2022 wereare as follows:
| | | | | | | | | | | | | | | | | | | | |
| Instrument | | Income Statement Location | | Amount of gain
(loss) recorded
in the income statement | | Registrant |
| | | | (In Millions) | | |
20232024 | | | | | | |
| | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $5.2 | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.5 | (a) | Entergy New Orleans |
| | | | | | |
| Financial transmission rights | | Purchased power expense | | $26.9 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $16.2 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $1.1 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $1.1 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $7.5 | (b) | Entergy Texas |
| | | | | | |
| 2023 | | | | | | |
| Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | ($6.6) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($28.6) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.2) | (a) | Entergy New Orleans |
| | | | | | |
| Financial transmission rights | | Purchased power expense | | $3.9 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $8.8 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $1.5 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $0.9 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $0.7 | (b) | Entergy Texas |
| | | | | | |
2022 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $11.1 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $42.8 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $1.1 | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $7.5 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $9.4 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $1.0 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.8 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $3.8 | (b) | Entergy Texas |
(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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the data published by MISO. Entergy’s Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 20232024 and December 31, 2022.2023. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
| | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| 2024 | | 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) | | | | (In Millions) |
| Assets: | Assets: | |
| Temporary cash investments | |
| Temporary cash investments | |
| Temporary cash investments | Temporary cash investments | | $1,908 | | | $— | | | $— | | | $1,908 | |
| | Decommissioning trust funds (a): | Decommissioning trust funds (a): | |
| Temporary cash investments | | 1 | | | — | | | — | | | 1 | |
| Decommissioning trust funds (a): | |
| Decommissioning trust funds (a): | |
| | Equity securities | |
| | Equity securities | |
| | Equity securities | Equity securities | | 26 | | | — | | | — | | | 26 | |
| Debt securities | Debt securities | | 571 | | | 1,136 | | | — | | | 1,707 | |
| Common trusts (b) | Common trusts (b) | | 2,616 | |
| | Securitization recovery trust account | Securitization recovery trust account | | 17 | | | — | | | — | | | 17 | |
| Escrow accounts | | 406 | | | — | | | — | | | 406 | |
| Gas hedge contracts | | 2 | | | — | | | — | | | 2 | |
| Securitization recovery trust account | |
| Securitization recovery trust account | |
| Storm reserve escrow accounts | |
| | Financial transmission rights | Financial transmission rights | | — | | | — | | | 7 | | | 7 | |
| Financial transmission rights | |
| Financial transmission rights | |
| | $2,323 | |
| | $2,931 | | | $1,136 | | | $7 | | | $6,690 | |
| | Liabilities: | |
| Liabilities: | |
| Liabilities: | Liabilities: | |
| | Gas hedge contracts | Gas hedge contracts | | $22 | | | $— | | | $— | | | $22 | |
| | Gas hedge contracts | |
| | Gas hedge contracts | |
|
| | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| 2023 | | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) | | | | (In Millions) |
| Assets: | Assets: | | | | | | | | | Assets: | | |
| Temporary cash investments | Temporary cash investments | | $109 | | | $— | | | $— | | | $109 | |
| Decommissioning trust funds (a): | Decommissioning trust funds (a): | | | | | | | | | Decommissioning trust funds (a): | | |
| Equity securities | Equity securities | | 24 | | | — | | | — | | | 24 | |
| Debt securities | Debt securities | | 534 | | | 1,122 | | | — | | | 1,656 | |
| Common trusts (b) | Common trusts (b) | | 2,442 | |
| | Securitization recovery trust account | Securitization recovery trust account | | 13 | | | — | | | — | | | 13 | |
| Escrow accounts | | 402 | | | — | | | — | | | 402 | |
| Gas hedge contracts | | 13 | | | 3 | | | — | | | 16 | |
| Securitization recovery trust account | |
| Securitization recovery trust account | |
| Storm reserve escrow accounts | |
| | Financial transmission rights | |
| Financial transmission rights | |
| Financial transmission rights | Financial transmission rights | | — | | | — | | | 19 | | | 19 | |
| | | | $1,095 | | | $1,125 | | | $19 | | | $4,681 | |
| Liabilities: | Liabilities: | | | | | | | | | Liabilities: | | |
| | Gas hedge contracts | Gas hedge contracts | | $25 | | | $— | | | $— | | | $25 | |
| Gas hedge contracts | |
| Gas hedge contracts | |
|
(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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the three months ended March 31, 20232024 and 2022:2023:
| | | 2023 | | 2022 |
| | | (In Millions) |
| | | 2024 | |
| | | 2024 | |
| | | 2024 | | | 2023 |
| | | (In Millions) | | | | | (In Millions) |
| Balance as of January 1, | Balance as of January 1, | | $19 | | | $4 | |
| Total gains (losses) for the period | Total gains (losses) for the period | | |
| | Included as a regulatory liability/asset | Included as a regulatory liability/asset | | 4 | | | 20 | |
| | Included as a regulatory liability/asset | |
| | Included as a regulatory liability/asset | |
| | Settlements | |
| | Settlements | |
| | Settlements | Settlements | | (16) | | | (23) | |
| Balance as of March 31, | Balance as of March 31, | | $7 | | | $1 | |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.
The following table 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 March 31, 20232024 and December 31, 2022.2023. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Arkansas
| | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| 2024 | | 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) | | | | (In Millions) |
| Assets: | Assets: | |
| Temporary cash investments | Temporary cash investments | | $156.7 | | | $— | | | $— | | | $156.7 | |
| Temporary cash investments | |
| Temporary cash investments | |
| Decommissioning trust funds (a): | Decommissioning trust funds (a): | |
| Equity securities | |
| Equity securities | |
| Equity securities | Equity securities | | 10.4 | | | — | | | — | | | 10.4 | |
| Debt securities | Debt securities | | 135.9 | | | 343.5 | | | — | | | 479.4 | |
| Common trusts (b) | Common trusts (b) | | 775.7 | |
| | Financial transmission rights | Financial transmission rights | | — | | | — | | | 4.0 | | | 4.0 | |
| | $303.0 | | | $343.5 | | | $4.0 | | | $1,426.2 | |
| Financial transmission rights | |
| | Financial transmission rights | |
| | $258.7 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| 2023 | | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) | | | | (In Millions) |
| Assets: | Assets: | |
| Temporary cash investments | Temporary cash investments | | $3.4 | | | $— | | | $— | | | $3.4 | |
| Temporary cash investments | |
| Temporary cash investments | |
| Decommissioning trust funds (a): | Decommissioning trust funds (a): | |
| Equity securities | |
| Equity securities | |
| Equity securities | Equity securities | | 4.5 | | | — | | | — | | | 4.5 | |
| Debt securities | Debt securities | | 126.8 | | | 343.9 | | | — | | | 470.7 | |
| Common trusts (b) | Common trusts (b) | | 724.7 | |
| | Financial transmission rights | Financial transmission rights | | — | | | — | | | 10.3 | | | 10.3 | |
| | $134.7 | | | $343.9 | | | $10.3 | | | $1,213.6 | |
| Financial transmission rights | |
| | Financial transmission rights | |
| | $139.4 | |
Entergy Louisiana
| | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| 2024 | | 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) | | | | (In Millions) |
| Assets: | Assets: | |
| Temporary cash investments | |
| Temporary cash investments | |
| Temporary cash investments | Temporary cash investments | | $1,079.3 | | | $— | | | $— | | | $1,079.3 | |
| | Decommissioning trust funds (a): | Decommissioning trust funds (a): | |
| Temporary cash investments | | 1.5 | | | — | | | — | | | 1.5 | |
| Decommissioning trust funds (a): | |
| Decommissioning trust funds (a): | |
| | Equity securities | |
| | Equity securities | |
| | Equity securities | Equity securities | | 7.5 | | | — | | | — | | | 7.5 | |
| Debt securities | Debt securities | | 230.7 | | | 528.3 | | | — | | | 759.0 | |
| Common trusts (b) | Common trusts (b) | | 1,111.6 | |
| Escrow accounts | | 296.4 | | | — | | | — | | | 296.4 | |
| Storm reserve escrow account | |
| | Gas hedge contracts | | 2.4 | | | — | | | — | | | 2.4 | |
| | Financial transmission rights | Financial transmission rights | | — | | | — | | | 2.5 | | | 2.5 | |
| | Financial transmission rights | |
| | Financial transmission rights | |
| | $1,332.3 | |
| | $1,617.8 | | | $528.3 | | | $2.5 | | | $3,260.2 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $6.3 | | | $— | | | $— | | | $6.3 | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 16.8 | | | — | | | — | | | 16.8 | |
| Debt securities | | 209.4 | | | 515.7 | | | — | | | 725.1 | |
| Common trusts (b) | | | | | | | | 1,037.2 | |
| Escrow accounts | | 293.4 | | | — | | | — | | | 293.4 | |
| | | | | | | | |
| Gas hedge contracts | | 13.1 | | | 3.4 | | | — | | | 16.5 | |
| Financial transmission rights | | — | | | — | | | 7.3 | | | 7.3 | |
| | | $539.0 | | | $519.1 | | | $7.3 | | | $2,102.6 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $35.3 | | | $— | | | $— | | | $35.3 | |
| Escrow accounts | | 33.9 | | | — | | | — | | | 33.9 | |
| | | | | | | | |
| Financial transmission rights | | — | | | — | | | 0.2 | | | 0.2 | |
| | $69.2 | | | $— | | | $0.2 | | | $69.4 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $21.8 | | | $— | | | $— | | | $21.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $17.0 | | | $— | | | $— | | | $17.0 | |
| Escrow accounts | | 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 New Orleans
| | 2023 | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
| Assets: | Assets: | | Assets: | | |
| Temporary cash investments | Temporary cash investments | | $175.5 | | | $— | | | $— | | | $175.5 | |
| Securitization recovery trust account | | 5.3 | | | — | | | — | | | 5.3 | |
| Escrow accounts | | 75.8 | | | — | | | — | | | 75.8 | |
| Decommissioning trust funds (a): | | Decommissioning trust funds (a): | | |
| Equity securities | |
| Debt securities | |
| Common trusts (b) | |
| Storm reserve escrow account | |
| | Financial transmission rights | |
| | Financial transmission rights | |
| | Financial transmission rights | Financial transmission rights | | — | | | — | | | 0.3 | | | 0.3 | |
| | $256.6 | | | $— | | | $0.3 | | | $256.9 | |
| | Liabilities: | |
| Liabilities: | |
| Liabilities: | |
| Gas hedge contracts | |
| Gas hedge contracts | |
| Gas hedge contracts | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| Escrow accounts | | 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 | | $91.2 | | | $— | | | $— | | | $91.2 | |
| Securitization recovery trust account | | 11.7 | | | — | | | — | | | 11.7 | |
| | | | | | | | |
| | $102.9 | | | $— | | | $— | | | $102.9 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Financial transmission rights | | $— | | | $— | | | $0.1 | | | $0.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | $259.3 | | | $— | | | $— | | | $259.3 | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 8.3 | | | — | | | — | | | 8.3 | |
| Debt securities | | 204.0 | | | 264.1 | | | — | | | 468.1 | |
| Common trusts (b) | | | | | | | | 728.4 | |
| | $471.6 | | | $264.1 | | | $— | | | $1,464.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $2.9 | | | $— | | | $— | | | $2.9 | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 2.8 | | | — | | | — | | | 2.8 | |
| Debt securities | | 197.5 | | | 262.2 | | | — | | | 459.7 | |
| Common trusts (b) | | | | | | | | 680.4 | |
| | $203.2 | | | $262.2 | | | $— | | | $1,145.8 | |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of January 1, | $10.3 | | | $7.3 | | | $0.6 | | | $0.8 | | | $0.1 | |
| | | | | | | | | |
| Gains (losses) included as a regulatory liability/asset | (2.4) | | | 4.0 | | | 1.1 | | | 0.4 | | | 0.5 | |
| Settlements | (3.9) | | | (8.8) | | | (1.5) | | | (0.9) | | | (0.7) | |
| Balance as of March 31, | $4.0 | | | $2.5 | | | $0.2 | | | $0.3 | | | ($0.1) | |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of January 1, | $2.3 | | | $0.6 | | | $0.3 | | | $0.1 | | | $0.8 | |
| | | | | | | | | |
| Gains (losses) included as a regulatory liability/asset | 5.6 | | | 9.1 | | | 0.9 | | | 0.8 | | | 3.5 | |
| Settlements | (7.5) | | | (9.4) | | | (1.0) | | | (0.8) | | | (3.8) | |
| Balance as of March 31, | $0.4 | | | $0.3 | | | $0.2 | | | $0.1 | | | $0.5 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System 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.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant. Decommissioning trust funds for the Palisades non-utility nuclear plant did not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds were recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
As discussed in Note 14 to the financial statements in the Form 10-K, in June 2022, Entergy completed the sale of Palisades to Holtec. As part of the transaction, Entergy transferred the Palisades decommissioning trust fund to Holtec. The disposition-date fair value of the decommissioning trust fund was approximately $552 million.
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $161 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
The available-for-sale securities held as of March 31, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2023 | | | | | | |
| Debt Securities | | $1,707 | | | $8 | | | $160 | |
| | | | | | |
| 2022 | | | | | | |
| Debt Securities | | $1,655 | | | $4 | | | $201 | |
As of March 31, 2023 and December 31, 2022, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $1,858 million as of March 31, 2023 and $1,852 million as of December 31, 2022. As of March 31, 2023, available-for-sale debt securities had an average coupon rate of approximately 3.07%, an average duration of approximately 6.45 years, and an average maturity of approximately 10.81 years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) |
| Less than 12 months | | $391 | | | $13 | | | $840 | | | $63 | |
| More than 12 months | | 961 | | | 147 | | | 666 | | | 138 | |
| Total | | $1,352 | | | $160 | | | $1,506 | | | $201 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
| Less than 1 year | $70 | | | $62 | |
| 1 year - 5 years | 516 | | | 520 | |
| 5 years - 10 years | 496 | | | 461 | |
| 10 years - 15 years | 111 | | | 117 | |
| 15 years - 20 years | 161 | | | 161 | |
| 20 years+ | 353 | | | 334 | |
| Total | $1,707 | | | $1,655 | |
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $124 million and $303 million, respectively. During the three months ended March 31, 2023, there were no gross gains and $9 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022, there were gross gains of $1 million and gross losses of $12 million reclassified out of other regulatory liabilities/assets into earnings.
Entergy Arkansas
Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2023 | | | | | | |
| Debt Securities | | $479.4 | | | $0.9 | | | $56.8 | |
| | | | | | |
| 2022 | | | | | | |
| Debt Securities | | $470.7 | | | $0.2 | | | $69.3 | |
The amortized cost of available-for-sale debt securities was $535.4 million as of March 31, 2023 and $539.8 million as of December 31, 2022. As of March 31, 2023, the available-for-sale debt securities had an
Entergy Corporation and Subsidiaries
Notes to Financial Statements
average coupon rate of approximately 2.38%, an average duration of approximately 6.04 years, and an average maturity of approximately 7.51 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $47.3 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) |
| Less than 12 months | | $52.3 | | | $1.4 | | | $197.6 | | | $18.8 | |
| More than 12 months | | 380.4 | | | 55.4 | | | 260.1 | | | 50.5 | |
| Total | | $432.7 | | | $56.8 | | | $457.7 | | | $69.3 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| | 2023 | | 2022 |
| | (In Millions) |
| Less than 1 year | $28.7 | | | $21.2 | |
| 1 year - 5 years | 153.6 | | | 159.7 | |
| 5 years - 10 years | 194.2 | | | 191.7 | |
| 10 years - 15 years | 41.6 | | | 38.0 | |
| 15 years - 20 years | 43.0 | | | 42.6 | |
| 20 years+ | 18.3 | | | 17.5 | |
| Total | $479.4 | | | $470.7 | |
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $15.7 million and $7.2 million, respectively. During the three months ended March 31, 2023, there were no gross gains and $1.6 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022, there were gross gains of $0.03 million and gross losses of $0.2 million reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy LouisianaMississippi
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $2.1 | | | $— | | | $— | | | $2.1 | |
| Storm reserve escrow account | | 0.7 | | | — | | | — | | | 0.7 | |
| | | | | | | | |
| Financial transmission rights | | — | | | — | | | 0.6 | | | 0.6 | |
| | $2.8 | | | $— | | | $0.6 | | | $3.4 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $6.5 | | | $— | | | $— | | | $6.5 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $6.6 | | | $— | | | $— | | | $6.6 | |
| Storm reserve escrow account | | 0.7 | | | — | | | — | | | 0.7 | |
| | | | | | | | |
| Financial transmission rights | | — | | | — | | | 1.4 | | | 1.4 | |
| | | $7.3 | | | $— | | | $1.4 | | | $8.7 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $10.1 | | | $— | | | $— | | | $10.1 | |
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2023 | | | | | | |
| Debt Securities | | $759.0 | | | $5.4 | | | $50.4 | |
| | | | | | |
| 2022 | | | | | | |
| Debt Securities | | $725.1 | | | $3.5 | | | $67.5 | |
The amortized cost of available-for-sale debt securities was $804.1 million as of March 31, 2023 and $789.1 million as of December 31, 2022. As of March 31, 2023, the available-for-sale debt securities had an average coupon rate of approximately 3.72%, an average duration of approximately 6.64 years, and an average maturity of approximately 13.12 years. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| | | | | | | | |
| Securitization recovery trust account | | $5.4 | | | $— | | | $— | | | $5.4 | |
| Storm reserve escrow account | | 80.6 | | | — | | | — | | | 80.6 | |
| | | | | | | | |
| Financial transmission rights | | — | | | — | | | 0.5 | | | 0.5 | |
| | $86.0 | | | $— | | | $0.5 | | | $86.5 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $69.4 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| | | | | | | | |
| Securitization recovery trust account | | $2.4 | | | $— | | | $— | | | $2.4 | |
| Storm reserve escrow account | | 78.7 | | | — | | | — | | | 78.7 | |
| | | | | | | | |
| Financial transmission rights | | — | | | — | | | 1.1 | | | 1.1 | |
| | $81.1 | | | $— | | | $1.1 | | | $82.2 | |
| | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $0.6 | | | $— | | | $— | | | $0.6 | |
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) |
| Less than 12 months | | $258.1 | | | $6.7 | | | $409.9 | | | $24.6 | |
| More than 12 months | | 304.8 | | | 43.7 | | | 207.5 | | | 42.9 | |
| Total | | $562.9 | | | $50.4 | | | $617.4 | | | $67.5 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
| Less than 1 year | $37.1 | | | $33.6 | |
| 1 year - 5 years | 168.4 | | | 159.1 | |
| 5 years - 10 years | 176.4 | | | 161.7 | |
| 10 years - 15 years | 62.8 | | | 67.1 | |
| 15 years - 20 years | 80.0 | | | 83.3 | |
| 20 years+ | 234.3 | | | 220.3 | |
| Total | $759.0 | | | $725.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $67.4 million and $120.5 million, respectively. During the three months ended March 31, 2023 and 2022, gross gains of $0.4 million and $0.9 million, respectively, and gross losses of $4.9 million and $5.5 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.Entergy Texas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | | $177.9 | | | $— | | | $— | | | $177.9 | |
| Securitization recovery trust account | | 11.2 | | | — | | | — | | | 11.2 | |
| Financial transmission rights | | — | | | — | | | 1.2 | | | 1.2 | |
| | $189.1 | | | $— | | | $1.2 | | | $190.3 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | | $20.5 | | | $— | | | $— | | | $20.5 | |
| Securitization recovery trust account | | 5.2 | | | — | | | — | | | 5.2 | |
| Financial transmission rights | | — | | | — | | | 2.4 | | | 2.4 | |
| | $25.7 | | | $— | | | $2.4 | | | $28.1 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
System Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $111.4 | | | $— | | | $— | | | $111.4 | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 3.7 | | | — | | | — | | | 3.7 | |
| Debt securities | | 205.8 | | | 275.7 | | | — | | | 481.5 | |
| Common trusts (b) | | | | | | | | 939.0 | |
| | $320.9 | | | $275.7 | | | $— | | | $1,535.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
| Assets: | | | | | | | | |
| | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | $2.7 | | | $— | | | $— | | | $2.7 | |
| Debt securities | | 209.5 | | | 275.7 | | | — | | | 485.2 | |
| Common trusts (b) | | | | | | | | 854.4 | |
| | $212.2 | | | $275.7 | | | $— | | | $1,342.3 | |
(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.
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 three months ended March 31, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of January 1, | $6.0 | | | $9.8 | | | $1.4 | | | $1.1 | | | $2.4 | |
| | | | | | | | | |
| Gains (losses) included as a regulatory liability/asset | 23.7 | | | 10.5 | | | 0.3 | | | 0.5 | | | 6.3 | |
| Settlements | (26.9) | | | (16.2) | | | (1.1) | | | (1.1) | | | (7.5) | |
| Balance as of March 31, | $2.8 | | | $4.1 | | | $0.6 | | | $0.5 | | | $1.2 | |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of January 1, | $10.3 | | | $7.3 | | | $0.6 | | | $0.8 | | | $0.1 | |
| | | | | | | | | |
| Gains (losses) included as a regulatory liability/asset | (2.4) | | | 4.0 | | | 1.1 | | | 0.4 | | | 0.5 | |
| Settlements | (3.9) | | | (8.8) | | | (1.5) | | | (0.9) | | | (0.7) | |
| Balance as of March 31, | $4.0 | | | $2.5 | | | $0.2 | | | $0.3 | | | ($0.1) | |
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
The NRC requires certain of the Utility operating companies and System Energy to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, and Grand Gulf. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, for unrealized gains/(losses) on investment securities, the Registrant Subsidiaries record an offsetting amount 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. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The unrealized gains/(losses) recognized during the three months ended March 31, 2024 on equity securities still held as of March 31, 2024 were $287 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The available-for-sale securities held as of March 31, 2024 and December 31, 2023 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2024 | | | | | | |
| Debt Securities | | $1,761 | | | $10 | | | $142 | |
| | | | | | |
| 2023 | | | | | | |
| Debt Securities | | $1,770 | | | $19 | | | $134 | |
As of March 31, 2024 and December 31, 2023, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $1,893 million as of March 31, 2024 and $1,885 million as of December 31, 2023. As of March 31, 2024, available-for-sale debt securities had an average coupon rate of approximately 3.51%, an average duration of approximately 6.28 years, and an average maturity of approximately 10.63 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 March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) |
| Less than 12 months | | $335 | | | $5 | | | $134 | | | $6 | |
| More than 12 months | | 995 | | | 137 | | | 999 | | | 128 | |
| Total | | $1,330 | | | $142 | | | $1,133 | | | $134 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2024 and December 31, 2023 are as follows:
| | | | | | | | | | | |
| 2024 | | 2023 |
| (In Millions) |
| Less than 1 year | $71 | | | $82 | |
| 1 year - 5 years | 503 | | | 517 | |
| 5 years - 10 years | 526 | | | 504 | |
| 10 years - 15 years | 132 | | | 121 | |
| 15 years - 20 years | 168 | | | 179 | |
| 20 years+ | 361 | | | 367 | |
| Total | $1,761 | | | $1,770 | |
During the three months ended March 31, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $169 million and $124 million, respectively. During the three months ended March 31, 2024 and 2023, there were no gross gains and gross losses of $7 million and $9 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 20232024 and December 31, 20222023 are summarized as follows:
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | Fair
Value | | | | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) | | | | (In Millions) |
| 2024 | |
| Debt Securities | |
| Debt Securities | |
| Debt Securities | |
| | (In Millions) |
| 2023 | 2023 | |
| 2023 | |
| 2023 | |
| Debt Securities | Debt Securities | | $468.1 | | | $2.1 | | | $52.6 | |
| | 2022 | |
| Debt Securities | Debt Securities | | $459.7 | | | $0.7 | | | $63.7 | |
| Debt Securities | |
The amortized cost of available-for-sale debt securities was $518.6$555 million as of March 31, 20232024 and $522.7$548.1 million as of December 31, 2022.2023. As of March 31, 2023,2024, the available-for-sale debt securities had an average coupon rate of approximately 2.74%2.83%, an average duration of approximately 6.566.12 years, and an average maturity of approximately 10.517.84 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 20232024 on equity securities still held as of March 31, 20232024 were $44.5$84.1 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 20232024 and December 31, 2022:2023:
| | March 31, 2023 | | December 31, 2022 |
| Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| (In Millions) |
| | March 31, 2024 | | | | March 31, 2024 | | December 31, 2023 |
| | Fair
Value | | | | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) | | | | (In Millions) |
| Less than 12 months | Less than 12 months | | $80.8 | | | $4.3 | | | $231.9 | | | $19.2 | |
| More than 12 months | More than 12 months | | 275.2 | | | 48.3 | | | 198.0 | | | 44.5 | |
| Total | Total | | $356.0 | | | $52.6 | | | $429.9 | | | $63.7 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2024 and December 31, 2023 are as follows:
| | | | | | | | | | | |
| | 2024 | | 2023 |
| | (In Millions) |
| Less than 1 year | $39.7 | | | $45.3 | |
| 1 year - 5 years | 133.9 | | | 132.2 | |
| 5 years - 10 years | 206.8 | | | 205.7 | |
| 10 years - 15 years | 40.1 | | | 39.9 | |
| 15 years - 20 years | 53.9 | | | 49.6 | |
| 20 years+ | 24.4 | | | 24.2 | |
| Total | $498.8 | | | $496.9 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the three months ended March 31, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $12.4 million and $15.7 million, respectively. During the three months ended March 31, 2024 and 2023, there were no gross gains and gross losses of $0.4 million and $1.6 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
Entergy Louisiana
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2024 and December 31, 2023 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2024 | | | | | | |
| Debt Securities | | $780.4 | | | $5.9 | | | $40.3 | |
| | | | | | |
| 2023 | | | | | | |
| Debt Securities | | $788.1 | | | $11.7 | | | $37.4 | |
The amortized cost of available-for-sale debt securities was $814.8 million as of March 31, 2024 and $813.9 million as of December 31, 2023. As of March 31, 2024, the available-for-sale debt securities had an average coupon rate of approximately 3.84%, an average duration of approximately 6.30 years, and an average maturity of approximately 12.59 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2024 on equity securities still held as of March 31, 2024 were $124.3 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| | (In Millions) |
| Less than 12 months | | $158.3 | | | $2.6 | | | $69.8 | | | $0.9 | |
| More than 12 months | | 360.6 | | | 37.7 | | | 356.1 | | | 36.5 | |
| Total | | $518.9 | | | $40.3 | | | $425.9 | | | $37.4 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 20232024 and December 31, 2022 were2023 are as follows:
| | 2023 | | 2022 |
| (In Millions) |
| 2024 | | | 2024 | | 2023 |
| (In Millions) | | | (In Millions) |
| Less than 1 year | Less than 1 year | $3.8 | | | $6.8 | |
| 1 year - 5 years | 1 year - 5 years | 193.9 | | | 201.7 | |
| 5 years - 10 years | 5 years - 10 years | 125.2 | | | 107.1 | |
| 10 years - 15 years | 10 years - 15 years | 6.8 | | | 11.7 | |
| 15 years - 20 years | 15 years - 20 years | 38.1 | | | 35.0 | |
| 20 years+ | 20 years+ | 100.3 | | | 97.4 | |
| Total | Total | $468.1 | | | $459.7 | |
During the three months ended March 31, 2024 and 2023, proceeds from the dispositions of available-for-sale securities amounted to $48.4 million and 2022,$67.4 million, respectively. During the three months ended March 31, 2024 and 2023, there were gross gains of $0.2 million and $0.4 million, respectively, and gross losses of $2.9 million and $4.9 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
System Energy
System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2024 and December 31, 2023 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair
Value | | Total
Unrealized
Gains | | Total
Unrealized
Losses |
| | (In Millions) |
| 2024 | | | | | | |
| Debt Securities | | $481.5 | | | $2.7 | | | $44.6 | |
| | | | | | |
| 2023 | | | | | | |
| Debt Securities | | $485.2 | | | $4.5 | | | $42.5 | |
The amortized cost of available-for-sale debt securities was $523.4 million as of March 31, 2024 and $523.2 million as of December 31, 2023. As of March 31, 2024, the available-for-sale debt securities had an average coupon rate of approximately 3.65%, an average duration of approximately 6.41 years, and an average maturity of approximately 10.21 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2024 on equity securities still held as of March 31, 2024 were $79.1 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2024 and December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | Fair
Value | | Gross
Unrealized
Losses | | Fair
Value | | Gross
Unrealized
Losses |
| (In Millions) |
| Less than 12 months | | $126.4 | | | $1.8 | | | $42.1 | | | $4.5 | |
| More than 12 months | | 242.0 | | | 42.8 | | | 239.1 | | | 38.0 | |
| Total | | $368.4 | | | $44.6 | | | $281.2 | | | $42.5 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2024 and December 31, 2023 are as follows:
| | | | | | | | | | | |
| 2024 | | 2023 |
| (In Millions) |
| Less than 1 year | $4.1 | | | $5.3 | |
| 1 year - 5 years | 196.6 | | | 203.4 | |
| 5 years - 10 years | 137.1 | | | 128.6 | |
| 10 years - 15 years | 11.5 | | | 10.7 | |
| 15 years - 20 years | 37.9 | | | 38.8 | |
| 20 years+ | 94.3 | | | 98.4 | |
| Total | $481.5 | | | $485.2 | |
During the three months ended March 31, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $41.3$108 million and $36.2$41.3 million, respectively. During the three months ended March 31, 2023,2024, there were no gross gains and $2.3of $0.2 million inand gross losses of $3.5 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022,2023, there were no gross gains of $0.1 million and gross losses of $0.7$2.3 million related to available-for-sale debt securities 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. Entergy did not have an allowance for expected credit losses related to available-for-sale securities as of March 31, 2023 and December 31, 2022. Entergy did not record any impairments of available-for-sale debt securities for the three months ended March 31, 2023. Entergy recorded $1.5 million in impairments of available-for-sale debt securities for the three months ended March 31, 2022.
