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__________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | |||||
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended June 30, 2024
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| For the transition period from ____________ to ____________ | |||||
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | |||||||||||
| 1-11299 | ENTERGY CORPORATION | 1-35747 | ENTERGY NEW ORLEANS, LLC | |||||||||||
(a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 | (a Texas limited liability company) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3702 | |||||||||||||
| 72-1229752 | 82-2212934 | |||||||||||||
| 1-10764 | ENTERGY ARKANSAS, LLC | 1-34360 | ENTERGY TEXAS, INC. | |||||||||||
(a Texas limited liability company) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 | (a Texas corporation) 2107 Research Forest Drive The Woodlands, Texas 77380 Telephone (409) 981-2000 | |||||||||||||
| 83-1918668 | 61-1435798 | |||||||||||||
| 1-32718 | ENTERGY LOUISIANA, LLC | 1-09067 | SYSTEM ENERGY RESOURCES, INC. | |||||||||||
(a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 | (an Arkansas corporation) 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 | |||||||||||||
| 47-4469646 | 72-0752777 | |||||||||||||
| 1-31508 | ENTERGY MISSISSIPPI, LLC | |||||||||||||
(a Texas limited liability company) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 | ||||||||||||||
| 83-1950019 | ||||||||||||||
__________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Registrant | Title of Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||
| Entergy Corporation | Common Stock, $0.01 Par Value | ETR | New York Stock Exchange | ||||||||
| Common Stock, $0.01 Par Value | ETR | NYSE Chicago, Inc. | |||||||||
| Entergy Arkansas, LLC | Mortgage Bonds, 4.875% Series due September 2066 | EAI | New York Stock Exchange | ||||||||
| Entergy Louisiana, LLC | Mortgage Bonds, 4.875% Series due September 2066 | ELC | New York Stock Exchange | ||||||||
| Entergy Mississippi, LLC | Mortgage Bonds, 4.90% Series due October 2066 | EMP | New York Stock Exchange | ||||||||
| Entergy New Orleans, LLC | Mortgage Bonds, 5.0% Series due December 2052 | ENJ | New York Stock Exchange | ||||||||
| Mortgage Bonds, 5.50% Series due April 2066 | ENO | New York Stock Exchange | |||||||||
| Entergy Texas, Inc. | 5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share) | ETI/PR | New York Stock Exchange | ||||||||
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files). Yes ☑ No ☐
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||
| Entergy Corporation | ü | ||||||||||||||||||||||||||||
| Entergy Arkansas, LLC | ü | ||||||||||||||||||||||||||||
| Entergy Louisiana, LLC | ü | ||||||||||||||||||||||||||||
| Entergy Mississippi, LLC | ü | ||||||||||||||||||||||||||||
| Entergy New Orleans, LLC | ü | ||||||||||||||||||||||||||||
| Entergy Texas, Inc. | ü | ||||||||||||||||||||||||||||
| System Energy Resources, Inc. | ü | ||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
| Common Stock Outstanding | Outstanding at July 31, 2024 | |||||||
| Entergy Corporation | ($0.01 par value) | 213,830,846 | ||||||
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 makes 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, 2023 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
TABLE OF CONTENTS
| Page Number | |||||
| Part I. Financial Information | |||||
| Entergy Corporation and Subsidiaries | |||||
| Notes to Financial Statements | |||||
Note 13. Asset Retirement Obligations | |||||
| Entergy Arkansas, LLC and Subsidiaries | |||||
Consolidated Income Statements | |||||
| Entergy Louisiana, LLC and Subsidiaries | |||||
i
TABLE OF CONTENTS
| Page Number | |||||
| Entergy Mississippi, LLC and Subsidiaries | |||||
| Entergy New Orleans, LLC and Subsidiaries | |||||
Consolidated Statements of Operations | |||||
| Entergy Texas, Inc. and Subsidiaries | |||||
| System Energy Resources, Inc. | |||||
| Part II. Other Information | |||||
ii
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);
iii
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;
•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 the 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, heat waves, 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 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;
iv
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;
•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 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 (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 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 such as 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;
v
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 benefits 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.
vi
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below:
| Abbreviation or Acronym | Term | ||||
| ALJ | Administrative Law Judge | ||||
| ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas | ||||
| APSC | Arkansas Public Service Commission | ||||
| 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 | ||||
| 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 | ||||
| EPA | United States Environmental Protection Agency | ||||
| FERC | Federal Energy Regulatory Commission | ||||
| Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, 2023, 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 | ||||
| Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC | ||||
| Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), previously owned as part of Entergy’s non-utility business, which ceased power production in April 2020 and was sold in May 2021 | ||||
vii
DEFINITIONS (Continued)
| Abbreviation or Acronym | Term | ||||
| Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), previously owned as part of Entergy’s non-utility business, which ceased power production in April 2021 and was sold in May 2021 | ||||
| IRS | Internal Revenue Service | ||||
| ISO | Independent System Operator | ||||
| kW | Kilowatt, which equals one thousand watts | ||||
| kWh | Kilowatt-hour(s) | ||||
| LPSC | Louisiana Public Service Commission | ||||
| LURC | Louisiana Utilities Restoration Corporation | ||||
| MISO | Midcontinent Independent System Operator, Inc., a regional transmission organization | ||||
| MMBtu | One million British Thermal Units | ||||
| MPSC | Mississippi Public Service Commission | ||||
| MW | Megawatt(s), which equals one thousand kilowatts | ||||
| MWh | Megawatt-hour(s) | ||||
| 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 | ||||
| Utility | Entergy’s reportable 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 | ||||
viii
DEFINITIONS (Concluded)
| Abbreviation or Acronym | Term | ||||
| Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), previously owned as part of Entergy’s non-utility business, which ceased power production in December 2014 and was disposed of in January 2019 | ||||
| Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana | ||||
| weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather | ||||
| White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas | ||||
ix
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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 “Planned Sale of Gas Distribution Businesses” herein and in the Form 10-K for discussion of the planned sale of the Entergy New Orleans and Entergy Louisiana gas distribution businesses. See Note 7 to the financial statements herein for discussion of and financial information regarding Entergy’s business segment.
Results of Operations
Second Quarter 2024 Compared to Second Quarter 2023
Following are income statement variances for Utility, Parent & Other, and Entergy comparing the second quarter 2024 to the second quarter 2023 showing how much the line item increased or (decreased) in comparison to the prior period.
Utility | Parent & Other (a) | Entergy | ||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| 2023 Net Income (Loss) Attributable to Entergy Corporation | $514,227 | ($122,983) | $391,244 | |||||||||||||||||
| Operating revenues | 122,657 | (15,063) | 107,594 | |||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | (60,277) | (890) | (61,167) | |||||||||||||||||
| Purchased power | 1,801 | (7,632) | (5,831) | |||||||||||||||||
| Other regulatory charges (credits) - net | 224,108 | — | 224,108 | |||||||||||||||||
| Other operation and maintenance | 41,842 | 39 | 41,881 | |||||||||||||||||
| Taxes other than income taxes | 3,925 | 17 | 3,942 | |||||||||||||||||
| Depreciation and amortization | 36,401 | 24 | 36,425 | |||||||||||||||||
| Other income (deductions) | 50,001 | (314,439) | (264,438) | |||||||||||||||||
| Interest expense | 20,977 | 17,732 | 38,709 | |||||||||||||||||
| Other expenses | 6,532 | 1 | 6,533 | |||||||||||||||||
| Income taxes | (31,472) | (69,690) | (101,162) | |||||||||||||||||
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,040 | — | 2,040 | |||||||||||||||||
| 2024 Net Income (Loss) Attributable to Entergy Corporation | $441,008 | ($392,086) | $48,922 | |||||||||||||||||
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
Second quarter 2024 results of operations include: (1) a $317 million ($250 million net-of-tax) settlement charge, reflected in Parent & Other above, recognized as a result of a group annuity contract purchased in May 2024 to settle certain pension liabilities; and (2) expenses of $151 million ($112 million net-of-tax), recorded at Utility in second quarter 2024, primarily consisting of regulatory charges to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. See Note 6 to the financial statements herein for discussion of the group annuity contract and settlement charge. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana agreement in principle and the subsequently filed global stipulated settlement agreement.
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Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $2,819 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | 8 | ||||
| Volume/weather | 79 | ||||
| Retail electric price | 35 | ||||
| 2024 operating revenues | $2,941 | ||||
The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial 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 petroleum refining industry.
The retail electric price variance is primarily due to:
•an increase in Entergy Arkansas’s formula rate plan rates effective January 2024;
•an increase in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2023; and
•an increase in Entergy Mississippi’s formula rate plan rates effective April 2024.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the regulatory proceedings discussed above.
Total electric energy sales for Utility for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 9,557 | 9,027 | 6 | ||||||||||||||
| Commercial | 7,236 | 6,969 | 4 | ||||||||||||||
| Industrial | 13,973 | 13,301 | 5 | ||||||||||||||
| Governmental | 626 | 608 | 3 | ||||||||||||||
| Total retail | 31,392 | 29,905 | 5 | ||||||||||||||
| Sales for resale | 3,052 | 3,171 | (4) | ||||||||||||||
| Total | 34,444 | 33,076 | 4 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of operating revenues.
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Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $644 million for the second quarter 2023 to $686 million for the second quarter 2024 primarily due to:
•an increase of $12 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $11 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•a gain of $7 million on the partial sale of a service center at Entergy Texas in April 2023 as part of an eminent domain proceeding; and
•an increase of $5 million in transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for discussion of the recovery of these costs.
Depreciation and amortization expenses increased primarily due to:
•additions to plant in service;
•the recognition of $14 million in depreciation expense in second quarter 2024 at Entergy Texas 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; 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 regulatory charges of $150 million, recorded by Entergy Louisiana in second quarter 2024, to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana agreement in principle and the subsequently filed global stipulated settlement agreement. In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.
Other income increased primarily due to:
•changes in decommissioning trust fund activity, including portfolio rebalancing of decommissioning trust funds in second quarter 2024; and
•a decrease of $11 million in net periodic pension and other postretirement benefits non-service costs primarily as a result of pension settlement charges recorded in second quarter 2023 and a reduction in 2024 in the amortization of deferred pension losses as a result of an amendment to a qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the 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
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to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs.
Interest expense increased primarily due to:
•the issuance by Entergy Arkansas of $300 million of 5.30% Series mortgage bonds in August 2023;
•the issuances by Entergy Arkansas of $400 million of 5.75% Series mortgage bonds and $400 million of 5.45% Series mortgage bonds, each in May 2024; and
•the issuance by Entergy Texas of $350 million of 5.80% Series mortgage bonds in August 2023.
Parent and Other
Other income (deductions) decreased primarily due to a $317 million ($250 million net-of-tax) non-cash settlement charge recognized as a result of a group annuity contract purchased in May 2024 to settle certain pension liabilities. See Note 6 to the financial statements herein for discussion of the group annuity contract and settlement charge.
Interest expense increased primarily due to higher commercial paper balances and the issuance of $1.2 billion of junior subordinated debentures in May 2024. See Note 4 to the financial statements herein for discussion of Entergy’s commercial paper program.
Income Taxes
The effective income tax rate was 39.4% for the second quarter 2024. The difference in the effective income tax rate for the second quarter 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, a provision for uncertain tax positions, and amortization of accumulated deferred income taxes as a result of tax rate changes, 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 25.6% for the second quarter 2023. The difference in the effective income tax rate for the second quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes.
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Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following are income statement variances for Utility, Parent & Other, and Entergy comparing the six months ended June 30, 2024 to the six months ended June 30, 2023 showing how much the line item increased or (decreased) in comparison to the prior period.
Utility | Parent & Other (a) | Entergy | ||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| 2023 Net Income (Loss) Attributable to Entergy Corporation | $911,529 | ($209,350) | $702,179 | |||||||||||||||||
| Operating revenues | (53,161) | (25,676) | (78,837) | |||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | (344,322) | 1,388 | (342,934) | |||||||||||||||||
| Purchased power | 2,028 | (18,004) | (15,976) | |||||||||||||||||
| Other regulatory charges (credits) - net | 309,781 | — | 309,781 | |||||||||||||||||
| Other operation and maintenance | 102,763 | (5,378) | 97,385 | |||||||||||||||||
| Asset write-offs, impairments, and related charges | 131,775 | — | 131,775 | |||||||||||||||||
| Taxes other than income taxes | 11,295 | (361) | 10,934 | |||||||||||||||||
| Depreciation and amortization | 82,147 | 22 | 82,169 | |||||||||||||||||
| Other income (deductions) | 185,805 | (340,449) | (154,644) | |||||||||||||||||
| Interest expense | 30,890 | 29,281 | 60,171 | |||||||||||||||||
| Other expenses | 10,450 | 2 | 10,452 | |||||||||||||||||
| Income taxes | 69,202 | (70,396) | (1,194) | |||||||||||||||||
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 1,932 | — | 1,932 | |||||||||||||||||
| 2024 Net Income (Loss) Attributable to Entergy Corporation | $636,232 | ($512,029) | $124,203 | |||||||||||||||||
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
Results of operations for the six months ended June 30, 2024 include: (1) a $317 million ($250 million net-of-tax) settlement charge, reflected in Parent & Other above, recognized as a result of a group annuity contract purchased in May 2024 to settle certain pension liabilities; (2) expenses of $151 million ($112 million net-of-tax), recorded at Utility in second quarter 2024, primarily consisting of regulatory charges to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023; (3) 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 (4) 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 6 to the financial statements herein for discussion of the group annuity contract and settlement charge. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana agreement in principle and the subsequently filed global stipulated settlement agreement. 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 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.
Results of operations for the six months ended June 30, 2023 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.
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See Notes 2 and 3 to the financial statements in the Form 10-K for 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 six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $5,767 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (201) | ||||
| Storm restoration carrying costs | (31) | ||||
| Retail electric price | 81 | ||||
| Volume/weather | 98 | ||||
| 2024 operating revenues | $5,714 | ||||
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 retail electric price variance is primarily due to:
•an increase in Entergy Arkansas’s formula rate plan rates effective January 2024;
•an increase in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2023;
•increases in Entergy Mississippi’s formula rate plan rates effective April 2023 and April 2024; and
•an increase in Entergy Texas’s base rates effective June 2023, partially offset by the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective over three months beginning in May 2023.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the regulatory proceedings discussed above.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.
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Total electric energy sales for Utility for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 17,315 | 16,303 | 6 | ||||||||||||||
| Commercial | 13,460 | 13,217 | 2 | ||||||||||||||
| Industrial | 26,633 | 26,041 | 2 | ||||||||||||||
| Governmental | 1,198 | 1,185 | 1 | ||||||||||||||
| Total retail | 58,606 | 56,746 | 3 | ||||||||||||||
| Sales for resale | 7,010 | 7,674 | (9) | ||||||||||||||
| Total | 65,616 | 64,420 | 2 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of operating revenues.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,264 million for the six months ended June 30, 2023 to $1,367 million for the six months ended June 30, 2024 primarily due to:
•an increase of $21 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $15 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•an increase of $14 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 $7 million in nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2024 as compared to 2023;
•an increase of $7 million in transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for discussion of the recovery of these costs; and
•a gain of $7 million on the partial sale of a service center at Entergy Texas in April 2023 as part of an eminent domain proceeding.
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.
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Depreciation and amortization expenses increased primarily due to:
•additions to plant in service;
•the recognition of $28 million in depreciation expense in 2024 at Entergy Texas 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; 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:
•regulatory charges of $150 million, recorded by Entergy Louisiana in second quarter 2024, to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. See Note 2 to the financial statements here in for discussion of the Entergy Louisiana agreement in principle and the subsequently filed global stipulated settlement agreement;
•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 2024;
•a decrease of $26 million in net periodic pension and other postretirement benefits non-service costs primarily as a result of pension settlement charges recorded in 2023 and a reduction in 2024 in the amortization of deferred pension losses as a result of an amendment to a qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the 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;
•an increase of $21 million in intercompany dividend income from affiliated preferred membership interests related to storm cost securitizations. The intercompany dividend income on the affiliate preferred
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membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary; and
•a $15 million charge, recorded by Entergy Louisiana in first quarter 2023, for the LURC’s 1% beneficial interest in the storm trust II established as part of the March 2023 storm cost securitization. See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Louisiana March 2023 storm cost securitization.
Interest expense increased primarily due to:
•the issuance by Entergy Arkansas of $300 million of 5.30% Series mortgage bonds in August 2023;
•the issuances by Entergy Arkansas of $400 million of 5.75% Series mortgage bonds and $400 million of 5.45% Series mortgage bonds, each in May 2024; and
•the issuance by Entergy Texas of $350 million of 5.80% Series mortgage bonds in August 2023.
Parent and Other
Other income (deductions) decreased primarily due to:
•a $317 million ($250 million net-of-tax) non-cash settlement charge recognized as a result of a group annuity contract purchased in May 2024 to settle certain pension liabilities. See Note 6 to the financial statements herein for discussion of the group annuity contract and settlement charge; and
•the elimination for consolidation purposes of intercompany dividend income of $21 million from affiliated preferred membership interests, as discussed above.
Interest expense increased primarily due to higher commercial paper balances and the issuance of $1.2 billion of junior subordinated debentures in May 2024. See Note 4 to the financial statements herein for discussion of Entergy’s commercial paper program.
Income Taxes
The effective income tax rate was 29.9% for the six months ended June 30, 2024. The difference in the effective income tax rate for the six months ended June 30, 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, amortization of accumulated deferred income taxes as a result of tax rate changes, and a provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 7.3% for the six months ended June 30, 2023. The difference in the effective income tax rate for the six months ended June 30, 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 3 to the financial statements in the Form 10-K for a discussion of the 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
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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, such credits have not been recognized for the nuclear power produced through the second quarter of 2024. If credits are recognized in future periods, the value of such credits is expected to be provided to 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 exit from the merchant power business.
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. The following is an update to that discussion.
In July 2024 the LPSC staff issued a report recommending LPSC approval of the application of Delta States Utilities LA, LLC (a Bernhard Capital Partners Management LP affiliate) and Entergy Louisiana and the transaction described therein as being in the public interest and proposing certain conditions. Entergy Louisiana anticipates that the LPSC will review the matter at its August Business and Executive meeting.
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 spending plans and other uses of capital, and sources of capital. The 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 is primarily due to the net issuance of long-term debt in 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 65.9 | % | 63.8 | % | |||||||
| Effect of excluding securitization bonds | (0.2 | %) | (0.3 | %) | |||||||
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | 65.7 | % | 63.5 | % | |||||||
| Effect of subtracting cash | (1.1 | %) | (0.1 | %) | |||||||
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 64.6 | % | 63.4 | % | |||||||
(a)Calculation excludes the New Orleans and Texas securitization bonds, which are non-recourse to Entergy New Orleans and Entergy Texas, respectively.
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As of June 30, 2024, 21.3% of the debt outstanding is at the parent company, Entergy Corporation, and 78.2% 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, equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3 billion and expires in June 2029. 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. As there were no borrowings under the facility for the six months ended June 30, 2024, the estimated interest rate as of June 30, 2024 that would have been applied to outstanding borrowings under the facility was 6.94%. The following is a summary of the amounts outstanding and capacity available under the credit facility as of June 30, 2024:
| Capacity | Borrowings | Letters of Credit | Capacity Available | |||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| $3,000 | $— | $4 | $2,996 | |||||||||||||||||
Entergy Corporation’s credit facility includes 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 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 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 $2 billion. As of June 30, 2024, Entergy Corporation had $932.4 million of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 2024 was 5.67%.
Equity Issuances and Equity Distribution Program
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Sources of Capital - Equity Issuances and Equity Distribution Program” in the Form 10-K and Note 3 to the financial statements herein for discussion of the equity distribution program.
11
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 2024 through 2026. The following are updates to that discussion.
Following are the current annual amounts of Entergy’s planned construction and other capital investments.
| Planned construction and capital investments | 2024 | 2025 | 2026 | |||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| Generation | $2,215 | $2,850 | $2,470 | |||||||||||||||||
| Transmission | 1,245 | 1,580 | 1,930 | |||||||||||||||||
| Distribution | 2,080 | 2,470 | 2,045 | |||||||||||||||||
| Utility Support | 355 | 295 | 315 | |||||||||||||||||
| Total | $5,895 | $7,195 | $6,760 | |||||||||||||||||
The updated capital plan for 2024-2026 reflects accelerated resilience spending and a change in the timing of capital investment for certain potential generation projects. The capital plan includes amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth. In addition to routine capital projects, the capital plan also includes amounts Entergy plans to spend on non-routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise expects to make to satisfy regulatory or legal requirements. Amounts include the following types of construction and capital investments:
•Investments in generation projects to modernize, decarbonize, and diversify Entergy’s portfolio, including Walnut Bend Solar, West Memphis Solar, Driver Solar, Bayou Power Station, Orange County Advanced Power Station, Lone Star Power Station, Segno Solar, Votaw Solar, and potential construction of additional generation;
•Investments in Entergy’s Utility nuclear fleet;
•Transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and
•Distribution and Utility support spending to improve reliability, resilience, and customer experience through projects focused on asset renewals and enhancements and grid stability.
Renewables
Alternative RFP and Certification
As 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, was filed in May 2023. In addition to the acquisition of up to 3 GW of solar resources, the filing also seeks approval of a new renewable energy credits-based tariff, Rider Geaux ZERO. In May 2024 the LPSC voted to approve the application, and in June 2024 the LPSC issued an order reflecting that approval.