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 updatesis an update to that discussion.
Income Tax Cuts and Jobs ActAudits
DuringAs discussed in Note 3 to the second quarter 2018,financial statements in the Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated withForm 10-K, in November 2023 the effectsIRS completed its examination of the Tax Cuts2016 through 2018 tax years and Jobs Act,issued a Revenue Agent Report for each federal filer under audit. Based on prior regulatory agreements and general rate-making principles, in fourth quarter 2023 Entergy New Orleans recorded a regulatory liability and associated regulatory charge of $60 million ($44 million net-of-tax). In April 2024, Entergy New Orleans and the City Council entered into a settlement in principle whereby Entergy New Orleans agreed to theirshare with customers through rate riders and other means approved by their respective regulatory authorities. Return$138 million of income tax benefits from the resolution of the unprotected excess accumulated deferred income taxes results2016–2018 IRS audit. Based on this settlement in a reductionprinciple, in first quarter 2024 Entergy New Orleans increased the associated regulatory liability for income taxesfrom $60 million to $138 million and recorded 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. There was no return of unprotected excess accumulated deferred income taxes for Entergy or the Registrant Subsidiaries for the three months ended March 31, 2023. For the three months ended March 31, 2022, the return of unprotected excess accumulated deferred income taxes reduced$78 million
Entergy Corporation and Subsidiaries
Notes to Financial Statements
regulatory charge ($57 million net-of-tax). The settlement in principle requires that the regulatory liability for income taxes by $17 million for Entergy, including $9 million for Entergy Louisiana, $1 million forbe amortized over 25 years with the unamortized balance included in rate base and the amortization treated as a reduction to Entergy New Orleans, and $7 million for Entergy Texas.
Other Tax Matters
Act 293 Securitization
As described in Note 2 to the financial statements herein, Entergy Louisiana implemented a securitization authorized under Act 293 of the Louisiana Legislature’s Regular Session of 2021 in the first quarter 2023. Act 293 provides that the LURC contribute the net bond proceeds to a LURC-sponsored trust. Over the 15-year term of the Act 293 bonds, the storm trust II will make distributions to Entergy Louisiana, a beneficiary of the storm trust II, that will not be taxable to Entergy Louisiana. Additionally, Entergy Louisiana will not include the receipt of the system restoration charges in taxable income because the right to receive the system restoration charges has been granted directly to the LURC, and Entergy Louisiana only acts as an agent to collect those charges on behalf of the LURC.
Accordingly, the securitization provides for a tax accounting permanent difference resulting in a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions.
In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with its customers. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization.
Arkansas Corporate Income Tax Rate Change
In April 2023, Arkansas Act 532 reduced the Arkansas corporate income tax rate from 5.3% to 5.1%. In accordance with GAAP, the adoption of the rate change will be recorded in the second quarter of 2023. The rate change is not expected to have a significant effect on the financial position, results of operations, or cash flows of Entergy Arkansas, the Utility, or Entergy.Orleans’s retail revenue requirement.
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Construction Expenditures in Accounts Payable
Construction expenditures included in accounts payable at March 31, 2023 were $426 million for Entergy, $64.4 million for Entergy Arkansas, $117.3 million for Entergy Louisiana, $57.6 million for Entergy Mississippi, $5.7 million for Entergy New Orleans, $104.8 million for Entergy Texas, and $36.6 million for System Energy. Construction expenditures included in accounts payable at December 31, 2022 were $459 million for Entergy, $93.2 million for Entergy Arkansas, $154.3 million for Entergy Louisiana, $59.5 million for Entergy Mississippi, $11.2 million for Entergy New Orleans, $68.9 million for Entergy Texas, and $29 million for System Energy.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 12. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 17 to the financial statements in the Form 10-K for a discussion of variable interest entities.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. See Note 6 to the financial statements in the Form 10-K and Note 3 to the financial statements herein for discussion of noncontrolling interests.
Restoration Law Trust I (the storm trust I), a trust consolidated by Entergy Louisiana, is a variable interest entityVIE and Entergy Louisiana is the primary beneficiary. As of March 31, 20232024 and December 31, 2022,2023, the primary asset held by the storm trust I was $3.1$2.9 billion and $3.2$3 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 sheetsheets of Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust I is presentedrecorded as noncontrolling interest inon the consolidated balance sheets of Entergy and Entergy Louisiana, with balances of $31.8$30.1 million as of March 31, 20232024 and $31.7$30.5 million as of December 31, 2022.2023.
Restoration Law Trust II (the storm trust II), a trust consolidated by Entergy Louisiana, is a variable interest entityVIE and Entergy Louisiana is the primary beneficiary. The storm trust II was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Ida restoration costs, less Hurricane Ida amounts previously financed in May 2022 in a prior securitization transaction. Entergy Louisiana is the primary beneficiary of the storm trust II because it was created to facilitate the financing of Entergy Louisiana’s storm restoration costs and Entergy Louisiana is entitled to receive a majority of the proceeds received by the storm trust II. As of March 31, 2024 and December 31, 2023, the primary asset held by the storm trust II is thewas $1.5 billion of outstanding Entergy Finance Company preferred membership interests, which is reflected as an investment in affiliate preferred membership interests on the consolidated balance sheet of Entergy Louisiana. The holders of the securitization bonds do not have recourse to the assets or revenues of the storm trust II or to any Entergy affiliate and the bonds are not reflected in the consolidated balance sheets of Entergy or Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust II is presentedrecorded as noncontrolling interest inon the consolidated balance sheets of Entergy and Entergy Louisiana, with a balancebalances of $14.6$14.9 million as of March 31, 2023. See Note 2 to the financial statements herein for additional discussion2024 and $14.6 million as of the securitization bonds and the preferred membership interests.December 31, 2023.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% ofin the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 5 to the financial statements in the Form 10-K. System Energy made payments under this arrangement, including interest, of $8.6 million in each of the three months ended March 31, 20232024 and the three months ended March 31, 2022.2023.
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. As of March 31, 2023,2024, AR Searcy Partnership, LLC recorded assets equal to $137.6$133.1 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $110$111.9 million. As of December 31, 2022,2023, AR Searcy Partnership, LLC recorded assets equal to $138.3$134 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $109$111.2 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.interest on the consolidated balance sheets of Entergy and Entergy Arkansas.
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. As of March 31, 2023,2024, MS Sunflower Partnership, LLC recorded assets equal to $152.6$165.9 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately $117.8$130.3 million. As of December 31, 2022,2023, MS Sunflower Partnership, LLC recorded assets equal to $154.5$163.2 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately $128.4 million. The tax equity investor’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Mississippi’s ownership interest in the partnership was approximately $117.2 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.interest on the consolidated balance sheets of Entergy and Entergy Mississippi.
NOTE 13.12. REVENUE (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Operating Revenues
See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition. Entergy’s total revenues for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| Utility: | Utility: | |
| Residential | |
| Residential | |
| Residential | Residential | | $1,041,460 | | | $986,023 | |
| Commercial | Commercial | | 714,300 | | | 634,626 | |
| Industrial | Industrial | | 863,723 | | | 743,634 | |
| Governmental | Governmental | | 67,337 | | | 57,292 | |
| Total billed retail | Total billed retail | | 2,686,820 | | | 2,421,575 | |
| | Sales for resale (a) | Sales for resale (a) | | 107,947 | | | 128,959 | |
| Sales for resale (a) | |
| Sales for resale (a) | |
| Other electric revenues (b) | Other electric revenues (b) | | 44,457 | | | 93,880 | |
| Revenues from contracts with customers | Revenues from contracts with customers | | 2,839,224 | | | 2,644,414 | |
| Other Utility revenues (c) | Other Utility revenues (c) | | 44,187 | | | 11,362 | |
| Electric revenues | Electric revenues | | 2,883,411 | | | 2,655,776 | |
| | Natural gas revenues | Natural gas revenues | | 64,581 | | | 72,361 | |
| Natural gas revenues | |
| Natural gas revenues | |
| | Other revenues (d) | |
| Other revenues (d) | |
| Other revenues (d) | Other revenues (d) | | 33,067 | | | 149,788 | |
| | Total operating revenues | Total operating revenues | | $2,981,059 | | | $2,877,925 | |
| Total operating revenues | |
| Total operating revenues | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Utility operating companies’ total revenues for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Thousands) |
| | 2024 | | 2024 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Thousands) | | | | (In Thousands) |
| Residential | Residential | | $239,499 | | | $360,647 | | | $169,389 | | | $63,566 | | | $208,359 | |
| Commercial | Commercial | | 125,336 | | | 278,178 | | | 133,676 | | | 54,069 | | | 123,041 | |
| Industrial | Industrial | | 131,237 | | | 509,904 | | | 51,415 | | | 7,413 | | | 163,754 | |
| Governmental | Governmental | | 4,660 | | | 23,074 | | | 13,883 | | | 17,798 | | | 7,922 | |
| Total billed retail | Total billed retail | | 500,732 | | | 1,171,803 | | | 368,363 | | | 142,846 | | | 503,076 | |
| Sales for resale (a) | Sales for resale (a) | | 66,018 | | | 83,237 | | | 38,743 | | | 24,910 | | | 2,445 | |
| Other electric revenues (b) | Other electric revenues (b) | | 13,718 | | | 26,567 | | | 2,874 | | | 417 | | | 2,224 | |
| Revenues from contracts with customers | Revenues from contracts with customers | | 580,468 | | | 1,281,607 | | | 409,980 | | | 168,173 | | | 507,745 | |
| Other Utility revenues (c) | | 2,281 | | | 38,145 | | | 2,448 | | | 1,522 | | | (239) | |
| Other revenues (c) | |
| Electric revenues | Electric revenues | | 582,749 | | | 1,319,752 | | | 412,428 | | | 169,695 | | | 507,506 | |
| Natural gas revenues | Natural gas revenues | | — | | | 25,456 | | | — | | | 39,125 | | | — | |
| Total operating revenues | Total operating revenues | | $582,749 | | | $1,345,208 | | | $412,428 | | | $208,820 | | | $507,506 | |
| | 2022 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Thousands) |
| | 2023 | | 2023 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Thousands) | | | | (In Thousands) |
| Residential | Residential | | $227,786 | | | $353,567 | | | $152,939 | | | $58,658 | | | $193,073 | |
| Commercial | Commercial | | 113,238 | | | 257,591 | | | 110,661 | | | 45,572 | | | 107,564 | |
| Industrial | Industrial | | 109,675 | | | 451,954 | | | 39,157 | | | 6,272 | | | 136,576 | |
| Governmental | Governmental | | 4,460 | | | 19,016 | | | 12,000 | | | 15,033 | | | 6,783 | |
| Total billed retail | Total billed retail | | 455,159 | | | 1,082,128 | | | 314,757 | | | 125,535 | | | 443,996 | |
| Sales for resale (a) | Sales for resale (a) | | 70,414 | | | 107,701 | | | 21,641 | | | 26,540 | | | 17,644 | |
| Other electric revenues (b) | Other electric revenues (b) | | 30,572 | | | 41,482 | | | 10,337 | | | 1,393 | | | 11,449 | |
| Revenues from contracts with customers | Revenues from contracts with customers | | 556,145 | | | 1,231,311 | | | 346,735 | | | 153,468 | | | 473,089 | |
| Other Utility revenues (c) | | 2,811 | | | 5,926 | | | 2,294 | | | 1,178 | | | (607) | |
| Other revenues (c) | |
| Electric revenues | Electric revenues | | 558,956 | | | 1,237,237 | | | 349,029 | | | 154,646 | | | 472,482 | |
| Natural gas revenues | Natural gas revenues | | — | | | 28,735 | | | — | | | 43,626 | | | — | |
| Total operating revenues | Total operating revenues | | $558,956 | | | $1,265,972 | | | $349,029 | | | $198,272 | | | $472,482 | |
(a)Sales for resale includes day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments and includes them as part of customer revenues.
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue.
(c)Other Utility revenues include the equity component of carrying costs related to securitization, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and certain customer credits as directed by regulators.late fees.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(c)(d)Other Utility revenues include the equity componentsale of carrying costs relatedelectric power and capacity to securitization, settlement of financial hedges, occasionalwholesale customers, day-ahead sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.
(d)Other revenues includes competitive business sales including day-ahead sale of energy in a market administered by an ISO, and operation and management services fees, and amortization of a below-market power purchase agreement.fees.
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. The following tables set forth a reconciliation of changes in the allowance for doubtful accounts for the three months ended March 31, 20232024 and 2022.2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of December 31, 2023 | $25.9 | | | $7.2 | | | $6.1 | | | $3.3 | | | $7.8 | | | $1.5 | |
| Provisions | 9.3 | | | 2.9 | | | 2.3 | | | 1.5 | | | 0.7 | | | 1.9 | |
| Write-offs | (28.5) | | | (6.6) | | | (8.4) | | | (5.0) | | | (5.0) | | | (3.5) | |
| Recoveries | 15.2 | | | 3.0 | | | 4.6 | | | 3.3 | | | 3.1 | | | 1.2 | |
| Balance as of March 31, 2024 | $21.9 | | | $6.5 | | | $4.6 | | | $3.1 | | | $6.6 | | | $1.1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 6.1 | | | 1.3 | | | 4.0 | | | 0.7 | | | (1.1) | | | 1.2 | |
| Write-offs | (34.4) | | | (9.4) | | | (15.1) | | | (1.7) | | | (3.4) | | | (4.8) | |
| Recoveries | 20.7 | | | 6.9 | | | 9.2 | | | 0.7 | | | 0.9 | | | 3.0 | |
| Balance as of March 31, 2023 | $23.3 | | | $5.3 | | | $5.7 | | | $2.2 | | | $8.3 | | | $1.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of December 31, 2021 | $68.6 | | | $13.1 | | | $29.2 | | | $7.2 | | | $13.3 | | | $5.8 | |
| Provisions (a) | (5.9) | | | 3.7 | | | (6.1) | | | (0.9) | | | (2.4) | | | (0.2) | |
| Write-offs | (45.3) | | | (14.4) | | | (17.5) | | | (4.1) | | | (5.4) | | | (3.9) | |
| Recoveries | 14.1 | | | 4.1 | | | 5.5 | | | 1.2 | | | 2.2 | | | 1.1 | |
| Balance as of March 31, 2022 | $31.5 | | | $6.5 | | | $11.1 | | | $3.4 | | | $7.7 | | | $2.8 | |
(a)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of ($11.0) million for Entergy, $1.8 million for Entergy Arkansas, ($8.5) million for Entergy Louisiana, ($3.0) million for Entergy New Orleans, and ($1.3) million for Entergy Texas that have been deferred as regulatory assets. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the COVID-19 orders issued by retail regulators.
The allowance for currently expected credit losses is calculated as the historical rate of customer write-offs multiplied by the current accounts receivable balance, taking into account the length of time the receivable balances have been outstanding. The rate of customer write-offs has historically experienced minimal variation, although general economic conditions such as the COVID-19 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 13. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. The following is an update to that discussion.
Nuclear Plant Decommissioning
In first quarter 2024, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $14.4 million decrease in its decommissioning cost liabilities, along with corresponding decreases in the related asset retirement cost assets that will be depreciated over the remaining useful lives of the units.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 14. ACQUISITIONS (Entergy Corporation and Entergy Arkansas)
Acquisitions
Walnut Bend Solar
In June 2020, Entergy Arkansas signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic energy facility, Walnut Bend Solar facility, to be sited on approximately 1,000 acres in Lee County, Arkansas. Acquisition of the Walnut Bend Solar facility was initially approved by the APSC in July 2021. The agreement was amended by the parties in February 2023 and the revised agreement was approved by the APSC in July 2023. In February 2024, Entergy Arkansas made an initial payment of approximately $170 million to acquire the facility. The project will achieve commercial operation once testing is completed and the project has achieved substantial completion. Entergy Arkansas currently expects the project to achieve commercial operation in second quarter 2024, at which time a substantial completion payment of approximately $20 million is expected.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial
Entergy Corporation and Subsidiaries
Notes to Financial Statements
statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods 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 March 31, 2023,2024, 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 (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 Registrant’s management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 20232024 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
NetEntergy Arkansas experienced a net loss of $32.3 million for the three months ended March 31, 2024 compared to net income decreased $6.2of $59.4 million for the three months ended March 31, 2023 primarily due to lower volume/weather and higher interest expense, partially offset bya $131.8 million ($99.1 million net-of-tax) charge to reflect the write-off of a previously recorded regulatory asset as a result of an adverse decision in the opportunity sales proceeding in March 2024. Partially offsetting the charge to Entergy Arkansas’s earnings were higher retail electric price and higher other income.volume/weather. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the opportunity sales proceeding.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $559.0582.7 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 26.014.1 | |
| Retail electric price | 19.415.1 | |
| |
| Volume/weather | (21.7)10.1 | |
| |
20232024 operating revenues | $582.7622.0 | |
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 2023.2024. See Note 2 to the financial statements in the Form 10-K for further discussion of the 20222023 formula rate plan filing.
The volume/weather variance is primarily due to the effect of lessmore favorable weather on residential sales.
sales and an increase in industrial usage.
Entergy Arkansas, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 1,802 | | | 2,092 | | | (14) | |
| Commercial | Commercial | 1,239 | | | 1,307 | | | (5) | |
| Industrial | Industrial | 2,050 | | | 1,972 | | | 4 | |
| Governmental | Governmental | 46 | | | 55 | | | (16) | |
| Total retail | Total retail | 5,137 | | | 5,426 | | | (5) | |
| Sales for resale: | Sales for resale: | |
| Associated companies | Associated companies | 564 | | | 486 | | | 16 | |
| Associated companies | |
| Associated companies | |
| Non-associated companies | Non-associated companies | 1,568 | | | 1,391 | | | 13 | |
| Total | Total | 7,269 | | | 7,303 | | | — | |
See Note 1312 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Other Income Statement Variances
Fuel, fuel-related expenses, and gas purchased for resale includes a credit of $9 million, recorded in first quarter 2024, for costs related to net metering. The costs were incurred in 2023 and included within Entergy Arkansas’s annual redetermination of its energy cost recovery rider filed in March 2024 due to a change in law in the state of Arkansas. See Note 2 to the financial statements herein for discussion of the March 2024 energy cost recovery rider filing.
Other operation and maintenance expenses decreased slightlyincreased primarily due to:
•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 includeincluded the reimbursement of approximately $10.3 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 18 to the financial statements hereinin the Form 10-K for discussion of the spent nuclear fuel litigation; and
•a decreasean increase of $4.7$3.8 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•an increase of $2.5 million in power delivery expenses primarily due to higher vegetation maintenance costs due to timing;
•an increase of $2.3 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $2.2 million in contract costs related to operational performance, customer service, and organizational health initiatives.
Asset write-offs includes a revision$131.8 million ($99.1 million net-of-tax) charge to estimated incentive compensation expense inreflect the first quarter 2023 andwrite-off of a decrease in net periodic pension and other postretirement benefits costspreviously recorded regulatory asset as a result of an increaseadverse decision in the discount rates used to value the benefit liabilities.opportunity sales proceeding in March 2024. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 62 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.the opportunity sales proceeding.
The decrease was substantially offset by an increase of $8.2 million in insuranceDepreciation and amortization expenses increased primarily due to loweradditions to plant in service.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear insurance refunds receiveddecommissioning trust earnings plus asset retirement obligation-related costs collected in 2023 and an increase of $6.7 million in power delivery expenses primarily due to higher reliability costs, higher vegetation maintenance costs, and higher metering costs.revenue.
Other income increased primarily due to an increasechanges in interest earned on money pool investments, an increasedecommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in the allowance for equity funds used during construction due to higher construction work in progress in 2023, and higher interest income from carrying costs related to the deferred fuel balance.
Interest expense increased primarily due to the issuance of $425 million of 5.15% Series mortgage bonds in January 2023.first quarter 2024.
Income Taxes
The effective income tax rate was 24.8% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and the accrual for state income taxes, partially offset by the amortization of state accumulated deferred income taxes as a result of tax rate changes.
The effective income tax rate was 14.9% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the amortization of
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
state accumulated deferred income taxes as a result of tax rate changes and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.
The effective income tax rate was 22.6% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for a discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Liquidity and Capital Resources
Cash FlowWalnut Bend Solar
Cash flowsIn June 2020, Entergy Arkansas signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic energy facility, Walnut Bend Solar facility, to be sited on approximately 1,000 acres in Lee County, Arkansas. Acquisition of the Walnut Bend Solar facility was initially approved by the APSC in July 2021. The agreement was amended by the parties in February 2023 and the revised agreement was approved by the APSC in July 2023. In February 2024, Entergy Arkansas made an initial payment of approximately $170 million to acquire the facility. The project will achieve commercial operation once testing is completed and the project has achieved substantial completion. Entergy Arkansas currently expects the project to achieve commercial operation in second quarter 2024, at which time a substantial completion payment of approximately $20 million is expected.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
See 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 March 31, 2024, 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 (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 Control over Financial Reporting
Under the supervision and with the participation of each Registrant’s management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 2024 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
Entergy Arkansas experienced a net loss of $32.3 million for the three months ended March 31, 2023 and 2022 were as follows:
| | | | | | | | | | | |
| | 2023 | | 2022 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period | $5,278 | | | $12,915 | |
| | | |
| Net cash provided by (used in): | | | |
| Operating activities | 274,037 | | | 247,426 | |
| Investing activities | (306,032) | | | (214,477) | |
| Financing activities | 186,302 | | | 64,167 | |
| Net increase in cash and cash equivalents | 154,307 | | | 97,116 | |
| | | |
| Cash and cash equivalents at end of period | $159,585 | | | $110,031 | |
Operating Activities
Net cash flow provided by operating activities increased $26.62024 compared to net income of $59.4 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to:
•to a $131.8 million ($99.1 million net-of-tax) charge to reflect the write-off of a previously recorded regulatory asset as a result of an adverse decision in the opportunity sales proceeding in March 2024. Partially offsetting the charge to Entergy Arkansas’s earnings were higher retail electric price and higher volume/weather. higher collections from customers;
•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 the opportunity sales proceeding.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 2024 to the first quarter 2023:
| | | | | |
| Amount |
| (In Millions) |
| 2023 operating revenues | $582.7 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 14.1 | |
| Retail electric price | 15.1 | |
| Volume/weather | 10.1 | |
| |
| 2024 operating revenues | $622.0 | |
Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, and 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 2024. See Note 2 to the financial statements in the Form 10-K for discussion of the 2023 formula rate plan filing.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in industrial usage. The increase in industrial usage is primarily due to an increase in demand from large industrial customers, primarily in the technology 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.
Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the three months ended March 31, 2024 and 2023 are as follows:
| | | | | | | | | | | | | | | | | |
| 2024 | | 2023 | | % Change |
| (GWh) | | |
| Residential | 1,966 | | | 1,802 | | | 9 | |
| Commercial | 1,280 | | | 1,239 | | | 3 | |
| Industrial | 2,268 | | | 2,050 | | | 11 | |
| Governmental | 46 | | | 46 | | | — | |
| Total retail | 5,560 | | | 5,137 | | | 8 | |
| Sales for resale: | | | | | |
| Associated companies | 462 | | | 564 | | | (18) | |
| Non-associated companies | 966 | | | 1,568 | | | (38) | |
| Total | 6,988 | | | 7,269 | | | (4) | |
See Note 12 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Other Income Statement Variances
Fuel, fuel-related expenses, and gas purchased for resale includes a credit of $9 million, recorded in first quarter 2024, for costs related to net metering. The costs were incurred in 2023 and included within Entergy Arkansas’s annual redetermination of its energy cost recovery;recovery rider filed in March 2024 due to a change in law in the state of Arkansas. See Note 2 to the financial statements herein for discussion of the March 2024 energy cost recovery rider filing.
Other operation and maintenance expenses increased primarily due to:
•the refundeffects of $41.7recording 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 included the reimbursement of approximately $10.3 million which was appliedof spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 8 to the under-recovered deferredfinancial statements in the Form 10-K for discussion of the spent nuclear fuel balance,litigation;
• receivedan increase of $3.8 million in energy efficiency expenses primarily due to the timing of recovery from System Energycustomers;
•an increase of $2.5 million in January 2023power delivery expenses primarily due to higher vegetation maintenance costs due to timing;
•an increase of $2.3 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $2.2 million in contract costs related to operational performance, customer service, and organizational health initiatives.
Asset write-offs includes a $131.8 million ($99.1 million net-of-tax) charge to reflect the sale-leaseback renewal costs and depreciation litigationwrite-off of a previously recorded regulatory asset as calculateda result of an adverse decision in System Energy’s January 2023 compliance report filed with the FERC.opportunity sales proceeding in March 2024. 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
•a decrease of $8.7 million in pension contributions in 2023.opportunity sales proceeding.
The increase was partially offset by the timing of paymentsDepreciation and amortization expenses increased primarily due to vendors and an increaseadditions to plant in spending of $4 million on nuclear refueling outages in 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.service.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing ActivitiesEntergy Arkansas 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.
Net cash flow used in investing activitiesOther income increased $91.6 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to:to changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in first quarter 2024.
Income Taxes
•
an increase
The effective income tax rate was 24.8% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of $56.9 million in distribution construction expenditures21% was primarily due to higher capital expenditurescertain book and tax differences related to utility plant items and the accrual for storm restoration in 2023 and increased investment instate income taxes, partially offset by the reliability and infrastructureamortization of Entergy Arkansas’s distribution system;
•an increase of $29 million in transmission construction expenditures primarily due to a higher scope of work on projects performed in 2023 as compared to 2022; and
•an increase of $48.3 millionstate accumulated deferred income taxes 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.tax rate changes.
The increaseeffective income tax rate was partially offset by money pool activity.
Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased $11 million14.9% for the three months ended March 31, 2023 compared to increasing by $60 millionfirst quarter 2023. The difference in the effective income tax rate for the three months ended March 31, 2022. The money pool is an intercompany borrowing arrangement designed to reducefirst quarter 2023 versus the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $122.1 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022federal statutory rate of 21% was primarily due to the issuanceamortization of $425 millionstate accumulated deferred income taxes as a result of 5.15% Series mortgage bonds in January 2023tax rate changes and net borrowings of $31.5 million in 2023 comparedcertain book and tax differences related to net repayments of $4.8 million in 2022 on the nuclear fuel company variable interest entity’s credit facility. The increase wasutility plant items, partially offset by:by the accrual for state income taxes.
•the issuance of $200 million of 4.20% Series mortgage bonds in March 2022;
•$80 million in common equity distributions paid in 2023 in order to maintain Entergy Arkansas’s capital structure;Income Tax Legislation and
•money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased $180.8 million for the three months ended March 31, 2023 compared to decreasing by $139.9 million for the three months ended March 31, 2022.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Arkansas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Arkansas is primarily due to the issuance of long-term debt in 2023.
| | | | | | | | | | | |
| March 31,
2023 | | December 31,
2022 |
| Debt to capital | 55.1 | % | | 52.5 | % |
| Effect of subtracting cash | (0.9 | %) | | — | % |
| Net debt to net capital (non-GAAP) | 54.2 | % | | 52.5 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Arkansas also uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - LiquidityIncome Tax Legislation and Capital ResourcesRegulation” herein and in the Form 10-K for a discussion of Entergy Arkansas’s usesincome tax legislation and sources of capital. Following are updates to the information provided in the Form 10-K.regulation.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31,
2023 | | December 31,
2022 | | March 31,
2022 | | December 31,
2021 |
| (In Thousands) |
| $11,035 | | ($180,795) | | $59,981 | | ($139,904) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in June 2027. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2024. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of March 31, 2023, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2023, $5.6 million in letters of credit were outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for further discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in June 2025. As of March 31, 2023, $31.5 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for further discussion of the nuclear fuel company variable interest entity credit facility.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Walnut Bend Solar
In June 2020, Entergy Arkansas signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic energy facility, Walnut Bend Solar facility, to be sited on approximately 1,000 acres in Lee County, Arkansas. Acquisition of the Walnut Bend Solar facility was initially approved by the APSC in July 2021. The agreement was amended by the parties in February 2023 and the revised agreement was approved by the APSC in July 2023. In February 2024, Entergy Arkansas made an initial payment of approximately $170 million to acquire the facility. The project will achieve commercial operation once testing is completed and the project has achieved substantial completion. Entergy Arkansas currently expects the project to achieve commercial operation in second quarter 2024, at which time a substantial completion payment of approximately $20 million is expected.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
See 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 discussedof March 31, 2024, 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 (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 Control over Financial Reporting
Under the supervision and with the participation of each Registrant’s management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 2024 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
Entergy Arkansas experienced a net loss of $32.3 million for the three months ended March 31, 2024 compared to net income of $59.4 million for the three months ended March 31, 2023 primarily due to a $131.8 million ($99.1 million net-of-tax) charge to reflect the write-off of a previously recorded regulatory asset as a result of an adverse decision in the opportunity sales proceeding in March 2024. Partially offsetting the charge to Entergy Arkansas’s earnings were higher retail electric price and higher volume/weather. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the opportunity sales proceeding.
Operating Revenues
Following is an analysis of the change in July 2021,operating revenues comparing the APSC directed first quarter 2024 to the first quarter 2023:
| | | | | |
| Amount |
| (In Millions) |
| 2023 operating revenues | $582.7 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 14.1 | |
| Retail electric price | 15.1 | |
| Volume/weather | 10.1 | |
| |
| 2024 operating revenues | $622.0 | |
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 2024. See Note 2 to the financial statements in the Form 10-K for discussion of the 2023 formula rate plan filing.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in industrial usage. The increase in industrial usage is primarily due to an increase in demand from large industrial customers, primarily in the technology 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.
Entergy Arkansas, to file a report within 180 days detailing its efforts to obtain a tax equity partnershipLLC and Subsidiaries
Management’s Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the purposethree months ended March 31, 2024 and 2023 are as follows:
| | | | | | | | | | | | | | | | | |
| 2024 | | 2023 | | % Change |
| (GWh) | | |
| Residential | 1,966 | | | 1,802 | | | 9 | |
| Commercial | 1,280 | | | 1,239 | | | 3 | |
| Industrial | 2,268 | | | 2,050 | | | 11 | |
| Governmental | 46 | | | 46 | | | — | |
| Total retail | 5,560 | | | 5,137 | | | 8 | |
| Sales for resale: | | | | | |
| Associated companies | 462 | | | 564 | | | (18) | |
| Non-associated companies | 966 | | | 1,568 | | | (38) | |
| Total | 6,988 | | | 7,269 | | | (4) | |
See Note 12 to the financial statements herein for additional discussion of acquiringEntergy Arkansas’s operating revenues.
Other Income Statement Variances
Fuel, fuel-related expenses, and gas purchased for resale includes a credit of $9 million, recorded in first quarter 2024, for costs related to net metering. The costs were incurred in 2023 and included within Entergy Arkansas’s annual redetermination of its energy cost recovery rider filed in March 2024 due to a change in law in the state of Arkansas. See Note 2 to the financial statements herein for discussion of the March 2024 energy cost recovery rider filing.
Other operation and maintenance expenses increased primarily due to:
•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 included the reimbursement of approximately $10.3 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation;
•an increase of $3.8 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•an increase of $2.5 million in power delivery expenses primarily due to higher vegetation maintenance costs due to timing;
•an increase of $2.3 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $2.2 million in contract costs related to operational performance, customer service, and organizational health initiatives.
Asset write-offs includes a $131.8 million ($99.1 million net-of-tax) charge to reflect the write-off of a previously recorded regulatory asset as a result of an adverse decision in the opportunity sales proceeding in March 2024. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the opportunity sales proceeding.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas 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 changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in first quarter 2024.
Income Taxes
The effective income tax rate was 24.8% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and the accrual for state income taxes, partially offset by the amortization of state accumulated deferred income taxes as a result of tax rate changes.
The effective income tax rate was 14.9% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the amortization of state accumulated deferred income taxes as a result of tax rate changes and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2024 and 2023 were as follows:
| | | | | | | | | | | |
| | 2024 | | 2023 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period | $3,632 | | | $5,278 | |
| | | |
| Net cash provided by (used in): | | | |
| Operating activities | 287,251 | | | 274,037 | |
| Investing activities | (371,389) | | | (306,032) | |
| Financing activities | 126,073 | | | 186,302 | |
| Net increase in cash and cash equivalents | 41,935 | | | 154,307 | |
| | | |
| Cash and cash equivalents at end of period | $45,567 | | | $159,585 | |
Operating Activities
Net cash flow provided by operating activities increased $13.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to higher collections from customers. The increase was partially offset by:
•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;
Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
•the refund of $41.7 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. The refund was subsequently applied to the under-recovered deferred fuel balance. See Note 2 to the financial statements in the Form 10-K for further discussion of the refund and the related proceedings;
•the timing of payments to vendors;
•an increase of $23 million in interest paid; and
•an increase of $5.6 million in pension contributions in 2024. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
Investing Activities
Net cash flow used in investing activities increased $65.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to the initial payment of approximately $169.7 million in February 2024 for the purchase of the Walnut Bend Solar facility. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until The increase was partially offset by:
•a tax equity partnership is obtained or decrease of $53 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2024;
•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 rightdecrease of termination. Negotiations were conducted, including with respect to cost and schedule and to updates arising$27.2 million as a result of fluctuations in nuclear fuel activity due to variations from year to year in the Inflation Reduction Acttiming and pricing of 2022. In April 2023, Entergy Arkansas filed an application for an amended certificatefuel reload requirements, materials and services deliveries, and the timing of environmental compatibilitycash payments during the nuclear fuel cycle;
•a decrease of $8.1 million in nuclear construction expenditures primarily due to decreased spending on various nuclear projects in 2024; and public need with the APSC seeking approval by June 2023 for the updates
•a decrease of $5.8 million in non-nuclear generation construction expenditures primarily due to the cost and schedule that were previously approved by the APSC. The project, if approved, is currently expecteda lower scope of work, including during plant outages, performed in 2024 as compared to achieve commercial operation in 2024.2023.
West MemphisSee Note 14 to the financial statements herein for discussion of the Walnut Bend Solar facility purchase.
As discussedFinancing Activities
Net cash flow provided by financing activities decreased $60.2 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to the issuance of $425 million of 5.15% Series mortgage bonds in January 2023 and net repayments of $70.2 million in 2024 compared to net borrowings of $31.5 million in 2023 on the nuclear fuel company variable interest entity’s credit facility. The decrease was partially offset by:
•a capital contribution of approximately $275 million received from Entergy Corporation in 2024 in anticipation of upcoming expenditures, including the acquisition of the Walnut Bend Solar facility;
•$80 million in common equity distributions paid in 2023 in order to maintain Entergy Arkansas’s capital structure;
•the issuance of $70 million of 5.54% Series O notes by the Entergy Arkansas nuclear fuel company variable interest entity in March 2024; and
•money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased $145.4 million for the three months ended March 31, 2024 compared to decreasing by $180.8 million for the three months ended March 31, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Arkansas’s debt to capital ratio is shown in October 2021 the APSC directedfollowing table. The decrease in the debt to capital ratio for Entergy Arkansas is primarily due to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purposecapital contribution of acquiring$275 million received from Entergy Corporation in 2024.
| | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
| Debt to capital | 54.0 | % | | 55.5 | % |
| Effect of subtracting cash | (0.3 | %) | | — | % |
| Net debt to net capital (non-GAAP) | 53.7 | % | | 55.5 | % |
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 West Memphis Solar facility. In April 2022,currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas fileduses the debt to capital ratio in analyzing its tax equity partnership status reportfinancial condition and will file subsequent reports untilbelieves 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 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 notifiednon-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 it was seeking changes to certain termscould 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 build-own-transfer agreement, including both cost and schedule. In January 2023, Entergy Arkansas filed a supplemental application with the APSC seeking approvalForm 10-K for a change in the transmission routediscussion of Entergy Arkansas’s uses and sources of capital. The following are updates to the cost and schedule that were previously approved byinformation provided in the APSC. In March 2023 the APSC approved Form 10-K.
Entergy Arkansas’s supplemental application.receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31,
2024 | | December 31, 2023 | | March 31,
2023 | | December 31, 2022 |
| (In Thousands) |
| $8,505 | | ($145,385) | | $11,035 | | ($180,795) |
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 2028. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2026. The project$150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of March 31, 2024, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is currently expecteda party to achieve commercial operationan uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2024, $2.1 million in 2024.letters of credit were outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for 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 March 31, 2024, there were no loans outstanding under the
Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for discussion of the nuclear fuel company variable interest entity credit facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Fuel and purchased power cost recovery
Energy Cost Recovery Rider
In March 2023,2024 Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increasea decrease in the rate from $0.01639$0.01883 per kWh to $0.01883$0.00882 per kWh. Due to a change in law in the state of Arkansas, the annual redetermination included $9 million, recorded as a credit to fuel expense in first quarter 2024, for recovery attributed to net metering costs in 2023. The primary reason for the rate increasedecrease is a large under-recoveredover-recovered balance as a result of higherlower natural gas prices in 2022 and a $32 million deferral related to2023. To mitigate the 2021 February winter storms consistent with APSC general staff’s requesteffect of projected increases in 2022. The under-recoverednatural gas prices in 2024, Entergy Arkansas adjusted the over-recovered balance included in the March 2024 annual redetermination filing was partially offset by $43.7 million. This adjustment is expected to reduce the proceeds ofrate change that will be reflected in 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.2025 energy cost rate redetermination. The redetermined rate of $0.01883$0.00882 per kWh became effective with the first billing cycle in April 20232024 through the normal operation of the tariff. See Note 2 to the financial statements in the Form 10-K for information on the 2021 February winter storm investigation proceeding.
Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in January 2023,September 2020, Entergy Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a notice of appeal ofcomplaint in the U.S. District Court for the Eastern District of Arkansas’s order denying its motionArkansas challenging the APSC’s denial of recovery of $135 million of payments to interveneother Utility operating companies in December 2018 relating to off-system sales of electricity from 2002-2009, as ordered by the FERC. The complaint also involved a challenge to the United States Court$13.7 million, plus interest, of Appeals forrelated refunds ordered by the Eighth CircuitAPSC and a motion with the district court to stay the proceedings pending the appeal, which was denied. In February 2023,
paid by Entergy Arkansas LLC and Subsidiaries
Management's Financial Discussion and Analysis
Arkansas Electric Energy Consumers, Inc. filed a motion with the United States Court of Appeals for the Eighth District to stay the proceedings pending the appeal, which also was denied.in August 2020. The trial was held in February 2023. Following the trial, Entergy Arkansas filed a motion with the United States Court of Appeals for the Eighth District to expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The courtUnited States Court of Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments are scheduled forwere held in June 2023.
Net Metering Legislation
As discussed in In August 2023 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 ArkansasUnited States Court of Appeals grantedfor the motion and dismissed Entergy Arkansas’s appeal, although other appealsEighth District affirmed the order 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 respectdenying Arkansas Electric Energy Consumers, Inc.’s motion 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 September 2022 the APSC opened a rulemaking concerning proposed amendments to the net metering rules to address the expiration on December 31, 2022 of the automatic grandfathering of the existing net metering rate structure. Entergy Arkansas and other utility parties filed initial briefs and comments setting forth that the statute imposing the expiration of the automatic grandfathering is not ambiguous and that the APSC does not have the authority to extend the grandfathering period, and the hearing was held in October 2022. In December 2022 the APSC issued an order attempting to modify the net metering rules and purporting to allow for the potential for grandfathering after December 31, 2022. More than thirty applicants filed individual net metering applications in December 2022 seeking to be considered under the APSC’s order, although the APSC issued an order in January 2023 holding those applications in abeyance. Several parties, including Entergy Arkansas, sought rehearing, and the Arkansas’s Governor’s executive order limiting new rulemakings calls into question how the APSC’s order to adopt new rules may be effectuated.
Also in September 2022 the APSC opened another proceeding to investigate the issue of potential cost shifting arising as a result of net metering. Investor owned utilities and some cooperatives were required to make and did make filings in October 2022 with supporting documentation as to the amount and extent of cost shifting and the manner in which they would design tariffs to recover those costs on behalf of non-net metering customers.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Responses to the utility and cooperative filings were filed in January 2023, and utilities filed their further responses in February 2023.
An Arkansas law was enacted effective March 2023 that revises the billing arrangements for net metering facilities in order to reduce the cost shift to non-net metering customers. The new law also imposes a new limit of 5 MW for future net metering facilities, allows utilities to recover net metering credits in the same manner as fuel, and grandfathers certain net metering facilities that are online or in process to be online by September 2024. Entergy Arkansas joined other utilities in a motion in April 2023 to close the current APSC docket related to potential cost shifting in light of the new law. The APSC must approve revisions to the utilities’ tariffs to conform to the new law no later than December 2023.
COVID-19 Orders
See Note 2 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of March 31, 2023, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.
Remaining Useful Lives Reviewintervene.
In response to 2021 legislation,March 2024 the U.S. District Court for the Eastern District of Arkansas issued a judgment in favor of the APSC openedand against Entergy Arkansas. In March 2024 Entergy Arkansas filed a proceeding in December 2022notice of appeal and a motion to establish a procedure to evaluate life extensionsexpedite oral arguments with the United States Court of all utility generation units and opened a separate docket to evaluate life extensionsAppeals for White Bluff, Independence,the Eighth District and the Lake Catherine plant. In January 2023, court granted the motion to expedite and issued an order establishing that the briefing will occur in May 2024 through July 2024. As a result of the adverse decision by the U.S. District Court for the Eastern District of Arkansas,Entergy Arkansas and one other party filed for rehearingconcluded that it could no longer support the recognition of its $131.8 million regulatory asset reflecting the previously-expected recovery of a portion of the ordercosts at issue in the generalopportunity sales proceeding and Entergy Arkansas movedrecorded a $131.8 million ($99.1 million net-of-tax) charge to dismiss the separate docket. In February 2023 the APSC granted rehearingearnings in the general proceeding. A new law passed in April 2023 changed the requirements for the APSC to perform these evaluations, thus eliminating the need for the current APSC proceedings, and the APSC cancelled the procedural schedule. See “Regulation of Entergy’s Business - Environmental Regulation - National Ambient Air Quality Standards - Regional Haze” in Part I, Item 1 in the Form 10-K for further discussion related to these plants.first quarter 2024.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy Arkansas, 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 a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | For the Three Months Ended March 31, 2023 and 2022 | | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | |
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF OPERATIONS | | CONSOLIDATED STATEMENTS OF OPERATIONS |
| For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | | | | | 2024 | |
| | | 2023 | | 2022 |
| | | | | | 2024 | |
| | | (In Thousands) |
| | | | | | 2024 | | | 2023 |
| | | | (In Thousands) | | | | | | (In Thousands) |
| OPERATING REVENUES | OPERATING REVENUES | | | |
| Electric | |
| Electric | |
| Electric | Electric | | | $582,749 | | | $558,956 | |
| | OPERATING EXPENSES | OPERATING EXPENSES | | | |
| OPERATING EXPENSES | |
| OPERATING EXPENSES | |
| Operation and Maintenance: | 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 | |
| Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | | 113,509 | | | 86,225 | |
| Purchased power | Purchased power | | | 64,751 | | | 57,471 | |
| Nuclear refueling outage expenses | Nuclear refueling outage expenses | | | 15,341 | | | 14,070 | |
| Other operation and maintenance | Other operation and maintenance | | | 156,819 | | | 157,257 | |
| Asset write-offs | |
| Decommissioning | Decommissioning | | | 21,350 | | | 20,129 | |
| Taxes other than income taxes | Taxes other than income taxes | | | 32,351 | | | 33,202 | |
| Depreciation and amortization | Depreciation and amortization | | | 96,441 | | | 95,610 | |
| Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | | (20,844) | | | (20,542) | |
| TOTAL | TOTAL | | | 479,718 | | | 443,422 | |
| | OPERATING INCOME | | | 103,031 | | | 115,534 | |
| OPERATING INCOME (LOSS) | |
| OPERATING INCOME (LOSS) | |
| OPERATING INCOME (LOSS) | |
| | OTHER INCOME | OTHER INCOME | | | |
| OTHER INCOME | |
| OTHER INCOME | |
| Allowance for equity funds used during construction | |
| Allowance for equity funds used during construction | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | | 4,843 | | | 3,055 | |
| Interest and investment income | Interest and investment income | | | 7,479 | | | 6,320 | |
| Miscellaneous - net | Miscellaneous - net | | | (2,100) | | | (5,392) | |
| TOTAL | TOTAL | | | 10,222 | | | 3,983 | |
| | INTEREST EXPENSE | INTEREST EXPENSE | | | |
| INTEREST EXPENSE | |
| INTEREST EXPENSE | |
| Interest expense | |
| Interest expense | |
| Interest expense | Interest expense | | | 45,367 | | | 36,047 | |
| Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | | (1,945) | | | (1,214) | |
| TOTAL | TOTAL | | | 43,422 | | | 34,833 | |
| | INCOME BEFORE INCOME TAXES | | | 69,831 | | | 84,684 | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| INCOME (LOSS) BEFORE INCOME TAXES | |
| | Income taxes | Income taxes | | | 10,434 | | | 19,117 | |
| Income taxes | |
| Income taxes | |
| | NET INCOME | | | 59,397 | | | 65,567 | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
| NET INCOME (LOSS) | |
| | Net loss attributable to noncontrolling interest | Net loss attributable to noncontrolling interest | | | (1,629) | | | (1,387) | |
| Net loss attributable to noncontrolling interest | |
| Net loss attributable to noncontrolling interest | |
| | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | $61,026 | | | $66,954 | |
| EARNINGS (LOSS) APPLICABLE TO MEMBER'S EQUITY | |
| EARNINGS (LOSS) APPLICABLE TO MEMBER'S EQUITY | |
| EARNINGS (LOSS) APPLICABLE TO MEMBER'S EQUITY | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
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| | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | |
| Net income | | $59,397 | | | $65,567 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | |
| Net income (loss) | |
| Net income (loss) | |
| Net income (loss) | |
| 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 | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 134,779 | | | 133,634 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 15,495 | | | 11,776 | |
| Asset write-offs | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | |
| Receivables | |
| Receivables | |
| Receivables | Receivables | | 57,003 | | | 23,583 | |
| Fuel inventory | Fuel inventory | | (15,255) | | | 7,199 | |
| Accounts payable | Accounts payable | | (58,227) | | | (33,409) | |
| Taxes accrued | Taxes accrued | | 10,647 | | | 27,209 | |
| Interest accrued | Interest accrued | | 35,905 | | | 32,233 | |
| Deferred fuel costs | Deferred fuel costs | | 87,581 | | | (16,954) | |
| Other working capital accounts | Other working capital accounts | | (3,948) | | | 3,794 | |
| Provisions for estimated losses | Provisions for estimated losses | | (6,600) | | | (309) | |
| Other regulatory assets | Other regulatory assets | | (27,001) | | | (7,198) | |
| Other regulatory liabilities | Other regulatory liabilities | | 45,201 | | | (91,068) | |
| | Pension and other postretirement liabilities | | (7,998) | | | (19,852) | |
| Pension and other postretirement funded status | |
| Other assets and liabilities | Other assets and liabilities | | (52,942) | | | 111,221 | |
| Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 274,037 | | | 247,426 | |
| | INVESTING ACTIVITIES | INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| Construction expenditures | |
| Construction expenditures | |
| Construction expenditures | Construction expenditures | | (255,248) | | | (162,108) | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 4,843 | | | 3,055 | |
| | Payment for purchase of plant | |
| Nuclear fuel purchases | Nuclear fuel purchases | | (55,974) | | | (27,258) | |
| Proceeds from sale of nuclear fuel | Proceeds from sale of nuclear fuel | | 17,549 | | | 37,157 | |
| Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 32,798 | | | 64,608 | |
| Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (38,948) | | | (69,950) | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | (11,035) | | | (59,981) | |
| | Decrease (increase) in other investments | |
| | Other | | (17) | | | — | |
| | Decrease (increase) in other investments | |
| | Decrease (increase) in other investments | |
| Net cash flow used in investing activities | Net cash flow used in investing activities | | (306,032) | | | (214,477) | |
| | FINANCING ACTIVITIES | FINANCING ACTIVITIES | |
| FINANCING ACTIVITIES | |
| FINANCING ACTIVITIES | |
| Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 514,206 | | | 212,060 | |
| | Proceeds from the issuance of long-term debt | |
| Proceeds from the issuance of long-term debt | |
| Retirement of long-term debt | Retirement of long-term debt | | (62,505) | | | (7,506) | |
| | Capital contribution from parent | |
| | Change in money pool payable - net | | (180,795) | | | (139,904) | |
| Capital contribution from parent | |
| | Capital contribution from parent | |
| Changes in money pool payable - net | |
| Common equity distributions paid | Common equity distributions paid | | (80,000) | | | — | |
| Other | |
| Net cash flow provided by financing activities | |
| | Other | | (4,604) | | | (483) | |
| Net cash flow provided in financing activities | | 186,302 | | | 64,167 | |
| | Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | | 154,307 | | | 97,116 | |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | 5,278 | | | 12,915 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $159,585 | | | $110,031 | |
| | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | |
| Cash paid during the period for: | Cash paid during the period for: | |
| Interest - net of amount capitalized | Interest - net of amount capitalized | | $8,823 | | | $3,227 | |
| Interest - net of amount capitalized | |
| Interest - net of amount capitalized | |
| | Noncash investing activities: | |
| Noncash investing activities: | |
| Noncash investing activities: | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
| ASSETS | ASSETS | ASSETS |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT ASSETS | CURRENT ASSETS | |
| Cash and cash equivalents: | Cash and cash equivalents: | |
| Cash and cash equivalents: | |
| Cash and cash equivalents: | |
| Cash | |
| Cash | |
| Cash | Cash | | $2,871 | | | $1,911 | |
| Temporary cash investments | Temporary cash investments | | 156,714 | | | 3,367 | |
| Total cash and cash equivalents | Total cash and cash equivalents | | 159,585 | | | 5,278 | |
| | Accounts receivable: | Accounts receivable: | | | | |
| Customer | |
| Customer | |
| Customer | Customer | | 129,852 | | | 140,513 | |
| Allowance for doubtful accounts | Allowance for doubtful accounts | | (5,255) | | | (6,528) | |
| Associated companies | Associated companies | | 51,962 | | | 45,336 | |
| Other | Other | | 94,252 | | | 101,096 | |
| Accrued unbilled revenues | Accrued unbilled revenues | | 98,387 | | | 116,816 | |
| Total accounts receivable | Total accounts receivable | | 369,198 | | | 397,233 | |
| | Deferred fuel costs | | 52,158 | | | 139,739 | |
| Fuel inventory - at average cost | |
| Fuel inventory - at average cost | |
| Fuel inventory - at average cost | Fuel inventory - at average cost | | 66,399 | | | 51,144 | |
| Materials and supplies - at average cost | Materials and supplies - at average cost | | 304,342 | | | 288,260 | |
| Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 47,143 | | | 56,443 | |
| | Prepayments and other | Prepayments and other | | 26,120 | | | 26,576 | |
| TOTAL | TOTAL | | 1,024,945 | | | 964,673 | |
| | OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | |
| OTHER PROPERTY AND INVESTMENTS | |
| OTHER PROPERTY AND INVESTMENTS | |
| Decommissioning trust funds | Decommissioning trust funds | | 1,265,519 | | | 1,199,860 | |
| | Decommissioning trust funds | |
| Decommissioning trust funds | |
| Other | Other | | 2,430 | | | 2,414 | |
| TOTAL | TOTAL | | 1,267,949 | | | 1,202,274 | |
| | UTILITY PLANT | UTILITY PLANT | |
| UTILITY PLANT | |
| UTILITY PLANT | |
| Electric | Electric | | 14,226,705 | | | 14,077,844 | |
| | Electric | |
| Electric | |
| Construction work in progress | Construction work in progress | | 448,820 | | | 417,244 | |
| Nuclear fuel | Nuclear fuel | | 185,531 | | | 176,174 | |
| TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 14,861,056 | | | 14,671,262 | |
| Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 5,804,506 | | | 5,729,304 | |
| UTILITY PLANT - NET | UTILITY PLANT - NET | | 9,056,550 | | | 8,941,958 | |
| | DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| Regulatory assets: | Regulatory assets: | |
| | Regulatory assets: | |
| Regulatory assets: | |
| Other regulatory assets | Other regulatory assets | | 1,837,282 | | | 1,810,281 | |
| Deferred fuel costs | | 68,883 | | | 68,883 | |
| Other regulatory assets | |
| Other regulatory assets | |
| Other | Other | | 24,821 | | | 18,507 | |
| TOTAL | TOTAL | | 1,930,986 | | | 1,897,671 | |
| | TOTAL ASSETS | TOTAL ASSETS | | $13,280,430 | | | $13,006,576 | |
| TOTAL ASSETS | |
| TOTAL ASSETS | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT LIABILITIES | CURRENT LIABILITIES | |
| Currently maturing long-term debt | Currently maturing long-term debt | | $290,000 | | | $290,000 | |
| | Currently maturing long-term debt | |
| Currently maturing long-term debt | |
| Accounts payable: | Accounts payable: | |
| Associated companies | |
| Associated companies | |
| Associated companies | Associated companies | | 65,002 | | | 276,362 | |
| Other | Other | | 241,282 | | | 310,339 | |
| Customer deposits | Customer deposits | | 103,891 | | | 102,799 | |
| Taxes accrued | Taxes accrued | | 111,173 | | | 100,526 | |
| | Interest accrued | Interest accrued | | 54,721 | | | 18,816 | |
| | Deferred fuel costs | |
| Other | Other | | 44,772 | | | 43,394 | |
| TOTAL | TOTAL | | 910,841 | | | 1,142,236 | |
| | NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 1,522,328 | | | 1,498,234 | |
| Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 28,171 | | | 28,472 | |
| Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 422,376 | | | 435,157 | |
| Other regulatory liabilities | Other regulatory liabilities | | 533,740 | | | 475,758 | |
| Decommissioning | Decommissioning | | 1,494,086 | | | 1,472,736 | |
| Accumulated provisions | Accumulated provisions | | 73,398 | | | 79,998 | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 109,991 | | | 118,020 | |
| Long-term debt | Long-term debt | | 4,330,604 | | | 3,876,500 | |
| Other | Other | | 93,787 | | | 97,650 | |
| TOTAL | TOTAL | | 8,608,481 | | | 8,082,525 | |
| | Commitments and Contingencies | Commitments and Contingencies | |
| | Commitments and Contingencies | |
| Commitments and Contingencies | | | |
| | EQUITY | EQUITY | |
| EQUITY | |
| EQUITY | |
| Member's equity | |
| Member's equity | |
| Member's equity | Member's equity | | 3,735,016 | | | 3,753,990 | |
| Noncontrolling interest | Noncontrolling interest | | 26,092 | | | 27,825 | |
| TOTAL | TOTAL | | 3,761,108 | | | 3,781,815 | |
| | TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $13,280,430 | | | $13,006,576 | |
| TOTAL LIABILITIES AND EQUITY | |
| TOTAL LIABILITIES AND EQUITY | |
| | See Notes to Financial Statements. | 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 Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | Noncontrolling Interest | |
| Noncontrolling Interest | |
| Noncontrolling Interest | | | Member's Equity | | Total |
| (In Thousands) | | | (In Thousands) |
| | Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| | Net income (loss) | |
| Net income (loss) | |
| Net income (loss) | |
| Common equity distributions | |
| | | Noncontrolling Interest | | Member's Equity | | Total |
| Distributions to noncontrolling interest | |
| | (In Thousands) |
| | Balance at December 31, 2021 | $33,110 | | | $3,542,745 | | | $3,575,855 | |
| | Net income (loss) | (1,387) | | | 66,954 | | | 65,567 | |
| Distributions to noncontrolling interest | |
| | Balance at March 31, 2022 | $31,723 | | | $3,609,699 | | | $3,641,422 | |
| Distributions to noncontrolling interest | |
| Balance at March 31, 2023 | |
| | | Balance at December 31, 2022 | $27,825 | | | $3,753,990 | | | $3,781,815 | |
| | Net income (loss) | (1,629) | | | 61,026 | | | 59,397 | |
| Balance at December 31, 2023 | |
| | Common equity distributions | — | | | (80,000) | | | (80,000) | |
| | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Net loss | |
| Net loss | |
| Net loss | |
| | Capital contribution from parent | |
| Capital contribution from parent | |
| Capital contribution from parent | |
| | | Distributions to noncontrolling interest | Distributions to noncontrolling interest | (104) | | | — | | | (104) | |
| Balance at March 31, 2023 | $26,092 | | | $3,735,016 | | | $3,761,108 | |
| | Distributions to noncontrolling interest | |
| | Distributions to noncontrolling interest | |
| Balance at March 31, 2024 | |
| | | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| | See Notes to Financial Statements. | |
| | See Notes to Financial Statements. | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased $93.2decreased $61.3 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.customers; higher other operation and maintenance expenses; and higher depreciation and amortization expenses. The decrease was partially offset by higher other income, higher volume/weather, and higher retail electric price. See Note 2 to the financial statements hereinin the Form 10-K for discussion of the March 2023 storm cost securitization.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $1,266.01,345.2 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 29.3 (138.8) | |
Retail electric price | 40.9 | |
| Storm restoration carrying costs | 30.6 (30.6) | |
| Retail electric price | 11.3 | |
| Volume/weather | (21.6)15.3 | |
20232024 operating revenues | $1,345.21,202.4 | |
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.