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Segno Solar and Votaw Solar
In July 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Segno Solar facility, a 170 MW solar facility to be located in Polk County, Texas, and the Votaw Solar facility, a 141 MW solar facility to be located in Hardin County, Texas. The Segno Solar facility will cost an estimated $351.6 million, and the Votaw Solar facility will cost an estimated $303.8 million, in each case inclusive of estimated transmission interconnection and upgrade costs. Subject to receipt of required regulatory approval and other conditions, the Segno Solar facility is expected to be in service by early 2027, and the Votaw Solar facility is expected to be in service by mid-2028.
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. A procedural schedule has been established with a hearing in December 2024.
Legend Power Station and Lone Star Power Station
In June 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Legend Power Station, a 754 MW combined-cycle combustion turbine facility, which will be enabled with both carbon capture and storage and hydrogen co-firing optionality, to be located in Jefferson County, Texas, and the Lone Star Power Station, a 453 MW simple-cycle combustion turbine facility, which will be enabled with hydrogen co-firing optionality, to be located in Liberty County, Texas. Legend Power Station will cost an estimated $1.46 billion and Lone Star Power Station will cost an estimated $735.3 million, in each case inclusive of the estimated costs of the generation facilities, interconnection costs, transmission network upgrades, and an allowance for funds used during construction. As described in the application, Entergy Texas is considering alternative financing approaches for Legend Power Station and plans to pursue the financing option that is in the best interest of customers. In July 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and, also in July 2024, the ALJ with the State Office of Administrative Hearings adopted a procedural schedule, with a hearing on the merits scheduled to begin in October 2024. Subject to receipt of required regulatory approval and other conditions, both facilities are expected to be in service by mid-2028.
Resilience and Grid 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 in the December 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. 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 with cost recovery via a forward-looking rider with semi-annual true-ups. The plan is subject to specified reporting requirements and includes a performance review of the
13
hardened assets. The LPSC order approving the framework does not include any restrictions on Entergy Louisiana’s ability to file applications for approval of additional investments in resilience.
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. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council approval of the first phase (five years and $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 required 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 with the City Council for approval 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. In July 2024 the City Council held a technical conference regarding Entergy New Orleans’s three-year resilience plan.
Entergy Texas
In June 2024, Entergy Texas filed an application with the PUCT requesting approval of Phase I of its Texas Future Ready Resiliency Plan, a cost-effective set of measures to begin accelerating the resiliency of Entergy Texas’s transmission and distribution system. Phase I is comprised of projects totaling approximately $335.1 million, including approximately $198 million of projects contingent upon Entergy Texas’s receipt of grant funds in that amount from the Texas Energy Fund. The projects in Phase I include distribution and transmission hardening and modernization projects and targeted vegetation management projects to mitigate the risk of wildfire. Work on these projects is expected to commence within approximately three years of PUCT approval. The PUCT referred the proceeding to the State Office of Administrative Hearings in June 2024. In July 2024, Entergy Texas filed a motion, on behalf of the parties to the proceeding, requesting the ALJ with the State Office of Administrative Hearings adopt an agreed proposed procedural schedule, with a hearing on the merits scheduled for September 2024. A PUCT decision is expected in fourth quarter 2024.
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 segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its July 2024 meeting, the Board declared a dividend of $1.13 per share.
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Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Cash and cash equivalents at beginning of period | $133 | $224 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 1,546 | 1,826 | |||||||||
| Investing activities | (2,466) | (2,445) | |||||||||
| Financing activities | 2,142 | 1,589 | |||||||||
| Net increase in cash and cash equivalents | 1,222 | 970 | |||||||||
| Cash and cash equivalents at end of period | $1,355 | $1,194 | |||||||||
Operating Activities
Net cash flow provided by operating activities decreased $280 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to lower collections from Utility customers, including the effect of higher deferred fuel collections in 2023, and the timing of payments to vendors.
Investing Activities
Net cash flow used in investing activities increased $21 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the initial payment of approximately $170 million in February 2024 for the purchase of the Walnut Bend Solar facility by Entergy Arkansas; and
•an increase of $34 million in transmission construction expenditures primarily due to increased spending on various transmission projects in 2024 and increased development in the Utility service area, partially offset by lower capital expenditures for storm restoration in 2024.
The increase was partially offset by:
•a decrease of $115 million in nuclear construction expenditures primarily due to decreased spending on various nuclear projects in 2024;
•a decrease of $44 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2024 and a lower scope of work on projects in 2024 as compared to 2023; and
•the substantial completion payment of approximately $30 million in April 2023 for the purchase of the Sunflower Solar facility by the Entergy Mississippi tax equity partnership.
See Note 14 to the financial statements herein for discussion of the Walnut Bend Solar facility purchase and Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase.
Financing Activities
Net cash flow provided by financing activities increased $553 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to long-term debt activity providing
15
approximately $2,688 million of cash in 2024 compared to providing approximately $216 million of cash in 2023. The increase was partially offset by:
•proceeds from securitization of $1.5 billion received by the storm trust II at Entergy Louisiana in 2023; and
•net repayments of $206 million of commercial paper in 2024 as compared to net issuances of $281 million of commercial paper in 2023.
See Note 2 to the financial statements in 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.
Federal Regulation
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding federal regulatory proceedings.
Market and Credit Risk Sensitive Instruments
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Market and Credit Risk Sensitive Instruments” in the Form 10-K for a discussion of market and credit risk sensitive instruments. The following is an update to that discussion.
Some of the agreements to sell the power produced by Entergy’s non-utility operations business contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under such agreement. The primary form of credit support used to satisfy these requirements is an Entergy Corporation guarantee. Cash and letters of credit are also acceptable forms of credit support. At June 30, 2024, based on power prices at that time, Entergy had liquidity exposure of $6 million under the guarantees in place supporting its non-utility operations business transactions and $3 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
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
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Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except Waterford 3. Entergy expects the NRC to determine that Waterford 3 entered Column 2, effective second quarter 2024, based on exceeding the threshold for reactor scrams in June 2024. Waterford 3 will remain in Column 2 until a supplemental inspection is satisfactorily completed.
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, 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.
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| ENTERGY CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED INCOME STATEMENTS | |||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In Thousands, Except Share Data) | |||||||||||||||||||||||
| OPERATING REVENUES | |||||||||||||||||||||||
| Electric | $2,906,047 | $2,785,244 | $5,612,553 | $5,668,654 | |||||||||||||||||||
| Natural gas | 35,357 | 33,503 | 101,024 | 98,084 | |||||||||||||||||||
| Other | 12,216 | 27,279 | 34,671 | 60,347 | |||||||||||||||||||
| TOTAL | 2,953,620 | 2,846,026 | 5,748,248 | 5,827,085 | |||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Operation and Maintenance: | |||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 522,550 | 583,717 | 1,139,166 | 1,482,100 | |||||||||||||||||||
| Purchased power | 200,705 | 206,536 | 428,847 | 444,823 | |||||||||||||||||||
| Nuclear refueling outage expenses | 38,277 | 34,785 | 76,540 | 72,018 | |||||||||||||||||||
| Other operation and maintenance | 701,775 | 659,894 | 1,388,806 | 1,291,421 | |||||||||||||||||||
| Asset write-offs, impairments, and related charges | — | — | 131,775 | — | |||||||||||||||||||
| Decommissioning | 54,193 | 51,152 | 107,574 | 101,644 | |||||||||||||||||||
| Taxes other than income taxes | 187,520 | 183,578 | 379,949 | 369,015 | |||||||||||||||||||
| Depreciation and amortization | 505,363 | 468,938 | 1,005,024 | 922,855 | |||||||||||||||||||
| Other regulatory charges (credits) - net | 125,607 | (98,501) | 234,954 | (74,827) | |||||||||||||||||||
| TOTAL | 2,335,990 | 2,090,099 | 4,892,635 | 4,609,049 | |||||||||||||||||||
| OPERATING INCOME | 617,630 | 755,927 | 855,613 | 1,218,036 | |||||||||||||||||||
| OTHER INCOME (DEDUCTIONS) | |||||||||||||||||||||||
| Allowance for equity funds used during construction | 29,275 | 24,867 | 56,070 | 48,013 | |||||||||||||||||||
| Interest and investment income | 70,587 | 45,428 | 221,283 | 93,687 | |||||||||||||||||||
| Miscellaneous - net | (342,549) | (48,544) | (393,294) | (102,997) | |||||||||||||||||||
| TOTAL | (242,687) | 21,751 | (115,941) | 38,703 | |||||||||||||||||||
| INTEREST EXPENSE | |||||||||||||||||||||||
| Interest expense | 301,263 | 261,349 | 579,006 | 516,678 | |||||||||||||||||||
| Allowance for borrowed funds used during construction | (11,686) | (10,481) | (22,229) | (20,072) | |||||||||||||||||||
| TOTAL | 289,577 | 250,868 | 556,777 | 496,606 | |||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 85,366 | 526,810 | 182,895 | 760,133 | |||||||||||||||||||
| Income taxes | 33,634 | 134,796 | 54,627 | 55,821 | |||||||||||||||||||
| CONSOLIDATED NET INCOME | 51,732 | 392,014 | 128,268 | 704,312 | |||||||||||||||||||
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,810 | 770 | 4,065 | 2,133 | |||||||||||||||||||
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $48,922 | $391,244 | $124,203 | $702,179 | |||||||||||||||||||
| Earnings per average common share: | |||||||||||||||||||||||
| Basic | $0.23 | $1.85 | $0.58 | $3.32 | |||||||||||||||||||
| Diluted | $0.23 | $1.84 | $0.58 | $3.31 | |||||||||||||||||||
| Basic average number of common shares outstanding | 213,617,110 | 211,449,211 | 213,380,414 | 211,400,230 | |||||||||||||||||||
| Diluted average number of common shares outstanding | 214,376,721 | 212,201,529 | 214,155,768 | 212,173,254 | |||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||
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| ENTERGY CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||
| Net Income | $51,732 | $392,014 | $128,268 | $704,312 | |||||||||||||||||||
| Other comprehensive income (loss) | |||||||||||||||||||||||
| Pension and other postretirement adjustment (net of tax expense (benefit) of $65,371, ($1,065), $64,170, and ($335)) | 246,489 | (3,292) | 242,821 | (1,265) | |||||||||||||||||||
| Other comprehensive income (loss) | 246,489 | (3,292) | 242,821 | (1,265) | |||||||||||||||||||
| Comprehensive Income | 298,221 | 388,722 | 371,089 | 703,047 | |||||||||||||||||||
| Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,810 | 770 | 4,065 | 2,133 | |||||||||||||||||||
| Comprehensive Income Attributable to Entergy Corporation | $295,411 | $387,952 | $367,024 | $700,914 | |||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||
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| ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Consolidated net income | $128,268 | $704,312 | ||||||||||||
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | 1,206,492 | 1,116,843 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 15,998 | 43,502 | ||||||||||||
| Asset write-offs, impairments, and related charges | 131,775 | — | ||||||||||||
| Pension settlement charge | 316,738 | — | ||||||||||||
| Changes in working capital: | ||||||||||||||
| Receivables | (187,554) | 65,259 | ||||||||||||
| Fuel inventory | 18,324 | (43,493) | ||||||||||||
| Accounts payable | (149,554) | (267,820) | ||||||||||||
| Taxes accrued | 16,546 | (25,080) | ||||||||||||
| Interest accrued | 23,560 | 6,807 | ||||||||||||
| Deferred fuel costs | 134,953 | 563,610 | ||||||||||||
| Other working capital accounts | (120,277) | (148,738) | ||||||||||||
| Changes in provisions for estimated losses | 4,630 | (16,564) | ||||||||||||
| Changes in regulatory assets | 260,722 | 391,188 | ||||||||||||
| Changes in other regulatory liabilities | 380,394 | 308,058 | ||||||||||||
| Effect of securitization on regulatory asset | — | (491,150) | ||||||||||||
| Changes in pension and other postretirement funded status | (131,539) | (128,379) | ||||||||||||
| Other | (503,020) | (252,383) | ||||||||||||
Net cash flow provided by operating activities | 1,546,456 | 1,825,972 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction/capital expenditures | (2,124,279) | (2,311,465) | ||||||||||||
| Allowance for equity funds used during construction | 56,070 | 48,013 | ||||||||||||
| Nuclear fuel purchases | (161,483) | (134,698) | ||||||||||||
| Payment for purchase of plant and assets | (172,614) | (30,433) | ||||||||||||
| Proceeds from sale of assets | — | 11,000 | ||||||||||||
| Insurance proceeds received for property damages | — | 6,184 | ||||||||||||
| Changes in securitization account | 3,976 | 7,803 | ||||||||||||
| Payments to storm reserve escrow accounts | (9,595) | (9,080) | ||||||||||||
| Decrease (increase) in other investments | (9,689) | 262 | ||||||||||||
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | — | 17,933 | ||||||||||||
| Proceeds from nuclear decommissioning trust fund sales | 1,201,162 | 435,903 | ||||||||||||
| Investment in nuclear decommissioning trust funds | (1,250,039) | (486,853) | ||||||||||||
| Net cash flow used in investing activities | (2,466,491) | (2,445,431) | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of: | ||||||||||||||
| Long-term debt | 5,068,266 | 2,489,886 | ||||||||||||
| Treasury stock | 45,982 | 4,078 | ||||||||||||
| Retirement of long-term debt | (2,379,903) | (2,273,773) | ||||||||||||
| Changes in commercial paper - net | (205,820) | 280,765 | ||||||||||||
| Capital contribution from noncontrolling interest | — | 25,708 | ||||||||||||
| Proceeds received by storm trust related to securitization | — | 1,457,676 | ||||||||||||
| Other | 105,540 | 66,898 | ||||||||||||
| Dividends paid: | ||||||||||||||
| Common stock | (482,255) | (452,442) | ||||||||||||
| Preferred stock | (9,159) | (9,159) | ||||||||||||
| Net cash flow provided by financing activities | 2,142,651 | 1,589,637 | ||||||||||||
| Net increase in cash and cash equivalents | 1,222,616 | 970,178 | ||||||||||||
| Cash and cash equivalents at beginning of period | 132,548 | 224,164 | ||||||||||||
| Cash and cash equivalents at end of period | $1,355,164 | $1,194,342 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $532,742 | $490,201 | ||||||||||||
| Income taxes | $7,822 | $31,231 | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $537,463 | $535,714 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
21
| ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $82,850 | $71,609 | ||||||||||||
| Temporary cash investments | 1,272,314 | 60,939 | ||||||||||||
| Total cash and cash equivalents | 1,355,164 | 132,548 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 777,791 | 699,411 | ||||||||||||
| Allowance for doubtful accounts | (16,642) | (25,905) | ||||||||||||
| Other | 227,075 | 225,334 | ||||||||||||
| Accrued unbilled revenues | 592,785 | 494,615 | ||||||||||||
| Total accounts receivable | 1,581,009 | 1,393,455 | ||||||||||||
| Deferred fuel costs | 78,434 | 169,967 | ||||||||||||
| Fuel inventory - at average cost | 174,475 | 192,799 | ||||||||||||
| Materials and supplies - at average cost | 1,576,459 | 1,418,969 | ||||||||||||
| Deferred nuclear refueling outage costs | 134,500 | 140,115 | ||||||||||||
| Prepayments and other | 247,056 | 213,016 | ||||||||||||
| TOTAL | 5,147,097 | 3,660,869 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Decommissioning trust funds | 5,265,003 | 4,863,710 | ||||||||||||
| Non-utility property - at cost (less accumulated depreciation) | 417,553 | 418,546 | ||||||||||||
| Storm reserve escrow accounts | 332,801 | 323,206 | ||||||||||||
| Other | 71,920 | 69,494 | ||||||||||||
| TOTAL | 6,087,277 | 5,674,956 | ||||||||||||
| PROPERTY, PLANT, AND EQUIPMENT | ||||||||||||||
| Electric | 68,241,911 | 66,850,474 | ||||||||||||
| Natural gas | 732,677 | 717,503 | ||||||||||||
| Construction work in progress | 2,682,373 | 2,109,703 | ||||||||||||
| Nuclear fuel | 682,247 | 707,852 | ||||||||||||
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | 72,339,208 | 70,385,532 | ||||||||||||
| Less - accumulated depreciation and amortization | 27,171,548 | 26,551,203 | ||||||||||||
| PROPERTY, PLANT, AND EQUIPMENT - NET | 45,167,660 | 43,834,329 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets (includes securitization property of $243,478 as of June 30, 2024 and $250,830 as of December 31, 2023) | 5,408,682 | 5,669,404 | ||||||||||||
| Deferred fuel costs | 172,201 | 172,201 | ||||||||||||
| Goodwill | 374,099 | 374,099 | ||||||||||||
| Accumulated deferred income taxes | 16,510 | 16,367 | ||||||||||||
| Other | 392,771 | 301,171 | ||||||||||||
| TOTAL | 6,364,263 | 6,533,242 | ||||||||||||
| TOTAL ASSETS | $62,766,297 | $59,703,396 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
22
| ENTERGY CORPORATION AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $1,517,072 | $2,099,057 | ||||||||||||
| Notes payable and commercial paper | 932,351 | 1,138,171 | ||||||||||||
| Accounts payable | 1,314,661 | 1,566,745 | ||||||||||||
| Customer deposits | 462,222 | 446,146 | ||||||||||||
| Taxes accrued | 450,759 | 434,213 | ||||||||||||
| Interest accrued | 237,757 | 214,197 | ||||||||||||
| Deferred fuel costs | 262,348 | 218,927 | ||||||||||||
| Pension and other postretirement liabilities | 56,521 | 59,508 | ||||||||||||
| Other | 253,489 | 219,528 | ||||||||||||
| TOTAL | 5,487,180 | 6,396,492 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 4,321,771 | 4,245,982 | ||||||||||||
| Accumulated deferred investment tax credits | 199,745 | 205,973 | ||||||||||||
| Regulatory liability for income taxes - net | 1,042,248 | 1,033,242 | ||||||||||||
| Other regulatory liabilities | 3,488,314 | 3,116,926 | ||||||||||||
| Decommissioning and asset retirement cost liabilities | 4,683,902 | 4,505,782 | ||||||||||||
| Accumulated provisions | 467,200 | 462,570 | ||||||||||||
| Pension and other postretirement liabilities | 519,861 | 648,413 | ||||||||||||
| Long-term debt (includes securitization bonds of $248,670 as of June 30, 2024 and $263,007 as of December 31, 2023) | 26,301,092 | 23,008,839 | ||||||||||||
| Other | 1,353,919 | 1,116,661 | ||||||||||||
| TOTAL | 42,378,052 | 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 | 7,785,921 | 7,795,411 | ||||||||||||
| Retained earnings | 11,582,332 | 11,940,384 | ||||||||||||
| Accumulated other comprehensive income (loss) | 80,361 | (162,460) | ||||||||||||
| Less - treasury stock, at cost (67,166,752 shares in 2024 and 68,126,778 shares in 2023) | 4,883,695 | 4,953,498 | ||||||||||||
Total shareholders’ equity | 14,567,729 | 14,622,647 | ||||||||||||
Subsidiaries’ preferred stock without sinking fund and noncontrolling interests | 113,926 | 120,459 | ||||||||||||
| TOTAL | 14,681,655 | 14,743,106 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $62,766,297 | $59,703,396 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
23
| ENTERGY CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Subsidiaries’ Preferred Stock and Noncontrolling Interests | Common Stock | Treasury Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||||||||||||
| Consolidated net income (a) | 2,810 | — | — | — | 48,922 | — | 51,732 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 246,489 | 246,489 | ||||||||||||||||||||||||||||||||||
| Common stock issuances related to stock plans | — | — | 38,922 | 16,352 | — | — | 55,274 | ||||||||||||||||||||||||||||||||||
| Common stock dividends declared | — | — | — | — | (241,296) | — | (241,296) | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (330) | — | — | — | — | — | (330) | ||||||||||||||||||||||||||||||||||
| Preferred dividend requirements of subsidiaries (a) | (4,580) | — | — | — | — | — | (4,580) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $113,926 | $2,810 | ($4,883,695) | $7,785,921 | $11,582,332 | $80,361 | $14,681,655 | ||||||||||||||||||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||||||||||||||||||||
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2024 and second quarter 2024 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |||||||||||||||||||||||||||||||||||||||||
24
| ENTERGY CORPORATION AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | |||||||||||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Common Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Subsidiaries' Preferred Stock and Noncontrolling Interests | Common Stock | Treasury Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | $97,907 | $2,797 | ($4,978,994) | $7,632,895 | $10,502,041 | ($191,754) | $13,064,892 | ||||||||||||||||||||||||||||||||||
| Consolidated net income (a) | 1,364 | — | — | — | 310,935 | — | 312,299 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | 2,027 | 2,027 | ||||||||||||||||||||||||||||||||||
| Common stock issuances related to stock plans | — | — | 19,599 | (15,118) | — | — | 4,481 | ||||||||||||||||||||||||||||||||||
| Common stock dividends declared | — | — | — | — | (226,194) | — | (226,194) | ||||||||||||||||||||||||||||||||||
| Beneficial interest in storm trust | 14,577 | — | — | — | — | — | 14,577 | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (574) | — | — | — | — | — | (574) | ||||||||||||||||||||||||||||||||||
| Preferred dividend requirements of subsidiaries (a) | (4,580) | — | — | — | — | — | (4,580) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | $108,694 | $2,797 | ($4,959,395) | $7,617,777 | $10,586,782 | ($189,727) | $13,166,928 | ||||||||||||||||||||||||||||||||||
| Consolidated net income (a) | 770 | — | — | — | 391,244 | — | 392,014 | ||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | — | (3,292) | (3,292) | ||||||||||||||||||||||||||||||||||
| Common stock issuances related to stock plans | — | — | 600 | 16,528 | — | — | 17,128 | ||||||||||||||||||||||||||||||||||
| Common stock dividends declared | — | — | — | — | (226,248) | — | (226,248) | ||||||||||||||||||||||||||||||||||
| Capital contribution from noncontrolling interest | 25,708 | — | — | — | — | — | 25,708 | ||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | (113) | — | — | — | — | — | (113) | ||||||||||||||||||||||||||||||||||
| Preferred dividend requirements of subsidiaries (a) | (4,580) | — | — | — | — | — | (4,580) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $130,479 | $2,797 | ($4,958,795) | $7,634,305 | $10,751,778 | ($193,019) | $13,367,545 | ||||||||||||||||||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||||||||||||||||||||
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023 and second quarter 2023 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |||||||||||||||||||||||||||||||||||||||||
25
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.
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.
Nuclear Insurance
See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.
Non-Nuclear Property Insurance
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.
Employment and Labor-related Proceedings
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.
Grand Gulf - Related Agreements
See Note 8 to the financial statements in the Form 10-K for information regarding Grand Gulf-related agreements.
26
Nelson Industrial Steam Company (Entergy Louisiana)
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Nelson Industrial Steam Company 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 2024, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease in the rate from $0.01883 per kWh to $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 decrease is a large over-recovered balance as a result of lower natural gas prices in 2023. To mitigate the effect of projected increases in natural gas prices in 2024, Entergy Arkansas adjusted the over-recovered balance included in the March 2024 annual redetermination filing by $43.7 million. This adjustment is expected to reduce the rate change that will be reflected in the 2025 energy cost rate redetermination. The redetermined rate of $0.00882 per kWh became effective with the first billing cycle in April 2024 through the normal operation of the tariff.
Entergy Mississippi
In June 2024 the MPSC approved a joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 2024 formula rate plan filing. The 2024 formula rate plan filing included the conclusion of the modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider, which were approved in October 2022 and allowed Entergy Mississippi to recover certain under-collected fuel balances. The stipulation provided for Entergy Mississippi to reduce its net energy cost factor. See “Retail Rate Proceedings - Filings with the MPSC (Entergy Mississippi) - Retail Rates - 2024 Formula Rate Plan Filing” below for further discussion of the 2024 formula rate plan filing and the joint stipulation agreement.
27
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that discussion.
Filings with the APSC (Entergy Arkansas)
Retail Rates
2024 Formula Rate Plan Filing
In July 2024, Entergy Arkansas filed with the APSC its 2024 formula rate plan filing to set its formula rate for the 2025 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the 2025 projected year and a netting adjustment for the 2023 historical year. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2025 projected year was 8.43% resulting in a revenue deficiency of $69.5 million. The earned rate of return on common equity for the 2023 historical year was 7.48% resulting in a $33.1 million netting adjustment. The total proposed revenue change for the 2025 projected year and 2023 historical year netting adjustment is $102.6 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the resulting increase was limited to $82.6 million. This filing is subject to review by the APSC, which is expected to issue its order on the filing in December 2024.
Grand Gulf Credit Rider
In June 2024, Entergy Arkansas filed with the APSC a tariff to provide retail customers a credit resulting from the terms of the settlement agreement between Entergy Arkansas, System Energy, additional named Entergy parties, and the APSC pertaining to System Energy’s billings for wholesale sales of energy and capacity from the Grand Gulf nuclear plant. See “Complaints Against System Energy - System Energy Settlement with the APSC” below and in the Form 10-K for discussion of the settlement. In July 2024 the APSC approved the tariff, under which Entergy Arkansas will refund retail customers a total of $100.6 million with a one-time bill credit during the August 2024 billing cycle.
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
As discussed in the Form 10-K, in August 2023, Entergy Louisiana filed an application for approval of a regulatory blueprint necessary for it to strengthen the electric grid for the State of Louisiana, which contains a dual-path request to update rates through either: (1) extension of Entergy Louisiana’s current formula rate plan (with certain modifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of rates resulting from a cost-of-service study (the Rate Case path). The application complies with Entergy Louisiana’s previous formula rate plan extension order requiring that for Entergy Louisiana to obtain another extension of its formula rate plan that included a rate reset, Entergy Louisiana would need to submit a full cost-of-service/rate case. Entergy Louisiana’s filing supports the need to extend Entergy Louisiana’s formula rate plan with credit supportive mechanisms needed to facilitate investment in the distribution, transmission, and generation functions.
A status conference was held in October 2023 at which a procedural schedule was adopted that included three technical conferences and a hearing in August 2024. In March 2024 the parties agreed to an eight-week
28
extension of all deadlines to allow for continuation of settlement negotiations, and the ALJ issued an order with an amended procedural schedule. In July 2024 the parties agreed to extend further the procedural schedule to facilitate the continuation of settlement negotiations, with the hearing commencing in December 2024.
In July 2024, Entergy Louisiana reached an agreement in principle with the LPSC staff and the intervenors in the proceeding and filed with the LPSC a joint motion to suspend the procedural schedule to allow for all parties to finalize a stipulated settlement agreement.
In August 2024, Entergy Louisiana and the LPSC staff jointly filed a global stipulated settlement agreement for consideration by the LPSC with key terms as follows:
•continuation of the formula rate plan for 2024-2026 (test years 2023-2025);
•a base formula rate plan revenue increase of $120 million for test year 2023, effective for rates beginning September 2024;
•a $140 million cumulative cap on base formula rate plan revenue increases, if needed, for test years 2024 and 2025, excluding outside the bandwidth items;
•$184 million of customer rate credits to be given over two years, including increasing customer sharing of income tax benefits resulting from the 2016-2018 IRS audit, to resolve any remaining disputed issues stemming from formula rate plan test years prior to test year 2023, including but not limited to the investigation into Entergy Services costs billed to Entergy Louisiana. As discussed in Note 3 to the financial statements in the Form 10-K, a $38 million regulatory liability was recorded in 2023 in connection with the 2016-2018 IRS audit;
•$75.8 million of customer rate credits, as provided for in the System Energy global settlement, to be credited over three years subject to and conditioned upon FERC approval of the System Energy global settlement. See “Complaints Against System Energy – System Energy Settlement with the LPSC” below for further details of the System Energy global settlement;
•$5.8 million of customer rate credits provided for in the Entergy Louisiana formula rate plan global settlement agreement approved by the LPSC in November 2023 credited over one year. See Note 2 to the financial statements in the Form 10-K for the discussion of the November 2023 Entergy Louisiana formula rate plan global settlement agreement;
•an increase in the allowed midpoint return on common equity from 9.5% to 9.7%, with a bandwidth of 40 basis points above and below the midpoint, for the extended term of the formula rate plan, except that for test year 2023 in which the authorized return on common equity shall have no bearing on the change in base formula rate plan revenue described above and, for test year 2024, any earnings above the authorized return on common equity shall be returned to customers through a credit;
•an increase in nuclear depreciation rates by $15 million in each of the 2023, 2024, and 2025 test years outside of the formula rate plan bandwidth calculation; and
•for the transmission recovery mechanism and the distribution recovery mechanism, no change to the existing floors, but the caps for both would be $350 million for test year 2023, $375 million for test year 2024, and $400 million for test year 2025. LPSC-approved transmission projects will be exempt from the transmission recovery mechanism cap.
The terms of the global stipulated settlement agreement are subject to approval by the LPSC and will not go into effect unless/until such approval is obtained. Entergy Louisiana anticipates the global stipulated settlement agreement to be considered by the LPSC at its Business and Executive meeting on August 14, 2024.
Based on the July 2024 agreement in principle, in second quarter 2024 Entergy Louisiana recorded expenses of $151 million ($111 million net-of-tax) primarily consisting of regulatory charges to reflect the effects of the agreement in principle.
29
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 2024 test year filing showed a $63.4 million rate increase was necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 7.10%, within the formula rate plan bandwidth. The 2023 look-back filing compared actual 2023 results to the approved benchmark return on rate base and reflected 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.
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 because the MPSC had not yet approved the proposed depreciation rates.
In June 2024, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2024 test year filing, with the exception of immaterial adjustments to certain operation and maintenance expenses. After performance adjustments, the formula rate plan reflected an earned return on rate base of 6.08% for calendar year 2024, which resulted in a total revenue increase of $64.6 million for 2024. The joint stipulation also recommended approval of a revised customer charge of $31.82 per month for residential customers and $53.10 per month for general service customers. Pursuant to the stipulation, Entergy Mississippi’s 2023 look-back filing reflected an earned return on rate base of 6.81%, resulting in an increase of $0.3 million in the formula rate plan revenues for 2023. Finally, the stipulation recommended approval of Entergy Mississippi’s proposed depreciation rates with those rates to be implemented upon request and approval at a later date. In June 2024 the MPSC approved the joint stipulation with rates effective in July 2024. The approval also included a reduction to the energy cost factor, resulting in a net bill decrease for a typical residential customer using 1,000 kWh per month. Also in June 2024, Entergy Mississippi recorded regulatory credits of $7.3 million to reflect the difference between interim rates placed in effect in April 2024 and the rates reflected in the joint stipulation.
Also, in May 2024, Entergy Mississippi received approval from the MPSC for formula rate plan revisions that were necessary for Entergy Mississippi to comply with recently passed state legislation. The legislation allows Entergy Mississippi to make interim rate adjustments to recover the non-fuel related annual ownership cost of certain facilities that directly or indirectly provide service to customers who own certain data processing center projects as specified in the legislation. Entergy Mississippi filed its interim facilities rate adjustment report in May 2024 to recover approximately $8.7 million of these costs over a six-month period with rates effective beginning in July 2024.
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Filings with the City Council (Entergy New Orleans)
Retail Rates
2024 Formula Rate Plan Filing
In April 2024, Entergy New Orleans submitted to the City Council its formula rate plan 2023 test year filing. Without the requested rate change in 2024, the 2023 test year evaluation report produced an electric earned return on equity of 8.66% and a gas earned return on equity of 5.87% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $12.6 million rate increase based on the formula set by the City Council in the 2018 rate case and approved again by the City Council in 2023. The formula would result in an increase in authorized electric revenues of $7.0 million and an increase in authorized gas revenues of $5.6 million. Following City Council review, the City Council’s advisors issued a report in July 2024 seeking a reduction in Entergy New Orleans’s requested formula rate plan revenues in an aggregate amount of approximately $1.6 million for electric and gas together due to alleged errors. The City Council’s advisors’ report began a 35-day period to resolve any disputes among the parties regarding the formula rate plan. Resulting rates will be effective with the first billing cycle of September 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
2022 Base Rate Case
As discussed in the Form 10-K, in August 2023 the PUCT issued an order severing issues related to electric vehicle charging infrastructure in the 2022 base rate case proceeding to a separate proceeding. In December 2023 the PUCT referred the separate proceeding to resolve the issues related to electric vehicle charging infrastructure to the State Office of Administrative Hearings. A hearing on the merits was held in April 2024. In June 2024 the ALJ with the State Office of Administrative Hearings issued a proposal for decision concluding that it is appropriate for a vertically integrated electric utility, and Entergy Texas specifically, to own vehicle-charging facilities or other transportation electrification and charging infrastructure and recommending that both of Entergy Texas’s proposed transportation electrification riders be approved. A PUCT decision is expected in third quarter 2024.
Distribution Cost Recovery Factor (DCRF) Rider
In June 2024, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $40.3 million annually based on its capital invested in distribution between January 1, 2022 and March 31, 2024. The PUCT adopted a procedural schedule in July 2024. A PUCT decision is expected in third quarter 2024.
Entergy Arkansas Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s denial of recovery of $135 million of payments to other 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 $13.7 million, plus interest, of related refunds ordered by the APSC and paid by Entergy Arkansas 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 United States Court of
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Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments were held in June 2023. In August 2023 the United States Court of Appeals for 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. Briefing to the United States Court of Appeals for the Eighth District concluded in 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.
MSS-4 Replacement Tariff – Net Operating Loss Carryforward Proceeding
In January 2021, pursuant to section 205 of the Federal Power Act, Entergy Services filed an amendment to the MSS-4 replacement tariff, a tariff governing the sales of energy and capacity between the Utility operating companies, in order to provide for the inclusion of specified accumulated deferred income taxes, including net operating loss carryforward accumulated deferred income taxes (NOLC ADIT), in the rate for sales of energy among the Utility operating companies on a prospective basis. In March 2021, the FERC accepted the filing, subject to refund and hearing procedures.
In October 2021 the LPSC filed a complaint with the FERC alleging that Entergy Services improperly excluded NOLC ADIT from MSS-4 replacement tariff rates in the period before March 20, 2021. The LPSC argued that sales from Entergy Louisiana to Entergy Texas and Entergy New Orleans were charged at rates lower than they otherwise should have been, and it accordingly seeks surcharges for the period prior to March 20, 2021. The FERC set the complaint for hearing procedures and subsequently the hearing for this complaint proceeding was consolidated with the hearing procedures for Entergy Services’ January 2021 NOLC ADIT filing.
Testimony was filed by parties in 2023, and the hearing before a FERC ALJ was concluded in February 2024. In June 2024, the FERC ALJ issued an initial decision addressing three major issues: (1) whether Entergy Services’ proposed prospective inclusion and allocation of NOLC ADIT in MSS-4 replacement tariff rates using a modified with-and-without methodology is just and reasonable; (2) whether Entergy Services correctly calculated excess and deficient accumulated deferred income taxes in accordance with the terms of a prior settlement; and (3) whether NOLC ADIT should have been included in MSS-4 replacement tariff rates prior to the effective date of the January 2021 MSS-4 replacement tariff filing.
With respect to issues (1) and (2), the presiding ALJ concluded that Entergy Services’ proposed methodology for allocating and including NOLC ADIT in MSS-4 replacement tariff rates was just and reasonable and that Entergy Services correctly performed the excess and deficient accumulated deferred income taxes calculations. With respect to issue (3), however, the presiding ALJ agreed with the LPSC that NOLC ADIT should have been included in MSS-4 replacement tariff rates since September 1, 2016, and as a result, the presiding ALJ ordered that Entergy Louisiana and Entergy Arkansas recalculate bills for the period of September 1, 2016 through November 11, 2023 with surcharges expected to be due to those operating companies from the purchasing operating companies, Entergy New Orleans, Entergy Texas, and Entergy Louisiana (for some Entergy Arkansas sales). The presiding ALJ also ordered Entergy Services to pay the interest owed to Entergy Louisiana on these surcharges.
The surcharge methodology that the presiding ALJ recommended in connection with issue (3) was not supported by any participant in the hearing. As part of their exceptions to the initial decision, all parties to the proceeding opposed the use of the ALJ’s methodology, except for the FERC trial staff, which took no position. During the hearing, the LPSC and the FERC trial staff advocated that the alleged tariff violation should be remedied by the application of Entergy Services’ January 2021 proposed methodology. All other parties, including the
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PUCT, the City Council, and Entergy Services, opposed any surcharges for the period prior to the March 20, 2021 effective date of the January 2021 filing.
Entergy Services disputes the presiding ALJ's rulings on issue (3) and filed exceptions to these rulings in July 2024. The ALJ's initial decision is not binding on the FERC and is an interim step in the hearing process. No refunds will be owed in connection with this proceeding unless and until the FERC requires them in a final order.
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. Settlements that resolve all significant aspects of these complaints have been reached with the MPSC and the APSC and approved by the FERC. A settlement has been reached with the City Council and is pending FERC approval, as described in “System Energy Settlement with the City Council” below. An agreement in principle has been reached with the LPSC staff, as described in “System Energy Settlement with the LPSC” below. If the settlement with the City Council is approved by the FERC and the settlement with the LPSC staff is approved by the LPSC and the FERC, it would resolve all significant aspects of these pending complaints. The following are updates to the discussion in the Form 10-K.
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 $25.3 million, which includes interest through June 30, 2024, and the estimated resulting annual rate reduction would be approximately $15 million. As a result of the settlement agreements with the MPSC and the APSC, both the estimated refund and rate reduction exclude Entergy Mississippi's 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 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
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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.
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.
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 initiated a sixty-day period in which aggrieved parties could 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.
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In the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial lease 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. In June 2024 counsel for the FERC filed the respondent’s brief, arguing that the FERC’s August 2023 rehearing order concerning the sale-leaseback and depreciation rate remedy issues should be affirmed and arguing that the dispute over the uncertain tax position issue is not yet ripe. In July 2024, System Energy and the LPSC each filed separate reply briefs.
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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 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.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolved the following issues raised in the Unit Power Sales Agreement complaint: advance collection of lease payments, aircraft costs, executive incentive compensation, money pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of the capital funds agreement. The settlement provided that System Energy would provide a black box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provided that if the APSC, the City Council, or the LPSC agrees to the 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 addressed other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement was included in the May 2023 service month bills under the Unit Power Sales Agreement.
In May 2023 the presiding ALJ issued an initial decision finding that System Energy should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power
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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 $69.9 million plus $97.8 million of interest through June 30, 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 LPSC’s mandamus request 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. In July 2024 the Fifth Circuit held oral argument on the petition. During oral argument, the FERC’s counsel represented that the FERC intends to issue an order in the return on equity and capital structure proceeding by the end of the year. Later in July 2024 the Fifth Circuit issued an order denying the LPSC’s petition.
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” 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.
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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 remaining 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 paid the remaining black box refund of $92 million to Entergy Arkansas in May 2024.
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” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In May 2024, System Energy, Entergy New Orleans, additional named Entergy parties, and the City Council filed the settlement agreement and supporting materials with the FERC. 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 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’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.
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System Energy Settlement with the LPSC
In July 2024, System Energy and the LPSC staff reached a settlement in principle to globally resolve all of the LPSC’s actual and potential claims in multiple docketed proceedings pending before the FERC (including all docketed proceedings resolved by the MPSC, the APSC, and the City Council settlements) 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” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. The settling parties intend to file the settlement for approval by the FERC following the LPSC’s approval of the settlement.
The terms of the settlement with the LPSC staff 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, between System Energy and the APSC in November 2023, and between System Energy and the City Council in April 2024. The settlement in principle provides for Entergy Louisiana to receive a black box refund of $95 million from System Energy, inclusive of approximately $15 million already received by Entergy Louisiana from System Energy. In June 2024 the remaining $80 million black box refund to Entergy Louisiana 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 $95 million described above, beginning with the September 2024 service month, the settlement provides for Entergy Louisiana’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.
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. System Energy’s remaining regulatory liability related to complaints against System Energy as of December 31, 2023 was $178 million. As discussed above in “System Energy 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. As discussed above in “System Energy Settlement with the LPSC,” in second quarter 2024 the $80 million black box refund to Entergy Louisiana was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2022 Calendar Year Bills
In February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2022. The formal challenge alleges: (1) that the equity ratio charged in rates was excessive; and (2) that all issues in the pending Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2022 bills. These allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 and 2021 bills.
In 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.
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Pension Costs Amendment Proceeding
As discussed in the Form 10-K, in October 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to include in the rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Energy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony was filed through April 2024, and the hearing occurred from late May through early June 2024. The presiding ALJ’s initial decision is expected in September 2024.
Storm Cost Recovery Filings with Retail Regulators
See Note 2 to the financial statements in the Form 10-K for discussion regarding storm cost recovery filings. The following is an update to that discussion.
Entergy Mississippi
As discussed in the Form 10-K, Entergy Mississippi had 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 exceeded $15 million, the collection of the storm damage provision ceased until such time that the accumulated storm damage provision became 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 subsequent filing by Entergy Mississippi in this proceeding. The storm damage reserve exceeded $15 million upon receipt of the 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 March 2024, Entergy Mississippi made a combined dual filing which included a Notice of Intent 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 per month. Furthermore, if Entergy Mississippi’s accumulated storm damage provision balance exceeds $70 million, collection of the storm damage provision would cease until such time that the accumulated storm damage provision becomes less than $60 million.
The Mississippi Public Utilities Staff reviewed the storm-related costs submitted by Entergy Mississippi and found them prudent. In June 2024 the MPSC considered and unanimously granted the relief sought by Entergy Mississippi. The new combined storm damage mitigation and restoration rider became effective with the July 2024 billing cycle. Additionally, Entergy Mississippi made a compliance filing to cease billing under the existing vegetation management rider schedule as of the same billing cycle.
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NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following tables present Entergy’s basic and diluted earnings per share calculations for the three and six months ended June 30, 2024 and 2023, included on the consolidated income statements:
| For the Three Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Dollars In Thousands, Except Per Share Data; Shares in Millions) | |||||||||||||||||||||||
| $/share | $/share | ||||||||||||||||||||||
| Consolidated net income | $51,732 | $392,014 | |||||||||||||||||||||
| Less: Preferred dividend requirements of subsidiaries and noncontrolling interests | 2,810 | 770 | |||||||||||||||||||||
| Net income attributable to Entergy Corporation | $48,922 | $391,244 | |||||||||||||||||||||
| Basic shares and earnings per average common share | 213.6 | $0.23 | 211.4 | $1.85 | |||||||||||||||||||
| Average dilutive effect of: | |||||||||||||||||||||||
| Stock options | 0.3 | — | 0.3 | — | |||||||||||||||||||
| Other equity plans | 0.5 | — | 0.5 | (0.01) | |||||||||||||||||||
| Diluted shares and earnings per average common shares | 214.4 | $0.23 | 212.2 | $1.84 | |||||||||||||||||||
| For the Six Months Ended June 30, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (Dollars In Thousands, Except Per Share Data; Shares in Millions) | |||||||||||||||||||||||
| $/share | $/share | ||||||||||||||||||||||
| Consolidated net income | $128,268 | $704,312 | |||||||||||||||||||||
| Less: Preferred dividend requirements of subsidiaries and noncontrolling interests | 4,065 | 2,133 | |||||||||||||||||||||
| Net income attributable to Entergy Corporation | $124,203 | $702,179 | |||||||||||||||||||||
| Basic shares and earnings per average common share | 213.4 | $0.58 | 211.4 | $3.32 | |||||||||||||||||||
| Average dilutive effect of: | |||||||||||||||||||||||
| Stock options | 0.3 | — | 0.3 | — | |||||||||||||||||||
| Other equity plans | 0.5 | — | 0.5 | (0.01) | |||||||||||||||||||
| Diluted shares and earnings per average common shares | 214.2 | $0.58 | 212.2 | $3.31 | |||||||||||||||||||
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was 1,448,982 options for the three months ended June 30, 2024 and 1,315,567 options for the three months ended June 30, 2023. The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was 1,471,220 options for the six months ended June 30, 2024 and 1,248,743 options for the six months ended June 30, 2023.