Storm restoration carrying costs represent the equity component of storm restoration carrying costs recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the March 2023 storm cost securitization.
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 2022.2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan proceeding.
Storm restoration carrying costs represents the equity component of storm restoration carrying costs, recorded in first quarter 2023, recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements herein for discussion of the March 2023 storm securitization.
The volume/weather variance is primarily due to the effect of lessmore favorable weather on residential sales.sales and an increase in weather-adjusted residential usage.
Entergy Louisiana, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Total electric energy sales for Entergy Louisiana for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 2,685 | | | 3,069 | | | (13) | |
| Commercial | Commercial | 2,447 | | | 2,421 | | | 1 | |
| Industrial | Industrial | 7,832 | | | 7,606 | | | 3 | |
| Governmental | Governmental | 194 | | | 191 | | | 2 | |
| Total retail | Total retail | 13,158 | | | 13,287 | | | (1) | |
| Sales for resale: | Sales for resale: | |
| Associated companies | Associated companies | 1,677 | | | 1,341 | | | 25 | |
| Associated companies | |
| Associated companies | |
| Non-associated companies | Non-associated companies | 224 | | | 853 | | | (74) | |
| Total | Total | 15,059 | | | 15,481 | | | (3) | |
See Note 1312 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses decreasedincreased primarily due to:
•an increase of $10.4 million in non-nuclear generation expenses primarily due to a decreasehigher scope of $6.3work, including during plant outages, performed in 2024 as compared to 2023;
•an increase of $3.1 million in contract costs related to operational performance, customer service, and organizational health initiatives; and
•an increase of $2.5 million in compensation and benefits costs primarily due to a revision to estimated incentive-based compensation accruals expensehigher healthcare claims activity in the first quarter 2023 and a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rates used to value the benefit liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs; and
•a decrease of $5.6 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs.2024.
The decrease was partially offset by an increase of $5 million in insurance expensesTaxes other than income taxes increased primarily due to lower nuclear insurance refunds.increases in ad valorem taxes resulting from higher assessments.
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 hereinin the Form 10-K for discussion of the March 2023 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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Other income increased primarily due to to:
•an increase of $23.5$24.1 million in affiliated dividend income resulting from the May 2022 storm trust I investment of securitization proceeds in affiliated preferred membership interests, partially offset byrelated to storm cost securitizations;
•changes in decommissioning trust fund activity, including portfolio rebalancing of the liquidation of Entergy Louisiana’s investmentRiver Bend decommissioning trust fund in affiliated preferred membership interests in connection with previous securitizations of storm restoration costs. The increase was partially offset by first quarter 2024; and
•a $14.6 million charge 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.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the storm cost securitizations.
Interest expense increased primarily due to the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022.
Income Taxes
The effective income tax rate was 17.6% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of 21% was primarily due to the book and tax differences related to the non-taxable income distributions earned on preferred membership interests and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes.
The effective income tax rate was (83.2%) for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the March 2023 securitization of storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes. See Notes 2 and 10 to the financial statements herein for a discussion of the March 2023 storm cost securitization under Act 293.
The effective income tax rate was 16.9% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, and the amortization of excess accumulated deferred income taxes, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Planned Sale of Gas Distribution Business
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Planned Sale of Gas Distribution Businesses” in the Form 10-K for a discussion of the Inflation Reduction Actplanned sale of 2022.Entergy Louisiana’s gas distribution business.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| 2024 | | | 2024 | | 2023 |
| (In Thousands) | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | 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): | |
| Net cash provided by (used in): | |
| Operating activities | |
| Operating activities | |
| Operating activities | Operating activities | 539,761 | | | 183,126 | |
| Investing activities | Investing activities | (2,038,403) | | | (1,032,121) | |
| Financing activities | Financing activities | 2,521,881 | | | 987,069 | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | 1,023,239 | | | 138,074 | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $1,079,852 | | | $156,647 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities increased $356.6decreased $234.9 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:
•higher fuel costs and 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;
•lower collections from customers;
•a decreasethe timing of $151.8 million in storm spending, primarily duepayments to Hurricane Ida restoration efforts in 2022;vendors;
•the refund of $27.8 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refundsthe refund and the related proceedings;
•lower fuel costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery; and
•a decreasean increase of $7.1$7.2 million in pension contributions in 2023.2024. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
The increasedecrease was partially offset by:
•the timingby a decrease of payments to vendors;
•an increase of $20.9$11 million in spending on nuclear refueling outages; and
•an increase of $16 million in interest paid in 2023 as compared to 2022.outages.
Investing Activities
Net cash flow used in investing activities increased $1,006.3decreased $1,554.5 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:
•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 hereinin the Form 10-K for a discussion of Entergy Louisiana’sthe March 2023 securitization of storm costscost securitization and the storm trust II’s investment in preferred membership interests;
•an increasea decrease of $72.5$78 million in nuclear construction expenditures primarily due to increaseddecreased spending on various nuclear projects in 2023;
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•an increase of $22.8 million in non-nuclear generation construction expenditures primarily due to a higher scope of work on projects performed in 2023 as compared to 2022, including during plant outages; and2024;
•an increasea decrease of $26.1$45.2 million as a result of fluctuations in nuclear fuel activity primarily due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle.
The increase was partially offset by:
•a decreasean increase of $439.6$38.4 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022, partially offset by higher construction expenditures as a resultredemptions of increased investment in the reliability and infrastructure of Entergy Louisiana’s distribution system;
•a decrease of $105 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2022; and
•the $46.6 million redemption of preferred membership interests held by the storm trust I,trusts in 2024 as compared to 2023, as part of periodic redemptions that are expected to occur, subject to certain conditions, for the preferred membership interests that were issued in connection with the May 2022 storm securitization.cost securitizations. See Note 2 to the financial statements in the Form 10-K for a discussion of the storm cost securitizations;
•a decrease of $31.6 million in distribution construction expenditures primarily due to a lower scope of work, including lower capital expenditures for storm restoration in 2024;
•a decrease of $22.7 million in non-nuclear generation construction expenditures primarily due to a lower scope of work, including during plant outages, performed in 2024 as compared to 2023; and
•a decrease of $15.9 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2024 and decreased spending on various transmission projects in 2024.
The decrease was partially offset by money pool activity.
Increases in Entergy Louisiana’s receivables from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased $218.1 million for the three months ended March 31, 2024 compared to increasing by $77.4 million for the three months ended March 31, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements,
Entergy Louisiana, May 2022 storm securitization LLC and Subsidiaries
Management’s Financial Discussion and Analysis
and the storm trust I’s investment in preferred membership interests.money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $1,534.8decreased $1,572.3 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:
•proceeds from securitization of approximately $1.5 billion received by the storm trust II for the closing of the storm securitization in March 2023;2023;
•a capital contribution of approximately $1.5 billion in 2023 received indirectly from Entergy Corporation in March 2023 related to the March 2023 storm cost securitization; and
•a decrease of $75 million in 2023an increase in net long-term repayments of $42.7 million on Entergy Louisiana’s revolvingthe nuclear fuel company variable interest entities’ credit facility.facilities.
The increasedecrease was partially offset by:
•$1.2 billionthe issuances of proceeds received from an unsecured term loan$500 million of 5.35% Series mortgage bonds and $700 million of 5.70% Series mortgage bonds in January 2022;March 2024;
•a decrease of $62.8 million in common equity distributions paid in 2024 in order to maintain Entergy Louisiana’s capital structure;
•a decrease of $50 million in 2024 in net repayments on Entergy Louisiana’s revolving credit facility; and
•money pool activity; and
•an increase of $35.3 million in common equity distributions in 2023 primarily to maintain Entergy Louisiana’s targeted capital structure.activity.
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 $156.2 million for the three months ended March 31, 2024 compared to decreasing by $226.1 million infor the three months ended March 31, 2023. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
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 hereinin the Form 10-K for a discussion of the March 2023 storm securitization.cost securitizations.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Louisiana’s debt to capital ratio is shown in the following table. The decreaseincrease in the debt to capital ratio for Entergy Louisiana is primarily due to the $1.5 billion capital contribution received indirectly from Entergy Corporationissuances of long-term debt in March 2023.2024.
| | March 31,
2023 | | December 31,
2022 |
| March 31,
2024 | | | March 31,
2024 | | December 31,
2023 |
| Debt to capital | Debt to capital | 49.2 | % | | 53.0 | % | Debt to capital | 47.7 | % | | 44.9 | % |
| | Effect of subtracting cash | Effect of subtracting cash | (2.6 | %) | | (0.1 | %) |
| | Effect of subtracting cash | |
| | Effect of subtracting cash | | (1.9 | %) | | 0.0 | % |
| Net debt to net capital (non-GAAP) | Net debt to net capital (non-GAAP) | 46.6 | % | | 52.9 | % | Net debt to net capital (non-GAAP) | 45.8 | % | | 44.9 | % |
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.
Entergy Louisiana, 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 Louisiana’s uses and sources of capital. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31,
2023 | | December 31,
2022 | | March 31,
2022 | | December 31,
2021 |
| (In Thousands) |
| $77,354 | | ($226,114) | | $81,160 | | $14,539 |
| | | | | | | | | | | | | | | | | | | | |
March 31,
2024 | | December 31,
2023 | | March 31,
2023 | | December 31,
2022 |
| (In Thousands) |
| $218,098 | | ($156,166) | | $77,354 | | ($226,114) |
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 March 31, 2023,2024, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2023, $202024, $11.8 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 March 31, 2023, $58.52024, $38.9 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of March 31, 2023, $52.12024, $31.2 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, LLCAlternative RFP and Subsidiaries
Management's Financial Discussion and Analysis
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 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 were 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 was seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, eligible for recovery from customers. 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 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. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in December 2022. The settlement agreement contains the following key terms: $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 $59.2 million were recoverable; and Entergy Louisiana was authorized to finance $1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. In January 2023, the LPSC approved the stipulated settlement subject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a reduction of the 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 were reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to authorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to issue the bonds authorized in the LPSC’s financing order.
In March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to the damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of April 2023 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.
As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions. In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.
As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust II as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $15 million in other income to reflect the LURC’s beneficial interest in the storm trust II.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
System Resilience and Storm HardeningCertification
As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC seeking a public interest finding regarding Phase I of Entergy Louisiana’s Future Ready resilience plan and approval of a rider mechanism to recover the program’s costs.Phase I reflects the first five years of a ten-year resilience plan and includes investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement.In April 2023 a procedural schedule was established with a hearing scheduled for January 2024.
The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of electric utility infrastructure. In April 2023 the LPSC staff issued a draft rule in the rulemaking proceeding related to a requirement to file a grid resilience plan. The procedural schedule entered in the rulemaking proceeding contemplates adoption of a final rule in September 2023.
2022 Solar Portfolio and Expansion of the Geaux Green Option
In February 2023, Entergy Louisiana filed an application with the LPSC seeking certification of the Iberville/Coastal Prairie facility, which will provide 175 MW of capacity through a PPA with a third party, and the Sterlington facility, a 49 MW self-build project located near the deactivated Sterlington power plant. Entergy Louisiana is seeking to include these within the portfolio supporting the Geaux Green Option (Rider GGO) rate schedule to help fulfill customer interest in access to renewable energy. Entergy Louisiana has requested the costs of these facilities, as offset by Rider GGO revenues, be deemed eligible for recovery in accordance with the terms of the formula rate plan and fuel adjustment clause rate mechanisms that exist at the time the facilities are placed into service. The Louisiana Energy Users Group and the Alliance for Affordable Energy have intervened and discovery is underway. A procedural schedule has been established with a hearing scheduled for December 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources- Uses of Capital - 2021 Solar Certification and the Geaux Green Option” in the Form 10-K for further discussion of the Rider GGO.
Alternative RFP and Certification
In March 2023, Entergy Louisiana made the first phase of a bifurcated filing to seek approval from the LPSC for an alternative to the requests for proposals (RFP) process that would enable the acquisition of up to 3 GW of solar resources on a faster timeline than the current RFP and certification process allows. The initial phase of the filing established the need for the acquisition of additional resources and the need for an alternative to the RFP process. The second phase of the filing, which contains the details of the proposal for the alternative competitive procurement process and the information necessary to support certification, will bewas 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, Rider Geaux ZERO. Several parties have intervened, and a status conference has been set forprocedural schedule was established in May 2023 at which timewith a procedural schedule is expectedhearing scheduled for March 2024. In March 2024 the hearing in this matter was rescheduled to be established.June 2024.
Nelson Industrial Steam CompanySystem Resilience and Storm Hardening
As discussed in the Form 10-K, in December 2022, Entergy Louisiana isfiled an application with the LPSC seeking a partnerpublic 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 in the Nelson Industrial Steam Company (NISCO) partnership which owns two petroleum coke generating units. In April 2023 these generating units suspended operationsDecember 2022 application reflected the first five years of a ten-year resilience plan and included investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement. The LPSC staff and certain intervenors filed direct testimony in the MISO market,August, September, and Entergy Louisiana currently is working with the partners to wind up the NISCO partnership, which will ultimately resultOctober 2023. The LPSC staff filed cross-answering testimony in ownership of the generating units transferring to Entergy Louisiana. Entergy Louisiana is evaluating the effect of this on its financial condition, results of operations, and cash flows but at this time does not expect the effects to be material.
Entergy Louisiana, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
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. In April 2024 the LPSC approved a framework which includes an initial five-year resilience plan providing for an investment of approximately $1.9 billion and a rider to recover the associated costs. The plan is subject to specified reporting requirements and includes a performance review of the hardened assets. Entergy Louisiana is permitted to make future filings for additional investments.
Bayou Power Station
In March 2024, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Bayou Power Station, a 112 MW aggregated capacity floating natural gas power station with black-start capability in Leeville, Louisiana and an associated microgrid that would serve nearby areas, including Port Fourchon, Golden Meadow, Leeville, and Grand Isle. The current estimated cost of the Bayou Power Station is $411 million, including estimated costs of transmission interconnection and other related costs. Subject to timely approval by the LPSC and receipt of other permits and approvals, commercial operation is expected to occur by the end of 2028. No procedural schedule has been set at this time.
Nelson Industrial Steam Company
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nelson Industrial Steam Company” in the Form 10-K for information on Entergy Louisiana’s Nelson Industrial Steam Company partnership.
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 is an updateare updates to that discussion.
COVID-19 OrdersRetail Rates
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
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 AprilAugust 2023, Entergy Louisiana filed an application proposingfor approval of a regulatory blueprint necessary for it to utilize approximately $1.6 billion instrengthen 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 low interest debt to generate earnings to apply toward the reductionmodifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of the COVID-19 regulatory asset. Inrates 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 filing,for Entergy Louisiana proposed to delay repaymentobtain another extension of certain shorter-term first mortgage bondsits formula rate plan that were issuedincluded a rate reset, Entergy Louisiana would need to finance storm restoration costs untilsubmit a full cost-of-service/rate case. Entergy Louisiana’s filing supports the costs could be securitized, andneed to invest the funds that otherwise would be usedextend Entergy Louisiana’s formula rate plan with credit supportive mechanisms needed to repay those bondsfacilitate investment in the money pooldistribution, transmission, and generation functions.
A status conference was held in October 2023 at which a procedural schedule was adopted that included three technical conferences and a hearing date of August 2024. In March 2024 the parties agreed to take advantagean eight week extension of the spread between prevailing interest rates on investments in the money poolall deadlines to allow for continuation of settlement negotiations, and the interest rates on the bonds. In the event the LPSC approves Entergy Louisiana’s requested relief, subsequent filings will be required to permit the LPSC to review the COVID-19 regulatory asset. As of March 31, 2023, Entergy Louisiana had a regulatory asset of $47.8 million for costs associatedALJ issued an order with the COVID-19 pandemic.an amended procedural schedule that includes hearing dates commencing in October 2024.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
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 Bend and Waterford 3 are currently in 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. In December 2023, River Bend successfully completed the inspection of the high pressure core spray system issue and in February 2024, River Bend completed the supplemental inspection of the radiation monitor calibration issue, each in accordance with the NRC’s inspection policies for nuclear plants in Column 2. The NRC issued its inspection report on both issues in March 2024 and River Bend was returned to Column 1.
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.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the 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 Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | | | | | 2024 | |
| | | | | | | 2024 | |
| | | 2023 | | 2022 |
| | (In Thousands) |
| | | | | | 2024 | | | 2023 |
| | | | (In Thousands) | | | | | | (In Thousands) |
| OPERATING REVENUES | OPERATING REVENUES | | | |
| Electric | |
| Electric | |
| Electric | Electric | | | $1,319,752 | | | $1,237,237 | |
| Natural gas | Natural gas | | | 25,456 | | | 28,735 | |
| TOTAL | TOTAL | | | 1,345,208 | | | 1,265,972 | |
| | OPERATING EXPENSES | OPERATING EXPENSES | | | |
| OPERATING EXPENSES | |
| OPERATING EXPENSES | |
| Operation and Maintenance: | 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 | |
| Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | | 375,270 | | | 362,074 | |
| Purchased power | Purchased power | | | 194,934 | | | 176,197 | |
| Nuclear refueling outage expenses | Nuclear refueling outage expenses | | | 15,273 | | | 11,947 | |
| Other operation and maintenance | Other operation and maintenance | | | 246,371 | | | 254,001 | |
| Decommissioning | Decommissioning | | | 18,586 | | | 17,688 | |
| Taxes other than income taxes | Taxes other than income taxes | | | 63,955 | | | 61,615 | |
| Depreciation and amortization | Depreciation and amortization | | | 176,095 | | | 169,083 | |
| Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | | 73,996 | | | (20,897) | |
| TOTAL | TOTAL | | | 1,164,480 | | | 1,031,708 | |
| | OPERATING INCOME | OPERATING INCOME | | | 180,728 | | | 234,264 | |
| OPERATING INCOME | |
| OPERATING INCOME | |
| | OTHER INCOME | OTHER INCOME | | | |
| OTHER INCOME | |
| OTHER INCOME | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | | 9,061 | | | 6,726 | |
| Interest and investment income (loss) | | | 28,843 | | | (15,998) | |
| Allowance for equity funds used during construction | |
| Allowance for equity funds used during construction | |
| Interest and investment income | |
| Interest and investment income - affiliated | Interest and investment income - affiliated | | | 55,426 | | | 31,898 | |
| Miscellaneous - net | Miscellaneous - net | | | (48,085) | | | 15,517 | |
| TOTAL | TOTAL | | | 45,245 | | | 38,143 | |
| | INTEREST EXPENSE | INTEREST EXPENSE | | | |
| INTEREST EXPENSE | |
| INTEREST EXPENSE | |
| Interest expense | |
| Interest expense | |
| Interest expense | Interest expense | | | 97,171 | | | 93,784 | |
| Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | | (4,393) | | | (3,026) | |
| TOTAL | TOTAL | | | 92,778 | | | 90,758 | |
| | INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | | 133,195 | | | 181,649 | |
| INCOME BEFORE INCOME TAXES | |
| INCOME BEFORE INCOME TAXES | |
| | Income taxes | |
| Income taxes | |
| Income taxes | Income taxes | | | (110,829) | | | 30,789 | |
| | NET INCOME | NET INCOME | | | 244,024 | | | 150,860 | |
| NET INCOME | |
| NET INCOME | |
| | Net income attributable to noncontrolling interests | |
| Net income attributable to noncontrolling interests | |
| Net income attributable to noncontrolling interests | Net income attributable to noncontrolling interests | | | 554 | | | — | |
| | EARNINGS APPLICABLE TO MEMBER'S EQUITY | EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | $243,470 | | | $150,860 | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | |
| | See Notes to Financial Statements. | 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 Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | | | | |
| | | |
| | | |
| | | |
| | | | | 2023 | | 2022 |
| | | (In Thousands) |
| | | | | | | |
| Net Income | | | | | $244,024 | | | $150,860 | |
| | | | | | | |
| Other comprehensive loss | | | | | | | |
| Pension and other postretirement liabilities (net of tax benefit of $290 and $226) | | | | | (786) | | | (613) | |
| Other comprehensive loss | | | | | (786) | | | (613) | |
| | | | | | | |
| Comprehensive Income | | | | | 243,238 | | | 150,247 | |
| Net income attributable to noncontrolling interests | | | | | 554 | | | — | |
| Comprehensive Income Applicable to Member’s Equity | | | | | $242,684 | | | $150,247 | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | | | | |
| | | |
| | | | | 2024 | | 2023 |
| | | (In Thousands) |
| | | | | | | |
| Net Income | | | | | $182,723 | | | $244,024 | |
| | | | | | | |
| Other comprehensive loss | | | | | | | |
| Pension and other postretirement adjustment (net of tax benefit of $746 and $290) | | | | | (2,024) | | | (786) | |
| Other comprehensive loss | | | | | (2,024) | | | (786) | |
| | | | | | | |
| Comprehensive Income | | | | | 180,699 | | | 243,238 | |
| Net income attributable to noncontrolling interests | | | | | 795 | | | 554 | |
| Comprehensive Income Applicable to Member’s Equity | | | | | $179,904 | | | $242,684 | |
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
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| | 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 Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | |
| Net income | |
| Net income | |
| Net income | Net income | | $244,024 | | | $150,860 | |
| 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 | | 210,138 | | | 213,022 | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | (70,518) | | | 95,785 | |
| Changes in working capital: | Changes in working capital: | |
| Receivables | |
| Receivables | |
| Receivables | Receivables | | 119,726 | | | 71,237 | |
| Fuel inventory | Fuel inventory | | (4,489) | | | (46) | |
| Accounts payable | Accounts payable | | (127,171) | | | (262,042) | |
| Taxes accrued | Taxes accrued | | 11,627 | | | (42,950) | |
| Interest accrued | Interest accrued | | (12,730) | | | (857) | |
| Deferred fuel costs | Deferred fuel costs | | 173,809 | | | 498 | |
| Other working capital accounts | Other working capital accounts | | (99,650) | | | (24,241) | |
| Changes in provisions for estimated losses | Changes in provisions for estimated losses | | 2,050 | | | 2,694 | |
| Changes in other regulatory assets | Changes in other regulatory assets | | 492,055 | | | (1,336,616) | |
| Changes in other regulatory liabilities | Changes in other regulatory liabilities | | 155,296 | | | (67,164) | |
| Effect of securitization on regulatory asset | Effect of securitization on regulatory asset | | (491,150) | | | 1,338,559 | |
| | Changes in pension and other postretirement liabilities | | (3,556) | | | (11,608) | |
| Changes in pension and other postretirement funded status | |
| Other | Other | | (59,700) | | | 55,995 | |
| Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 539,761 | | | 183,126 | |
| | INVESTING ACTIVITIES | INVESTING ACTIVITIES | |
| Construction expenditures | |
| Construction expenditures | |
| Construction expenditures | Construction expenditures | | (484,581) | | | (935,692) | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 9,061 | | | 6,726 | |
| | Nuclear fuel purchases | Nuclear fuel purchases | | (72,003) | | | (55,913) | |
| | Nuclear fuel purchases | |
| | Nuclear fuel purchases | |
| Proceeds from sale of nuclear fuel | Proceeds from sale of nuclear fuel | | 16,637 | | | 26,681 | |
| Payments to storm reserve escrow account | |
| | Payments to storm reserve escrow account | | (3,037) | | | — | |
| Purchase of preferred membership interests of affiliate | |
| Purchase of preferred membership interests of affiliate | |
| Purchase of preferred membership interests of affiliate | Purchase of preferred membership interests of affiliate | | (1,457,676) | | | — | |
| Redemption of preferred membership interests of affiliate | Redemption of preferred membership interests of affiliate | | 46,643 | | | — | |
| | Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 111,263 | | | 155,269 | |
| Proceeds from nuclear decommissioning trust fund sales | |
| Proceeds from nuclear decommissioning trust fund sales | |
| Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (127,338) | | | (168,283) | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | (77,354) | | | (66,621) | |
| | Litigation proceeds from settlement agreement | | — | | | 5,695 | |
| Decrease (increase) in other investments | |
| Decrease (increase) in other investments | |
| Decrease (increase) in other investments | |
| | Other | | (18) | | | 17 | |
| Net cash flow used in investing activities | Net cash flow used in investing activities | | (2,038,403) | | | (1,032,121) | |
| | Net cash flow used in investing activities | |
| Net cash flow used in investing activities | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | |
| Proceeds from the issuance of long-term debt | |
| Proceeds from the issuance of long-term debt | |
| Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 526,764 | | | 1,506,637 | |
| Retirement of long-term debt | Retirement of long-term debt | | (540,008) | | | (401,411) | |
| Proceeds received by storm trust related to securitization | Proceeds received by storm trust related to securitization | | 1,457,676 | | | — | |
| Capital contribution from parent | Capital contribution from parent | | 1,457,676 | | | — | |
| | Changes in money pool payable - net | |
| | Change in money pool payable - net | | (226,114) | | | — | |
| Changes in money pool payable - net | |
| | Changes in money pool payable - net | |
| | Common equity distributions paid | |
| Common equity distributions paid | |
| Common equity distributions paid | Common equity distributions paid | | (160,250) | | | (125,000) | |
| | Other | Other | | 6,137 | | | 6,843 | |
| Other | |
| Other | |
| Net cash flow provided by financing activities | Net cash flow provided by financing activities | | 2,521,881 | | | 987,069 | |
| | Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | | 1,023,239 | | | 138,074 | |
| Cash and cash equivalents at beginning of period | 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 | | $1,079,852 | | | $156,647 | |
| | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | 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 (received) 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 | | $107,408 | | | $91,441 | |
| Interest - net of amount capitalized | |
| Interest - net of amount capitalized | |
| Income taxes | Income taxes | | ($6,037) | | | $— | |
| Non-cash investing activities: | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| | See Notes to Financial Statements. | 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 |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT ASSETS | CURRENT ASSETS | |
| Cash and cash equivalents: | Cash and cash equivalents: | |
| Cash and cash equivalents: | |
| Cash and cash equivalents: | |
| Cash | |
| Cash | |
| Cash | Cash | | $503 | | | $50,318 | |
| Temporary cash investments | Temporary cash investments | | 1,079,349 | | | 6,295 | |
| Total cash and cash equivalents | Total cash and cash equivalents | | 1,079,852 | | | 56,613 | |
| | Accounts receivable: | Accounts receivable: | | | | |
| Customer | |
| Customer | |
| Customer | Customer | | 252,121 | | | 339,291 | |
| Allowance for doubtful accounts | Allowance for doubtful accounts | | (5,667) | | | (7,595) | |
| Associated companies | Associated companies | | 166,204 | | | 88,896 | |
| Other | Other | | 34,003 | | | 53,241 | |
| Accrued unbilled revenues | Accrued unbilled revenues | | 183,877 | | | 199,077 | |
| Total accounts receivable | Total accounts receivable | | 630,538 | | | 672,910 | |
| | Deferred fuel costs | Deferred fuel costs | | — | | | 159,183 | |
| Fuel inventory | | 46,348 | | | 41,859 | |
| Fuel inventory - at average cost | |
| Materials and supplies - at average cost | Materials and supplies - at average cost | | 582,975 | | | 555,860 | |
| Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 82,201 | | | 53,833 | |
| | Prepayments and other | |
| Prepayments and other | |
| Prepayments and other | Prepayments and other | | 122,373 | | | 76,646 | |
| TOTAL | TOTAL | | 2,544,287 | | | 1,616,904 | |
| | OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | |
| OTHER PROPERTY AND INVESTMENTS | |
| OTHER PROPERTY AND INVESTMENTS | |
| Investment in affiliate preferred membership interests | |
| Investment in affiliate preferred membership interests | |
| Investment in affiliate preferred membership interests | Investment in affiliate preferred membership interests | | 4,574,605 | | | 3,163,572 | |
| Decommissioning trust funds | Decommissioning trust funds | | 1,879,612 | | | 1,779,090 | |
| Non-utility property - at cost (less accumulated depreciation) | |
| Storm reserve escrow account | Storm reserve escrow account | | 296,443 | | | 293,406 | |
| Non-utility property - at cost (less accumulated depreciation) | | 384,988 | | | 350,723 | |
| | Other | Other | | 15,681 | | | 19,679 | |
| TOTAL | TOTAL | | 7,151,329 | | | 5,606,470 | |
| | UTILITY PLANT | UTILITY PLANT | |
| UTILITY PLANT | |
| UTILITY PLANT | |
| Electric | Electric | | 26,752,076 | | | 27,498,136 | |
| | Electric | |
| Electric | |
| Natural gas | Natural gas | | 304,956 | | | 301,719 | |
| | Construction work in progress | Construction work in progress | | 822,944 | | | 736,969 | |
| Nuclear fuel | Nuclear fuel | | 240,301 | | | 212,941 | |
| TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 28,120,277 | | | 28,749,765 | |
| Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 10,144,497 | | | 10,087,942 | |
| UTILITY PLANT - NET | UTILITY PLANT - NET | | 17,975,780 | | | 18,661,823 | |
| | DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| Regulatory assets: | Regulatory assets: | |
| Regulatory assets: | |
| Regulatory assets: | |
| | Other regulatory assets | |
| | Other regulatory assets | |
| | Other regulatory assets | Other regulatory assets | | 1,564,124 | | | 2,056,179 | |
| Deferred fuel costs | Deferred fuel costs | | 168,122 | | | 168,122 | |
| Other | Other | | 45,231 | | | 35,057 | |
| TOTAL | TOTAL | | 1,777,477 | | | 2,259,358 | |
| | TOTAL ASSETS | TOTAL ASSETS | | $29,448,873 | | | $28,144,555 | |
| TOTAL ASSETS | |
| TOTAL ASSETS | |
| | See Notes to Financial Statements. | 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 |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT LIABILITIES | CURRENT LIABILITIES | |
| Currently maturing long-term debt | Currently maturing long-term debt | | $1,010,000 | | | $1,010,000 | |
| | Currently maturing long-term debt | |
| Currently maturing long-term debt | |
| Accounts payable: | Accounts payable: | |
| Associated companies | |
| Associated companies | |
| Associated companies | Associated companies | | 99,730 | | | 356,688 | |
| Other | Other | | 447,572 | | | 589,355 | |
| Customer deposits | Customer deposits | | 164,075 | | | 161,666 | |
| Taxes accrued | Taxes accrued | | 47,631 | | | 36,004 | |
| Interest accrued | |
| | Interest accrued | | 88,606 | | | 101,336 | |
| Deferred fuel costs | | 14,626 | | | — | |
| | Other | |
| Other | |
| Other | Other | | 68,663 | | | 72,525 | |
| TOTAL | TOTAL | | 1,940,903 | | | 2,327,574 | |
| | NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 2,296,882 | | | 2,374,878 | |
| Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 96,711 | | | 97,868 | |
| Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 332,896 | | | 337,836 | |
| | Other regulatory liabilities | Other regulatory liabilities | | 1,198,198 | | | 1,037,962 | |
| Decommissioning | Decommissioning | | 1,758,469 | | | 1,736,801 | |
| Accumulated provisions | Accumulated provisions | | 318,364 | | | 316,314 | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 386,209 | | | 389,631 | |
| Long-term debt | Long-term debt | | 9,680,832 | | | 9,688,922 | |
| | Other | Other | | 391,218 | | | 343,321 | |
| TOTAL | TOTAL | | 16,459,779 | | | 16,323,533 | |
| | Commitments and Contingencies | Commitments and Contingencies | |
| Commitments and Contingencies | |
| Commitments and Contingencies | | | |
| | EQUITY | EQUITY | |
| | Member's equity | | 10,947,211 | | | 9,406,343 | |
| EQUITY | |
| EQUITY | |
| Member’s equity | |
| Member’s equity | |
| Member’s equity | |
| Accumulated other comprehensive income | Accumulated other comprehensive income | | 54,584 | | | 55,370 | |
| Noncontrolling interests | Noncontrolling interests | | 46,396 | | | 31,735 | |
| TOTAL | TOTAL | | 11,048,191 | | | 9,493,448 | |
| | TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $29,448,873 | | | $28,144,555 | |
| TOTAL LIABILITIES AND EQUITY | |
| TOTAL LIABILITIES AND EQUITY | |
| | See Notes to Financial Statements. | 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 Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | Noncontrolling Interests | |
| | | Noncontrolling Interests | |
| | | Noncontrolling Interests | | | Member’s
Equity | | Accumulated
Other
Comprehensive
Income | | Total |
| | | (In Thousands) | | | | | (In Thousands) |
| | | Noncontrolling Interests | | Member’s
Equity | | Accumulated
Other
Comprehensive
Income | | Total |
| | (In Thousands) |
| | Balance at December 31, 2021 | | $— | | | $8,172,294 | | | $8,278 | | | $8,180,572 | |
| | Net income | | — | | | 150,860 | | | — | | | 150,860 | |
| Other comprehensive loss | | — | | | — | | | (613) | | | (613) | |
| | Distributions declared on common equity | | — | | | (125,000) | | | — | | | (125,000) | |
| | Other | | — | | | (13) | | | — | | | (13) | |
| Balance at March 31, 2022 | | — | | | 8,198,141 | | | 7,665 | | | 8,205,806 | |
| | | | Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| 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 | |
| Net income | |
| Net income | |
| Other comprehensive loss | Other comprehensive loss | | — | | | — | | | (786) | | | (786) | |
| | Contributions from parent | | — | | | 1,457,676 | | | — | | | 1,457,676 | |
| Capital contribution from parent | |
| 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 | |
| | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Net income | |
| Net income | |
| Net income | |
| Other comprehensive loss | |
| | Non-cash contribution from parent | |
| Non-cash contribution from parent | |
| Non-cash contribution from parent | |
| Common equity distributions | |
| | Distributions to LURC | |
| | Distributions to LURC | |
| | Distributions to LURC | |
| Other | |
| Balance at March 31, 2024 | |
| | | See Notes to Financial Statements. | 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 Income
Net income decreased $9.4increased $6.5 million primarily due to lower volume/weather, higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense,retail electric price, partially offset by higher retail electric price.lower volume/weather.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $349.0412.4 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 65.5 (2.1) | |
| Retail electric price | 12.18.8 | |
| Volume/weather | (14.2)(4.2) | |
| |
20232024 operating revenues | $412.4414.9 | |
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 increasesan increase in formula rate plan rates effective April 2022 and August 2022.2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filings.filing.