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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 June 30, 2024 and $1.07 for the three months ended June 30, 2023. Dividends declared per common share were $2.26 for the six months ended June 30, 2024 and $2.14 for the six months ended June 30, 2023.
Equity Distribution Program
See Note 7 to the financial statements in the Form 10-K for discussion of Entergy Corporation’s at the market equity distribution program. The following are updates to that discussion.
In May 2024, Entergy Corporation entered into an amendment to the equity distribution sales agreement for its at the market equity distribution program wherein it increased by an additional $1 billion the aggregate gross sales price authorized under the at the market equity distribution program from $2 billion to $3 billion and added additional agents, forward purchasers, and forward sellers. 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 $3 billion. As of June 30, 2024, an aggregate gross sales price of approximately $2 billion has been sold under the at the market equity distribution program.
During the six months ended June 30, 2024 and 2023, there were no shares of common 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 have been or will be recorded on Entergy’s balance sheet with respect to the equity offerings until settlements of the equity forward sale agreements occur. The forward sale agreements require Entergy Corporation to, at its election prior to May 30, 2025, either (i) physically settle the transactions by issuing the total of 284,922 shares and 1,160,415 shares, respectively, of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the applicable agreement (initially approximately $101.92 and $101.74 per share, respectively) or (ii) net settle the applicable transaction in whole or in part through the delivery or receipt of cash or shares. Each forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the applicable agreement. In connection with the forward sale agreements, the forward seller, or its affiliates, borrowed from third parties and sold 284,922 shares and 1,160,415 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $29.3 million and $119.2 million, respectively. In connection with the sales of these shares, Entergy Corporation paid the forward seller fees of approximately $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.
In May 2024, Entergy Corporation entered into two separate forward sale agreements for 1,278,416 shares and 1,233,235 shares of common stock, respectively. No amounts have been or will be recorded on Entergy’s balance sheet with respect to the equity offerings until settlements of the equity forward sale agreements occur. The forward sale agreements require Entergy Corporation to, at its election prior to July 31, 2025, either (i) physically settle the transactions by issuing the total of 1,278,416 shares and 1,233,235 shares, respectively, of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the applicable agreement (initially approximately $110.32 and $107.93 per share, respectively) or (ii) net settle the applicable transaction in whole or in part through the delivery or receipt of cash or shares. Each forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the applicable agreement. In connection with the forward sale agreements, the forward seller, or its affiliates, borrowed from third parties and sold 1,278,416 shares and 1,233,235 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $142.4 million and $134.4 million, respectively. In connection with the sales of these shares, Entergy Corporation paid the forward
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seller fees of approximately $1.4 million and $1.3 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.
In June 2024, Entergy Corporation entered into a forward sale agreement for 1,070,003 shares of common stock. No amounts have been or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlement of the equity forward sale agreement occurs. The forward sale agreement requires Entergy Corporation to, at its election prior to July 31, 2025, either (i) physically settle the transaction by issuing the total of 1,070,003 shares of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially approximately $106.12 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 1,070,003 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $114.5 million. In connection with the sale of these shares, Entergy Corporation paid the forward seller fees of approximately $1.1 million 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 occurs, earnings per share dilution resulting from the agreements, if any, is determined under the treasury stock method. Share dilution occurs when the average market price of Entergy Corporation’s common stock is higher than the average forward sales price. For the three months ended June 30, 2024 and 2023, 1,094,239 shares and 156,101 shares, respectively, under current and then-outstanding forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive. For the six months ended June 30, 2024 and 2023, 1,502,247 and 78,050 shares, respectively, under current and then-outstanding forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive.
Treasury Stock
During the six months ended June 30, 2024, Entergy Corporation reissued 10,757 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the six months ended June 30, 2024.
Retained Earnings
On July 26, 2024, Entergy Corporation’s Board of Directors declared a common stock dividend of $1.13 per share, payable on September 3, 2024 to holders of record as of August 13, 2024.
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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 June 30, 2024 and 2023:
| Pension and Other Postretirement Benefit Plans | |||||||||||
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Beginning balance, April 1, | ($166,128) | ($189,727) | |||||||||
| Amounts reclassified from accumulated other comprehensive income (loss) | 246,489 | (3,292) | |||||||||
| Net other comprehensive income (loss) for the period | 246,489 | (3,292) | |||||||||
| Ending balance, June 30, | $80,361 | ($193,019) | |||||||||
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2024 and 2023:
| 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) | 242,821 | (1,265) | |||||||||
| Net other comprehensive income (loss) for the period | 242,821 | (1,265) | |||||||||
| Ending balance, June 30, | $80,361 | ($193,019) | |||||||||
The following table presents changes in accumulated other comprehensive income for Entergy Louisiana for the three months ended June 30, 2024 and 2023:
| Pension and Other Postretirement Benefit Plans | |||||||||||
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Beginning balance, April 1, | $52,774 | $54,584 | |||||||||
| Amounts reclassified from accumulated other comprehensive income | (2,023) | (1,773) | |||||||||
| Net other comprehensive loss for the period | (2,023) | (1,773) | |||||||||
| Ending balance, June 30, | $50,751 | $52,811 | |||||||||
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The following table presents changes in accumulated other comprehensive income for Entergy Louisiana for the six months ended June 30, 2024 and 2023:
| 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 | (4,047) | (2,559) | |||||||||
| Net other comprehensive loss for the period | (4,047) | (2,559) | |||||||||
| Ending balance, June 30, | $50,751 | $52,811 | |||||||||
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended June 30, 2024 and 2023 are as follows:
| Amounts reclassified from AOCI | Income Statement Location | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (In Thousands) | |||||||||||||||||
| Pension and other postretirement benefit plans | |||||||||||||||||
| Amortization of prior service credit | $3,473 | $3,398 | (a) | ||||||||||||||
| Amortization of net gain | 1,641 | 1,633 | (a) | ||||||||||||||
| Settlement loss | (316,974) | (674) | (a) | ||||||||||||||
| Total amortization and settlement loss | (311,860) | 4,357 | |||||||||||||||
| Income taxes | 65,371 | (1,065) | Income taxes | ||||||||||||||
| Total amortization and settlement loss (net of tax) | ($246,489) | $3,292 | |||||||||||||||
| Total reclassifications for the period (net of tax) | ($246,489) | $3,292 | |||||||||||||||
(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the six months ended June 30, 2024 and 2023 are as follows:
| Amounts reclassified from AOCI | Income Statement Location | ||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| (In Thousands) | |||||||||||||||||
| Pension and other postretirement benefit plans | |||||||||||||||||
| Amortization of prior service credit | $6,946 | $6,795 | (a) | ||||||||||||||
| Amortization of net gain | 3,037 | 3,295 | (a) | ||||||||||||||
| Settlement loss | (316,974) | (8,490) | (a) | ||||||||||||||
| Total amortization and settlement loss | (306,991) | 1,600 | |||||||||||||||
| Income taxes | 64,170 | (335) | Income taxes | ||||||||||||||
| Total amortization and settlement loss (net of tax) | ($242,821) | $1,265 | |||||||||||||||
| Total reclassifications for the period (net of tax) | ($242,821) | $1,265 | |||||||||||||||
(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
Total reclassifications out of accumulated other comprehensive income (AOCI) for Entergy Louisiana for the three months ended June 30, 2024 and 2023 are as follows:
| 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 net gain | 1,632 | 1,564 | (a) | |||||||||||||||||
| Settlement loss | — | (89) | (a) | |||||||||||||||||
| Total amortization and settlement loss | 2,768 | 2,426 | ||||||||||||||||||
| Income taxes | (745) | (653) | Income taxes | |||||||||||||||||
| Total amortization and settlement loss (net of tax) | 2,023 | 1,773 | ||||||||||||||||||
| Total reclassifications for the period (net of tax) | $2,023 | $1,773 | ||||||||||||||||||
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
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Total reclassifications out of accumulated other comprehensive income (AOCI) for Entergy Louisiana for the six months ended June 30, 2024 and 2023 are as follows:
| Amounts reclassified from AOCI | Income Statement Location | |||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| Pension and other postretirement benefit plans | ||||||||||||||||||||
| Amortization of prior service credit | $2,272 | $1,902 | (a) | |||||||||||||||||
| Amortization of net gain | 3,266 | 3,129 | (a) | |||||||||||||||||
| Settlement loss | — | (1,529) | (a) | |||||||||||||||||
| Total amortization and settlement loss | 5,538 | 3,502 | ||||||||||||||||||
| Income taxes | (1,491) | (943) | Income taxes | |||||||||||||||||
| Total amortization and settlement loss (net of tax) | 4,047 | 2,559 | ||||||||||||||||||
| Total reclassifications for the period (net of tax) | $4,047 | $2,559 | ||||||||||||||||||
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3 billion and expires in June 2029. 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. As there were no borrowings under the facility for the six months ended June 30, 2024, the estimated interest rate as of June 30, 2024 that would have been applied to outstanding borrowings under the facility was 6.94%. The following is a summary of the amounts outstanding and capacity available under the credit facility as of June 30, 2024:
| Capacity | Borrowings | Letters of Credit | Capacity Available | |||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| $3,000 | $— | $4 | $2,996 | |||||||||||||||||
Entergy Corporation’s credit facility includes 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 Registrant Subsidiaries (except Entergy New 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 $2 billion. As of June 30, 2024, Entergy Corporation had $932.4 million of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 2024 was 5.67%.
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Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 2024 as follows:
| Company | Expiration Date | Amount of Facility | Interest Rate (a) | Amount Drawn as of June 30, 2024 | Letters of Credit Outstanding as of June 30, 2024 | |||||||||||||||||||||||||||
| Entergy Arkansas | April 2026 | $25 million (b) | 7.29% | $— | $— | |||||||||||||||||||||||||||
| Entergy Arkansas | June 2029 | $300 million (c) | 6.57% | $— | $— | |||||||||||||||||||||||||||
| Entergy Louisiana | June 2029 | $400 million (c) | 6.69% | $— | $— | |||||||||||||||||||||||||||
| Entergy Mississippi | June 2029 | $300 million (c) | 6.57% | $— | $— | |||||||||||||||||||||||||||
| Entergy New Orleans | June 2027 | $25 million (c) | 7.07% | $— | $— | |||||||||||||||||||||||||||
| Entergy Texas | June 2029 | $300 million (c) | 6.69% | $— | $1.1 million | |||||||||||||||||||||||||||
(a)The interest rate is the estimated interest rate as of June 30, 2024 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; $5 million for Entergy Mississippi; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
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 has an uncommitted standby letter of credit facility as a means to post collateral to support its obligations to MISO and for other purposes. The following is a summary of the uncommitted standby letter of credit facilities as of June 30, 2024:
| Company | Amount of Uncommitted Facility | Letter of Credit Fee | Letters of Credit Issued as of June 30, 2024 (a) (b) | |||||||||||||||||
| Entergy Arkansas | $25 million | 0.78% | $12.4 million | |||||||||||||||||
| Entergy Louisiana | $125 million | 0.78% | $20.7 million | |||||||||||||||||
| Entergy Mississippi | $65 million | 0.78% | $41.1 million | |||||||||||||||||
| Entergy New Orleans | $15 million | 1.625% | $0.5 million | |||||||||||||||||
| Entergy Texas | $80 million | 1.250% | $79.7 million | |||||||||||||||||
(a)As of June 30, 2024, letters of credit posted with MISO covered financial transmission rights exposure of $1.0 million for Entergy Arkansas, $0.7 million for Entergy Louisiana, $0.6 million for Entergy Mississippi, and $0.4 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of June 30, 2024, the letters of credit issued for Entergy Mississippi include $30.9 million in MISO letters of credit and $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. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas have FERC-
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authorized short-term borrowing limits effective through April 2025. The FERC-authorized short-term borrowing limit for System Energy is effective through March 2025. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy system money pool and from other internal short-term borrowing arrangements. The money pool 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 designed to reduce the 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 are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of June 30, 2024 (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 | $40 | |||||||||
| Entergy New Orleans | $150 | $— | |||||||||
| Entergy Texas | $200 | $— | |||||||||
| System Energy | $200 | $— | |||||||||
Vermont Yankee Credit Facility (Entergy Corporation)
In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Entergy Assets Management Operations, LLC (formerly Vermont Yankee Asset Retirement, LLC), Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in December 2024. The commitment fee is currently 0.20% of the undrawn commitment amount. As of June 30, 2024, $139 million in cash borrowings were outstanding under the credit facility. The weighted-average interest rate for the six months ended June 30, 2024 was 6.95% on the drawn portion of the facility.
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 June 30, 2024:
| Company | Expiration Date | Amount of Facility | Weighted- Average Interest Rate on Borrowings (a) | Amount Outstanding as of June 30, 2024 | ||||||||||||||||||||||
| (Dollars in Millions) | ||||||||||||||||||||||||||
| Entergy Arkansas VIE | June 2027 | $80 | 6.44% | $— | ||||||||||||||||||||||
| Entergy Louisiana River Bend VIE | June 2027 | $105 | 6.43% | $27.9 | ||||||||||||||||||||||
| Entergy Louisiana Waterford VIE | June 2027 | $105 | 6.43% | $26.5 | ||||||||||||||||||||||
| System Energy VIE | June 2027 | $120 | 6.43% | $104.1 | ||||||||||||||||||||||
(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.
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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.
The nuclear fuel company VIEs had notes payable that were included in debt on the respective balance sheets as of June 30, 2024 as follows:
| Company | Description | Amount | ||||||||||||
| Entergy Arkansas VIE | 1.84% Series N due July 2026 | $90 million | ||||||||||||
| Entergy Arkansas VIE | 5.54% Series O due May 2029 | $70 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 | $70 million | ||||||||||||
| System Energy VIE | 2.05% Series K due September 2027 | $90 million | ||||||||||||
In accordance with regulatory treatment, interest on the nuclear fuel company VIEs’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
As of June 30, 2024, Entergy Arkansas and Entergy Louisiana each has obtained financing authorization from the FERC that extends through April 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 VIE.
Debt Issuances and Retirements
(Entergy Corporation)
In May 2024, Entergy Corporation issued $1.2 billion of junior subordinated debentures due December 2054. Entergy Corporation will pay interest at an annual rate of 7.125% through November 2029. Commencing on December 1, 2029, the annual rate will equal the five-year treasury rate as of the most recent reset interest determination date plus 2.67%. Entergy Corporation used the proceeds to repay a portion of outstanding commercial paper and for general corporate purposes.
(Entergy Arkansas)
In May 2024, Entergy Arkansas issued $400 million of 5.45% Series mortgage bonds due June 2034 and $400 million of 5.75% Series mortgage bonds due June 2054. Entergy Arkansas used a portion of the proceeds, together with other funds, to repay, at maturity, its $375 million of 3.70% Series mortgage bonds due June 2024 and to repay borrowings from the Entergy system money pool. Entergy Arkansas expects to use the remaining proceeds, together with other funds, to repay a portion of the purchase price of each of Driver Solar, Walnut Bend Solar, and/or West Memphis Solar, and for general corporate purposes.
(Entergy Louisiana)
In March 2024, Entergy Louisiana issued $500 million of 5.35% Series mortgage bonds due March 2034 and $700 million of 5.70% Series mortgage bonds due March 2054. Entergy Louisiana used a portion of the proceeds, together with other funds, to repay in March 2024 debt outstanding under its 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.
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(Entergy Mississippi)
In May 2024, Entergy Mississippi issued $300 million of 5.85% Series mortgage bonds due June 2054. Entergy Mississippi used the proceeds, together with other funds, to repay in June 2024, prior to maturity, its $100 million of 3.75% Series mortgage bonds due July 2024, to repay debt incurred under its long-term revolving credit facility, to repay borrowings from the Entergy system money pool, 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 to be issued in May 2024. In May 2024, Entergy New Orleans issued (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 used the proceeds, together with other funds, to repay, at maturity, its $85 million unsecured term loan due June 2024 and for general corporate purposes.
Fair Value
The book value and the fair value of long-term debt for Entergy and the Registrant Subsidiaries as of June 30, 2024 were as follows:
| Book Value of Long-Term Debt | Fair Value of Long-Term Debt (a) | ||||||||||
| (In Thousands) | |||||||||||
| Entergy | $27,818,164 | $24,689,579 | |||||||||
| Entergy Arkansas | $5,094,160 | $4,470,941 | |||||||||
| Entergy Louisiana | $10,188,393 | $8,964,781 | |||||||||
| Entergy Mississippi | $2,426,614 | $2,093,565 | |||||||||
| Entergy New Orleans | $736,476 | $695,029 | |||||||||
| Entergy Texas | $3,216,909 | $2,823,011 | |||||||||
| System Energy | $822,762 | $782,228 | |||||||||
(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 and the Registrant Subsidiaries as of December 31, 2023 were as follows:
| Book Value of Long-Term Debt | Fair Value of Long-Term Debt (a) | ||||||||||
| (In Thousands) | |||||||||||
| Entergy | $25,107,896 | $22,489,174 | |||||||||
| Entergy Arkansas | $4,673,080 | $4,166,941 | |||||||||
| Entergy Louisiana | $9,420,689 | $8,414,512 | |||||||||
| Entergy Mississippi | $2,229,510 | $1,969,334 | |||||||||
| Entergy New Orleans | $677,450 | $602,716 | |||||||||
| Entergy Texas | $3,225,092 | $2,936,130 | |||||||||
| System Energy | $738,459 | $696,168 | |||||||||
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(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 352,199 shares of its common stock under the 2019 Omnibus Incentive Plan with a fair value of $18.61 per option. As of June 30, 2024, there were options on 2,599,829 shares of common stock outstanding with a weighted-average exercise price of $101.84. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted-average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2024. The aggregate intrinsic value of the stock options outstanding as of June 30, 2024 was $25.7 million.
The following table includes financial information for stock options for the three months ended June 30, 2024 and 2023:
| 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 | $0.6 | |||||||||
The following table includes financial information for stock options for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Compensation expense included in Entergy’s consolidated net income | $2.2 | $2.1 | |||||||||
| Tax benefit recognized in Entergy’s consolidated net income | $0.6 | $0.6 | |||||||||
| Compensation cost capitalized as part of fixed assets and materials and supplies | $1.0 | $1.1 | |||||||||
Other Equity Awards
In January 2024 the Board approved and Entergy granted long-term incentive awards in the form of 409,947 restricted stock awards and 158,176 performance units under the 2019 Omnibus Incentive Plan. The restricted stock awards were made effective on January 25, 2024 and were valued at $99.08 per share, which was the closing price of Entergy 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.
The performance units 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
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period on the number of performance units earned. To emphasize the importance of environmental stewardship, specifically of carbon-free generation and resilience, an environmental achievement measure was selected as one of the performance measures for the 2024-2026 performance period. Performance will be based eighty percent on relative total shareholder return and twenty percent on the environmental achievement measure. The performance units were granted on January 25, 2024 and eighty percent were valued at $124.65 per share based on various factors, primarily market conditions; and twenty percent were valued at $99.08 per share, the closing price of Entergy Corporation’s common stock on that date. Performance units have the same dividend and voting rights as other common stock and are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three-year vesting period, and compensation cost for the portion of the award based on the selected 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 June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Compensation expense included in Entergy’s consolidated net income | $9.8 | $10.1 | |||||||||
| Tax benefit recognized in Entergy’s consolidated net income | $2.5 | $2.6 | |||||||||
| Compensation cost capitalized as part of fixed assets and materials and supplies | $4.6 | $4.4 | |||||||||
The following table includes financial information for other outstanding equity awards for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Compensation expense included in Entergy’s consolidated net income | $19.7 | $17.8 | |||||||||
| Tax benefit recognized in Entergy’s consolidated net income | $5.0 | $4.6 | |||||||||
| Compensation cost capitalized as part of fixed assets and materials and supplies | $9.1 | $7.6 | |||||||||
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Components of Qualified Net Pension Cost
Entergy’s qualified pension costs, including amounts capitalized, for the second quarters of 2024 and 2023, included the following components:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Service cost - benefits earned during the period | $23,370 | $25,366 | |||||||||
| Interest cost on projected benefit obligation | 65,961 | 74,033 | |||||||||
| Expected return on assets | (89,506) | (95,752) | |||||||||
| Recognized net loss | 14,854 | 21,307 | |||||||||
| Settlement charges | 325,253 | 7,246 | |||||||||
| Net pension costs | $339,932 | $32,200 | |||||||||
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Entergy’s qualified pension costs, including amounts capitalized, for the six months ended June 30, 2024 and 2023, included the following components:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Service cost - benefits earned during the period | $46,746 | $51,044 | |||||||||
| Interest cost on projected benefit obligation | 136,587 | 149,734 | |||||||||
| Expected return on assets | (185,486) | (193,885) | |||||||||
| Recognized net loss | 29,974 | 43,654 | |||||||||
| Settlement charges | 325,253 | 145,674 | |||||||||
| Net pension cost | $353,074 | $196,221 | |||||||||
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their current and former employees for the second quarters of 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 | $4,100 | $5,551 | $1,284 | $440 | $962 | $1,383 | ||||||||||||||||||||||||||||||||
| Interest cost on projected benefit obligation | 13,217 | 13,961 | 3,521 | 1,569 | 2,831 | 3,386 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (18,155) | (19,447) | (5,113) | (2,203) | (4,077) | (4,633) | ||||||||||||||||||||||||||||||||
| Recognized net loss | 5,746 | 2,602 | 1,140 | 470 | 393 | 1,162 | ||||||||||||||||||||||||||||||||
| Settlement charges | — | — | — | — | — | 611 | ||||||||||||||||||||||||||||||||
| Net pension cost | $4,908 | $2,667 | $832 | $276 | $109 | $1,909 | ||||||||||||||||||||||||||||||||
| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | System Energy | ||||||||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||||||||
| Service cost - benefits earned during the period | $4,661 | $6,199 | $1,456 | $487 | $1,090 | $1,445 | ||||||||||||||||||||||||||||||||
| Interest cost on projected benefit obligation | 13,917 | 14,944 | 3,824 | 1,669 | 3,162 | 3,435 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (17,878) | (18,766) | (4,635) | (2,310) | (4,023) | (4,501) | ||||||||||||||||||||||||||||||||
| Recognized net loss | 5,763 | 4,992 | 1,627 | 484 | 1,059 | 1,274 | ||||||||||||||||||||||||||||||||
| Settlement charges | 1,784 | 2,232 | 88 | 7 | 592 | 490 | ||||||||||||||||||||||||||||||||
| Net pension cost | $8,247 | $9,601 | $2,360 | $337 | $1,880 | $2,143 | ||||||||||||||||||||||||||||||||
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The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their current and former employees for the six months ended June 30, 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 | $8,199 | $11,102 | $2,568 | $880 | $1,923 | $2,767 | ||||||||||||||||||||||||||||||||
| Interest cost on projected benefit obligation | 26,434 | 27,922 | 7,042 | 3,138 | 5,662 | 6,777 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (36,310) | (38,894) | (10,226) | (4,407) | (8,154) | (9,281) | ||||||||||||||||||||||||||||||||
| Recognized net loss | 11,492 | 5,204 | 2,280 | 940 | 786 | 2,327 | ||||||||||||||||||||||||||||||||
| Settlement charges | — | — | — | — | — | 611 | ||||||||||||||||||||||||||||||||
| Net pension cost | $9,815 | $5,334 | $1,664 | $551 | $217 | $3,201 | ||||||||||||||||||||||||||||||||
| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | System Energy | ||||||||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||||||||
| Service cost - benefits earned during the period | $9,410 | $12,479 | $2,938 | $978 | $2,197 | $2,912 | ||||||||||||||||||||||||||||||||
| Interest cost on projected benefit obligation | 28,197 | 30,323 | 7,754 | 3,384 | 6,404 | 6,963 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (35,954) | (37,999) | (9,519) | (4,577) | (8,175) | (9,039) | ||||||||||||||||||||||||||||||||
| Recognized net loss | 12,732 | 9,956 | 3,392 | 997 | 2,049 | 2,735 | ||||||||||||||||||||||||||||||||
| Settlement charges | 23,958 | 38,230 | 11,743 | 1,700 | 10,270 | 5,290 | ||||||||||||||||||||||||||||||||
| Net pension cost | $38,343 | $52,989 | $16,308 | $2,482 | $12,745 | $8,861 | ||||||||||||||||||||||||||||||||
Non-Qualified Net Pension Cost
Entergy recognized $2.7 million and $8.8 million in pension cost for its non-qualified pension plans for the second quarters of 2024 and 2023, respectively. For the second quarter of 2024, there were no settlement charges related to the payment of lump sum benefits out of the plan. Included in the pension cost for non-qualified pension plans for the second quarter of 2023 were settlement charges of $4.6 million related to the payment of lump sum benefits out of the plans. Entergy recognized $5.4 million and $18 million in pension cost for its non-qualified pension plans for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, there were no settlement charges related to the payment of lump sum benefits out of the plan. Included in the pension cost non-qualified pension plans for the six months ended June 30, 2023 were settlement charges of $9.3 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 second quarters of 2024 and 2023:
| Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||||||||
| 2024 | $68 | $51 | $83 | $31 | $62 | ||||||||||||||||||||||||
| 2023 | $63 | $25 | $87 | $33 | $63 | ||||||||||||||||||||||||
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The Registrant Subsidiaries recognized the following pension cost for their current and former employees for their non-qualified pension plans for the six months ended June 30, 2024 and 2023:
| Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||||||||
| 2024 | $136 | $102 | $166 | $61 | $124 | ||||||||||||||||||||||||
| 2023 | $513 | $52 | $639 | $66 | $126 | ||||||||||||||||||||||||
For the second quarters of 2024 and 2023, there were no settlement charges for the Registrant Subsidiaries related to the payment of lump sum benefits out of the plan. For the six months ended June 30, 2024, there were no settlement charges for the Registrant Subsidiaries related to the payment of lump sum benefits out of the plan. For the six months ended June 30, 2023, there were settlement charges of $379 thousand and $453 thousand for Entergy Arkansas and Entergy Mississippi, respectively, included in the non-qualified pension costs above 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 second quarters of 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’s other postretirement benefits income, including amounts capitalized, for the six months ended June 30, 2024 and 2023, included the following components:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Service cost - benefits earned during the period | $6,252 | $7,328 | |||||||||
| Interest cost on accumulated postretirement benefit obligation (APBO) | 19,704 | 21,136 | |||||||||
| Expected return on assets | (21,138) | (18,366) | |||||||||
| Amortization of prior service credit | (11,440) | (11,280) | |||||||||
| Recognized net gain | (5,522) | (5,724) | |||||||||
| Net other postretirement benefits income | ($12,144) | ($6,906) | |||||||||
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The Registrant Subsidiaries’ other postretirement benefits cost (income), including amounts capitalized, for their current and former employees for the second quarters of 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 | $642 | $700 | $184 | $51 | $168 | $175 | ||||||||||||||||||||||||||||||||
| Interest cost on APBO | 1,833 | 1,999 | 486 | 253 | 603 | 398 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (4,384) | — | (1,372) | (1,479) | (2,539) | (728) | ||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 524 | (1,136) | (239) | (229) | (1,093) | (73) | ||||||||||||||||||||||||||||||||
| Recognized net (gain) loss | — | (1,738) | 15 | 19 | 148 | — | ||||||||||||||||||||||||||||||||
| Net other postretirement benefits income | ($1,385) | ($175) | ($926) | ($1,385) | ($2,713) | ($228) | ||||||||||||||||||||||||||||||||
| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | System Energy | ||||||||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||||||||
| Service cost - benefits earned during the period | $741 | $845 | $220 | $59 | $202 | $189 | ||||||||||||||||||||||||||||||||
| Interest cost on APBO | 2,001 | 2,233 | 543 | 290 | 649 | 432 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (3,778) | — | (1,179) | (1,316) | (2,194) | (634) | ||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 524 | (951) | (239) | (229) | (1,093) | (73) | ||||||||||||||||||||||||||||||||
| Recognized net (gain) loss | 43 | (1,764) | 21 | 117 | 229 | — | ||||||||||||||||||||||||||||||||
| Net other postretirement benefits (income) cost | ($469) | $363 | ($634) | ($1,079) | ($2,207) | ($86) | ||||||||||||||||||||||||||||||||
The Registrant Subsidiaries’ other postretirement benefits cost (income), including amounts capitalized, for their current and former employees for the six months ended June 30, 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 | $1,284 | $1,400 | $368 | $102 | $336 | $350 | ||||||||||||||||||||||||||||||||
| Interest cost on APBO | 3,666 | 3,998 | 972 | 506 | 1,206 | 796 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (8,768) | — | (2,744) | (2,958) | (5,078) | (1,456) | ||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 1,048 | (2,272) | (478) | (458) | (2,186) | (146) | ||||||||||||||||||||||||||||||||
| Recognized net (gain) loss | — | (3,476) | 30 | 38 | 296 | — | ||||||||||||||||||||||||||||||||
| Net other postretirement benefits income | ($2,770) | ($350) | ($1,852) | ($2,770) | ($5,426) | ($456) | ||||||||||||||||||||||||||||||||
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| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | System Energy | ||||||||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||||||||
| Service cost - benefits earned during the period | $1,482 | $1,690 | $440 | $118 | $404 | $378 | ||||||||||||||||||||||||||||||||
| Interest cost on APBO | 4,002 | 4,466 | 1,086 | 580 | 1,298 | 864 | ||||||||||||||||||||||||||||||||
| Expected return on assets | (7,556) | — | (2,358) | (2,632) | (4,388) | (1,268) | ||||||||||||||||||||||||||||||||
| Amortization of prior service cost (credit) | 1,048 | (1,902) | (478) | (458) | (2,186) | (146) | ||||||||||||||||||||||||||||||||
| Recognized net (gain) loss | 86 | (3,528) | 42 | 234 | 458 | — | ||||||||||||||||||||||||||||||||
| Net other postretirement benefits (income) cost | ($938) | $726 | ($1,268) | ($2,158) | ($4,414) | ($172) | ||||||||||||||||||||||||||||||||
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 second quarters of 2024 and 2023:
| 2024 | Qualified Pension Costs | Other Postretirement Costs | Non-Qualified Pension Costs | Total | ||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| Entergy | ||||||||||||||||||||||||||
| Amortization of prior service credit (cost) | $— | $3,513 | ($40) | $3,473 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (894) | 2,615 | (80) | 1,641 | ||||||||||||||||||||||
| Settlement loss | (316,974) | — | — | (316,974) | ||||||||||||||||||||||
| ($317,868) | $6,128 | ($120) | ($311,860) | |||||||||||||||||||||||
| Entergy Louisiana | ||||||||||||||||||||||||||
| Amortization of prior service credit | $— | $1,136 | $— | $1,136 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (104) | 1,738 | (2) | 1,632 | ||||||||||||||||||||||
| ($104) | $2,874 | ($2) | $2,768 | |||||||||||||||||||||||
| 2023 | Qualified Pension Costs | Other Postretirement Costs | Non-Qualified Pension Costs | Total | ||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| Entergy | ||||||||||||||||||||||||||
| Amortization of prior service credit (cost) | $— | $3,510 | ($112) | $3,398 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (1,104) | 2,897 | (160) | 1,633 | ||||||||||||||||||||||
| Settlement loss | (310) | — | (364) | (674) | ||||||||||||||||||||||
| ($1,414) | $6,407 | ($636) | $4,357 | |||||||||||||||||||||||
| Entergy Louisiana | ||||||||||||||||||||||||||
| Amortization of prior service credit | $— | $951 | $— | $951 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (200) | 1,764 | — | 1,564 | ||||||||||||||||||||||
| Settlement loss | (89) | — | — | (89) | ||||||||||||||||||||||
| ($289) | $2,715 | $— | $2,426 | |||||||||||||||||||||||
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Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the six months ended June 30, 2024 and 2023:
| 2024 | Qualified Pension Costs | Other Postretirement Costs | Non-Qualified Pension Costs | Total | ||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| Entergy | ||||||||||||||||||||||||||
| Amortization of prior service credit (cost) | $— | $7,026 | ($80) | $6,946 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (2,033) | 5,230 | (160) | 3,037 | ||||||||||||||||||||||
| Settlement loss | (316,974) | — | — | (316,974) | ||||||||||||||||||||||
| ($319,007) | $12,256 | ($240) | ($306,991) | |||||||||||||||||||||||
| Entergy Louisiana | ||||||||||||||||||||||||||
| Amortization of prior service credit | $— | $2,272 | $— | $2,272 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (208) | 3,476 | (2) | 3,266 | ||||||||||||||||||||||
| ($208) | $5,748 | ($2) | $5,538 | |||||||||||||||||||||||
| 2023 | Qualified Pension Costs | Other Postretirement Costs | Non-Qualified Pension Costs | Total | ||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| Entergy | ||||||||||||||||||||||||||
| Amortization of prior service credit (cost) | $— | $7,020 | ($225) | $6,795 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (2,144) | 5,796 | (357) | 3,295 | ||||||||||||||||||||||
| Settlement loss | (6,957) | — | (1,533) | (8,490) | ||||||||||||||||||||||
| ($9,101) | $12,816 | ($2,115) | $1,600 | |||||||||||||||||||||||
| Entergy Louisiana | ||||||||||||||||||||||||||
| Amortization of prior service credit | $— | $1,902 | $— | $1,902 | ||||||||||||||||||||||
| Amortization of net gain (loss) | (398) | 3,528 | (1) | 3,129 | ||||||||||||||||||||||
| Settlement loss | (1,529) | — | — | (1,529) | ||||||||||||||||||||||
| ($1,927) | $5,430 | ($1) | $3,502 | |||||||||||||||||||||||
Accounting for Pension and Other Postretirement Benefits
In accordance with 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
In May 2024, Entergy Corporation entered into a commitment agreement by and between Entergy Corporation, Newport Trust Company, LLC, as independent fiduciary of Entergy Corporation Retirement Plan II for Non-Bargaining Employees, Entergy Corporation Retirement Plan II for Bargaining Employees, Entergy Corporation Retirement Plan III, and Entergy Corporation Retirement Plan IV for Bargaining Employees (the Pension Plans), and the Metropolitan Life Insurance Company (MetLife), under which the Pension Plans purchased a nonparticipating single premium group annuity contract from MetLife to settle approximately $1.157 billion of benefit liabilities of the Pension Plans.
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The group annuity contract primarily covers a population that includes approximately 3,400 non-utility business retirees, joint annuitants, beneficiaries, and alternate payees who commenced benefit payments from the Pension Plans on or before March 1, 2024 (Transferred Participants). MetLife irrevocably guarantees and assumes the sole obligation to make future monthly pension benefit payments to the Transferred Participants as provided under its group annuity contract, with direct payments beginning September 1, 2024. The aggregate amount of each Transferred Participant’s payment under the group annuity contract will be equal to the amount of each individual’s payment under the Pension Plans.
The purchase of the group annuity contract was funded directly by assets of the Pension Plans. The transferred pension liability required no additional funding prior to transfer, as the liability was fully funded. As a result of the transaction, Entergy recognized a one-time non-cash pension settlement charge in the second quarter of 2024 of $325 million, of which $8 million was recorded at Utility, as described below, and $317 million was recorded at Parent & Other. The $317 million settlement charge at Parent & Other is reflected in Miscellaneous - net in Other income (deductions) on the consolidated income statements.
For the six months ended June 30, 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. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, 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.
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. 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.
In September 2020, Entergy Texas elected to establish a reserve, in accordance with PUCT regulations, to track the surplus or deficit in the annual amount of actuarially determined pension and other postretirement benefits chargeable to Entergy Texas’s expense. The reserve amounts recorded are evaluated in each rate case filed by Entergy Texas and an amortization period is determined at that time.
See Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs.
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Employer Contributions
Based on current assumptions, Entergy expects to contribute $270 million to its qualified pension plans in 2024. As of June 30, 2024, Entergy had contributed $111.4 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 2024:
| 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 June 2024 | $22,784 | $19,862 | $7,240 | $1,499 | $3,037 | $6,666 | |||||||||||||||||||||||||||||
| Remaining estimated pension contributions to be made in 2024 | $32,328 | $28,539 | $7,740 | $3,432 | $5,235 | $9,984 | |||||||||||||||||||||||||||||
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, 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.
Entergy’s segment financial information for the second quarters of 2024 and 2023 was as follows:
| Utility | Parent & Other | Eliminations | Consolidated | |||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||
| Operating revenues | $2,941,404 | $12,227 | ($11) | $2,953,620 | ||||||||||||||||||||||
| Income taxes | $113,017 | ($79,383) | $— | $33,634 | ||||||||||||||||||||||
| Consolidated net income (loss) | $443,319 | ($312,702) | ($78,885) | $51,732 | ||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||
| Operating revenues | $2,818,747 | $27,287 | ($8) | $2,846,026 | ||||||||||||||||||||||
| Income taxes | $144,489 | ($9,693) | $— | $134,796 | ||||||||||||||||||||||
| Consolidated net income (loss) | $514,498 | ($40,559) | ($81,925) | $392,014 | ||||||||||||||||||||||
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Entergy’s segment financial information for the six months ended June 30, 2024 and 2023 was as follows:
| Utility | Parent & Other | Eliminations | Consolidated | |||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||
| Operating revenues | $5,713,577 | $34,703 | ($32) | $5,748,248 | ||||||||||||||||||||||
| Income taxes | $147,565 | ($92,938) | $— | $54,627 | ||||||||||||||||||||||
| Consolidated net income (loss) | $639,299 | ($352,585) | ($158,446) | $128,268 | ||||||||||||||||||||||
| Total assets as of June 30, 2024 | $66,945,968 | $925,848 | ($5,105,519) | $62,766,297 | ||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||
| Operating revenues | $5,766,738 | $60,358 | ($11) | $5,827,085 | ||||||||||||||||||||||
| Income taxes | $78,363 | ($22,542) | $— | $55,821 | ||||||||||||||||||||||
| Consolidated net income (loss) | $912,664 | ($70,953) | ($137,399) | $704,312 | ||||||||||||||||||||||
| 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 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 commodity 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 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,
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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
Entergy designates a significant portion of its derivative instruments as normal purchase/normal sale transactions due to their physical settlement provisions, including power purchase and sales agreements, fuel purchase agreements, and capacity contracts. Certain derivative instruments do not qualify for designation as normal purchase/normal sale transactions due to their 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 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 June 30, 2024 is 9 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of June 30, 2024 is 10,988,500 MMBtu for Entergy and Entergy Mississippi. As of June 30, 2024, Entergy Louisiana and Entergy 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 2024, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2024 through May 31, 2025. 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 the 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 June 30, 2024 is 133,533 GWh for Entergy, including 31,900 GWh for Entergy Arkansas, 57,200 GWh for Entergy Louisiana, 19,179 GWh for Entergy Mississippi, 5,469 GWh for Entergy New Orleans, and 19,448 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’s 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 the non-utility operations business as of June 30, 2024 and December 31, 2023. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas as of June 30, 2024 and for Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of December 31, 2023.
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The fair values of Entergy’s derivative instruments not designated as hedging instruments on the consolidated balance sheets as of June 30, 2024 and December 31, 2023 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| Instrument | Balance Sheet Location | Gross Fair Value (a) | Offsetting Position (b) | Net Fair Value (c) (d) | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $49 | $— | $49 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Natural gas swaps and options | Other current liabilities | $2 | $— | $2 | ||||||||||||||||||||||
| 2023 | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $21 | $— | $21 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Natural gas swaps and options | Other current liabilities | $11 | $— | $11 | ||||||||||||||||||||||
(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 letters of credit in the amount of $3 million posted as of June 30, 2024 and $2 million posted as of December 31, 2023
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended June 30, 2024 and 2023 are as follows:
| Instrument | Income Statement location | Amount of gain (loss) recorded in the income statement | ||||||||||||
| (In Millions) | ||||||||||||||
| 2024 | ||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $3 | |||||||||||
| Financial transmission rights | Purchased power expense | (b) | $47 | |||||||||||
| 2023 | ||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($1) | |||||||||||
| Financial transmission rights | Purchased power expense | (b) | $32 | |||||||||||
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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the six months ended June 30, 2024 and 2023 are as follows:
| Instrument | Income Statement location | Amount of gain (loss) recorded in the income statement | ||||||||||||
| (In Millions) | ||||||||||||||
| 2024 | ||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($3) | |||||||||||
| Financial transmission rights | Purchased power expense | (b) | $100 | |||||||||||
| 2023 | ||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($38) | |||||||||||
| Financial transmission rights | Purchased power expense | (b) | $48 | |||||||||||
(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.
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The fair values of derivative instruments not designated as hedging instruments on the Registrant Subsidiaries’ balance sheets as of June 30, 2024 and December 31, 2023 are shown in the tables 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) | Registrant | |||||||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||||||||
| 2024 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $16.1 | $— | $16.1 | Entergy Arkansas | |||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $19.9 | ($0.1) | $19.8 | Entergy Louisiana | |||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $3.6 | $— | $3.6 | Entergy Mississippi | |||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $2.6 | $— | $2.6 | Entergy New Orleans | |||||||||||||||||||||||||||
| Financial transmission rights | Prepayments and other | $6.6 | $— | $6.6 | Entergy Texas | |||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Natural gas swaps | Other current liabilities | $1.5 | $— | $1.5 | Entergy Mississippi | |||||||||||||||||||||||||||
| 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
(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 June 30, 2024, letters of credit posted with MISO covered financial transmission rights exposure of $1.0 million for Entergy Arkansas, $0.7 million for Entergy Louisiana, $0.6 million for Entergy Mississippi,
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and $0.4 million for Entergy Texas. As of December 31, 2023, letters of credit posted with MISO covered financial transmission rights exposure of $1.2 million for Entergy Arkansas, $0.5 million for Entergy Louisiana, $0.3 million for Entergy Mississippi, and $0.1 million for Entergy Texas.