The volume/weather variance is primarily due to a decrease in commercial and industrial usage and a decrease in weather-adjusted residential usage, partially offset by the effect of lessmore favorable weather on residential sales. The decrease in industrial usage is primarily due to a decrease in demand from small industrial customers and a decrease in demand from large industrial customers, primarily in the wood products industry.
Entergy Mississippi, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Total electric energy sales for Entergy Mississippi for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 1,089 | | | 1,295 | | | (16) | |
| Commercial | Commercial | 1,015 | | | 1,021 | | | (1) | |
| Industrial | Industrial | 567 | | | 561 | | | 1 | |
| Governmental | Governmental | 92 | | | 96 | | | (4) | |
| Total retail | Total retail | 2,763 | | | 2,973 | | | (7) | |
| Sales for resale: | Sales for resale: | |
| Non-associated companies | Non-associated companies | 1,564 | | | 535 | | | 192 | |
| Non-associated companies | |
| Non-associated companies | |
| Total | Total | 4,327 | | | 3,508 | | | 23 | |
See Note 1312 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
•an increase of $3.3 million in non-nuclear generation expenses primarily due to a higher scope of work performed during plant outages in 2023 as compared to prior year;
•an increase of $1.6 million in power delivery expenses primarily due to higher reliability costs; and
•several individually insignificant items.
The increase was partially offset by:
•a decrease of $2 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation expense in the first quarter 2023, lower healthcare claims activity in 2023, and a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rates used to value the benefit liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs; and
•a decrease of $1.7 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Interest expense increased primarily due to borrowingsthe issuance of $300 million of 5.0% Series mortgage bonds in May 2023, partially offset by the repayment of a $150 million unsecured term loan in 2023, of which $50 million was repaid in May 2023 and $100 million was repaid in 2023 on Entergy Mississippi’s credit facility.
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 $1.5 million in first quarter 2023 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.December 2023.
Income Taxes
The effective income tax rates were 22.2% for the first quarter 2024 and 24.4% for the first quarter 2023 and 20.2% for the first quarter of 2022.2023. The differences in the effective income tax rates for the first quarter 20232024 and the first quarter 20222023 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.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for a 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 three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| 2024 | | | 2024 | | 2023 |
| (In Thousands) | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | 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): | |
| Net cash provided by (used in): | |
| Operating activities | |
| Operating activities | |
| Operating activities | Operating activities | 36,861 | | | (4,340) | |
| Investing activities | Investing activities | (111,842) | | | (61,154) | |
| Financing activities | Financing activities | 94,154 | | | 17,895 | |
| Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | 19,173 | | | (47,599) | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $36,152 | | | $28 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Operating Activities
Entergy Mississippi’sNet cash flow provided by operating activities provided $36.9decreased $2.5 million of cash for the three months ended March 31, 20232024 compared to using $4.3 million of cash for the three months ended March 31, 2022. The increase was2023 primarily due to higher collections from customers, partially offset by higher fuel costs in 2023 andthe timing of payments to vendors.vendors and the timing of recovery of fuel and purchased power costs, substantially offset by higher collections from customers. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $50.7$0.6 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:to money pool activity, substantially offset by:
•an increasea decrease of $19.3$7.2 million in distribution construction expenditures primarily due to higherlower capital expenditures for storm restoration in 2023 and a higher scope of work performed in 2023 as compared to 2022;2024;
•an increasea decrease of $16.6$6.7 million in facilities construction expenditures primarily due to the construction of a new transmission office in 2023; and
•a decrease of $4.8 million in transmission construction expenditures primarily due to a higher scope of work performeddecreased spending on various transmission projects in 2023 as compared to 2022; and
•money pool activity.2024.
Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased $25.4 million for the three months ended March 31, 2023 compared to decreasing by $40.5 million for the three months ended March 31, 2022.2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing arrangement designedand lending arrangements, including to reduce the Utility’s subsidiaries’Registrant Subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $76.3decreased $20.6 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to borrowingsmoney pool activity and a decrease of $100$15.5 million in 2023 on Entergy Mississippi’s credit facility,prepaid deposits related to contributions-in-aid-of-construction primarily for customer and generator interconnection agreements, partially offset by money pool activity.$12.5 million in common equity distributions paid in first quarter 2023 in order to maintain Entergy Mississippi’s capital structure.
Entergy Mississippi, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Decreases in Entergy Mississippi’s payable to the money pool are a sourceuse of cash flow, and Entergy Mississippi’s payable to the money pool increased by $22.4decreased $17.5 million for the three months ended March 31, 2022.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.2024.
Capital Structure
Entergy Mississippi’s debt to capital ratio is shown in the following table.
| | March 31, 2023 | | December 31,
2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
| Debt to capital | Debt to capital | 54.4 | % | | 53.4 | % | Debt to capital | 51.3 | % | | 50.5 | % |
| Effect of subtracting cash | Effect of subtracting cash | (0.4 | %) | | (0.2 | %) | Effect of subtracting cash | (0.1 | %) | | (0.1 | %) |
| Net debt to net capital (non-GAAP) | Net debt to net capital (non-GAAP) | 54.0 | % | | 53.2 | % | Net debt to net capital (non-GAAP) | 51.2 | % | | 50.4 | % |
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 uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31,
2022 | | March 31, 2022 | | December 31,
2021 |
| (In Thousands) |
| $1,498 | | $26,879 | | ($22,386) | | $40,456 |
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | | March 31, 2023 | | December 31, 2022 |
| (In Thousands) |
| ($56,220) | | ($73,769) | | $1,498 | | $26,879 |
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 July 2023. As of March 31, 2023, 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 March 31, 2023, there was2024, $100 million in cashcash borrowings were 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. MISO and for other purposes. As of March 31, 2023, $6.72024, $17.4 million in MISO letters of credit and $9.2$10.2 million in non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Sunflower Solar
As discussed in the Form 10-K, in April 2020 the MPSC issued an order approving certification98
Entergy Mississippi, LLC and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 the final payment of $30.4 million for acquisition of the facility was made. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi’s investment in the Sunflower Solar facility.Subsidiaries
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 is an updateare updates to that discussion.
Retail Rates
20232024 Formula Rate Plan Filing
In March 2023,2024, Entergy Mississippi submitted its formula rate plan 20232024 test year filing and 20222023 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 20222023 calendar year to be belowwithin the formula rate plan bandwidth and projected earned return for the 20232024 calendar year to be below the formula rate plan bandwidth.The 20232024 test year filing showsshowed a $39.8$63.4 million rate increase iswas necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 6.67%7.10%, within the formula rate plan bandwidth.The 20222023 look-back filing comparescompared actual 20222023 results to the approved benchmark return on rate base and reflects the need for a $19.8 million temporary increasereflected no change in formula rate plan revenues. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $32.6 million interim rate increase, reflecting a cap equal to 2% of 2023 retail revenues, effective April 2024. A final order is expected in second quarter 2024, with the resulting rates, including amounts above the refund2% cap of retail revenues, effective July 2024.
In December 2014 the MPSC ordered Entergy Mississippi to file an updated depreciation study at least once every four years. Pursuant to this order and Entergy Mississippi’s filing cycle, Entergy Mississippi would have filed an updated depreciation report with its formula rate plan filing in 2023. However, in July 2022 the MPSC directed Entergy Mississippi to file its next depreciation study in connection with its 2024 formula rate plan filing notwithstanding the MPSC’s prior order. Accordingly, Entergy Mississippi filed a depreciation study in February 2024. The study showed a need for an increase in annual depreciation expense of $55.2 million. The calculated increase in annual depreciation expense was excluded from Entergy Mississippi’s 2024 formula rate plan revenue increase request as the $63.4 million rate increase determined in the formula rate plan 2024 test year filing was just lower than the cap on changes to formula rate plan revenues, set at 4% of retail revenues. Entergy Mississippi expects to engage in further discussions with the MPSC regarding the timing of implementing changes to depreciation rates and for recovery of the depreciation expense.
Storm Cost Recovery Filings with Retail Regulators
As discussed in the Form 10-K, Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million.
In December 2023, Entergy Mississippi filed a Notice of Storm Escrow Disbursement and Request for Interim Relief notifying the MPSC that Entergy Mississippi had requested disbursement of approximately $34.5 million of storm escrow funds from its restricted storm escrow account. The filing also requested authorization from the MPSC, on a temporary basis, that the $34.5 million of storm escrow funds be credited to Entergy Mississippi’s storm damage provision, pending the MPSC’s review of Entergy Mississippi’s storm-related costs, and that Entergy Mississippi continue to bill its monthly storm damage provision without suspension in the event the storm damage provision balance exceeds $15 million, in anticipation of a $1.3subsequent filing by Entergy Mississippi in this proceeding. The storm damage reserve exceeded $15 million over-recovery resulting fromupon receipt of the demand-side management costs true-up in 2022.storm escrow funds. Because the MPSC had not entered an order on Entergy Mississippi’s filing on the requested relief to continue billing this provision, Entergy Mississippi suspended billing the monthly storm damage provision effective with February 2024 bills.
In fourth
Entergy Mississippi, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
quarter 2022,In March 2024, Entergy Mississippi recordedmade a regulatory assetcombined dual filing which included a Notice of $18.2Intent to Make Routine Change in Rates and Schedules and a Motion for Determination relating to the above-described Notice of Storm Escrow Disbursement. The Notice of Intent proposed a new storm damage mitigation and restoration rider to supersede both the current storm damage rate schedule and the vegetation management rider schedule, in which the collection of both expenses would be combined. The proposal requests that the MPSC authorize Entergy Mississippi to collect a storm damage provision of $5.2 million in connection with the look-back featureper month. Furthermore, if Entergy Mississippi’s accumulated storm damage provision balance exceeds $70 million, collection of the formula rate plan to reflectstorm damage provision would cease until such time that the 2022 estimated earned return was belowaccumulated storm damage provision becomes less than $60 million. The new storm damage mitigation and restoration rider will go into effect July 2024 if the formula rate plan bandwidth.In accordance withnotice is not suspended by the provisionsMPSC. Should the proposal not go into effect and the collection of the formula rate plan,both expenses not be combined, Entergy Mississippi implementedproposed to collect a $27.9storm damage provision of $3.5 million interim rate increase, reflecting a cap equalper month, in which the storm damage reserve balance is not to 2% of 2022 retail revenues, effective in April 2023.exceed $50 million or become less than $40 million.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
| | | | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | |
| | | | |
| | 2023 | | 2022 | | | | |
| | (In Thousands) | | |
| OPERATING REVENUES | | | | | | | | |
| Electric | | $412,428 | | | $349,029 | | | | | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 161,285 | | | 67,277 | | | | | |
| Purchased power | | 63,814 | | | 61,212 | | | | | |
| Other operation and maintenance | | 69,818 | | | 65,811 | | | | | |
| | | | | | | | |
| Taxes other than income taxes | | 35,734 | | | 32,730 | | | | | |
| Depreciation and amortization | | 64,029 | | | 60,084 | | | | | |
| Other regulatory charges (credits) - net | | (32,843) | | | 3,907 | | | | | |
| TOTAL | | 361,837 | | | 291,021 | | | | | |
| | | | | | | | |
| OPERATING INCOME | | 50,591 | | | 58,008 | | | | | |
| | | | | | | | |
| OTHER INCOME (DEDUCTIONS) | | | | | | | | |
| Allowance for equity funds used during construction | | 1,884 | | | 1,078 | | | | | |
| Interest and investment income | | 464 | | | 64 | | | | | |
| Miscellaneous - net | | (2,083) | | | (1,153) | | | | | |
| TOTAL | | 265 | | | (11) | | | | | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 23,944 | | | 20,434 | | | | | |
| Allowance for borrowed funds used during construction | | (783) | | | (465) | | | | | |
| TOTAL | | 23,161 | | | 19,969 | | | | | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 27,695 | | | 38,028 | | | | | |
| | | | | | | | |
| Income taxes | | 6,755 | | | 7,673 | | | | | |
| | | | | | | | |
| NET INCOME | | 20,940 | | | 30,355 | | | | | |
| | | | | | | | |
| Net loss attributable to noncontrolling interest | | (2,141) | | | — | | | | | |
| | | | | | | | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $23,081 | | | $30,355 | | | | | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | |
| | | | |
| | | | | | 2024 | | 2023 |
| | | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | | | | | | $414,856 | | | $412,428 | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 117,850 | | | 161,285 | |
| Purchased power | | | | | | 67,655 | | | 63,814 | |
| Other operation and maintenance | | | | | | 71,206 | | | 69,818 | |
| Taxes other than income taxes | | | | | | 38,310 | | | 35,734 | |
| Depreciation and amortization | | | | | | 65,917 | | | 64,029 | |
| Other regulatory charges (credits) - net | | | | | | (6,491) | | | (32,843) | |
| TOTAL | | | | | | 354,447 | | | 361,837 | |
| | | | | | | | |
| OPERATING INCOME | | | | | | 60,409 | | | 50,591 | |
| | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | | | | | 1,918 | | | 1,884 | |
| Interest and investment income | | | | | | 193 | | | 464 | |
| Miscellaneous - net | | | | | | (1,621) | | | (2,083) | |
| TOTAL | | | | | | 490 | | | 265 | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | | | | | 26,397 | | | 23,944 | |
| Allowance for borrowed funds used during construction | | | | | | (747) | | | (783) | |
| TOTAL | | | | | | 25,650 | | | 23,161 | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | | | | 35,249 | | | 27,695 | |
| | | | | | | | |
| Income taxes | | | | | | 7,817 | | | 6,755 | |
| | | | | | | | |
| NET INCOME | | | | | | 27,432 | | | 20,940 | |
| | | | | | | | |
| Net loss attributable to noncontrolling interest | | | | | | (2,302) | | | (2,141) | |
| | | | | | | | |
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | | | | $29,734 | | | $23,081 | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
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| | 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 Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | |
| Net income | Net income | | $20,940 | | | $30,355 | |
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | |
| Net income | |
| Net income | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | |
| Depreciation and amortization | |
| Depreciation and amortization | |
| Depreciation and amortization | Depreciation and amortization | | 64,029 | | | 60,084 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 8,142 | | | 3,979 | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | |
| Receivables | |
| Receivables | |
| Receivables | Receivables | | 36,802 | | | (6,379) | |
| Fuel inventory | Fuel inventory | | (3,014) | | | 23 | |
| Accounts payable | Accounts payable | | (33,508) | | | 989 | |
| Taxes accrued | Taxes accrued | | (80,166) | | | (63,785) | |
| Interest accrued | Interest accrued | | 11,078 | | | 10,613 | |
| Deferred fuel costs | Deferred fuel costs | | 67,005 | | | (24,076) | |
| Other working capital accounts | Other working capital accounts | | (9,515) | | | (46,494) | |
| Provisions for estimated losses | Provisions for estimated losses | | 1,900 | | | (179) | |
| Other regulatory assets | Other regulatory assets | | 1,020 | | | 16,301 | |
| Other regulatory liabilities | Other regulatory liabilities | | (44,487) | | | 21,689 | |
| Pension and other postretirement liabilities | | (4,062) | | | (3,906) | |
| Pension and other postretirement funded status | |
| Other assets and liabilities | Other assets and liabilities | | 697 | | | (3,554) | |
| Net cash flow provided by (used in) operating activities | | 36,861 | | | (4,340) | |
| Net cash flow provided by operating activities | |
| | INVESTING ACTIVITIES | INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| Construction expenditures | |
| Construction expenditures | |
| Construction expenditures | Construction expenditures | | (138,760) | | | (102,686) | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 1,884 | | | 1,078 | |
| | Changes in money pool receivable - net | Changes in money pool receivable - net | | 25,381 | | | 40,456 | |
| | Other | | (347) | | | (2) | |
| Increase in other investments | |
| Increase in other investments | |
| Increase in other investments | |
| Net cash flow used in investing activities | Net cash flow used in investing activities | | (111,842) | | | (61,154) | |
| | FINANCING ACTIVITIES | FINANCING ACTIVITIES | |
| FINANCING ACTIVITIES | |
| FINANCING ACTIVITIES | |
| Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 99,916 | | | — | |
| | Proceeds from the issuance of long-term debt | |
| Proceeds from the issuance of long-term debt | |
| | Changes in money pool payable - net | Changes in money pool payable - net | | — | | | 22,386 | |
| | Changes in money pool payable - net | |
| | Changes in money pool payable - net | |
| Common equity distributions paid | Common equity distributions paid | | (12,500) | | | — | |
| | Other | Other | | 6,738 | | | (4,491) | |
| Net cash flow provided by financing activities | Net cash flow provided by financing activities | | 94,154 | | | 17,895 | |
| | Net increase (decrease) in cash and cash equivalents | |
| Net increase (decrease) in cash and cash equivalents | |
| Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | | 19,173 | | | (47,599) | |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | 16,979 | | | 47,627 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $36,152 | | | $28 | |
| | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| Cash paid during the period for: | |
| 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 | | $12,211 | | | $9,160 | |
| | Interest - net of amount capitalized | |
| Interest - net of amount capitalized | |
| Income taxes | |
| Noncash investing activities: | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| | See Notes to Financial Statements. | 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 |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | 2023 | | 2022 | | | 2024 | | 2023 |
| | | | (In Thousands) | | | (In Thousands) |
| CURRENT ASSETS | CURRENT ASSETS | | | | | CURRENT ASSETS | | |
| Cash and cash equivalents: | Cash and cash equivalents: | | | | | Cash and cash equivalents: | | |
| Cash | Cash | | $888 | | | $26 | |
| Temporary cash investments | Temporary cash investments | | 35,264 | | | 16,953 | |
| Total cash and cash equivalents | Total cash and cash equivalents | | 36,152 | | | 16,979 | |
| Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | |
| Customer | Customer | | 100,813 | | | 99,504 | |
| Allowance for doubtful accounts | Allowance for doubtful accounts | | (2,235) | | | (2,472) | |
| Associated companies | Associated companies | | 4,226 | | | 37,673 | |
| Other | Other | | 17,245 | | | 34,564 | |
| Accrued unbilled revenues | Accrued unbilled revenues | | 60,510 | | | 73,473 | |
| Total accounts receivable | Total accounts receivable | | 180,559 | | | 242,742 | |
| Deferred fuel costs | | 76,206 | | | 143,211 | |
| | Fuel inventory - at average cost | Fuel inventory - at average cost | | 18,562 | | | 15,548 | |
| Fuel inventory - at average cost | |
| Fuel inventory - at average cost | |
| Materials and supplies - at average cost | Materials and supplies - at average cost | | 91,576 | | | 84,346 | |
| | Prepayments and other | Prepayments and other | | 10,409 | | | 9,603 | |
| TOTAL | TOTAL | | 413,464 | | | 512,429 | |
| | OTHER PROPERTY AND INVESTMENTS | 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) | | 4,508 | | | 4,512 | |
| Storm reserve escrow account | Storm reserve escrow account | | 33,896 | | | 33,549 | |
| Other | | 911 | | | 910 | |
| | TOTAL | |
| TOTAL | |
| TOTAL | TOTAL | | 39,315 | | | 38,971 | |
| | UTILITY PLANT | UTILITY PLANT | | | | |
| UTILITY PLANT | |
| UTILITY PLANT | | | |
| Electric | Electric | | 7,143,328 | | | 7,079,849 | |
| | Construction work in progress | Construction work in progress | | 218,611 | | | 170,191 | |
| TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 7,361,939 | | | 7,250,040 | |
| Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 2,309,803 | | | 2,264,786 | |
| UTILITY PLANT - NET | UTILITY PLANT - NET | | 5,052,136 | | | 4,985,254 | |
| | DEFERRED DEBITS AND OTHER ASSETS | 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 | | 518,440 | | | 519,460 | |
| Other | Other | | 26,109 | | | 22,650 | |
| TOTAL | TOTAL | | 544,549 | | | 542,110 | |
| | TOTAL ASSETS | TOTAL ASSETS | | $6,049,464 | | | $6,078,764 | |
| TOTAL ASSETS | |
| TOTAL ASSETS | |
| | See Notes to Financial Statements. | 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 |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | 2023 | | 2022 | | | 2024 | | 2023 |
| | | | (In Thousands) | | | (In Thousands) |
| CURRENT LIABILITIES | CURRENT LIABILITIES | | | | | CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | Currently maturing long-term debt | | $400,000 | | | $400,000 | |
| | Accounts payable: | Accounts payable: | | | | | Accounts payable: | | |
| Associated companies | Associated companies | | 61,557 | | | 60,532 | |
| Other | Other | | 139,804 | | | 176,162 | |
| Customer deposits | Customer deposits | | 90,130 | | | 89,668 | |
| Taxes accrued | Taxes accrued | | 44,739 | | | 124,905 | |
| | Interest accrued | Interest accrued | | 29,287 | | | 18,208 | |
| | Deferred fuel costs | |
| Other | Other | | 36,741 | | | 38,908 | |
| TOTAL | TOTAL | | 802,258 | | | 908,383 | |
| | NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | | | |
| NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | | | |
| Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 788,820 | | | 780,030 | |
| Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 14,492 | | | 14,591 | |
| | Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 199,383 | | | 202,058 | |
| | Other regulatory liabilities | Other regulatory liabilities | | 38,052 | | | 79,865 | |
| Asset retirement cost liabilities | Asset retirement cost liabilities | | 7,903 | | | 7,797 | |
| Accumulated provisions | Accumulated provisions | | 39,409 | | | 37,509 | |
| Pension and other postretirement liabilities | | 19,573 | | | 23,742 | |
| | Long-term debt | |
| Long-term debt | |
| Long-term debt | Long-term debt | | 2,031,365 | | | 1,931,096 | |
| Other | Other | | 59,232 | | | 53,156 | |
| TOTAL | TOTAL | | 3,198,229 | | | 3,129,844 | |
| | Commitments and Contingencies | Commitments and Contingencies | | | | |
| Commitments and Contingencies | |
| Commitments and Contingencies | | | |
| | | EQUITY | |
| EQUITY | |
| EQUITY | EQUITY | | | | | | |
| Member's equity | Member's equity | | 2,047,771 | | | 2,037,190 | |
| Noncontrolling interest | Noncontrolling interest | | 1,206 | | | 3,347 | |
| TOTAL | TOTAL | | 2,048,977 | | | 2,040,537 | |
| | TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $6,049,464 | | | $6,078,764 | |
| TOTAL LIABILITIES AND EQUITY | |
| TOTAL LIABILITIES AND EQUITY | |
| | See Notes to Financial Statements. | 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 Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | Noncontrolling Interest | | Member's Equity | | Total |
| | | | (In Thousands) | | |
| | Balance at December 31, 2021 | $— | | | $1,839,568 | | | $1,839,568 | |
| | Net income | — | | | 30,355 | | | 30,355 | |
| | Balance at March 31, 2022 | $— | | | $1,869,923 | | | $1,869,923 | |
| | | | Noncontrolling Interest | | Member's Equity | | Total |
| | Balance at December 31, 2022 | Balance at December 31, 2022 | $3,347 | | | $2,037,190 | | | $2,040,537 | |
| | Balance at December 31, 2022 | |
| | Balance at December 31, 2022 | |
| | Net income (loss) | |
| Net income (loss) | |
| 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 | |
| | | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Net income (loss) | |
| Net income (loss) | |
| Net income (loss) | |
| | Balance at March 31, 2024 | |
| Balance at March 31, 2024 | |
| Balance at March 31, 2024 | |
| | See Notes to Financial Statements. | 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
NetEntergy New Orleans experienced a net loss of $49.0 million for the three months ended March 31, 2024 compared to net income decreased $5of $10.1 million for the three months ended March 31, 2023 primarily due to lower volume/weather, higher taxes other than income taxes,a $78.5 million ($57.4 million net-of-tax) regulatory charge, recorded in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and a higher effectivethe City Council in April 2024 for additional sharing with customers of income tax rate, partially offset by higher retail electric pricebenefits from the resolution of the 2016-2018 IRS audit. See Note 10 to the financial statements herein for discussion of the April 2024 settlement in principle and higher other income.Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $198.3208.8 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 11.3 (14.2) | |
| Volume/weather | (3.1) | |
| Retail electric price | 4.01.5 | |
Volume/weather | (4.8) | |
20232024 operating revenues | $208.8193.0 | |
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 a decrease in commercial and industrial usage, partially offset by the effect of more favorable weather on residential sales. The decrease in industrial usage is primarily due to a decrease in demand from existing customers.
The retail electric price variance is primarily due to aan increase in formula rate increaseplan rates effective September 20222023 in accordance with the terms of the 20222023 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 the effect of less favorable weather on residential sales, partially offset by increased commercial usage.
Entergy New Orleans, LLC and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Total electric energy sales for Entergy New Orleans for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 453 | | | 538 | | | (16) | |
| Commercial | Commercial | 487 | | | 465 | | | 5 | |
| Industrial | Industrial | 99 | | | 94 | | | 5 | |
| Governmental | Governmental | 182 | | | 178 | | | 2 | |
| Total retail | Total retail | 1,221 | | | 1,275 | | | (4) | |
| Sales for resale: | Sales for resale: | |
| Non-associated companies | Non-associated companies | 1,043 | | | 716 | | | 46 | |
| Non-associated companies | |
| Non-associated companies | |
| Total | Total | 2,264 | | | 1,991 | | | 14 | |
See Note 1312 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Taxes other than income taxesOther operation and maintenance expenses increased primarily due to:
•an increase of $1.3 million in loss provisions;
•an increase of $1.3 million in power delivery expenses primarily due to higher reliability costs and higher readiness and response costs;
•an increase of $1.1 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•an increase of $1.0 million in bad debt expense;
•an increase of $0.9 million due to higher gas infrastructure replacement deferrals in 2023;
•an increase of $0.7 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $0.7 million in energy efficiency expenses primarily due to higher energy efficiency costs, partially offset by the timing of recovery from customers; and
•several individually insignificant items.
Depreciation and amortization expenses increased primarily due to increasesadditions to plant in local franchise taxes.service.
Other regulatory charges (credits) - net includes a regulatory charge of $78.5 million, recorded in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS audit.See Note 10 to the financial statements herein for discussion of the April 2024 settlement in principle and Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
Other income increaseddecreased primarily due to higherlower interest earned on money pool investments.
Income Taxes
The effective income tax rate was 32%28.3% for the first quarter 2024. The difference in the effective income tax rate for the first quarter 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes.
Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
The effective income tax rate was 32.0% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 17.8% for first quarter 2022. The difference in the effective income tax rate for first quarter 2022 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Planned Sale of Gas Distribution Business
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Planned Sale of Gas Distribution Businesses” in the Form 10-K for a discussion of the Inflation Reduction Actplanned 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 three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| 2024 | | | 2024 | | 2023 |
| (In Thousands) | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | 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): | |
| Net cash provided by (used in): | |
| Operating activities | |
| Operating activities | |
| Operating activities | Operating activities | 71,578 | | | 41,811 | |
| Investing activities | Investing activities | 85,156 | | | (53,401) | |
| Financing activities | Financing activities | 14,688 | | | (107) | |
| Net increase (decrease) in cash and cash equivalents | 171,422 | | | (11,697) | |
| Net increase in cash and cash equivalents | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $175,886 | | | $31,165 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Operating Activities
Net cash flow provided by operating activities increased $29.8decreased $62.4 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to:
•to the refund of $34 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC.FERC and lower collections from customers. The decrease was partially offset by the timing of payments to vendors. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refundsthe refund and the related proceedings;
•the timing of recovery of fuel and purchased power costs; and
•a decrease of $11.8 million in storm spending primarily due to Hurricane Ida storm restoration efforts in 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” and Note 2 to the financial statements, each in the Form 10-K, for a discussion of storm restoration efforts.proceedings.
The increase was partially offset by higher receipts from associated companies in 2022.
Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Investing Activities
Entergy New Orleans’s investing activities providedused $36.9 million of cash for the three months ended March 31, 2024 compared to providing $85.2 million of cash for the three months ended March 31, 2023 compared to using $53.4 million of cash for the three months ended March 31, 2022 primarily due to the following activity:to:
•money pool activity;
•a decrease of $29.2$8.7 million in transmission construction expenditures primarily due to higher spending in 2023 related to Entergy New Orleans’s construction of the New Orleans Sewerage and Water Board Sullivan substation; and
•a decrease of $4.2 million in distribution construction expenditures primarily due to a lower capital expenditures for Hurricane Ida storm restoration efforts,scope of work on projects in 2024 as compared to 2023, partially offset by higher spending on the reliability and infrastructure of Entergy New Orleans’s distribution system as compared to the same period in prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” and Note 2 to the financial statements, each in the Form 10-K,capital expenditures for a discussion of storm restoration efforts; and
•an increase of $6.2 million in transmission construction expenditures primarily due to a higher scope of work performed in 2023.2024.
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 $134.7 million for the three months ended March 31,
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
2023 compared to decreasing by $18.3 million for the three months ended March 31, 2022. 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing arrangementand lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Utility subsidiaries’ need forRegistrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
Entergy New Orleans’sNet cash flow provided by financing activities provided $14.7increased $13.1 million of cash for the three months ended March 31, 20232024 compared to using $0.1 million of cash for the three months ended March 31, 20222023 primarily due to money pool activity, partially offset by a $15 million advance received in 2023 related to Entergy New Orleans’s construction of athe New Orleans Sewerage and Water Board Sullivan substation.
Increases in Entergy New Orleans’s payable to the money pool are a source of cash flow, and Entergy New Orleans’s payable to the money pool increased by $28.1 million for the three months ended March 31, 2024.
Capital Structure
Entergy New Orleans’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy New Orleans is primarily due to net loss in 2024.
| | March 31, 2023 | | December 31,
2022 |
| March 31,
2024 | | | March 31,
2024 | | December 31,
2023 |
| Debt to capital | Debt to capital | 52.2 | % | | 52.6 | % | Debt to capital | 47.4 | % | | 45.8 | % |
| Effect of excluding securitization bonds | Effect of excluding securitization bonds | (0.5 | %) | | (0.6 | %) | Effect of excluding securitization bonds | (0.2 | %) | | (0.2 | %) |
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 51.7 | % | | 52.0 | % | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 47.2 | % | | 45.6 | % |
| Effect of subtracting cash | Effect of subtracting cash | (6.6 | %) | | (0.1 | %) | Effect of subtracting cash | — | % | | — | % |
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 45.1 | % | | 51.9 | % | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 47.2 | % | | 45.6 | % |
(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, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. FollowingThe following are updates to the information provided in the Form 10-K.
Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31,
2022 | | March 31, 2022 | | December 31,
2021 |
| (In Thousands) |
| $12,584 | | $147,254 | | $18,122 | | $36,410 |
| | | | | | | | | | | | | | | | | | | | |
March 31,
2024 | | December 31,
2023 | | March 31,
2023 | | December 31,
2022 |
| (In Thousands) |
| ($49,776) | | ($21,651) | | $12,584 | | $147,254 |
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in June 2024. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of March 31, 2023,2024, 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 March 31, 2023,2024, a $1$0.5 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
System Resilience and Storm Hardening
As discussed in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. In July 2022, Entergy New Orleans filed with the City Council a response identifying a preliminary 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 in April 2023 containing a narrowed list of proposed hardening projects, with final comments on that filing due July 2023.projects. 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 February 2024 the City Council approved a resolution authorizing Entergy New Orleans to implement a resilience project to be partially funded by $55 million of matching funding through the DOE’s Grid Resilience and Innovation Partnerships program. The resolution also requires Entergy New Orleans to submit, no later than July 2024, a revised resilience plan consisting of projects over a three-year period. In March 2024, Entergy New Orleans filed the requested three-year resilience plan, which includes $168 million in hardening projects. The three-year resilience plan is in addition to the previously authorized resilience project to be partially funded by the DOE’s Grid Resilience and Innovation Partnerships program. The filing requests an expedited technical conference in May 2024, which request is pending.
Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.
Retail Rates
20232024 Formula Rate Plan Filing
In April 2023,2024, Entergy New Orleans submitted to the City Council its formula rate plan 20222023 test year filing. The 2022Without the requested rate change in 2024, the 2023 test year evaluation report produced an electric earned return on equity for each of 7.34%8.66% and a gas earned return on equity of 3.52%5.87% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $25.6$12.6 million rate increase based on the formula set in the 2018 rate case, which was approved again by the City Council in the 2018 rate case.2023. The formula results in an increase in authorized electric revenues of $17.4$7.0 million and an increase in authorized gas revenues of $8.2$5.6 million. Entergy New Orleans also seeks to commence collecting $3.4 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. The filing is subject to review by the City Council and other parties over a 75-day review period, followed by a 25-day period to resolve any disputes among the parties. Resulting rates will be effective with the first billing cycle of September 20232024 pursuant to the formula rate plan tariff. For any disputed rate adjustments, however, the City Council would set a procedural schedule that would extend the process for City Council approval of disputed rate adjustments.
Reliability InvestigationRenewable Portfolio Standard Rulemaking
As discussed in the Form 10-K, in April 2018May 2021 the City Council adopted a resolution directingestablished the Renewable and Clean Portfolio Standard. In May 2023, Entergy New Orleans submitted its compliance demonstration report to demonstrate that it has been prudentthe City Council for the 2022 compliance year, which describes and demonstrates Entergy New Orleans’s compliance with the Renewable and Clean Portfolio Standard in the management2022 and maintenance of the reliability of its distribution system.satisfies certain informational requirements. Entergy New Orleans responded to this resolution in June 2018 and filed a revised reliability plan withrequested, among other things, that the City Council in July 2018. Thedetermine 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 alsoapprove a proposal to recover costs associated with 2022 compliance. In April 2024 the City Council approved a resolution that opened a prudence investigation into whetherfinding Entergy New Orleans was imprudent for not acting sooner to address outages in New
Entergy New Orleans, LLCcompliance with the 2022 requirements and Subsidiaries
Management's Financial Discussion and Analysis
Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation 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 prudentlyexceed the customer protection cost cap, as well as approving Entergy New Orleans’s proposal to recover costs.
Income Tax Audits
As discussed in maintaining and improvingNote 3 to the financial statements in the Form 10-K, in November 2023 the IRS completed its distribution system reliability in recentexamination of the 2016 through 2018 tax years and recommending thatissued a financial penaltyRevenue Agent Report for each federal filer under audit. Based on prior regulatory agreements and general rate-making principles, in the range of $1.5 million to $2 million should be assessed.fourth quarter 2023 Entergy New Orleans disagreed with the recommendationrecorded a regulatory liability and submitted rebuttal testimonyassociated regulatory charge of $60 million ($44 million net-of-tax). In April 2024, Entergy New Orleans and rebuttal comments in June 2019. In November 2019 the City Council passedentered into a resolution that penalizedsettlement in principle whereby Entergy New Orleans $1agreed to share with customers $138 million for alleged imprudenceof income tax benefits from the resolution of the 2016–2018 IRS audit. Based on this settlement in the maintenance of its distribution system. In December 2019,principle, in first quarter 2024 Entergy New Orleans filed suitincreased the associated regulatory liability from $60 million to $138 million and recorded a corresponding $78 million regulatory charge ($57 million net-of-tax). The settlement in Louisiana state court seeking judicial review of the City Council’s resolution. In June 2022 the Orleans Civil District Court issued a written judgmentprinciple requires that the penaltyregulatory liability be set aside, reversed,amortized over 25 years with the unamortized balance included in rate base and vacated. In August 2022 the Orleans Civil District Court issued written reasons for its judgment and also grantedamortization treated as a post-judgment motionreduction to remand for the City Council to take actions consistent with its judgment. In April 2023 the City Council approved a resolution that established a procedural schedule to allow for the submission of additional evidence regarding the penalty discussed above. Entergy New Orleans is considering its legal options in response to the resolution.
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. Under the resolution, while compliance filings will be required 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.retail revenue requirement.
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 furthera discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
| | | | | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | | | | | | $169,695 | | | $154,646 | |
| Natural gas | | | | | | 39,125 | | | 43,626 | |
| TOTAL | | | | | | 208,820 | | | 198,272 | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 52,024 | | | 43,397 | |
| Purchased power | | | | | | 66,620 | | | 56,470 | |
| Other operation and maintenance | | | | | | 33,227 | | | 33,652 | |
| Taxes other than income taxes | | | | | | 16,424 | | | 13,989 | |
| Depreciation and amortization | | | | | | 19,575 | | | 19,815 | |
| Other regulatory charges (credits) - net | | | | | | (1,101) | | | 4,185 | |
| TOTAL | | | | | | 186,769 | | | 171,508 | |
| | | | | | | | |
| OPERATING INCOME | | | | | | 22,051 | | | 26,764 | |
| | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | | | | | 450 | | | 369 | |
| Interest and investment income | | | | | | 2,051 | | | 24 | |
| Miscellaneous - net | | | | | | (227) | | | (271) | |
| TOTAL | | | | | | 2,274 | | | 122 | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | | | | | 9,619 | | | 8,694 | |
| Allowance for borrowed funds used during construction | | | | | | (219) | | | (199) | |
| TOTAL | | | | | | 9,400 | | | 8,495 | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | | | | 14,925 | | | 18,391 | |
| | | | | | | | |
| Income taxes | | | | | | 4,783 | | | 3,265 | |
| | | | | | | | |
| NET INCOME | | | | | | $10,142 | | | $15,126 | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | |
| | | | |
| | | | | | 2024 | | 2023 |
| | | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | | | | | | $156,941 | | | $169,695 | |
| Natural gas | | | | | | 36,020 | | | 39,125 | |
| TOTAL | | | | | | 192,961 | | | 208,820 | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 30,825 | | | 52,024 | |
| Purchased power | | | | | | 60,382 | | | 66,620 | |
| Other operation and maintenance | | | | | | 43,332 | | | 33,227 | |
| Taxes other than income taxes | | | | | | 15,422 | | | 16,424 | |
| Depreciation and amortization | | | | | | 20,914 | | | 19,575 | |
| Other regulatory charges (credits) - net | | | | | | 81,520 | | | (1,101) | |
| TOTAL | | | | | | 252,395 | | | 186,769 | |
| | | | | | | | |
| OPERATING INCOME (LOSS) | | | | | | (59,434) | | | 22,051 | |
| | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | | | | | 378 | | | 450 | |
| Interest and investment income | | | | | | 141 | | | 2,051 | |
| Miscellaneous - net | | | | | | (29) | | | (227) | |
| TOTAL | | | | | | 490 | | | 2,274 | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | | | | | 9,526 | | | 9,619 | |
| Allowance for borrowed funds used during construction | | | | | | (157) | | | (219) | |
| TOTAL | | | | | | 9,369 | | | 9,400 | |
| | | | | | | | |
| INCOME (LOSS) BEFORE INCOME TAXES | | | | | | (68,313) | | | 14,925 | |
| | | | | | | | |
| Income taxes | | | | | | (19,333) | | | 4,783 | |
| | | | | | | | |
| NET INCOME (LOSS) | | | | | | ($48,980) | | | $10,142 | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
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| | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| OPERATING ACTIVITIES | OPERATING ACTIVITIES | |
| Net income | | $10,142 | | | $15,126 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | |
| Net income (loss) | |
| Net income (loss) | |
| Net income (loss) | |
| Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | |
| Depreciation and amortization | |
| Depreciation and amortization | |
| Depreciation and amortization | Depreciation and amortization | | 19,575 | | | 19,815 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 5,147 | | | 9,558 | |
| Changes in assets and liabilities: | Changes in assets and liabilities: | |
| Receivables | Receivables | | 26,040 | | | 39,328 | |
| Receivables | |
| Receivables | |
| Fuel inventory | Fuel inventory | | 2,920 | | | 446 | |
| Accounts payable | Accounts payable | | (14,313) | | | (14,168) | |
| Taxes accrued | | 1,687 | | | (2,803) | |
| Prepaid taxes and taxes accrued | |
| Interest accrued | Interest accrued | | (361) | | | (613) | |
| Deferred fuel costs | Deferred fuel costs | | 6,965 | | | (9,959) | |
| Other working capital accounts | Other working capital accounts | | (12,303) | | | (10,876) | |
| Provisions for estimated losses | Provisions for estimated losses | | 1,645 | | | 6,224 | |
| Other regulatory assets | Other regulatory assets | | 2,267 | | | 25,499 | |
| Other regulatory liabilities | Other regulatory liabilities | | 31,170 | | | (16,667) | |
| | Pension and other postretirement liabilities | | (1,113) | | | (2,782) | |
| Pension and other postretirement funded status | |
| Other assets and liabilities | Other assets and liabilities | | (7,890) | | | (16,317) | |
| Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 71,578 | | | 41,811 | |
| | INVESTING ACTIVITIES | INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| INVESTING ACTIVITIES | |
| Construction expenditures | |
| Construction expenditures | |
| Construction expenditures | Construction expenditures | | (46,098) | | | (68,959) | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 450 | | | 369 | |
| Change in money pool receivable - net | |
| | Changes in money pool receivable - net | | 134,670 | | | 18,288 | |
| | Payments to storm reserve escrow account | |
| Payments to storm reserve escrow account | |
| Payments to storm reserve escrow account | Payments to storm reserve escrow account | | (811) | | | — | |
| Changes in securitization account | Changes in securitization account | | (3,055) | | | (3,099) | |
| | Net cash flow provided by (used in) investing activities | Net cash flow provided by (used in) investing activities | | 85,156 | | | (53,401) | |
| Net cash flow provided by (used in) investing activities | |
| Net cash flow provided by (used in) investing activities | |
| | FINANCING ACTIVITIES | FINANCING ACTIVITIES | |
| | FINANCING ACTIVITIES | |
| FINANCING ACTIVITIES | |
| | Contribution from customer for construction | Contribution from customer for construction | | 15,000 | | | — | |
| | Contribution from customer for construction | |
| | Contribution from customer for construction | |
| Change in money pool payable - net | |
| | Other | Other | | (312) | | | (107) | |
| Net cash flow provided by (used in) financing activities | | 14,688 | | | (107) | |
| Other | |
| Other | |
| Net cash flow provided by financing activities | |
| | Net increase (decrease) in cash and cash equivalents | | 171,422 | | | (11,697) | |
| Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | |
| Net increase in cash and cash equivalents | |
| Cash and cash equivalents at beginning of period | 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 | | $175,886 | | | $31,165 | |
| | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | 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: | Cash paid during the period for: | |
| Interest - net of amount capitalized | Interest - net of amount capitalized | | $9,630 | | | $8,957 | |
| Interest - net of amount capitalized | |
| Interest - net of amount capitalized | |
| | Noncash investing activities: | |
| Noncash investing activities: | |
| Noncash investing activities: | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| Accrued construction expenditures | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
| ASSETS | ASSETS | ASSETS |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT ASSETS | |
| | Cash and cash equivalents | |
| | Cash and cash equivalents | |
| | Cash and cash equivalents | |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT ASSETS | |
| Cash and cash equivalents: | |
| Cash | | $367 | | | $27 | |
| Temporary cash investments | | 175,519 | | | 4,437 | |
| Total cash and cash equivalents | | 175,886 | | | 4,464 | |
| Securitization recovery trust account | |
| | Securitization recovery trust account | |
| | Securitization recovery trust account | Securitization recovery trust account | | 5,290 | | | 2,235 | |
| Accounts receivable: | Accounts receivable: | | | Accounts receivable: | | | | |
| Customer | Customer | | 67,827 | | | 93,288 | |
| Allowance for doubtful accounts | Allowance for doubtful accounts | | (8,334) | | | (11,909) | |
| Associated companies | Associated companies | | 14,502 | | | 149,927 | |
| Other | Other | | 7,258 | | | 6,110 | |
| Accrued unbilled revenues | Accrued unbilled revenues | | 32,737 | | | 37,284 | |
| Total accounts receivable | Total accounts receivable | | 113,990 | | | 274,700 | |
| Deferred fuel costs | Deferred fuel costs | | 3,188 | | | 10,153 | |
| Fuel inventory - at average cost | Fuel inventory - at average cost | | 2,952 | | | 5,872 | |
| Materials and supplies - at average cost | Materials and supplies - at average cost | | 23,868 | | | 22,498 | |
| | Prepaid taxes | |
| Prepayments and other | Prepayments and other | | 18,567 | | | 6,312 | |
| TOTAL | TOTAL | | 343,741 | | | 326,234 | |
| | OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | |
| Non-utility property at cost (less accumulated depreciation) | | 1,050 | | | 1,050 | |
| OTHER PROPERTY AND INVESTMENTS | |
| OTHER PROPERTY AND INVESTMENTS | |
| Non-utility property - at cost (less accumulated depreciation) | |
| Non-utility property - at cost (less accumulated depreciation) | |
| Non-utility property - at cost (less accumulated depreciation) | |
| Storm reserve escrow account | Storm reserve escrow account | | 75,811 | | | 75,000 | |
| Other | | 675 | | | 675 | |
| | TOTAL | |
| TOTAL | |
| TOTAL | TOTAL | | 77,536 | | | 76,725 | |
| | UTILITY PLANT | UTILITY PLANT | |
| UTILITY PLANT | |
| UTILITY PLANT | |
| Electric | |
| Electric | |
| Electric | Electric | | 1,963,198 | | | 1,934,837 | |
| Natural gas | Natural gas | | 392,815 | | | 390,252 | |
| Construction work in progress | Construction work in progress | | 23,011 | | | 39,607 | |
| TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 2,379,024 | | | 2,364,696 | |
| Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 817,324 | | | 808,224 | |
| UTILITY PLANT - NET | UTILITY PLANT - NET | | 1,561,700 | | | 1,556,472 | |
| | DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| DEFERRED DEBITS AND OTHER ASSETS | |
| Regulatory assets: | |
| Regulatory assets: | |
| Regulatory assets: | Regulatory assets: | |
| | Other regulatory assets (includes securitization property of $— as of March 31, 2024 and $506 as of December 31, 2023) | |
| | Other regulatory assets (includes securitization property of $— as of March 31, 2024 and $506 as of December 31, 2023) | |
| | Other regulatory assets (includes securitization property of $— as of March 31, 2024 and $506 as of December 31, 2023) | |
| Deferred fuel costs | Deferred fuel costs | | 4,080 | | | 4,080 | |
| Other regulatory assets (includes securitization property of $10,700 as of March 31, 2023 and $13,363 as of December 31, 2022) | | 199,845 | | | 202,112 | |
| Other | Other | | 50,425 | | | 46,778 | |
| TOTAL | TOTAL | | 254,350 | | | 252,970 | |
| | TOTAL ASSETS | TOTAL ASSETS | | $2,237,327 | | | $2,212,401 | |
| TOTAL ASSETS | |
| TOTAL ASSETS | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 | | March 31, 2024 and December 31, 2023 | | March 31, 2024 and December 31, 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| 2023 | | 2022 |
| (In Thousands) |
| | 2024 | | | | 2024 | | 2023 |
| | (In Thousands) | | | | (In Thousands) |
| CURRENT LIABILITIES | CURRENT LIABILITIES | |
| Currently maturing long-term debt | |
| Currently maturing long-term debt | |
| Currently maturing long-term debt | Currently maturing long-term debt | | $170,000 | | | $170,000 | |
| Payable due to associated company | Payable due to associated company | | 1,306 | | | 1,306 | |
| Accounts payable: | Accounts payable: | |
| Associated companies | |
| Associated companies | |
| Associated companies | Associated companies | | 47,327 | | | 53,258 | |
| Other | Other | | 43,464 | | | 57,291 | |
| Customer deposits | Customer deposits | | 32,161 | | | 31,826 | |
| Taxes accrued | Taxes accrued | | 11,995 | | | 10,308 | |
| Interest accrued | Interest accrued | | 7,719 | | | 8,080 | |
| | Other | Other | | 7,547 | | | 6,560 | |
| | Other | |
| | Other | |
| TOTAL | TOTAL | | 321,519 | | | 338,629 | |
| | NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| NON-CURRENT LIABILITIES | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | |
| Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 386,218 | | | 385,259 | |
| Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 16,475 | | | 16,481 | |
| Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 42,398 | | | 39,738 | |
| Other regulatory liabilities | |
| | Accumulated provisions | Accumulated provisions | | 88,693 | | | 87,048 | |
| Accumulated provisions | |
| Accumulated provisions | |
| | Long-term debt (includes securitization bonds of $17,757 as of March 31, 2023 and $17,697 as of December 31, 2022) | | 596,242 | | | 596,047 | |
| Long-term debt (includes securitization bonds of $5,476 as of March 31, 2024 and $5,415 as of December 31, 2023) | |
| Long-term debt (includes securitization bonds of $5,476 as of March 31, 2024 and $5,415 as of December 31, 2023) | |
| Long-term debt (includes securitization bonds of $5,476 as of March 31, 2024 and $5,415 as of December 31, 2023) | |
| Long-term payable due to associated company | Long-term payable due to associated company | | 8,279 | | | 8,279 | |
| Other | Other | | 64,545 | | | 38,104 | |
| TOTAL | TOTAL | | 1,202,850 | | | 1,170,956 | |
| | Commitments and Contingencies | Commitments and Contingencies | |
| Commitments and Contingencies | |
| Commitments and Contingencies | | | |
| | EQUITY | EQUITY | |
| EQUITY | |
| EQUITY | |
| Member's equity | |
| Member's equity | |
| Member's equity | Member's equity | | 712,958 | | | 702,816 | |
| TOTAL | TOTAL | | 712,958 | | | 702,816 | |
| | TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $2,237,327 | | | $2,212,401 | |
| TOTAL LIABILITIES AND EQUITY | |
| TOTAL LIABILITIES AND EQUITY | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
| | | | | | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY | |
For the Three Months Ended March 31, 20232024 and 20222023 |
| (Unaudited) | |
| |
| |
| | Member's Equity | |
| | (In Thousands) | |
| |
| Balance at December 31, 2021$638,715 | |
| |
Net income | 15,126 | |
| |
Balance at March 31, 2022 | $653,841 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Balance at December 31, 2022 | $702,816 | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Net income | 10,142 | | |
| | |
| Balance at March 31, 2023 | $712,958 | | |
| | |
| | |
| Balance at December 31, 2023 | $806,754 | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| Net loss | (48,980) | | |
| | |
| Balance at March 31, 2024 | $757,774 | | |
| | |
| See Notes to Financial Statements. | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $8.7$4.9 million primarily due to lower volume/weather, higher taxes other than income taxes,depreciation and amortization expenses and higher interest expense,other operation and maintenance expenses, partially offset by higher retail electric price and lower other operation and maintenance expenses.price.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20232024 to the first quarter 2022:2023:
| | | | | |
| Amount |
| (In Millions) |
20222023 operating revenues | $472.5507.5 | |
| Fuel, rider, and other revenues that do not significantly affect net income | 29.4 (73.3) | |
| Volume/weather | 0.7 | |
| Retail electric price | 11.79.6 | |
Return of unprotected excess accumulated deferred income taxes to customers | 6.5 | |
Volume/weather | (12.6) | |
20232024 operating revenues | $507.5444.5 | |
Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is insignificant and primarily due to an increase in weather-adjusted residential usage and the effect of more favorable weather on residential sales, substantially offset by a decrease in industrial usage. The increase in weather-adjusted residential usage is primarily due to an increase in customers. The decrease in industrial usage is primarily due to a decrease in demand from cogeneration customers.
The retail electric price variance is primarily due to an increase in the transmission cost recovery factor riderbase rates effective March 2022.June 2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the transmission cost recovery factor rider filing.2022 base rate case.
The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the first quarter 2022, $6.5 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the first quarter 2023. There was no effect on net income as the reductions in operating revenues
Entergy Texas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.
Total electric energy sales for Entergy Texas for the three months ended March 31, 20232024 and 20222023 are as follows:
| | 2023 | | 2022 | | % Change |
| (GWh) | | |
| 2024 | | | 2024 | | 2023 | | % Change |
| (GWh) | |
| Residential | |
| Residential | |
| Residential | Residential | 1,247 | | | 1,460 | | | (15) | |
| Commercial | Commercial | 1,061 | | | 1,059 | | | — | |
| Industrial | Industrial | 2,193 | | | 2,264 | | | (3) | |
| Governmental | Governmental | 63 | | | 64 | | | (2) | |
| Total retail | Total retail | 4,564 | | | 4,847 | | | (6) | |
| Sales for resale: | Sales for resale: | |
| Associated companies | — | | | 190 | | | (100) | |
| Non-associated companies | |
| Non-associated companies | |
| Non-associated companies | Non-associated companies | 104 | | | 144 | | | (28) | |
| Total | Total | 4,668 | | | 5,181 | | | (10) | |
See Note 1312 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses decreasedincreased primarily due to:
•a decreasean increase of $4.6$3.6 million in non-nuclear generationpower delivery expenses primarily due to lower long-term service agreement expenseshigher transmission repairs and a lower scope of work performed in 2023 as comparedmaintenance costs, higher transmission and distribution management overhead costs, higher vegetation maintenance costs due to prior year;timing, and higher metering costs;
•a decreasean increase of $2.2 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO;
•a decrease of $2.1$2.7 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation accruals in the first quarter 2023 and lowerhigher healthcare claims activity in 20232024;
•an increase of $1.6 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $1.3 million in non-nuclear generation expenses primarily due to a higher scope of work performed in 2024 as compared to 2023; and
•a decrease of $1.4 million in power delivery expenses primarily due to lower vegetation maintenance costs.several individually insignificant items.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes primarily resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to to:
•the recognition of $13.8 million in depreciation expense in first quarter 2024 for the 2022 base rate case relate back period, effective over six months beginning January 2024. The recognition of depreciation expense for the relate back period is effective over the same period as collections from the relate back surcharge rider and results in no effect on net income;
•an increase in depreciation rates effective with an increase in base rates in June 2023; and
•additions to plant in service.