The effects of derivative instruments not designated as hedging instruments on the Registrant Subsidiaries’ income statements for the three months ended June 30, 2024 and 2023 are as follows:
| Instrument | Income Statement Location | Amount of gain (loss) recorded in the income statement | Registrant | |||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | ($3.0) | (a) | Entergy Mississippi | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $12.0 | (b) | Entergy Arkansas | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $25.0 | (b) | Entergy Louisiana | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $2.1 | (b) | Entergy Mississippi | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $3.3 | (b) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $4.6 | (b) | Entergy Texas | ||||||||||||||||
| 2023 | ||||||||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | $0.8 | (a) | Entergy Louisiana | ||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | ($1.2) | (a) | Entergy Mississippi | ||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | $0.1 | (a) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $4.1 | (b) | Entergy Arkansas | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $19.5 | (b) | Entergy Louisiana | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $3.0 | (b) | Entergy Mississippi | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $1.5 | (b) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $3.5 | (b) | Entergy Texas | ||||||||||||||||
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The effects of derivative instruments not designated as hedging instruments on the Registrant Subsidiaries’ income statements for the six months ended June 30, 2024 and 2023 are as follows:
| Instrument | Income Statement Location | Amount of gain (loss) recorded in the income statement | Registrant | |||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | $2.3 | (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 | $38.9 | (b) | Entergy Arkansas | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $41.2 | (b) | Entergy Louisiana | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $3.1 | (b) | Entergy Mississippi | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $4.4 | (b) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $12.1 | (b) | Entergy Texas | ||||||||||||||||
| 2023 | ||||||||||||||||||||
| Natural gas swaps and options | Fuel, fuel-related expenses, and gas purchased for resale | ($5.7) | (a) | Entergy Louisiana | ||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | $29.8 | (a) | Entergy Mississippi | ||||||||||||||||
| Natural gas swaps | Fuel, fuel-related expenses, and gas purchased for resale | ($2.1) | (a) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $8.0 | (b) | Entergy Arkansas | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $28.3 | (b) | Entergy Louisiana | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $4.5 | (b) | Entergy Mississippi | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $2.4 | (b) | Entergy New Orleans | ||||||||||||||||
| Financial transmission rights | Purchased power expense | $4.2 | (b) | Entergy Texas | ||||||||||||||||
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize 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
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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.
The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s 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
69
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 June 30, 2024 and December 31, 2023. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect placement within the fair value hierarchy levels.
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $1,272 | $— | $— | $1,272 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 54 | — | — | 54 | ||||||||||||||||||||||
| Debt securities | 721 | 1,201 | — | 1,922 | ||||||||||||||||||||||
| Common trusts (b) | 3,289 | |||||||||||||||||||||||||
| Securitization recovery trust account | 4 | — | — | 4 | ||||||||||||||||||||||
| Storm reserve escrow accounts | 333 | — | — | 333 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 49 | 49 | ||||||||||||||||||||||
| $2,384 | $1,201 | $49 | $6,923 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Gas hedge contracts | $2 | $— | $— | $2 | ||||||||||||||||||||||
| 2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $61 | $— | $— | $61 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 24 | — | — | 24 | ||||||||||||||||||||||
| Debt securities | 611 | 1,159 | — | 1,770 | ||||||||||||||||||||||
| Common trusts (b) | 3,070 | |||||||||||||||||||||||||
| Securitization recovery trust account | 8 | — | — | 8 | ||||||||||||||||||||||
| Storm reserve escrow accounts | 323 | — | — | 323 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 21 | 21 | ||||||||||||||||||||||
| $1,027 | $1,159 | $21 | $5,277 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Gas hedge contracts | $11 | $— | $— | $11 | ||||||||||||||||||||||
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
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The following table sets forth a reconciliation of changes in the net assets for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Balance as of April 1, | $9 | $7 | |||||||||
| Total gains (losses) for the period | |||||||||||
| Included as a regulatory liability/asset | 34 | 23 | |||||||||
| Issuances of financial transmission rights | 53 | 42 | |||||||||
| Settlements | (47) | (32) | |||||||||
| Balance as of June 30, | $49 | $40 | |||||||||
The following table sets forth a reconciliation of changes in the net assets for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2024 and 2023:
| 2024 | 2023 | ||||||||||||||||
| (In Millions) | |||||||||||||||||
| Balance as of January 1, | $21 | $19 | |||||||||||||||
| Total gains (losses) for the period | |||||||||||||||||
| Included as a regulatory liability/asset | 75 | 27 | |||||||||||||||
| Issuances of financial transmission rights | 53 | 42 | |||||||||||||||
| Settlements | (100) | (48) | |||||||||||||||
| Balance as of June 30, | $49 | $40 | |||||||||||||||
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 tables 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 June 30, 2024 and December 31, 2023. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect placement within the fair value hierarchy levels.
Entergy Arkansas
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $772.2 | $— | $— | $772.2 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 33.1 | — | — | 33.1 | ||||||||||||||||||||||
| Debt securities | 165.1 | 389.3 | — | 554.4 | ||||||||||||||||||||||
| Common trusts (b) | 935.0 | |||||||||||||||||||||||||
| Financial transmission rights | — | — | 16.1 | 16.1 | ||||||||||||||||||||||
| $970.4 | $389.3 | $16.1 | $2,310.8 | |||||||||||||||||||||||
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| 2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $3.1 | $— | $— | $3.1 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 6.4 | — | — | 6.4 | ||||||||||||||||||||||
| Debt securities | 129.9 | 367.0 | — | 496.9 | ||||||||||||||||||||||
| Common trusts (b) | 910.7 | |||||||||||||||||||||||||
| Financial transmission rights | — | — | 6.0 | 6.0 | ||||||||||||||||||||||
| $139.4 | $367.0 | $6.0 | $1,423.1 | |||||||||||||||||||||||
Entergy Louisiana
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $185.3 | $— | $— | $185.3 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 18.6 | — | — | 18.6 | ||||||||||||||||||||||
| Debt securities | 293.7 | 518.9 | — | 812.6 | ||||||||||||||||||||||
| Common trusts (b) | 1,461.0 | |||||||||||||||||||||||||
| Storm reserve escrow account | 250.4 | — | — | 250.4 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 19.8 | 19.8 | ||||||||||||||||||||||
| $748.0 | $518.9 | $19.8 | $2,747.7 | |||||||||||||||||||||||
| 2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $0.5 | $— | $— | $0.5 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 14.6 | — | — | 14.6 | ||||||||||||||||||||||
| Debt securities | 271.7 | 516.4 | — | 788.1 | ||||||||||||||||||||||
| Common trusts (b) | 1,304.7 | |||||||||||||||||||||||||
| Storm reserve escrow account | 243.8 | — | — | 243.8 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 9.8 | 9.8 | ||||||||||||||||||||||
| $530.6 | $516.4 | $9.8 | $2,361.5 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Gas hedge contracts | $0.4 | $— | $— | $0.4 | ||||||||||||||||||||||
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Entergy Mississippi
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $3.1 | $— | $— | $3.1 | ||||||||||||||||||||||
| Storm reserve escrow account | 0.8 | — | — | 0.8 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 3.6 | 3.6 | ||||||||||||||||||||||
| $3.9 | $— | $3.6 | $7.5 | |||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Gas hedge contracts | $1.5 | $— | $— | $1.5 | ||||||||||||||||||||||
| 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 New Orleans
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $6.5 | $— | $— | $6.5 | ||||||||||||||||||||||
| Securitization recovery trust account | 1.3 | — | — | 1.3 | ||||||||||||||||||||||
| Storm reserve escrow account | 81.7 | — | — | 81.7 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 2.6 | 2.6 | ||||||||||||||||||||||
| $89.5 | $— | $2.6 | $92.1 | |||||||||||||||||||||||
| 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 | ||||||||||||||||||||||
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Entergy Texas
| 2024 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||
| Temporary cash investments | $124.9 | $— | $— | $124.9 | ||||||||||||||||||||||
| Securitization recovery trust account | 2.3 | — | — | 2.3 | ||||||||||||||||||||||
| Financial transmission rights | — | — | 6.6 | 6.6 | ||||||||||||||||||||||
| $127.2 | $— | $6.6 | $133.8 | |||||||||||||||||||||||
| 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 | $30.8 | $— | $— | $30.8 | ||||||||||||||||||||||
| Decommissioning trust funds (a): | ||||||||||||||||||||||||||
| Equity securities | 2.0 | — | — | 2.0 | ||||||||||||||||||||||
| Debt securities | 262.3 | 292.3 | — | 554.6 | ||||||||||||||||||||||
| Common trusts (b) | 893.7 | |||||||||||||||||||||||||
| $295.1 | $292.3 | $— | $1,481.1 | |||||||||||||||||||||||
| 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.
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(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2024.
| Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||||||||
| Balance as of April 1, | $2.8 | $4.1 | $0.6 | $0.5 | $1.2 | ||||||||||||||||||||||||
| Issuances of financial transmission rights | 17.6 | 21.6 | 3.9 | 2.8 | 7.3 | ||||||||||||||||||||||||
| Gains (losses) included as a regulatory liability/asset | 7.7 | 19.1 | 1.2 | 2.6 | 2.7 | ||||||||||||||||||||||||
| Settlements | (12.0) | (25.0) | (2.1) | (3.3) | (4.6) | ||||||||||||||||||||||||
| Balance as of June 30, | $16.1 | $19.8 | $3.6 | $2.6 | $6.6 | ||||||||||||||||||||||||
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 June 30, 2023.
| Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||
| (In Millions) | |||||||||||||||||||||||||||||
| Balance as of April 1, | $4.0 | $2.5 | $0.2 | $0.3 | ($0.1) | ||||||||||||||||||||||||
| Issuances of financial transmission rights | 20.6 | 18.1 | 1.4 | 1.4 | 0.2 | ||||||||||||||||||||||||
| Gains (losses) included as a regulatory liability/asset | (0.9) | 15.6 | 2.6 | 1.3 | 4.6 | ||||||||||||||||||||||||
| Settlements | (4.1) | (19.5) | (3.0) | (1.5) | (3.5) | ||||||||||||||||||||||||
| Balance as of June 30, | $19.6 | $16.7 | $1.2 | $1.5 | $1.2 | ||||||||||||||||||||||||
The following table sets forth a reconciliation of changes in the net assets for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the six months ended June 30, 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 | ||||||||||||||||||||||||
| Issuances of financial transmission rights | 17.6 | 21.6 | 3.9 | 2.8 | 7.3 | ||||||||||||||||||||||||
| Gains (losses) included as a regulatory liability/asset | 31.4 | 29.6 | 1.4 | 3.1 | 9.0 | ||||||||||||||||||||||||
| Settlements | (38.9) | (41.2) | (3.1) | (4.4) | (12.1) | ||||||||||||||||||||||||
| Balance as of June 30, | $16.1 | $19.8 | $3.6 | $2.6 | $6.6 | ||||||||||||||||||||||||
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The following table sets forth a reconciliation of changes in the net assets for the fair value of financial transmission rights classified as Level 3 in the fair value hierarchy for the six months ended June 30, 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 | ||||||||||||||||||||||||
| Issuances of financial transmission rights | 20.6 | 18.1 | 1.4 | 1.4 | 0.2 | ||||||||||||||||||||||||
| Gains (losses) included as a regulatory liability/asset | (3.3) | 19.6 | 3.7 | 1.7 | 5.1 | ||||||||||||||||||||||||
| Settlements | (8.0) | (28.3) | (4.5) | (2.4) | (4.2) | ||||||||||||||||||||||||
| Balance as of June 30, | $19.6 | $16.7 | $1.2 | $1.5 | $1.2 | ||||||||||||||||||||||||
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 and six months ended June 30, 2024 on equity securities still held as of June 30, 2024 were $78 million and $366 million, respectively. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
The available-for-sale securities held as of June 30, 2024 and December 31, 2023 are summarized as follows:
| Fair Value | Total Unrealized Gains | Total Unrealized Losses | ||||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Debt Securities | $1,922 | $10 | $139 | |||||||||||||||||
| 2023 | ||||||||||||||||||||
| Debt Securities | $1,770 | $19 | $134 | |||||||||||||||||
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As of June 30, 2024 and December 31, 2023, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $2,051 million as of June 30, 2024 and $1,885 million as of December 31, 2023. As of June 30, 2024, available-for-sale debt securities had an average coupon rate of approximately 3.63%, an average duration of approximately 6.14 years, and an average maturity of approximately 10.44 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 June 30, 2024 and December 31, 2023:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Less than 12 months | $453 | $5 | $134 | $6 | ||||||||||||||||||||||
| More than 12 months | 949 | 134 | 999 | 128 | ||||||||||||||||||||||
| Total | $1,402 | $139 | $1,133 | $134 | ||||||||||||||||||||||
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2024 and December 31, 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Less than 1 year | $76 | $82 | |||||||||
| 1 year - 5 years | 568 | 517 | |||||||||
| 5 years - 10 years | 575 | 504 | |||||||||
| 10 years - 15 years | 120 | 121 | |||||||||
| 15 years - 20 years | 186 | 179 | |||||||||
| 20 years+ | 397 | 367 | |||||||||
| Total | $1,922 | $1,770 | |||||||||
During the three months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $161 million and $136 million, respectively. During the three months ended June 30, 2024 and 2023, there were no gross gains and gross losses of $14 million and $8 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $330 million and $260 million, respectively. During the six months ended June 30, 2024 and 2023, there were gross gains of $1 million in each period and gross losses of $20 million and $17 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
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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 June 30, 2024 and December 31, 2023 are summarized as follows:
| Fair Value | Total Unrealized Gains | Total Unrealized Losses | ||||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Debt Securities | $554.4 | $1.9 | $59.0 | |||||||||||||||||
| 2023 | ||||||||||||||||||||
| Debt Securities | $496.9 | $2.4 | $53.6 | |||||||||||||||||
The amortized cost of available-for-sale debt securities was $611.5 million as of June 30, 2024 and $548.1 million as of December 31, 2023. As of June 30, 2024, the available-for-sale debt securities had an average coupon rate of approximately 2.92%, an average duration of approximately 5.80 years, and an average maturity of approximately 7.51 years.
The unrealized gains/(losses) recognized during the three and six months ended June 30, 2024 on equity securities still held as of June 30, 2024 were $21.7 million and $105.7 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2024 and December 31, 2023:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Less than 12 months | $70.8 | $1.1 | $22.5 | $0.4 | ||||||||||||||||||||||
| More than 12 months | 388.7 | 57.9 | 403.4 | 53.2 | ||||||||||||||||||||||
| Total | $459.5 | $59.0 | $425.9 | $53.6 | ||||||||||||||||||||||
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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2024 and December 31, 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Less than 1 year | $43.5 | $45.3 | |||||||||
| 1 year - 5 years | 156.3 | 132.2 | |||||||||
| 5 years - 10 years | 234.8 | 205.7 | |||||||||
| 10 years - 15 years | 31.7 | 39.9 | |||||||||
| 15 years - 20 years | 59.8 | 49.6 | |||||||||
| 20 years+ | 28.3 | 24.2 | |||||||||
| Total | $554.4 | $496.9 | |||||||||
During the three months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $5.5 million and $0.9 million, respectively. During the three months ended June 30, 2024, there were gross gains of $0.1 million and gross losses of $0.4 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings. During the three months ended June 30, 2023, there were no gross gains and gross losses of $0.1 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $17.9 million and $16.6 million, respectively. During the six months ended June 30, 2024, there were gross gains of $0.1 million and gross losses of $0.9 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings. During the six months ended June 30, 2023, there were no gross gains and gross losses of $1.7 million 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 June 30, 2024 and December 31, 2023 are summarized as follows:
| Fair Value | Total Unrealized Gains | Total Unrealized Losses | ||||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Debt Securities | $812.6 | $4.6 | $39.8 | |||||||||||||||||
| 2023 | ||||||||||||||||||||
| Debt Securities | $788.1 | $11.7 | $37.4 | |||||||||||||||||
The amortized cost of available-for-sale debt securities was $847.8 million as of June 30, 2024 and $813.9 million as of December 31, 2023. As of June 30, 2024, the available-for-sale debt securities had an average coupon rate of approximately 4.03%, an average duration of approximately 6.36 years, and an average maturity of approximately 12.79 years.
The unrealized gains/(losses) recognized during the three and six months ended June 30, 2024 on equity securities still held as of June 30, 2024 were $42.3 million and $166.6 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A
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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 June 30, 2024 and December 31, 2023:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Less than 12 months | $275.6 | $2.7 | $69.8 | $0.9 | ||||||||||||||||||||||
| More than 12 months | 340.4 | 37.1 | 356.1 | 36.5 | ||||||||||||||||||||||
| Total | $616.0 | $39.8 | $425.9 | $37.4 | ||||||||||||||||||||||
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2024 and December 31, 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Less than 1 year | $27.3 | $31.4 | |||||||||
| 1 year - 5 years | 189.2 | 181.6 | |||||||||
| 5 years - 10 years | 186.9 | 170.0 | |||||||||
| 10 years - 15 years | 79.8 | 70.2 | |||||||||
| 15 years - 20 years | 84.7 | 90.2 | |||||||||
| 20 years+ | 244.7 | 244.7 | |||||||||
| Total | $812.6 | $788.1 | |||||||||
During the three months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale securities amounted to $62.5 million and $65.2 million, respectively. During the three months ended June 30, 2024 and 2023, there were gross gains of $0.1 million in each period and gross losses of $4.8 million and $4 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale securities amounted to $110.9 million and $132.6 million, respectively. During the six months ended June 30, 2024 and 2023, there were gross gains of $0.2 million and $0.5 million, respectively, and gross losses of $7.7 million and $9 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
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System Energy
System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of June 30, 2024 and December 31, 2023 are summarized as follows:
| Fair Value | Total Unrealized Gains | Total Unrealized Losses | ||||||||||||||||||
| (In Millions) | ||||||||||||||||||||
| 2024 | ||||||||||||||||||||
| Debt Securities | $554.6 | $3.2 | $40.2 | |||||||||||||||||
| 2023 | ||||||||||||||||||||
| Debt Securities | $485.2 | $4.5 | $42.5 | |||||||||||||||||
The amortized cost of available-for-sale debt securities was $591.6 million as of June 30, 2024 and $523.2 million as of December 31, 2023. As of June 30, 2024, the available-for-sale debt securities had an average coupon rate of approximately 3.78%, an average duration of approximately 6.18 years, and an average maturity of approximately 10.03 years.
The unrealized gains/(losses) recognized during the three and six months ended June 30, 2024 on equity securities still held as of June 30, 2024 were $14.3 million and $93.3 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2024 and December 31, 2023:
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Fair Value | Gross Unrealized Losses | Fair Value | Gross Unrealized Losses | |||||||||||||||||||||||
| (In Millions) | ||||||||||||||||||||||||||
| Less than 12 months | $106.8 | $1.6 | $42.1 | $4.5 | ||||||||||||||||||||||
| More than 12 months | 219.8 | 38.6 | 239.1 | 38.0 | ||||||||||||||||||||||
| Total | $326.6 | $40.2 | $281.2 | $42.5 | ||||||||||||||||||||||
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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2024 and December 31, 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Millions) | |||||||||||
| Less than 1 year | $5.4 | $5.3 | |||||||||
| 1 year - 5 years | 222.1 | 203.4 | |||||||||
| 5 years - 10 years | 153.5 | 128.6 | |||||||||
| 10 years - 15 years | 8.1 | 10.7 | |||||||||
| 15 years - 20 years | 41.0 | 38.8 | |||||||||
| 20 years+ | 124.5 | 98.4 | |||||||||
| Total | $554.6 | $485.2 | |||||||||
During the three months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $93.5 million and $69.9 million, respectively. During the three months ended June 30, 2024 and 2023, there were no gross gains and gross losses of $8.4 million and $4.1 million, respectively, related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2024 and 2023, proceeds from the dispositions of available-for-sale debt securities amounted to $201.5 million and $111.2 million, respectively. During the six months ended June 30, 2024, there were gross gains of $0.2 million and gross losses of $11.9 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings. During the three months ended June 30, 2023, there were no gross gains and gross losses of $6.3 million related to available-for-sale debt securities reclassified out of other regulatory liabilities/assets into earnings.
NOTE 10. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See “Income Tax Audits” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits, the Tax Cuts and Jobs Act, and other income tax matters involving Entergy. The following are updates to that discussion.
Income Tax Audits
As discussed in Note 3 to the financial statements in the Form 10-K, in November 2023 the IRS completed its examination of the 2016 through 2018 tax years and 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 share with customers $138 million of income tax benefits from the resolution of the 2016–2018 IRS audit. Based on this settlement in principle, in first quarter 2024 Entergy New Orleans increased 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 principle requires that the regulatory liability be amortized over 25 years with the unamortized balance included in rate base and the amortization treated as a reduction to Entergy New Orleans’s retail revenue requirement. In May 2024 the City Council approved the settlement.
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Arkansas Corporate Income Tax Rate Change
In June 2024, Arkansas Act 1 of the Second Extraordinary Session reduced the Arkansas corporate income tax rate from 4.8% to 4.3%, which is retroactively effective as of January 1, 2024. As a result of the rate reduction, Entergy Arkansas accrued a regulatory liability for income taxes of approximately $31 million in the second quarter of 2024. The regulatory liability includes a tax gross-up related to the treatment of income taxes in the retail and wholesale ratemaking formulas and is expected to be included in future rate mechanisms.
NOTE 11. 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 (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 for discussion of noncontrolling interests.
Restoration Law Trust I (the storm trust I), a trust consolidated by Entergy Louisiana, is a VIE and Entergy Louisiana is the primary beneficiary. As of June 30, 2024 and December 31, 2023, the primary asset held by the storm trust I was $2.9 billion and $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 sheets of Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust I is recorded as noncontrolling interest on the consolidated balance sheets of Entergy and Entergy Louisiana, with balances of $30.6 million as of June 30, 2024 and $30.5 million as of December 31, 2023.
Restoration Law Trust II (the storm trust II), a trust consolidated by Entergy Louisiana, is a VIE and Entergy Louisiana is the primary beneficiary. As of June 30, 2024 and December 31, 2023, the primary asset held by the storm trust II was $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 sheets of Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust II is recorded as noncontrolling interest on the consolidated balance sheets of Entergy and Entergy Louisiana, with balances of $14.9 million as of June 30, 2024 and $14.6 million as of December 31, 2023.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest in 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 six months ended June 30, 2024 and the six months ended June 30, 2023.
AR Searcy Partnership, LLC is a tax equity partnership that qualifies as a VIE, which Entergy Arkansas is required to consolidate as it is the primary beneficiary. As of June 30, 2024, AR Searcy Partnership, LLC recorded assets equal to $132.5 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $112.9 million. As of December 31, 2023, AR Searcy Partnership, LLC recorded assets equal to $134 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $111.2 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest on the consolidated balance sheets of Entergy and Entergy Arkansas.
MS Sunflower Partnership, LLC is a tax equity partnership that qualifies as a VIE, which Entergy Mississippi is required to consolidate as it is the primary beneficiary. As of June 30, 2024, MS Sunflower Partnership, LLC recorded assets equal to $167.7 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately
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$131.1 million. As of December 31, 2023, MS Sunflower Partnership, LLC recorded assets equal to $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 ownership interest is recorded as noncontrolling interest on the consolidated balance sheets of Entergy and Entergy Mississippi.
NOTE 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 June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||||||||||||||
| (In Thousands) | |||||||||||||||||||||||
| Utility: | |||||||||||||||||||||||
| Residential | $1,009,836 | $951,424 | |||||||||||||||||||||
| Commercial | 713,282 | 692,788 | |||||||||||||||||||||
| Industrial | 792,721 | 750,177 | |||||||||||||||||||||
| Governmental | 65,861 | 63,816 | |||||||||||||||||||||
| Total billed retail | 2,581,700 | 2,458,205 | |||||||||||||||||||||
| Sales for resale (a) | 54,579 | 68,262 | |||||||||||||||||||||
| Other electric revenues (b) | 257,813 | 247,331 | |||||||||||||||||||||
| Revenues from contracts with customers | 2,894,092 | 2,773,798 | |||||||||||||||||||||
| Other Utility revenues (c) | 11,955 | 11,446 | |||||||||||||||||||||
| Electric revenues | 2,906,047 | 2,785,244 | |||||||||||||||||||||
| Natural gas revenues | 35,357 | 33,503 | |||||||||||||||||||||
| Other revenues (d) | 12,216 | 27,279 | |||||||||||||||||||||
| Total operating revenues | $2,953,620 | $2,846,026 | |||||||||||||||||||||
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Entergy’s total revenues for the six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| Utility: | ||||||||||||||
| Residential | $2,080,177 | $1,992,883 | ||||||||||||
| Commercial | 1,405,133 | 1,407,089 | ||||||||||||
| Industrial | 1,541,679 | 1,613,899 | ||||||||||||
| Governmental | 131,172 | 131,153 | ||||||||||||
| Total billed retail | 5,158,161 | 5,145,024 | ||||||||||||
| Sales for resale (a) | 133,583 | 176,209 | ||||||||||||
| Other electric revenues (b) | 293,847 | 291,788 | ||||||||||||
| Revenues from contracts with customers | 5,585,591 | 5,613,021 | ||||||||||||
| Other Utility revenues (c) | 26,962 | 55,633 | ||||||||||||
| Electric revenues | 5,612,553 | 5,668,654 | ||||||||||||
| Natural gas revenues | 101,024 | 98,084 | ||||||||||||
| Other revenues (d) | 34,671 | 60,347 | ||||||||||||
| Total operating revenues | $5,748,248 | $5,827,085 | ||||||||||||
The Utility operating companies’ total revenues for the three months ended June 30, 2024 and 2023 were as follows:
| 2024 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||
| Residential | $204,822 | $353,975 | $163,049 | $71,842 | $216,148 | |||||||||||||||||||||||||||
| Commercial | 132,950 | 265,869 | 142,173 | 57,360 | 114,930 | |||||||||||||||||||||||||||
| Industrial | 138,786 | 458,420 | 49,180 | 7,602 | 138,733 | |||||||||||||||||||||||||||
| Governmental | 4,433 | 21,223 | 14,061 | 19,167 | 6,977 | |||||||||||||||||||||||||||
| Total billed retail | 480,991 | 1,099,487 | 368,463 | 155,971 | 476,788 | |||||||||||||||||||||||||||
| Sales for resale (a) | 43,842 | 80,823 | 21,260 | 8,575 | 3,015 | |||||||||||||||||||||||||||
| Other electric revenues (b) | 81,733 | 74,670 | 50,718 | 12,811 | 39,224 | |||||||||||||||||||||||||||
| Revenues from contracts with customers | 606,566 | 1,254,980 | 440,441 | 177,357 | 519,027 | |||||||||||||||||||||||||||
| Other revenues (c) | 2,232 | 6,464 | 2,453 | 1,307 | 50 | |||||||||||||||||||||||||||
| Electric revenues | 608,798 | 1,261,444 | 442,894 | 178,664 | 519,077 | |||||||||||||||||||||||||||
| Natural gas revenues | — | 14,680 | — | 20,677 | — | |||||||||||||||||||||||||||
| Total operating revenues | $608,798 | $1,276,124 | $442,894 | $199,341 | $519,077 | |||||||||||||||||||||||||||
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| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||
| Residential | $204,808 | $334,246 | $163,001 | $68,535 | $180,834 | |||||||||||||||||||||||||||
| Commercial | 136,591 | 253,365 | 142,997 | 56,095 | 103,740 | |||||||||||||||||||||||||||
| Industrial | 153,817 | 407,045 | 54,738 | 7,562 | 127,015 | |||||||||||||||||||||||||||
| Governmental | 4,945 | 19,407 | 14,971 | 17,896 | 6,597 | |||||||||||||||||||||||||||
| Total billed retail | 500,161 | 1,014,063 | 375,707 | 150,088 | 418,186 | |||||||||||||||||||||||||||
| Sales for resale (a) | 48,266 | 80,248 | 26,073 | 11,075 | 1,986 | |||||||||||||||||||||||||||
| Other electric revenues (b) | 65,807 | 91,372 | 40,966 | 5,667 | 44,861 | |||||||||||||||||||||||||||
| Revenues from contracts with customers | 614,234 | 1,185,683 | 442,746 | 166,830 | 465,033 | |||||||||||||||||||||||||||
| Other revenues (c) | 2,113 | 6,226 | 2,384 | 1,386 | (603) | |||||||||||||||||||||||||||
| Electric revenues | 616,347 | 1,191,909 | 445,130 | 168,216 | 464,430 | |||||||||||||||||||||||||||
| Natural gas revenues | — | 13,703 | — | 19,800 | — | |||||||||||||||||||||||||||
| Total operating revenues | $616,347 | $1,205,612 | $445,130 | $188,016 | $464,430 | |||||||||||||||||||||||||||
The Utility operating companies’ total revenues for the six months ended June 30, 2024 and 2023 were as follows:
| 2024 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||
| Residential | $480,574 | $699,003 | $341,666 | $139,520 | $419,414 | |||||||||||||||||||||||||||
| Commercial | 274,258 | 522,565 | 274,491 | 110,585 | 223,234 | |||||||||||||||||||||||||||
| Industrial | 288,193 | 880,017 | 95,607 | 14,580 | 263,282 | |||||||||||||||||||||||||||
| Governmental | 9,133 | 43,044 | 27,390 | 37,521 | 14,084 | |||||||||||||||||||||||||||
| Total billed retail | 1,052,158 | 2,144,629 | 739,154 | 302,206 | 920,014 | |||||||||||||||||||||||||||
| Sales for resale (a) | 82,807 | 163,551 | 69,193 | 21,075 | 4,922 | |||||||||||||||||||||||||||
| Other electric revenues (b) | 91,074 | 112,615 | 44,516 | 9,592 | 38,736 | |||||||||||||||||||||||||||
| Revenues from contracts with customers | 1,226,039 | 2,420,795 | 852,863 | 332,873 | 963,672 | |||||||||||||||||||||||||||
| Other revenues (c) | 4,804 | 13,442 | 4,887 | 2,732 | (104) | |||||||||||||||||||||||||||
| Electric revenues | 1,230,843 | 2,434,237 | 857,750 | 335,605 | 963,568 | |||||||||||||||||||||||||||
| Natural gas revenues | — | 44,327 | — | 56,697 | — | |||||||||||||||||||||||||||
| Total operating revenues | $1,230,843 | $2,478,564 | $857,750 | $392,302 | $963,568 | |||||||||||||||||||||||||||
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| 2023 | Entergy Arkansas | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | |||||||||||||||||||||||||||
| (In Thousands) | ||||||||||||||||||||||||||||||||
| Residential | $444,307 | $694,892 | $332,390 | $132,101 | $389,193 | |||||||||||||||||||||||||||
| Commercial | 261,927 | 531,543 | 276,673 | 110,164 | 226,782 | |||||||||||||||||||||||||||
| Industrial | 285,053 | 916,949 | 106,153 | 14,975 | 290,769 | |||||||||||||||||||||||||||
| Governmental | 9,605 | 42,481 | 28,854 | 35,694 | 14,519 | |||||||||||||||||||||||||||
| Total billed retail | 1,000,892 | 2,185,865 | 744,070 | 292,934 | 921,263 | |||||||||||||||||||||||||||
| Sales for resale (a) | 114,283 | 163,484 | 64,816 | 35,985 | 4,431 | |||||||||||||||||||||||||||
| Other electric revenues (b) | 79,524 | 117,939 | 43,840 | 6,084 | 47,085 | |||||||||||||||||||||||||||
| Revenues from contracts with customers | 1,194,699 | 2,467,288 | 852,726 | 335,003 | 972,779 | |||||||||||||||||||||||||||
| Other revenues (c) | 4,397 | 44,373 | 4,832 | 2,908 | (843) | |||||||||||||||||||||||||||
| Electric revenues | 1,199,096 | 2,511,661 | 857,558 | 337,911 | 971,936 | |||||||||||||||||||||||||||
| Natural gas revenues | — | 39,159 | — | 58,925 | — | |||||||||||||||||||||||||||
| Total operating revenues | $1,199,096 | $2,550,820 | $857,558 | $396,836 | $971,936 | |||||||||||||||||||||||||||
(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 late fees.
(d)Other revenues include the sale of electric power and capacity to wholesale customers, day-ahead sales of energy in a market administered by an ISO, and operation and management services 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 six months ended June 30, 2024 and 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 | 15.3 | 2.6 | 6.2 | 2.2 | 1.4 | 2.9 | |||||||||||||||||||||||||||||
| Write-offs | (46.0) | (10.7) | (15.6) | (7.4) | (7.1) | (5.2) | |||||||||||||||||||||||||||||
| Recoveries | 21.4 | 5.2 | 6.7 | 4.1 | 3.7 | 1.7 | |||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $16.6 | $4.3 | $3.4 | $2.2 | $5.8 | $0.9 | |||||||||||||||||||||||||||||
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| 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 | 15.5 | 3.2 | 7.0 | 2.1 | 0.7 | 2.5 | |||||||||||||||||||||||||||||
| Write-offs | (51.5) | (13.2) | (21.4) | (3.7) | (6.5) | (6.7) | |||||||||||||||||||||||||||||
| Recoveries | 26.9 | 8.7 | 11.7 | 1.5 | 1.5 | 3.5 | |||||||||||||||||||||||||||||
| Balance as of June 30, 2023 | $21.8 | $5.2 | $4.9 | $2.4 | $7.6 | $1.7 | |||||||||||||||||||||||||||||
The allowance 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 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 are updates 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.
In second quarter 2024, revisions were recorded to the estimated decommissioning cost liabilities for White Bluff and Independence as a result of the EPA rule that was finalized in May 2024 establishing management standards for legacy coal combustion residuals (CCR) surface impoundments (i.e., inactive surface impoundments at inactive power plants) and establishing a new class of units referred to as CCR management units (CCRMUs) (i.e., non-containerized CCR located at a regulated CCR facility). Entergy does not have any legacy impoundments; however, the definition of CCR management units includes on-site areas where CCR was beneficially used. This is contrary to the previous CCR rule which exempted beneficial uses that met certain criteria. Under this expanded rule, all facilities must identify and delineate any CCRMU greater than one ton and submit a facility evaluation report by February 2026. Any potential requirements for corrective action or operational changes under the various CCR rules continue to be assessed. Given the complexity and recency of the EPA guidance, Entergy is still evaluating the level of work that will ultimately be required to comply with the rule. Based on initial estimates of multiple possible remediation scenarios, Entergy Arkansas and Entergy Mississippi recorded increases of $31 million and $9 million, respectively, in their decommissioning cost liabilities, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining useful lives of the units. Entergy will continue to update the asset retirement obligation as the requirements of the revised CCR rule are clarified.
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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 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.
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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 June 30, 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 June 30, 2024 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income increased $28.4 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher interest expense and higher depreciation and amortization expenses.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Net income decreased $63.3 million 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, higher other operation and maintenance expenses, higher interest expense, and higher depreciation and amortization expenses. The decrease was partially offset by 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
Second Quarter 2024 Compared to Second Quarter 2023
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $616.3 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (45.9) | ||||
| Volume/weather | 18.6 | ||||
| Retail electric price | 19.8 | ||||
| 2024 operating revenues | $608.8 | ||||
Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to an increase in weather-adjusted residential usage, the effect of more favorable weather on residential sales, and an increase in industrial and commercial usage. The increase in weather-adjusted residential usage is primarily due to an increase in customers. The increase in industrial usage is primarily due to an increase in demand from large industrial customers, primarily new customers in the technology industry, and an increase in demand from small industrial customers.
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.
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Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 1,855 | 1,767 | 5 | ||||||||||||||
| Commercial | 1,419 | 1,374 | 3 | ||||||||||||||
| Industrial | 2,443 | 2,226 | 10 | ||||||||||||||
| Governmental | 50 | 49 | 2 | ||||||||||||||
| Total retail | 5,767 | 5,416 | 6 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Associated companies | 522 | 512 | 2 | ||||||||||||||
| Non-associated companies | 982 | 811 | 21 | ||||||||||||||
| Total | 7,271 | 6,739 | 8 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $1,199.1 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (32.0) | ||||
| Retail electric price | 35.0 | ||||
| Volume/weather | 28.7 | ||||
| 2024 operating revenues | $1,230.8 | ||||
Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to 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, an increase in weather-adjusted residential usage, and an increase in industrial usage. The increase in weather-adjusted residential usage is primarily due to an increase in customers. The increase in industrial usage is primarily due to an increase in demand from large industrial customers, primarily new customers in the technology industry, and an increase in demand from small industrial customers.
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Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 3,821 | 3,569 | 7 | ||||||||||||||
| Commercial | 2,699 | 2,613 | 3 | ||||||||||||||
| Industrial | 4,711 | 4,276 | 10 | ||||||||||||||
| Governmental | 95 | 95 | — | ||||||||||||||
| Total retail | 11,326 | 10,553 | 7 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Associated companies | 984 | 1,075 | (8) | ||||||||||||||
| Non-associated companies | 1,949 | 2,379 | (18) | ||||||||||||||
| Total | 14,259 | 14,007 | 2 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Other Income Statement Variances
Second Quarter 2024 Compared to Second Quarter 2023
Other operation and maintenance expenses decreased primarily due to a decrease of $3.4 million in non-nuclear generation expenses primarily due to a lower scope of work during plant outages performed in 2024 as compared to 2023 and a decrease of $2.2 million in power delivery expenses primarily due to lower vegetation maintenance costs. The decrease was partially offset by an increase of $2.9 million in contract costs related to operational performance, customer service, and organizational health initiatives.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income increased primarily due to a decrease of $3.7 million in net periodic pension and other postretirement benefits non-service costs primarily as a result of pension settlement charges recorded in second quarter 2023 and a reduction in 2024 in the amortization of deferred pension losses as a result of an amendment to a qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the 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.
Interest expense increased primarily due to the issuance of $300 million of 5.30% Series mortgage bonds in August 2023 and the issuances of $400 million of 5.75% Series mortgage bonds and $400 million of 5.45% Series mortgage bonds, each in May 2024.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
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.
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Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 $6.1 million in energy efficiency expenses primarily due to the timing of recovery from customers; and
•an increase of $5.2 million in contract costs related to operational performance, customer service, and organizational health initiatives.
The increase was partially offset by a decrease of $5.5 million in non-nuclear generation expenses primarily due to a lower scope of work during plant outages performed in 2024 as compared to 2023.
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 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.
Interest expense increased primarily due to the issuance of $300 million of 5.30% Series mortgage bonds in August 2023 and the issuances of $400 million of 5.75% Series mortgage bonds and $400 million of 5.45% Series mortgage bonds, each in May 2024. The increase was partially offset by the repayment of $250 million of 3.05% Series mortgage bonds in June 2023.
Income Taxes
The effective income tax rate was 25.2% for the second quarter 2024. The difference in the effective income tax rate for the second quarter 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and the amortization of accumulated deferred income taxes as a result of tax rate changes, 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 25.4% for the six months ended June 30, 2024. The difference in the effective income tax rate for the six months ended June 30, 2024 versus the federal statutory rate of 21% was primarily due to the amortization of accumulated deferred income taxes as a result of tax rate changes 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 22.9% for the second quarter 2023. The difference in the effective income tax rate for the second quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
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Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
The effective income tax rate was 19.4% for the six months ended June 30, 2023. The difference in the effective income tax rate for the six months ended June 30, 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 six months ended June 30, 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 | 524,708 | 407,699 | |||||||||
| Investing activities | (721,529) | (563,854) | |||||||||
| Financing activities | 979,521 | 155,090 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 782,700 | (1,065) | |||||||||
| Cash and cash equivalents at end of period | $786,332 | $4,213 | |||||||||
Operating Activities
Net cash flow provided by operating activities increased $117 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the receipt of $92 million in settlement proceeds in May 2024 as a result of the System Energy settlement with the APSC. See Note 2 to the financial statements for a discussion of the System Energy settlement agreement with the APSC;
•higher collections from customers;
•a decrease of $30.1 million in interest paid; and
•a decrease in spending of $14.1 million on nuclear refueling outages in 2024.
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;
•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;
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Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
•$23.2 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
•the timing of payments to vendors.
Investing Activities
Net cash flow used in investing activities increased $157.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the initial payment of approximately $169.7 million in February 2024 for the purchase of the Walnut Bend Solar facility. See Note 14 to the financial statements herein for discussion of the Walnut Bend Solar facility purchase;
•money pool activity; and
•$17.9 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously recorded as plant. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
The increase was partially offset by:
•a decrease of $89.5 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2024;
•a decrease of $31.2 million in nuclear construction expenditures primarily due to decreased spending on various nuclear projects in 2024; and
•a decrease of $24.5 million as a result of fluctuations in nuclear fuel activity 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.
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 $130.6 million for the six months ended June 30, 2024. 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.
Financing Activities
Net cash flow provided by financing activities increased $824.4 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the issuances of $400 million of 5.45% Series mortgage bonds and $400 million of 5.75% Series mortgage bonds, each in May 2024;
•capital contributions of approximately $695 million received from Entergy Corporation in 2024 in anticipation of upcoming expenditures, including the acquisitions of the Walnut Bend Solar facility, the Driver Solar facility, and the West Memphis Solar facility;
•the repayment, at maturity, of $250 million of 3.05% Series mortgage bonds in June 2023;
•$89 million in common equity distributions paid in 2023 in order to maintain Entergy Arkansas’s capital structure; and
•the issuance of $70 million of 5.54% Series O notes by the Entergy Arkansas nuclear fuel company variable interest entity in March 2024.
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The increase was partially offset by:
•the issuance of $425 million of 5.15% Series mortgage bonds in January 2023;
•the repayment, at maturity, of $375 million of 3.70% Series mortgage bonds in June 2024;
•net repayments of $70.2 million in 2024 compared to net borrowings of $97.5 million in 2023 on the nuclear fuel company variable interest entity’s credit facility; 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 six months ended June 30, 2024 compared to decreasing by $28.5 million for the six months ended June 30, 2023.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Arkansas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Arkansas is primarily due to capital contributions of $695 million received from Entergy Corporation in 2024, partially offset by the net issuance of long-term debt in 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 53.1 | % | 55.5 | % | |||||||
| Effect of subtracting cash | (4.2 | %) | — | % | |||||||
| Net debt to net capital (non-GAAP) | 48.9 | % | 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 currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Arkansas also uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| $130,602 | ($145,385) | ($152,327) | ($180,795) | |||||||||||||||||
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
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Entergy Arkansas has a credit facility in the amount of $300 million scheduled to expire in June 2029. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2026. The $300 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 June 30, 2024, 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 June 30, 2024, $12.4 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 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 2027. As of June 30, 2024, there were no loans outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for discussion of the nuclear fuel company variable interest entity credit facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates
2024 Formula Rate Plan Filing
In July 2024, Entergy Arkansas filed with the APSC its 2024 formula rate plan filing to set its formula rate for the 2025 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the 2025 projected year and a netting adjustment for the 2023 historical year. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2025 projected year was 8.43% resulting in a revenue deficiency of $69.5 million. The earned rate of return on common equity for the 2023 historical year was 7.48% resulting in a $33.1 million netting adjustment. The total proposed revenue change for the 2025 projected year and 2023 historical year netting adjustment is $102.6 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the resulting increase was limited to $82.6 million. This filing is subject to review by the APSC, which is expected to issue its order on the filing in December 2024.
Grand Gulf Credit Rider
In June 2024, Entergy Arkansas filed with the APSC a tariff to provide retail customers a credit resulting from the terms of the settlement agreement between Entergy Arkansas, System Energy, additional named Entergy parties, and the APSC pertaining to System Energy’s billings for wholesale sales of energy and capacity from the Grand Gulf nuclear plant. See “Complaints Against System Energy - System Energy Settlement with the APSC” in Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement. In July 2024 the APSC approved the tariff, under which Entergy Arkansas will refund retail customers a total of $100.6 million with a one-time bill credit during the August 2024 billing cycle.