See Note 2 to the financial statements 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 as compared to prior year and higher interest earned on money pool investments.2024, including the Orange County Advanced Power Station project.
Interest expense increased primarily due to the issuance of $325$350 million of 5.00%5.80% Series mortgage bonds in August 2022 and the issuance of $290.85 million of senior secured system restoration bonds2023, partially offset by an increase in April 2022.
Income Taxes
The effective income tax rate was 18.9% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the allowance for borrowed funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.
Entergy Texas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Income Taxes
The effective income tax rates were 19.1% for the first quarter 2024 and 18.9% for the first quarter 2023. The differences in the effective income tax rates for the first quarter 2024 and the first quarter 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, partially offset by the accrual for state income taxes.
The effective income tax rate was 9.3% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for a discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| 2024 | | | 2024 | | 2023 |
| (In Thousands) | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | 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): | |
| Net cash provided by (used in): | |
| Operating activities | |
| Operating activities | |
| Operating activities | Operating activities | 198,102 | | | 82,338 | |
| Investing activities | Investing activities | (108,019) | | | (144,536) | |
| Financing activities | Financing activities | (1,416) | | | 62,196 | |
| Net increase (decrease) in cash and cash equivalents | 88,667 | | | (2) | |
| Net increase in cash and cash equivalents | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $92,164 | | | $26 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Operating Activities
Net cash flow provided by operating activities increased $115.8decreased $87.2 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to lower collections from customers, the timing of payments to vendors, and the timing of recovery of fuel and purchased power costs and higher collections from customers,costs. The decrease was partially offset by the timinga decrease of payments to vendors.$13.0 million in interest paid. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.
Investing Activities
Net cash flow used inEntergy Texas’s investing activities decreased $36.5provided $34.3 million of cash for the three months ended March 31, 2024 compared to using $108.0 million of cash for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to the following activity:
•money pool activity and cash collateral of $12 million posted in March 2022 to support Entergy Texas’s obligations to MISO. The decrease was partially offset by activity;
•an increase of $21$9.1 million in non-nuclear generation construction expenditures primarily due to higher spending on the Orange County Advanced Power Station project andproject;
•an increase of $9.7 million in transmission construction expenditures primarily due to a higher scope of work on projects performed in 20232024 as compared to 2023; and
Entergy Texas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
•an increase of $20.5$12.9 million in transmissiondistribution construction expenditures primarily due to higher scopecapital expenditures as a result of work performedincreased development in 2023.Entergy Texas’s service area.
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 $267.6 million for the three months ended March 31, 2024 compared to decreasing by $92.9 million for the three months ended March 31, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing arrangementand lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Utility subsidiaries’ need forRegistrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
Entergy Texas’s financing activities usedprovided $10.7 million of cash for the three months ended March 31, 2024 compared to using $1.4 million of cash for the three months ended March 31, 2023 compared to providing $62.2 million for the three months ended March 31, 2022 primarily due to money pool activity.
Increasesan increase of $12.5 million in Entergy Texas’s payableprepaid deposits related to the money pool are a source of cash flow,contributions-in-aid-of-construction primarily for customer and Entergy Texas’s payable to the money pool increased $91.8 million for the three months ended March 31, 2022.generator interconnection agreements.
Capital Structure
Entergy Texas’s debt to capital ratio is shown in the following table.
| | March 31,
2023 | | December 31,
2022 |
| March 31, 2024 | | | March 31, 2024 | | December 31, 2023 |
| Debt to capital | Debt to capital | 51.6 | % | | 52.0 | % | Debt to capital | 50.6 | % | | 50.9 | % |
| Effect of excluding securitization bonds | Effect of excluding securitization bonds | (2.5 | %) | | (2.5 | %) | Effect of excluding securitization bonds | (2.1 | %) | | (2.1 | %) |
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 49.1 | % | | 49.5 | % | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 48.5 | % | | 48.8 | % |
| Effect of subtracting cash | Effect of subtracting cash | (0.8 | %) | | — | % | Effect of subtracting cash | (1.5 | %) | | (0.2 | %) |
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 48.3 | % | | 49.5 | % | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 47.0 | % | | 48.6 | % |
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.
Net debt consists of debt less cash and cash equivalents. Debt consists of finance lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. FollowingThe following are updates to information provided in the Form 10-K.
Entergy Texas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31,
2023 | | December 31,
2022 | | March 31,
2022 | | December 31,
2021 |
| (In Thousands) |
| $6,536 | | $99,468 | | ($171,393) | | ($79,594) |
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | | March 31, 2023 | | December 31, 2022 |
| (In Thousands) |
| $50,244 | | $317,882 | | $6,536 | | $99,468 |
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 March 31, 2023,2024, 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 March 31, 2023, $8.82024, $76.5 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.
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
Generation Cost Recovery Rider
As discussed in the Form 10-K, in August 2022 the PUCT approved a unanimous settlement agreement adjusting Entergy Texas’s generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility, and rates became effective. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect. In April 2023 the PUCT approved Entergy Texas’s as-filed request.
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022. As of March 31, 2023, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic.
Fuel and purchased power recovery
As discussed in the Form 10-K, in September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. In November 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2023 municipal intervenors filed testimony proposing a $5.2 million disallowance for fuel purchased during Winter Storm Uri.PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023 and the hearing on the merits is set for May 2023. A PUCT decision is expected 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 a discussion of nuclear matters.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Texas’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the 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 Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | | | | | | | 2024 | |
| | | 2023 | | 2022 |
| | | | | | 2024 | |
| | | (In Thousands) |
| | | | | | 2024 | | | 2023 |
| | | | (In Thousands) | | | | | | (In Thousands) |
| OPERATING REVENUES | OPERATING REVENUES | | | |
| Electric | |
| Electric | |
| Electric | Electric | | | $507,506 | | | $472,482 | |
| | OPERATING EXPENSES | OPERATING EXPENSES | | | |
| OPERATING EXPENSES | |
| OPERATING EXPENSES | |
| Operation and Maintenance: | |
| 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 | | | 167,530 | | | 73,920 | |
| | Fuel, fuel-related expenses, and gas purchased for resale | |
| Fuel, fuel-related expenses, and gas purchased for resale | |
| Purchased power | Purchased power | | | 107,758 | | | 161,090 | |
| Other operation and maintenance | Other operation and maintenance | | | 64,430 | | | 74,977 | |
| | Taxes other than income taxes | Taxes other than income taxes | | | 27,996 | | | 20,449 | |
| Depreciation and amortization | Depreciation and amortization | | | 59,391 | | | 56,061 | |
| Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | | 10,924 | | | 13,446 | |
| TOTAL | TOTAL | | | 438,029 | | | 399,943 | |
| | OPERATING INCOME | OPERATING INCOME | | | 69,477 | | | 72,539 | |
| OPERATING INCOME | |
| OPERATING INCOME | |
| | OTHER INCOME | OTHER INCOME | | | |
| OTHER INCOME | |
| OTHER INCOME | |
| Allowance for equity funds used during construction | |
| Allowance for equity funds used during construction | |
| Allowance for equity funds used during construction | Allowance for equity funds used during construction | | | 5,089 | | | 2,596 | |
| Interest and investment income | Interest and investment income | | | 1,417 | | | 188 | |
| Miscellaneous - net | Miscellaneous - net | | | 439 | | | 307 | |
| TOTAL | TOTAL | | | 6,945 | | | 3,091 | |
| | INTEREST EXPENSE | INTEREST EXPENSE | | | |
| INTEREST EXPENSE | |
| INTEREST EXPENSE | |
| Interest expense | |
| Interest expense | |
| Interest expense | Interest expense | | | 26,962 | | | 20,912 | |
| Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | | (1,896) | | | (865) | |
| TOTAL | TOTAL | | | 25,066 | | | 20,047 | |
| | INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | | 51,356 | | | 55,583 | |
| INCOME BEFORE INCOME TAXES | |
| INCOME BEFORE INCOME TAXES | |
| | Income taxes | |
| Income taxes | |
| Income taxes | Income taxes | | | 9,683 | | | 5,180 | |
| | NET INCOME | NET INCOME | | | 41,673 | | | 50,403 | |
| NET INCOME | |
| NET INCOME | |
| | Preferred dividend requirements | |
| Preferred dividend requirements | |
| Preferred dividend requirements | Preferred dividend requirements | | | 518 | | | 518 | |
| | EARNINGS APPLICABLE TO COMMON STOCK | EARNINGS APPLICABLE TO COMMON STOCK | | | $41,155 | | | $49,885 | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | | |
| See Notes to Financial Statements. | |
| See Notes to Financial Statements. | |
(Page left blank intentionally)
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | | $41,673 | | | $50,403 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 59,391 | | | 56,061 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (6,536) | | | (1,175) | |
| Changes in assets and liabilities: | | | | |
| Receivables | | 63,210 | | | (1,674) | |
| Fuel inventory | | (8,445) | | | 8,039 | |
| Accounts payable | | (44,804) | | | 4,492 | |
| Taxes accrued | | (21,586) | | | (15,188) | |
| Interest accrued | | (12,656) | | | (11,195) | |
| Deferred fuel costs | | 107,238 | | | (8,440) | |
| Other working capital accounts | | 9,245 | | | 4,832 | |
| Provisions for estimated losses | | 522 | | | 54 | |
| Other regulatory assets | | 21,535 | | | (135,079) | |
| Other regulatory liabilities | | (3,283) | | | (11,491) | |
| Effect of securitization on regulatory asset | | — | | | 153,383 | |
| Pension and other postretirement liabilities | | (1,960) | | | (4,146) | |
| Other assets and liabilities | | (5,442) | | | (6,538) | |
| Net cash flow provided by operating activities | | 198,102 | | | 82,338 | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (205,191) | | | (155,948) | |
| Allowance for equity funds used during construction | | 5,089 | | | 2,596 | |
| | | | |
| | | | |
| Litigation proceeds from settlement agreement | | — | | | 4,134 | |
| Changes in money pool receivable - net | | 92,932 | | | — | |
| Changes in securitization account | | (849) | | | 16,631 | |
| Increase in other investments | | — | | | (11,949) | |
| | | | |
| Net cash flow used in investing activities | | (108,019) | | | (144,536) | |
| | | | |
| FINANCING ACTIVITIES | | | | |
| | | | |
| Retirement of long-term debt | | — | | | (29,064) | |
| | | | |
| | | | |
| Changes in money pool payable - net | | — | | | 91,799 | |
| Dividends paid: | | | | |
| | | | |
| Preferred stock dividends paid | | (518) | | | (505) | |
| Other | | (898) | | | (34) | |
| Net cash flow provided by (used in) financing activities | | (1,416) | | | 62,196 | |
| | | | |
| Net increase (decrease) in cash and cash equivalents | | 88,667 | | | (2) | |
| Cash and cash equivalents at beginning of period | | 3,497 | | | 28 | |
| Cash and cash equivalents at end of period | | $92,164 | | | $26 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | | $38,923 | | | $31,513 | |
| Income taxes | | $— | | | ($1,913) | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $1,004 | | | $500 | |
| Temporary cash investments | | 91,160 | | | 2,997 | |
| Total cash and cash equivalents | | 92,164 | | | 3,497 | |
| Securitization recovery trust account | | 11,728 | | | 10,879 | |
| Accounts receivable: | | | | |
| Customer | | 79,086 | | | 115,955 | |
| Allowance for doubtful accounts | | (1,847) | | | (2,352) | |
| Associated companies | | 13,824 | | | 115,549 | |
| Other | | 11,512 | | | 21,587 | |
| Accrued unbilled revenues | | 61,230 | | | 69,208 | |
| Total accounts receivable | | 163,805 | | | 319,947 | |
| Deferred fuel costs | | 150,877 | | | 258,115 | |
| Fuel inventory - at average cost | | 35,195 | | | 26,750 | |
| Materials and supplies - at average cost | | 88,560 | | | 93,031 | |
| | | | |
| Prepayments and other | | 14,622 | | | 20,568 | |
| TOTAL | | 556,951 | | | 732,787 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 222 | | | 250 | |
| Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | |
| Other | | 19,129 | | | 18,975 | |
| TOTAL | | 19,727 | | | 19,601 | |
| | | | |
| UTILITY PLANT | | | | |
| Electric | | 7,497,285 | | | 7,409,461 | |
| Construction work in progress | | 486,164 | | | 339,139 | |
| TOTAL UTILITY PLANT | | 7,983,449 | | | 7,748,600 | |
| Less - accumulated depreciation and amortization | | 2,180,743 | | | 2,135,400 | |
| UTILITY PLANT - NET | | 5,802,706 | | | 5,613,200 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| | | | |
| Other regulatory assets (includes securitization property of $262,481 as of March 31, 2023 and $269,523 as of December 31, 2022) | | 557,147 | | | 578,682 | |
| | | | |
| Other | | 97,837 | | | 99,694 | |
| TOTAL | | 654,984 | | | 678,376 | |
| | | | |
| TOTAL ASSETS | | $7,034,368 | | | $7,043,964 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | | $36,744 | | | $41,673 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 89,505 | | | 59,391 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 1,438 | | | (6,536) | |
| Changes in assets and liabilities: | | | | |
| Receivables | | 13,059 | | | 63,210 | |
| Fuel inventory | | 1,009 | | | (8,445) | |
| Accounts payable | | (17,830) | | | (44,804) | |
| Taxes accrued | | (28,917) | | | (21,586) | |
| Interest accrued | | 5,287 | | | (12,656) | |
| Deferred fuel costs | | 38,863 | | | 107,238 | |
| Other working capital accounts | | (11,186) | | | 9,245 | |
| Provisions for estimated losses | | (1,358) | | | 522 | |
| Other regulatory assets | | 24,181 | | | 21,535 | |
| Other regulatory liabilities | | (7,959) | | | (3,283) | |
| Pension and other postretirement funded status | | (4,648) | | | (1,960) | |
| Other assets and liabilities | | (27,281) | | | (5,442) | |
| Net cash flow provided by operating activities | | 110,907 | | | 198,102 | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (235,625) | | | (205,191) | |
| Allowance for equity funds used during construction | | 9,248 | | | 5,089 | |
| | | | |
| Changes in money pool receivable - net | | 267,638 | | | 92,932 | |
| Changes in securitization account | | (5,958) | | | (849) | |
| Increase in other investments | | (1,000) | | | — | |
| | | | |
| Net cash flow provided by (used in) investing activities | | 34,303 | | | (108,019) | |
| | | | |
| FINANCING ACTIVITIES | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Preferred stock dividends paid | | (518) | | | (518) | |
| Other | | 11,258 | | | (898) | |
| Net cash flow provided by (used in) financing activities | | 10,740 | | | (1,416) | |
| | | | |
| Net increase in cash and cash equivalents | | 155,950 | | | 88,667 | |
| Cash and cash equivalents at beginning of period | | 21,986 | | | 3,497 | |
| Cash and cash equivalents at end of period | | $177,936 | | | $92,164 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | | $25,940 | | | $38,923 | |
| Income taxes | | $2,447 | | | $— | |
| Noncash investing activities: | | | | |
| Accrued construction expenditures | | $276,548 | | | $104,805 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| | | | |
| Accounts payable: | | | | |
| Associated companies | | $59,669 | | | $70,321 | |
| Other | | 203,742 | | | 201,982 | |
| Customer deposits | | 38,953 | | | 38,764 | |
| Taxes accrued | | 71,447 | | | 93,033 | |
| Interest accrued | | 11,272 | | | 23,928 | |
| | | | |
| | | | |
| | | | |
| | | | |
| Other | | 15,745 | | | 16,963 | |
| TOTAL | | 400,828 | | | 444,991 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 740,360 | | | 744,227 | |
| Accumulated deferred investment tax credits | | 8,559 | | | 8,711 | |
| Regulatory liability for income taxes - net | | 127,872 | | | 132,647 | |
| Other regulatory liabilities | | 46,739 | | | 45,247 | |
| Asset retirement cost liabilities | | 11,274 | | | 11,121 | |
| Accumulated provisions | | 8,115 | | | 7,593 | |
| | | | |
| Long-term debt (includes securitization bonds of $275,154 as of March 31, 2023 and $275,064 as of December 31, 2022) | | 2,896,522 | | | 2,895,913 | |
| Other | | 73,483 | | | 74,053 | |
| TOTAL | | 3,912,924 | | | 3,919,512 | |
| | | | |
| Commitments and Contingencies | | | | |
| | | | |
| EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2023 and 2022 | | 49,452 | | | 49,452 | |
| Paid-in capital | | 1,050,125 | | | 1,050,125 | |
| Retained earnings | | 1,582,289 | | | 1,541,134 | |
| Total common shareholder's equity | | 2,681,866 | | | 2,640,711 | |
| Preferred stock without sinking fund | | 38,750 | | | 38,750 | |
| TOTAL | | 2,720,616 | | | 2,679,461 | |
| | | | |
| TOTAL LIABILITIES AND EQUITY | | $7,034,368 | | | $7,043,964 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| Preferred Stock | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2021 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,344,879 | | | $2,483,206 | |
| | | | | | | | | |
| Net income | — | | | — | | | — | | | 50,403 | | | 50,403 | |
| | | | | | | | | |
| Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at March 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,394,764 | | | $2,533,091 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,541,134 | | | $2,679,461 | |
| | | | | | | | | |
| Net income | — | | | — | | | — | | | 41,673 | | | 41,673 | |
| | | | | | | | | |
| | | | | | | | | |
| Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at March 31, 2023 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,582,289 | | | $2,720,616 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | |
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $26 | | | $1,497 | |
| Temporary cash investments | | 177,910 | | | 20,489 | |
| Total cash and cash equivalents | | 177,936 | | | 21,986 | |
| Securitization recovery trust account | | 11,153 | | | 5,195 | |
| Accounts receivable: | | | | |
| Customer | | 86,081 | | | 88,468 | |
| Allowance for doubtful accounts | | (1,100) | | | (1,484) | |
| Associated companies | | 56,939 | | | 329,941 | |
| Other | | 28,833 | | | 24,416 | |
| Accrued unbilled revenues | | 62,662 | | | 72,771 | |
| Total accounts receivable | | 233,415 | | | 514,112 | |
| Deferred fuel costs | | 100,156 | | | 139,019 | |
| Fuel inventory - at average cost | | 49,838 | | | 50,847 | |
| Materials and supplies - at average cost | | 144,081 | | | 123,020 | |
| | | | |
| Prepayments and other | | 31,522 | | | 35,232 | |
| TOTAL | | 748,101 | | | 889,411 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 170 | | | 214 | |
| Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | |
| Other | | 15,117 | | | 15,068 | |
| TOTAL | | 15,663 | | | 15,658 | |
| | | | |
| UTILITY PLANT | | | | |
| Electric | | 8,003,032 | | | 7,931,340 | |
| Construction work in progress | | 1,022,362 | | | 857,707 | |
| TOTAL UTILITY PLANT | | 9,025,394 | | | 8,789,047 | |
| Less - accumulated depreciation and amortization | | 2,414,265 | | | 2,363,919 | |
| UTILITY PLANT - NET | | 6,611,129 | | | 6,425,128 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets (includes securitization property of $246,746 as of March 31, 2024 and $250,324 as of December 31, 2023) | | 572,425 | | | 596,606 | |
| Other | | 158,880 | | | 129,769 | |
| TOTAL | | 731,305 | | | 726,375 | |
| | | | |
| TOTAL ASSETS | | $8,106,198 | | | $8,056,572 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| | | | |
| Accounts payable: | | | | |
| Associated companies | | $55,706 | | | $74,423 | |
| Other | | 173,694 | | | 195,703 | |
| Customer deposits | | 40,695 | | | 39,999 | |
| Taxes accrued | | 49,970 | | | 78,887 | |
| Interest accrued | | 36,572 | | | 31,285 | |
| | | | |
| Other | | 20,985 | | | 16,237 | |
| TOTAL | | 377,622 | | | 436,534 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 818,667 | | | 814,905 | |
| Accumulated deferred investment tax credits | | 7,776 | | | 7,963 | |
| Regulatory liability for income taxes - net | | 108,234 | | | 114,759 | |
| Other regulatory liabilities | | 41,579 | | | 43,013 | |
| Asset retirement cost liabilities | | 15,598 | | | 11,743 | |
| Accumulated provisions | | 8,122 | | | 9,480 | |
| Long-term debt (includes securitization bonds of $257,683 as of March 31, 2024 and $257,592 as of December 31, 2023) | | 3,225,444 | | | 3,225,092 | |
| Other | | 348,268 | | | 274,421 | |
| TOTAL | | 4,573,688 | | | 4,501,376 | |
| | | | |
| Commitments and Contingencies | | | | |
| | | | |
| EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2024 and 2023 | | 49,452 | | | 49,452 | |
| Paid-in capital | | 1,200,125 | | | 1,200,125 | |
| Retained earnings | | 1,866,561 | | | 1,830,335 | |
| Total common shareholder's equity | | 3,116,138 | | | 3,079,912 | |
| Preferred stock without sinking fund | | 38,750 | | | 38,750 | |
| TOTAL | | 3,154,888 | | | 3,118,662 | |
| | | | |
| TOTAL LIABILITIES AND EQUITY | | $8,106,198 | | | $8,056,572 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| Preferred Stock | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,541,134 | | | $2,679,461 | |
| | | | | | | | | |
| Net income | — | | | — | | | — | | | 41,673 | | | 41,673 | |
| | | | | | | | | |
| Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at March 31, 2023 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,582,289 | | | $2,720,616 | |
| | | | | | | | | |
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| Balance at December 31, 2023 | $38,750 | | | $49,452 | | | $1,200,125 | | | $1,830,335 | | | $3,118,662 | |
| | | | | | | | | |
| Net income | — | | | — | | | — | | | 36,744 | | | 36,744 | |
| | | | | | | | | |
| | | | | | | | | |
| Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
| Balance at March 31, 2024 | $38,750 | | | $49,452 | | | $1,200,125 | | | $1,866,561 | | | $3,154,888 | |
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| 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(or on appeal from the retail regulatorsFERC to the United States Court of its customers regarding its return on equity, its capital structure, its renewal ofAppeals for the sale-leaseback of 11.5% of Grand Gulf, the treatment of uncertain tax positions in rate base, the prudence of its operation of Grand Gulf, and the rates it charges under the Unit Power Sales Agreement. The claims in these proceedings include claims for refunds and claims for rate adjustments; the aggregate amount of refunds claimed in these proceedings substantially exceeds the net book value of System Energy. In the event of an adverse decision in one or more of these proceedings requiring the payment of substantial additional refunds, System Energy would be required to seek financing to pay such refunds which may not be available on terms acceptable to System Energy, or may not be available at all, when required.Fifth Circuit).
Results of Operations
Net Income
Net income decreased $3.9increased $3.6 million primarily due to the disallowance of the recovery of sale-leaseback renewal costsan increase in operating revenues resulting from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans per the December 2022 FERC order related to the Grand Gulf sale-leaseback renewal complaint andchanges in rate base, partially offset by the lower authorized rate of return on equity and capital structure limitations on monthly bills issued to Entergy MississippiArkansas per the June 2022November 2023 settlement agreement with the MPSC. The decrease was partially offset by an increaseAPSC. See Note 2 to the financial statements herein and in operating revenues resulting from changes in rate base.the Form 10-K for discussion of the settlement with the APSC.
Income Taxes
The effective income tax rate wasrates were 20.5% for the first quarter 2024 and 23.5% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and provisions, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 23.2% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for a discussion of the Inflation Reduction Act of 2022.income tax legislation and regulation.
System Energy Resources, Inc.
Management'sManagement’s Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20232024 and 20222023 were as follows:
| | 2023 | | 2022 |
| (In Thousands) |
| 2024 | | | 2024 | | 2023 |
| (In Thousands) | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | 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): | |
| Net cash provided by (used in): | |
| Operating activities | |
| Operating activities | |
| Operating activities | Operating activities | (32,839) | | | 40,011 | |
| Investing activities | Investing activities | 48,231 | | | (94,802) | |
| Financing activities | Financing activities | 241,671 | | | 63,845 | |
| Net increase in cash and cash equivalents | Net increase in cash and cash equivalents | 257,063 | | | 9,054 | |
| | Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $260,003 | | | $98,255 | |
| Cash and cash equivalents at end of period | |
| Cash and cash equivalents at end of period | |
Operating Activities
System Energy’s operating activities usedprovided $70.3 million of cash for the three months ended March 31, 2024 compared to using $32.8 million of cash for the three months ended March 31, 2023 compared to providing $40 million of cash for the three months ended March 31, 2022 primarily due to the following activity:
•the aggregate paymentrefunds of $103.5 million made in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion on theseof the refunds and the related proceedings;
•a decrease in spending of $12.8 million on nuclear refueling outages in 2023 as compared to the same period in 2022; and
•the timing of payments to vendors.proceedings.
Investing Activities
System Energy’s investing activities providedused $188.3 million of cash for the three months ended March 31, 2024 compared to providing $48.2 million of cash for the three months ended March 31, 2023 compared to using $94.8 million of cash for the three months ended March 31, 2022 primarily due to the following activity:to:
•money pool activity;
•a decreasean increase of $53.3$114.9 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; and
•a decrease of $21.8 million in nuclear construction expenditures primarily due to higher spending in 2022 for Grand Gulf outage projects and upgrades.money pool activity.
DecreasesIncreases in System Energy’s receivable from the money pool are a sourceuse of cash flow and System Energy’s receivable from the money pool decreasedincreased $31.5 million for the three months ended March 31, 2024 compared to decreasing by $76.4 million for the three months ended March 31, 2023 compared to decreasing by $18.6 million for the three months ended March 31, 2022.2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing arrangementand lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Utility subsidiaries’ need forRegistrant Subsidiaries’ dependence on external short-term borrowings.
System Energy Resources, Inc.
Management'sManagement’s Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities increased $177.8decreased $12.3 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to the issuance of $325 million of 6.00% Series mortgage bonds in March 2023.
2023 and money pool activity. The increasedecrease was partially offset by:
•a capital contribution of $150 million received from Entergy Corporation in January 2024 in order to maintain System Energy’s capital structure;
•net long-term borrowings of $91.7 million in 2024 compared to net repayments of $16.7 million in 2023 compared to net long-term borrowings of $63.9 million in 2022 on the nuclear fuel company variable interest entities’entity’s credit facilities;facility; and
•the repayment, prior to maturity, in March 2023 of thea $50 million term loan due in November 2023.
Decreases in System Energy’s payable to the money pool are a use of cash flow, and System Energy’s payable to the money pool decreased $12.2 million for the three months ended March 31, 2024.
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 the capital contribution of $150 million received from Entergy Corporation in 2024, partially offset by the net issuance of long-term debt in 2023.2024.
| | | | March 31, 2023 | | December 31,
2022 | | March 31,
2024 | | December 31,
2023 |
| Debt to capital | Debt to capital | 51.1 | % | | 45.0 | % | Debt to capital | 43.7 | % | | 45.4 | % |
| Effect of subtracting cash | Effect of subtracting cash | (7.3 | %) | | (0.1 | %) | Effect of subtracting cash | (3.5 | %) | | — | % |
| Net debt to net capital (non-GAAP) | Net debt to net capital (non-GAAP) | 43.8 | % | | 44.9 | % | Net debt to net capital (non-GAAP) | 40.2 | % | | 45.4 | % |
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’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31,
2022 | | March 31, 2022 | | December 31, 2021 |
| (In Thousands) |
| $18,590 | | $94,981 | | $57,139 | | $75,745 |
| | | | | | | | | | | | | | | | | | | | |
March 31,
2024 | | December 31,
2023 | | March 31,
2023 | | December 31,
2022 |
| (In Thousands) |
| $31,456 | | ($12,246) | | $18,590 | | $94,981 |
System Energy Resources, Inc.
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.
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 March 31, 2023, $55.92024, $113.2 million in loans were outstanding under the
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion.
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the FERC’s Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $38$24.8 million, which includes interest through March 31, 2023,2024, and the estimated resulting annual rate reduction would be approximately $31$14.1 million. As a result of the 2022 settlement agreementagreements with the MPSC and the APSC, both the estimated refund and rate reduction exclude Entergy Mississippi's portion.and Entergy Arkansas’s portions. See “System Energy Settlement with the MPSC” in the Form 10-K and see “System Energy Settlement with the APSC” below and in the Form 10-K for discussion of the settlement.settlements. 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.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
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, and in December 2022 the FERC 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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
refunds on three 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 paid the refunds of $103.5 million, which included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans. Based on the December 2022 FERC order and analysis of the remaining litigation, management determined that System Energy’s regulatory liability related to complaints against System Energy as of March 31, 2023 is adequate.
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 thea 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 FebruaryAugust 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 submitted a tariff compliance filing withand the LPSC, the APSC, and the City Council.
In the rehearing order, the FERC directs System Energy to clarify that, consistent withrecalculate refunds for two issues: (1) refunds of rental expenses related to the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its allocationrenewal of the sale-leaseback renewal costs underarrangements and (2) refunds for the Unit Power Sales Agreement. See “System Energy Settlementnet effect of correcting the depreciation inputs for capital additions associated with the MPSC” in the Form 10-K for discussion of the settlement. In March 2023, the MPSC filed a protestsale-leaseback. With regard 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 underrental expenses, the Unit Power Sales Agreement. Entergy Mississippi’s allocated sale-leaseback renewal costs are estimated at $5.7 million annually forrehearing order allows System Energy to recover an implied return of and on the remaining termdepreciated cost of the portion of the plant subject to the sale-leaseback renewal.
System Energy Resources, Inc.
Management'sManagement’s Financial Discussion and Analysis
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.
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 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.
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. In November 2023 the FERC issued a further notice stating that it would not issue any further order addressing the rehearing request.Also in November 2023 the LPSC filed with the United States Court of Appeals for the Fifth Circuit a petition for review of the FERC’s August 2023 rehearing order and denials of the September 2023 rehearing request.
In December 2023 the United States Court of Appeals for the Fifth Circuit lifted the abeyance on the consolidated System Energy appeals and it also consolidated the LPSC’s appeal with the System Energy appeals. In March 2024, separate petition briefs were filed by System Energy and by the LPSC.Also in March 2024, the City Council filed an intervenor brief supporting the LPSC.Briefing will continue through July 2024.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
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
As 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.
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. System Energy filed answering testimony in January 2022. In March 2022 the FERC trial staff filed direct and answering testimony recommending refunds and prospective modifications to the Unit Power Sales Agreement.
In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and to oppose its revised recommendation.
In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The hearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the May 2023 deadline for the initial decision was granted. The initial decision is due in May 2023.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolvesresolved 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 providesprovided that System Energy willwould 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 providesprovided that if the APSC, the City Council, or the LPSC agrees to the global settlement System Energy entered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black-box refund amount, then the black-box refund for this settlement agreement shall not be incremental or in addition to the global black-box refund amount. The settlement agreement addressesaddressed other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement will bewas included in the May 2023 service month bills under the Unit Power Sales Agreement.
System Energy Resources, Inc.
Management'sManagement’s Financial Discussion and Analysis
In May 2023 the presiding ALJ issued an initial decision finding that System Energy should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power Sales Agreement bills. Based on this finding, the initial decision recommended refunds; System Energy estimates that those refunds for Entergy Louisiana and Entergy New Orleans would total approximately $69.7 million plus $94.3 million of interest through March 31, 2024. The initial decision also finds that the Unit Power Sales Agreement should be modified such that a cash working capital allowance of negative $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 which the complainants sought refunds or changes to the Unit Power Sales Agreement, the 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 LPSC, the City Council, and the FERC 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.
LPSC Petition for a Writ of Mandamus
In March 2024 the LPSC filed a petition for a writ of mandamus, requesting that the United States Court of Appeals for the Fifth Circuit direct the FERC to take action on (1) System Energy’s pending compliance filings (and the LPSC’s protests) in response to the FERC’s orders on the uncertain tax position rate base issue, as discussed above; and (2) the ALJ’s pending initial decision in the return on equity and capital structure proceeding, also as discussed above. System Energy filed a notice of intervention in the proceeding.
In March 2024 the United States Court of Appeals for the Fifth Circuit directed the FERC to respond to the LPSC’s petition. Also in March 2024, System Energy filed its response to the LPSC’s petition, in which it opposed the request for action on the compliance filing and took no position on the request for action on the return on equity and capital structure case. Later in March 2024, the FERC responded opposing both parts of the LPSC’s petition, and the LPSC filed an opposed motion for leave to answer and its answer to the FERC’s and System Energy’s responses.
System Energy Settlement with the APSC
As discussed in the Form 10-K, in October 2023, System Energy, Entergy Arkansas, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the APSC to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” above and in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. System Energy, Entergy Arkansas, additional Entergy parties, and the APSC filed the settlement agreement and supporting materials with the FERC in November
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
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.
The terms of the settlement with the APSC align with the $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 $49.5 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.”
In addition to the black box refund of $142 million described above, beginning with the November 2023 service month, the settlement 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.
In December 2023 the FERC trial staff and the LPSC filed comments. The FERC trial staff commented that it “believes that the settlement is fair, and in the public interest,” and neither it nor the LPSC oppose the settlement. In December 2023 the $93 million black box refund to Entergy Arkansas was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet. In March 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.”
System Energy Settlement with the City Council
In April 2024, System Energy, Entergy New Orleans, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the City Council to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed above in “Grand Gulf Prudence Complaint,” filed at the FERC in October 2023. System Energy, Entergy New Orleans, additional Entergy parties, and the City Council intend to file the settlement agreement and supporting materials with the FERC no later than May 10, 2024. 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. As discussed above and in Note 2 to the financial statements in the Form 10-K, System Energy previously settled with the MPSC and APSC with respect to these complaints before the FERC. Entergy Mississippi and Entergy Arkansas have nearly 65% of System Energy’s share of Grand Gulf’s output, after purchases from affiliates are considered. The settlements with the APSC, the MPSC, and the City Council represent almost 85% of System Energy’s share of the output of Grand Gulf.
The terms of the settlement with the City Council align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022 and between System Energy and the APSC in November 2023. The settlement provides for Entergy New Orleans to receive a black box refund of $116 million from System Energy, inclusive of approximately $18 million already received by Entergy New Orleans from System Energy. In November 2022 the FERC approved the System Energy settlement with the MPSC, and in March 2024 the FERC approved the System Energy settlement with the APSC. In both settlements, the FERC stated that the settlements “appear to be fair and reasonable and in the public interest.” In March 2024 the $98 million black box refund to Entergy New Orleans was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Entergy’s balance sheet.
In addition to the black box refund of $116 million described above, beginning with the June 2024 service month, the settlement provides for Entergy New Orleans’ 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.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
System Energy Regulatory Liability for Pending Complaints
As discussed in the Form 10-K, System Energy had recorded a regulatory liability related to complaints against System Energy, which was consistent with the settlement agreements reached with the MPSC and the APSC, taking into account amounts already or expected to be refunded. As discussed above in “Settlement with the City Council,” in first quarter 2024 the $98 million black box refund to Entergy New Orleans was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet. System Energy’s remaining regulatory liability related to complaints against System Energy as of March 31, 2024 is $80 million.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 20212022 Calendar Year Bills
In March 2023,February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC the APSC, and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2021.2022. 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)(2) that all issues in the ongoingpending Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 20212022 bills. The first, third, and fourthThese allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 bills. The formal challenge to the calendar yearand 2021 bills states that the impact of the first allegation is “tens of millions of dollars,” but it does not provide an estimate of the financial impact of the remaining allegations.bills.
In May 2023,March 2024, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.
Unit Power Sales Agreement
See Note 2 to the financial statements in the Form 10-K for information regarding proposed amendments to the Unit Power Sales Agreement.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
| | | | | | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | | | |
| | | | |
| | | | | | 2024 | | 2023 |
| | | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | | | | | | $152,620 | | | $171,572 | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 13,117 | | | 18,847 | |
| Nuclear refueling outage expenses | | | | | | 6,661 | | | 6,619 | |
| Other operation and maintenance | | | | | | 51,423 | | | 50,200 | |
| Decommissioning | | | | | | 10,707 | | | 10,287 | |
| Taxes other than income taxes | | | | | | 7,209 | | | 7,282 | |
| Depreciation and amortization | | | | | | 29,678 | | | 37,137 | |
| Other regulatory charges (credits) - net | | | | | | (4,973) | | | (6,459) | |
| TOTAL | | | | | | 113,822 | | | 123,913 | |
| | | | | | | | |
| OPERATING INCOME | | | | | | 38,798 | | | 47,659 | |
| | | | | | | | |
| OTHER INCOME (DEDUCTIONS) | | | | | | | | |
| Allowance for equity funds used during construction | | | | | | 2,434 | | | 1,818 | |
| Interest and investment income | | | | | | 7,973 | | | 5,764 | |
| Miscellaneous - net | | | | | | 237 | | | (9,078) | |
| TOTAL | | | | | | 10,644 | | | (1,496) | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | | | | | 11,171 | | | 10,491 | |
| Allowance for borrowed funds used during construction | | | | | | (859) | | | (355) | |
| TOTAL | | | | | | 10,312 | | | 10,136 | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | | | | 39,130 | | | 36,027 | |
| | | | | | | | |
| Income taxes | | | | | | 8,012 | | | 8,482 | |
| | | | | | | | |
| NET INCOME | | | | | | $31,118 | | | $27,545 | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
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| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | | $31,118 | | | $27,545 | |
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 51,714 | | | 63,793 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 11,452 | | | 10,801 | |
| Changes in assets and liabilities: | | | | |
| Receivables | | 8,832 | | | (8,198) | |
| Accounts payable | | 116,460 | | | (21,866) | |
| Prepaid taxes and taxes accrued | | (14,091) | | | (15,836) | |
| Interest accrued | | 883 | | | (58) | |
| Other working capital accounts | | (25,431) | | | 2,837 | |
| Other regulatory assets | | (5,358) | | | (3,247) | |
| Other regulatory liabilities | | (23,057) | | | (47,212) | |
| Pension and other postretirement funded status | | (3,806) | | | (1,652) | |
| Other assets and liabilities | | (78,377) | | | (39,746) | |
| Net cash flow provided by (used in) operating activities | | 70,339 | | | (32,839) | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (39,563) | | | (26,472) | |
| Allowance for equity funds used during construction | | 2,434 | | | 1,818 | |
| Nuclear fuel purchases | | (111,959) | | | (21,994) | |
| Proceeds from sale of nuclear fuel | | — | | | 24,976 | |
| Decrease (increase) in other investments | | 23 | | | (4) | |
| Proceeds from nuclear decommissioning trust fund sales | | 136,035 | | | 60,067 | |
| Investment in nuclear decommissioning trust funds | | (143,773) | | | (66,551) | |
| Changes in money pool receivable - net | | (31,456) | | | 76,391 | |
| | | | |
| Net cash flow provided by (used in) investing activities | | (188,259) | | | 48,231 | |
| | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 233,933 | | | 473,687 | |
| Retirement of long-term debt | | (142,326) | | | (232,016) | |
| Capital contribution from parent | | 150,000 | | | — | |
| | | | |
| Change in money pool payable - net | | (12,246) | | | — | |
| | | | |
| | | | |
| | | | |
| Net cash flow provided by financing activities | | 229,361 | | | 241,671 | |
| | | | |
| Net increase in cash and cash equivalents | | 111,441 | | | 257,063 | |
| Cash and cash equivalents at beginning of period | | 60 | | | 2,940 | |
| Cash and cash equivalents at end of period | | $111,501 | | | $260,003 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | | $10,357 | | | $11,304 | |
| Income taxes | | ($2,326) | | | $— | |
| Noncash investing activities: | | | | |
| Accrued construction expenditures | | $48,856 | | | $36,604 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | | | | | | $171,572 | | | $141,376 | |
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 18,847 | | | 7,923 | |
| Nuclear refueling outage expenses | | | | | | 6,619 | | | 5,927 | |
| Other operation and maintenance | | | | | | 50,200 | | | 43,904 | |
| Decommissioning | | | | | | 10,287 | | | 9,917 | |
| Taxes other than income taxes | | | | | | 7,282 | | | 7,851 | |
| Depreciation and amortization | | | | | | 37,137 | | | 29,923 | |
| Other regulatory charges (credits) - net | | | | | | (6,459) | | | (8,524) | |
| TOTAL | | | | | | 123,913 | | | 96,921 | |
| | | | | | | | |
| OPERATING INCOME | | | | | | 47,659 | | | 44,455 | |
| | | | | | | | |
| OTHER INCOME (DEDUCTIONS) | | | | | | | | |
| Allowance for equity funds used during construction | | | | | | 1,818 | | | 2,047 | |
| Interest and investment income | | | | | | 5,764 | | | 5,232 | |
| Miscellaneous - net | | | | | | (9,078) | | | (1,639) | |
| TOTAL | | | | | | (1,496) | | | 5,640 | |
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | | | | | 10,491 | | | 9,481 | |
| Allowance for borrowed funds used during construction | | | | | | (355) | | | (327) | |
| TOTAL | | | | | | 10,136 | | | 9,154 | |
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | | | | 36,027 | | | 40,941 | |
| | | | | | | | |
| Income taxes | | | | | | 8,482 | | | 9,509 | |
| | | | | | | | |
| NET INCOME | | | | | | $27,545 | | | $31,432 | |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $117 | | | $60 | |
| Temporary cash investments | | 111,384 | | | — | |
| Total cash and cash equivalents | | 111,501 | | | 60 | |
| Accounts receivable: | | | | |
| Associated companies | | 74,348 | | | 54,544 | |
| Other | | 9,681 | | | 6,861 | |
| Total accounts receivable | | 84,029 | | | 61,405 | |
| | | | |
| Materials and supplies - at average cost | | 158,916 | | | 155,565 | |
| Deferred nuclear refueling outage costs | | 28,466 | | | 8,603 | |
| | | | |
| | | | |
| Prepayments and other | | 8,696 | | | 3,373 | |
| TOTAL | | 391,608 | | | 229,006 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 1,424,256 | | | 1,342,317 | |
| TOTAL | | 1,424,256 | | | 1,342,317 | |
| | | | |
| UTILITY PLANT | | | | |
| Electric | | 5,590,516 | | | 5,495,728 | |
| | | | |
| Construction work in progress | | 77,429 | | | 130,866 | |
| Nuclear fuel | | 233,919 | | | 160,655 | |
| TOTAL UTILITY PLANT | | 5,901,864 | | | 5,787,249 | |
| Less - accumulated depreciation and amortization | | 3,502,472 | | | 3,493,299 | |
| UTILITY PLANT - NET | | 2,399,392 | | | 2,293,950 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| | | | |
| Other regulatory assets | | 451,718 | | | 446,360 | |
| | | | |
| Other | | 12,966 | | | 730 | |
| TOTAL | | 464,684 | | | 447,090 | |
| | | | |
| TOTAL ASSETS | | $4,679,940 | | | $4,312,363 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2023 and 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | | $27,545 | | | $31,432 | |
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 63,793 | | | 46,566 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 10,801 | | | (8,690) | |
| Changes in assets and liabilities: | | | | |
| Receivables | | (8,198) | | | (3,845) | |
| Accounts payable | | (21,866) | | | (15,017) | |
| Prepaid taxes and taxes accrued | | (15,836) | | | 5,939 | |
| Interest accrued | | (58) | | | (475) | |
| Other working capital accounts | | 2,837 | | | (20,646) | |
| Other regulatory assets | | (3,247) | | | (2,331) | |
| Other regulatory liabilities | | (47,212) | | | (85,655) | |
| Pension and other postretirement liabilities | | (1,652) | | | (4,542) | |
| Other assets and liabilities | | (39,746) | | | 97,275 | |
| Net cash flow provided by (used in) operating activities | | (32,839) | | | 40,011 | |
| | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (26,472) | | | (46,509) | |
| Allowance for equity funds used during construction | | 1,818 | | | 2,047 | |
| Nuclear fuel purchases | | (21,994) | | | (75,251) | |
| Proceeds from sale of nuclear fuel | | 24,976 | | | 11,257 | |
| Increase in other investments | | (4) | | | — | |
| Proceeds from nuclear decommissioning trust fund sales | | 60,067 | | | 62,717 | |
| Investment in nuclear decommissioning trust funds | | (66,551) | | | (67,669) | |
| Changes in money pool receivable - net | | 76,391 | | | 18,606 | |
| | | | |
| Net cash flow provided by (used in) investing activities | | 48,231 | | | (94,802) | |
| | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 473,687 | | | 225,956 | |
| Retirement of long-term debt | | (232,016) | | | (162,111) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| Net cash flow provided by financing activities | | 241,671 | | | 63,845 | |
| | | | |
| Net increase in cash and cash equivalents | | 257,063 | | | 9,054 | |
| Cash and cash equivalents at beginning of period | | 2,940 | | | 89,201 | |
| Cash and cash equivalents at end of period | | $260,003 | | | $98,255 | |
| | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | | $11,304 | | | $9,749 | |
| | | | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2024 and December 31, 2023 |
| (Unaudited) |
| | 2024 | | 2023 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | | $72 | | | $57 | |
| | | | |
| Accounts payable: | | | | |
| Associated companies | | 209,617 | | | 118,523 | |
| Other | | 85,273 | | | 73,580 | |
| Taxes accrued | | 13,310 | | | 27,401 | |
| | | | |
| Interest accrued | | 13,837 | | | 12,954 | |
| | | | |
| | | | |
| Other | | 4,353 | | | 4,354 | |
| TOTAL | | 326,462 | | | 236,869 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 417,081 | | | 405,744 | |
| Accumulated deferred investment tax credits | | 45,648 | | | 46,960 | |
| Regulatory liability for income taxes - net | | 107,229 | | | 107,458 | |
| Other regulatory liabilities | | 760,084 | | | 782,912 | |
| Decommissioning | | 1,094,941 | | | 1,084,234 | |
| Pension and other postretirement liabilities | | 27,904 | | | 19,491 | |
| Long-term debt | | 830,926 | | | 738,402 | |
| Other | | 8 | | | 1,754 | |
| TOTAL | | 3,283,821 | | | 3,186,955 | |
| | | | |
| Commitments and Contingencies | | | | |
| | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2024 and 2023 | | 1,066,850 | | | 916,850 | |
| Retained earnings (accumulated deficit) | | 2,807 | | | (28,311) | |
| TOTAL | | 1,069,657 | | | 888,539 | |
| | | | |
| TOTAL LIABILITIES AND EQUITY | | $4,679,940 | | | $4,312,363 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | | $723 | | | $78 | |
| Temporary cash investments | | 259,280 | | | 2,862 | |
| Total cash and cash equivalents | | 260,003 | | | 2,940 | |
| Accounts receivable: | | | | |
| Associated companies | | 89,804 | | | 158,601 | |
| Other | | 6,749 | | | 6,145 | |
| Total accounts receivable | | 96,553 | | | 164,746 | |
| | | | |
| Materials and supplies - at average cost | | 138,039 | | | 135,346 | |
| Deferred nuclear refueling outage costs | | 26,344 | | | 33,377 | |
| Prepaid taxes | | 8,239 | | | — | |
| Prepayments and other | | 10,600 | | | 9,097 | |
| TOTAL | | 539,778 | | | 345,506 | |
| | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 1,204,762 | | | 1,142,914 | |
| TOTAL | | 1,204,762 | | | 1,142,914 | |
| | | | |
| UTILITY PLANT | | | | |
| Electric | | 5,434,346 | | | 5,425,449 | |
| | | | |
| Construction work in progress | | 122,510 | | | 102,987 | |
| Nuclear fuel | | 162,124 | | | 193,004 | |
| TOTAL UTILITY PLANT | | 5,718,980 | | | 5,721,440 | |
| Less - accumulated depreciation and amortization | | 3,446,204 | | | 3,412,257 | |
| UTILITY PLANT - NET | | 2,272,776 | | | 2,309,183 | |
| | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| | | | |
| Other regulatory assets | | 418,368 | | | 415,121 | |
| | | | |
| Other | | 848 | | | 1,422 | |
| TOTAL | | 419,216 | | | 416,543 | |
| | | | |
| TOTAL ASSETS | | $4,436,532 | | | $4,214,146 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2023 and December 31, 2022 |
| (Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | | $250,046 | | | $300,037 | |
| | | | |
| Accounts payable: | | | | |
| Associated companies | | 12,901 | | | 21,701 | |
| Other | | 55,406 | | | 58,178 | |
| Taxes accrued | | — | | | 7,597 | |
| | | | |
| Interest accrued | | 11,533 | | | 11,591 | |
| | | | |
| Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
| Other | | 4,067 | | | 4,071 | |
| TOTAL | | 333,953 | | | 506,672 | |
| | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 386,757 | | | 376,070 | |
| Accumulated deferred investment tax credits | | 44,348 | | | 44,692 | |
| Regulatory liability for income taxes - net | | 110,068 | | | 110,840 | |
| Other regulatory liabilities | | 722,081 | | | 665,024 | |
| Decommissioning | | 1,052,748 | | | 1,042,461 | |
| Pension and other postretirement liabilities | | 39,098 | | | 40,750 | |
| Long-term debt | | 770,165 | | | 477,868 | |
| Other | | 2 | | | 2 | |
| TOTAL | | 3,125,267 | | | 2,757,707 | |
| | | | |
| Commitments and Contingencies | | | | |
| | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2023 and 2022 | | 1,086,850 | | | 1,086,850 | |
| Accumulated deficit | | (109,538) | | | (137,083) | |
| TOTAL | | 977,312 | | | 949,767 | |
| | | | |
| TOTAL LIABILITIES AND EQUITY | | $4,436,532 | | | $4,214,146 | |
| | | | |
| See Notes to Financial Statements. | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY | STATEMENTS OF CHANGES IN COMMON EQUITY | STATEMENTS OF CHANGES IN COMMON EQUITY |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2024 and 2023 | | For the Three Months Ended March 31, 2024 and 2023 |
| (Unaudited) | (Unaudited) | (Unaudited) |
| | Common
Stock | |
| Common
Stock | |
| Common
Stock | | | Retained Earnings (Accumulated Deficit) | | Total |
| (In Thousands) | | | (In Thousands) |
| | Common Equity | |
| Common
Stock | | Retained
Earnings (Accumulated Deficit) | | Total |
| (In Thousands) |
| | Balance at December 31, 2021 | $951,850 | | | $139,510 | | | $1,091,360 | |
| Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| Balance at December 31, 2022 | |
| | Net income | Net income | — | | | 31,432 | | | 31,432 | |
| Net income | |
| Net income | |
| | Balance at March 31, 2022 | $951,850 | | | $170,942 | | | $1,122,792 | |
| Balance at March 31, 2023 | |
| Balance at March 31, 2023 | |
| Balance at March 31, 2023 | |
| | | | Balance at December 31, 2022 | $1,086,850 | | | ($137,083) | | | $949,767 | |
| Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Balance at December 31, 2023 | |
| | Net income | Net income | — | | | 27,545 | | | 27,545 | |
| Net income | |
| Net income | |
| Capital contribution from parent | |
| | Balance at March 31, 2023 | $1,086,850 | | | ($109,538) | | | $977,312 | |
| Balance at March 31, 2024 | |
| Balance at March 31, 2024 | |
| Balance at March 31, 2024 | |
| | | See Notes to Financial Statements. | See Notes to Financial Statements. | |
| | See Notes to Financial Statements. | |
| | See Notes to Financial Statements. | |
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy. Also see Notes 1 and 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in "Part I, Item 1A. RISK FACTORS" in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (a)(1)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of
Shares Purchased | | Average Price Paid
per Share | | Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan | | Maximum Dollar$
Amount
of Shares that May
Yet be Purchased
Under a Plan (b)(2) |
| | | | | | | | |
1/01/2023-1/2024-1/31/20232024 | | — | | | $— | | | — | | | $350,052,918 | |
2/01/2023-2/28/20232024-2/29/2024 | | — | | | $— | | | — | | | $350,052,918 | |
3/01/2023-3/2024-3/31/20232024 | | — | | | $— | | | — | | | $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 2023,2024, Entergy withheld 71,722101,960 shares of its common stock at $108.71$99.31 per share, 27,53375,018 shares of its common stock at $107.69$98.86 per share, 12,2651,731 shares of its common stock at $107.59$103.94 per share, 551316 shares of its common stock at $103.72$102.64 per share, 232 shares of its common stock at $106.07$102.77 per share, and 10041 shares of its common stock at $105.79$100.15 per share, and 6 shares of its common stock at $104.68 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)(1)See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.
(b)(2)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
U.S. Securities and Exchange Commission Investigation
The Staff of the Division of Enforcement of the U.S. Securities and Exchange Commission has been conducting an investigation regarding Entergy’s processes and controls relating to its accounting for materials and supplies inventory. Entergy is cooperating with the SEC staff’s investigation and has engaged in discussions with the staff regarding a possible resolution of the investigation. There can be no assurance regarding the timing or terms of any potential resolution, by settlement or otherwise, and any potential impact of a resolution cannot be predicted. Management does not believe, however, that any resolution will have a material impact on Entergy’s business, financial condition, or results of operations.
Rule 10b5-1 Trading Agreements
During the three months ended March 31, 2024, no director or officer of Entergy or any of the Registrant Subsidiaries adopted, modified, 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, except as follows:
On March 6, 2024, Haley Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) for the sale of up to 1,000 shares of Entergy’s common stock. The first date that sale of any shares permitted to be sold under the trading arrangement can occur is June 5, 2024. Subsequent sales under the trading arrangement may occur on a regular basis until December 31, 2024.
Regulation of the Nuclear Power Industry
FollowingThe following is an update to the “Regulation of the Nuclear Power Industry” section of Part I, Item 1 of the Form 10-K.
Nuclear Waste Policy Act of 1982NRC Reactor Oversight Process
Nuclear Plant Decommissioning
In MarchJuly 2023 filingsthe 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 were made reporting on decommissioning funding for allissued a finding and notice of Entergy’s subsidiaries’ nuclear plants.Those reports showed that decommissioning funding for eachviolation related to a radiation monitor calibration issue at River Bend. In December 2023, River Bend successfully completed the inspection of the high pressure core spray system issue and in February 2024, River Bend completed the supplemental inspection of the radiation monitor calibration issue, each in accordance with the NRC’s inspection policies for nuclear plants met the NRC’s financial assurance requirements.in Column 2. The NRC issued its inspection report on both issues in March 2024 and River Bend was returned to Column 1.
Environmental Regulation
FollowingThe following is an update to the “Environmental Regulation” section of Part I, Item 1 of the Form 10-K.
National Ambient Air Quality Standards
See the Form 10-K for discussion of the National Ambient Air Quality Standards (NAAQS) set by the EPA in accordance with the Clean Air Act. FollowingThe following is an update to that discussion.
Good Neighbor Plan/Cross-State Air Pollution RuleRevised Fine Particulate (PM2.5) NAAQS
In March 2023 the2024, EPA released itsissued a final rule which revised the primary annual NAAQS for fine particulate matter, also known as the Good Neighbor Plan,PM2.5, from 12 ug/m3 to 9 ug/m3. This new standard is effective May 2024 and initial attainment/nonattainment designations for areas with available information are due within two years, by May 2026.
For any areas designated as nonattainment for this revised standard, State Implementation Plans (SIPs) to address interstate transport for the 2015 ozone NAAQS whichnonattainment requirements will increase the stringencybe due within 18 months of the Cross-State Air Pollution Rule programeffective date of any initial nonattainment designations. Within Entergy’s utility service territory, current regulatory agency air monitor data for Harris County, Texas and Hinds County, Mississippi reflect annual average PM2.5 concentrations in all fourexcess of this new standard and monitors for several other areas reflect concentrations between 8-9 ug/m3. Entergy will continue to work with state environmental agencies on appropriate methods for assessing attainment and nonattainment with the states where the Utility operating companies operate.The rule will significantly reduce ozone season nitrogen oxides (NOx) emission allowance budgets and allocations for electric generating units. Entergy is currently assessing its compliance options for the final rule. This may include the installation of post-combustion NOx emissions controls on certain coal or large legacy gas units that will operate beyond 2026 and are not currently equipped with such controls. Prior to issuance of the final rule, in February 2023 the EPA issued related 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.this revised fine particulate NAAQS.
Item 6. Exhibits
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| 4(a) - | | | | | | | | |
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| 10(a)4(d) - | Forty-first AssignmentOfficer’s Certificate No. 28-B-21, dated March 4, 2024, supplemental to Mortgage and Deed of Availability Agreement, Consent and Agreement,Trust of Entergy Louisiana, dated as of March 14, 2023, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and The Bank of New York Mellon, as successor trustee (4.77November 1, 2015 (4.67(b) to Form 8-K filed March 14, 20238, 2024 in 1-09067)1-32718). |
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| *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. |
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| *101 SCH - | Inline XBRL Schema Document. |
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| *101 PRE - | Inline XBRL Presentation Linkbase Document. |
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| *101 LAB - | Inline XBRL Label Linkbase Document. |
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| *101 CAL - | Inline XBRL Calculation Linkbase Document. |
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| *101 DEF - | Inline XBRL Definition Linkbase Document. |
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| *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: May 4, 20232, 2024