Energy Cost Recovery Rider
In March 2024, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease in the rate from $0.01883 per kWh to $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
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Management’s Financial Discussion and Analysis
the rate decrease is a large over-recovered balance as a result of lower natural gas prices in 2023. To mitigate the effect of projected increases in natural gas prices in 2024, Entergy Arkansas adjusted the over-recovered balance included in the March 2024 annual redetermination filing by $43.7 million. This adjustment is expected to reduce the rate change that will be reflected in the 2025 energy cost rate redetermination. The redetermined rate of $0.00882 per kWh became effective with the first billing cycle in April 2024 through the normal operation of the tariff.
Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s denial of recovery of $135 million of payments to other 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 $13.7 million, plus interest, of related refunds ordered by the APSC and paid by Entergy Arkansas 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 United States Court of Appeals for the Eighth District granted Entergy Arkansas’s request, and oral arguments were held in June 2023. In August 2023 the United States Court of Appeals for 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. Briefing to the United States Court of Appeals for the Eighth District concluded in 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.
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. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
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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.
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| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED INCOME STATEMENTS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $608,798 | $616,347 | $1,230,843 | $1,199,096 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 52,756 | 102,350 | 159,195 | 215,859 | ||||||||||||||||||||||
| Purchased power | 55,602 | 57,648 | 107,922 | 122,399 | ||||||||||||||||||||||
| Nuclear refueling outage expenses | 14,101 | 15,504 | 28,189 | 30,845 | ||||||||||||||||||||||
| Other operation and maintenance | 174,835 | 178,044 | 352,876 | 334,863 | ||||||||||||||||||||||
| Asset write-offs | — | — | 131,775 | — | ||||||||||||||||||||||
| Decommissioning | 22,832 | 21,667 | 45,479 | 43,017 | ||||||||||||||||||||||
| Taxes other than income taxes | 34,390 | 34,743 | 70,614 | 67,094 | ||||||||||||||||||||||
| Depreciation and amortization | 103,966 | 99,707 | 206,957 | 196,148 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | (20,934) | (19,185) | 27,685 | (40,029) | ||||||||||||||||||||||
| TOTAL | 437,548 | 490,478 | 1,130,692 | 970,196 | ||||||||||||||||||||||
| OPERATING INCOME | 171,250 | 125,869 | 100,151 | 228,900 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 5,862 | 5,400 | 11,394 | 10,243 | ||||||||||||||||||||||
| Interest and investment income | 5,181 | 5,727 | 77,941 | 13,206 | ||||||||||||||||||||||
| Miscellaneous - net | (2,799) | (6,239) | (6,380) | (8,340) | ||||||||||||||||||||||
| TOTAL | 8,244 | 4,888 | 82,955 | 15,109 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 54,879 | 46,038 | 104,144 | 91,405 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (2,864) | (2,169) | (5,563) | (4,114) | ||||||||||||||||||||||
| TOTAL | 52,015 | 43,869 | 98,581 | 87,291 | ||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 127,479 | 86,888 | 84,525 | 156,718 | ||||||||||||||||||||||
| Income taxes | 32,120 | 19,940 | 21,446 | 30,374 | ||||||||||||||||||||||
| NET INCOME | 95,359 | 66,948 | 63,079 | 126,344 | ||||||||||||||||||||||
| Net loss attributable to noncontrolling interest | (825) | (1,006) | (2,643) | (2,635) | ||||||||||||||||||||||
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | $96,184 | $67,954 | $65,722 | $128,979 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
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| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $63,079 | $126,344 | ||||||||||||
| Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | 287,564 | 270,098 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 41,130 | 33,572 | ||||||||||||
| Asset write-offs | 131,775 | — | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Receivables | 67,067 | 21,444 | ||||||||||||
| Fuel inventory | 10,890 | (6,830) | ||||||||||||
| Accounts payable | 26,093 | (43,953) | ||||||||||||
| Taxes accrued | (15,496) | (4,315) | ||||||||||||
| Interest accrued | 4,647 | 10,421 | ||||||||||||
| Deferred fuel costs | 2,317 | 123,264 | ||||||||||||
| Other working capital accounts | (13,243) | (30,581) | ||||||||||||
| Provisions for estimated losses | 5,725 | (26,606) | ||||||||||||
| Other regulatory assets | 179,719 | (51,960) | ||||||||||||
| Other regulatory liabilities | 71,529 | 97,349 | ||||||||||||
| Pension and other postretirement funded status | (27,588) | (18,948) | ||||||||||||
| Other assets and liabilities | (310,500) | (91,600) | ||||||||||||
| Net cash flow provided by operating activities | 524,708 | 407,699 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (394,973) | (524,723) | ||||||||||||
| Allowance for equity funds used during construction | 11,394 | 10,243 | ||||||||||||
| Payment for purchase of plant | (169,694) | — | ||||||||||||
| Nuclear fuel purchases | (65,010) | (73,912) | ||||||||||||
| Proceeds from sale of nuclear fuel | 33,213 | 17,614 | ||||||||||||
| Proceeds from nuclear decommissioning trust fund sales | 412,931 | 54,469 | ||||||||||||
| Investment in nuclear decommissioning trust funds | (418,818) | (65,584) | ||||||||||||
| Change in money pool receivable - net | (130,602) | — | ||||||||||||
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | — | 17,933 | ||||||||||||
| Decrease in other investments | 30 | 106 | ||||||||||||
| Net cash flow used in investing activities | (721,529) | (563,854) | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of long-term debt | 970,030 | 661,923 | ||||||||||||
| Retirement of long-term debt | (555,411) | (394,810) | ||||||||||||
| Capital contributions from parent | 695,000 | — | ||||||||||||
| Changes in money pool payable - net | (145,385) | (28,468) | ||||||||||||
| Common equity distributions paid | — | (89,000) | ||||||||||||
| Other | 15,287 | 5,445 | ||||||||||||
| Net cash flow provided by financing activities | 979,521 | 155,090 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | 782,700 | (1,065) | ||||||||||||
| Cash and cash equivalents at beginning of period | 3,632 | 5,278 | ||||||||||||
| Cash and cash equivalents at end of period | $786,332 | $4,213 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $49,597 | $79,716 | ||||||||||||
| Income taxes | $1,569 | $— | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $36,355 | $113,205 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $14,168 | $520 | ||||||||||||
| Temporary cash investments | 772,164 | 3,112 | ||||||||||||
| Total cash and cash equivalents | 786,332 | 3,632 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 159,732 | 157,520 | ||||||||||||
| Allowance for doubtful accounts | (4,297) | (7,182) | ||||||||||||
| Associated companies | 176,832 | 124,672 | ||||||||||||
| Other | 70,310 | 89,532 | ||||||||||||
| Accrued unbilled revenues | 142,619 | 117,119 | ||||||||||||
| Total accounts receivable | 545,196 | 481,661 | ||||||||||||
| Fuel inventory - at average cost | 46,605 | 57,495 | ||||||||||||
| Materials and supplies - at average cost | 387,125 | 358,302 | ||||||||||||
| Deferred nuclear refueling outage costs | 39,064 | 35,463 | ||||||||||||
| Prepayments and other | 37,288 | 40,866 | ||||||||||||
| TOTAL | 1,841,610 | 977,419 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Decommissioning trust funds | 1,522,508 | 1,414,009 | ||||||||||||
| Other | 799 | 801 | ||||||||||||
| TOTAL | 1,523,307 | 1,414,810 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 15,166,477 | 14,821,814 | ||||||||||||
| Construction work in progress | 503,003 | 340,601 | ||||||||||||
| Nuclear fuel | 226,459 | 213,722 | ||||||||||||
| TOTAL UTILITY PLANT | 15,895,939 | 15,376,137 | ||||||||||||
| Less - accumulated depreciation and amortization | 6,144,521 | 6,002,203 | ||||||||||||
| UTILITY PLANT - NET | 9,751,418 | 9,373,934 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets | 1,705,642 | 1,885,361 | ||||||||||||
| Other | 154,064 | 21,334 | ||||||||||||
| TOTAL | 1,859,706 | 1,906,695 | ||||||||||||
| TOTAL ASSETS | $14,976,041 | $13,672,858 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $— | $375,000 | ||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | 98,324 | 225,344 | ||||||||||||
| Other | 196,722 | 215,502 | ||||||||||||
| Customer deposits | 121,174 | 113,186 | ||||||||||||
| Taxes accrued | 89,655 | 105,151 | ||||||||||||
| Interest accrued | 40,017 | 35,370 | ||||||||||||
| Deferred fuel costs | 90,599 | 88,282 | ||||||||||||
| Other | 65,592 | 55,683 | ||||||||||||
| TOTAL | 702,083 | 1,213,518 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 1,445,165 | 1,437,053 | ||||||||||||
| Accumulated deferred investment tax credits | 26,670 | 27,270 | ||||||||||||
| Regulatory liability for income taxes - net | 419,526 | 392,496 | ||||||||||||
| Other regulatory liabilities | 803,680 | 759,181 | ||||||||||||
| Decommissioning | 1,625,476 | 1,560,057 | ||||||||||||
| Accumulated provisions | 64,684 | 58,959 | ||||||||||||
| Pension and other postretirement liabilities | 103,190 | 8,901 | ||||||||||||
| Long-term debt | 5,094,160 | 4,298,080 | ||||||||||||
| Other | 172,939 | 156,673 | ||||||||||||
| TOTAL | 9,755,490 | 8,698,670 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||
| EQUITY | ||||||||||||||
| Member's equity | 4,499,793 | 3,739,071 | ||||||||||||
| Noncontrolling interest | 18,675 | 21,599 | ||||||||||||
| TOTAL | 4,518,468 | 3,760,670 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $14,976,041 | $13,672,858 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Noncontrolling Interest | Member's Equity | Total | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Balance at December 31, 2022 | $27,825 | $3,753,990 | $3,781,815 | ||||||||||||||
| Net income (loss) | (1,629) | 61,026 | 59,397 | ||||||||||||||
| Common equity distributions | — | (80,000) | (80,000) | ||||||||||||||
| Distributions to noncontrolling interest | (104) | — | (104) | ||||||||||||||
| Balance at March 31, 2023 | 26,092 | 3,735,016 | 3,761,108 | ||||||||||||||
| Net income (loss) | (1,006) | 67,954 | 66,948 | ||||||||||||||
| Common equity distributions | — | (9,000) | (9,000) | ||||||||||||||
| Distributions to noncontrolling interest | (113) | — | (113) | ||||||||||||||
| Balance at June 30, 2023 | $24,973 | $3,793,970 | $3,818,943 | ||||||||||||||
| Balance at December 31, 2023 | $21,599 | $3,739,071 | $3,760,670 | ||||||||||||||
| Net loss | (1,818) | (30,462) | (32,280) | ||||||||||||||
| Capital contribution from parent | — | 275,000 | 275,000 | ||||||||||||||
| Distributions to noncontrolling interest | (250) | — | (250) | ||||||||||||||
| Balance at March 31, 2024 | 19,531 | 3,983,609 | 4,003,140 | ||||||||||||||
| Net income (loss) | (825) | 96,184 | 95,359 | ||||||||||||||
| Capital contribution from parent | — | 420,000 | 420,000 | ||||||||||||||
| Distributions to noncontrolling interest | (31) | — | (31) | ||||||||||||||
| Balance at June 30, 2024 | $18,675 | $4,499,793 | $4,518,468 | ||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||
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Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income decreased $132.1 million primarily due to expenses of $151.5 million ($110.7 million net-of-tax), recorded in second quarter 2024, primarily consisting of regulatory charges to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. Also contributing to the decrease were higher other operation and maintenance expenses, partially offset by higher volume/weather and a lower effective income tax rate. See Note 2 to the financial statements herein for discussion of the agreement in principle and the subsequently filed global stipulated settlement agreement.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Net income decreased $193.4 million primarily due to expenses of $151.5 million ($110.7 million net-of-tax), recorded in second quarter 2024, primarily consisting of regulatory charges to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. Also contributing to the decrease are 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, and higher other operation and maintenance expenses. The decrease was partially offset by higher other income and higher volume/weather. See Note 2 to the financial statements herein for discussion of the agreement in principle and the subsequently filed global stipulated settlement agreement. See Note 2 to the financial statements in the Form 10-K for discussion of the March 2023 storm cost securitization.
Operating Revenues
Second Quarter 2024 Compared to Second Quarter 2023
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $1,205.6 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | 43.0 | ||||
| Volume/weather | 18.4 | ||||
| Retail electric price | 9.1 | ||||
| 2024 operating revenues | $1,276.1 | ||||
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Management’s Financial Discussion and Analysis
Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in industrial usage, partially offset by a decrease in weather-adjusted residential usage. The increase in industrial usage is primarily due to an increase in demand from large industrial customers, primarily in the petroleum refining industry.
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 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan proceeding.
Total electric energy sales for Entergy Louisiana for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 3,913 | 3,694 | 6 | ||||||||||||||
| Commercial | 2,881 | 2,801 | 3 | ||||||||||||||
| Industrial | 8,414 | 8,014 | 5 | ||||||||||||||
| Governmental | 209 | 206 | 1 | ||||||||||||||
| Total retail | 15,417 | 14,715 | 5 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Associated companies | 1,482 | 678 | 119 | ||||||||||||||
| Non-associated companies | 395 | 464 | (15) | ||||||||||||||
| Total | 17,294 | 15,857 | 9 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $2,550.8 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (95.7) | ||||
| Storm restoration carrying costs | (30.6) | ||||
| Retail electric price | 20.4 | ||||
| Volume/weather | 33.7 | ||||
| 2024 operating revenues | $2,478.6 | ||||
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.
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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 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan proceeding.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.
Total electric energy sales for Entergy Louisiana for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 6,728 | 6,378 | 5 | ||||||||||||||
| Commercial | 5,335 | 5,248 | 2 | ||||||||||||||
| Industrial | 16,175 | 15,845 | 2 | ||||||||||||||
| Governmental | 408 | 400 | 2 | ||||||||||||||
| Total retail | 28,646 | 27,871 | 3 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Associated companies | 2,740 | 2,355 | 16 | ||||||||||||||
| Non-associated companies | 777 | 688 | 13 | ||||||||||||||
| Total | 32,163 | 30,914 | 4 | ||||||||||||||
See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Other Income Statement Variances
Second Quarter 2024 Compared to Second Quarter 2023
Other operation and maintenance expenses increased primarily due to:
•an increase of $7.8 million in nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2024 as compared to 2023;
•an increase of $7 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•an increase of $4.4 million in contract costs related to operational performance, customer service, and organizational health initiatives; and
•an increase of $2.5 million in transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for discussion of 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.
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Management’s Financial Discussion and Analysis
Other regulatory charges (credits) - net includes a regulatory charge of $150.2 million, recorded in second quarter 2024, to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. 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. See Note 2 to the financial statements herein for discussion of the agreement in principle and the subsequently filed global stipulated settlement agreement.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Other operation and maintenance expenses increased primarily due to:
•an increase of $8.8 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;
•an increase of $8.1 million in nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2024 as compared to 2023;
•an increase of $7.6 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $7 million in energy efficiency expenses primarily due to the timing of recovery from customers;
•an increase of $3.9 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $3.4 million in transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for discussion of 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.
Other regulatory charges (credits) - net includes:
•a regulatory charge of $150.2 million, recorded in second quarter 2024, to reflect the effects of an agreement in principle between Entergy Louisiana and the LPSC staff and the intervenors in July 2024 to renew Entergy Louisiana’s formula rate plan and resolve a number of other retail dockets and matters, including all formula rate plan test years prior to 2023. See Note 2 to the financial statements herein for discussion of the agreement in principle and the subsequently filed global stipulated settlement agreement; and
•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 in 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.
Other income increased primarily due to:
•changes in decommissioning trust fund activity, including portfolio rebalancing of the River Bend decommissioning trust fund in first quarter 2024;
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Management’s Financial Discussion and Analysis
•an increase of $21 million in affiliated dividend income from affiliated preferred membership interests, related to storm cost securitizations;
•a $14.6 million charge, recorded 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; and
•a decrease of $12.8 million in net periodic pension and other postretirement benefits non-service costs primarily as a result of pension settlement charges recorded in second quarter 2023 and a reduction in 2024 in the amortization of deferred pension losses as a result of an amendment to a qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the 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.
See Note 2 to the financial statements in the Form 10-K for discussion of the storm cost securitizations.
Interest expense increased primarily due to a decrease in the allowance for borrowed funds used during construction due to lower construction work in progress in 2024.
Income Taxes
The effective income tax rate was 13.7% for the second quarter 2024 and 16% for the six months ended June 30, 2024. The differences in the effective income tax rates for the second quarter 2024 and for the six months ended June 30, 2024 versus the federal statutory rate of 21% were 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 20.7% for the second quarter 2023. The difference in the effective income tax rate for the second quarter 2023 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, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of a tax rate change.
The effective income tax rate was (9.1%) for the six months ended June 30, 2023. The difference in the effective income tax rate for the six months ended June 30, 2023 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the March 2023 securitization of storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of a tax rate change. See Notes 2 and 10 to the financial statements herein for a discussion of the March 2023 storm cost securitization under Act 293.
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.
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Management’s Financial Discussion and Analysis
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 discussion of the planned sale of Entergy Louisiana’s gas distribution business. The following is an update to that discussion.
In July 2024 the LPSC staff issued a report recommending LPSC approval of the application of Delta States Utilities LA, LLC (a Bernhard Capital Partners Management LP affiliate) and Entergy Louisiana and the transaction described therein as being in the public interest and proposing certain conditions. Entergy Louisiana anticipates that the LPSC will review the matter at its August Business and Executive meeting.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Cash and cash equivalents at beginning of period | $2,772 | $56,613 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 808,398 | 928,060 | |||||||||
| Investing activities | (639,095) | (2,658,135) | |||||||||
| Financing activities | 13,706 | 2,530,488 | |||||||||
| Net increase in cash and cash equivalents | 183,009 | 800,413 | |||||||||
| Cash and cash equivalents at end of period | $185,781 | $857,026 | |||||||||
Operating Activities
Net cash flow provided by operating activities decreased $119.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 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;
•the timing of payments to vendors; and
•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 in the Form 10-K for further discussion of the refund and the related proceedings.
The decrease was partially offset by a decrease of $16.3 million in spending on nuclear refueling outages.
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Management’s Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $2,019 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 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 in the Form 10-K for a discussion of the March 2023 storm cost securitization and the storm trust II’s investment in preferred membership interests;
•money pool activity;
•a decrease of $123.6 million in nuclear construction expenditures primarily due to decreased spending on various nuclear projects in 2024;
•an increase of $67.3 million in redemptions of the preferred membership interests held by the storm 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 storm 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 $57.5 million as a result of fluctuations in nuclear fuel activity 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;
•a decrease of $36.3 million in transmission construction expenditures primarily due to decreased spending on various transmission projects in 2024 and lower capital expenditures for storm restoration in 2024; and
•a decrease of $25.5 million in non-nuclear generation construction expenditures primarily due to a lower scope of work on projects performed in 2024 as compared to 2023.
Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased $31.4 million for the six months ended June 30, 2024 compared to increasing by $275.6 million for the six months ended June 30, 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.
Financing Activities
Net cash flow provided by financing activities decreased $2,516.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•proceeds from securitization of $1.5 billion received by the storm trust II in 2023;
•a capital contribution of approximately $1.5 billion in 2023 received indirectly from Entergy Corporation related to the March 2023 storm cost securitization;
•an increase of $503.9 million in common equity distributions paid in 2024 in order to maintain Entergy Louisiana’s capital structure;
•the repayment, prior to maturity, of $400 million of 5.40% Series mortgage bonds in April 2024; and
•an increase in net long-term repayments of $54 million on the nuclear fuel company variable interest entities’ credit facilities.
The decrease was partially offset by:
•the issuances of $500 million of 5.35% Series mortgage bonds and $700 million of 5.70% Series mortgage bonds in March 2024;
•money pool activity; and
•a decrease of $50 million in 2024 in net repayments on Entergy Louisiana’s revolving credit facility.
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Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased $156.2 million for the six months ended June 30, 2024 compared to decreasing by $226.1 million for the six months ended June 30, 2023.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt. See Note 2 to the financial statements in the Form 10-K for a discussion of the storm cost securitizations.
Capital Structure
Entergy Louisiana’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to the net issuance of long-term debt in 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 47.7 | % | 44.9 | % | |||||||
| Effect of subtracting cash | (0.5 | %) | 0.0 | % | |||||||
| Net debt to net capital (non-GAAP) | 47.2 | % | 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.
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. The following are updates to the information provided in the Form 10-K.
Following are the current annual amounts of Entergy Louisiana’s planned construction and other capital investments.
| 2024 | 2025 | 2026 | |||||||||||||||
| (In Millions) | |||||||||||||||||
| Planned construction and capital investment: | |||||||||||||||||
| Generation | $380 | $825 | $515 | ||||||||||||||
| Transmission | 615 | 955 | 1,230 | ||||||||||||||
| Distribution | 785 | 1,120 | 860 | ||||||||||||||
| Utility Support | 100 | 80 | 75 | ||||||||||||||
| Total | $1,880 | $2,980 | $2,680 | ||||||||||||||
The updated capital plan for 2024-2026 reflects accelerated resilience spending. In addition to routine capital spending to maintain operations, the capital plan includes investments in generation projects to modernize, decarbonize, and diversify Entergy Louisiana’s portfolio, including Bayou Power Station; investments in River Bend and Waterford 3; distribution and Utility support spending to improve reliability, resilience, and customer
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experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments.
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| $31,361 | ($156,166) | $275,559 | ($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 $400 million scheduled to expire in June 2029. 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 June 30, 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 June 30, 2024, $20.7 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 2027. As of June 30, 2024, $27.9 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity and $26.5 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
Alternative RFP and Certification
As 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, was filed in May 2023. In addition to the acquisition of up to 3 GW of solar resources, the filing also seeks approval of a new renewable energy credits-based tariff, Rider Geaux ZERO. In May 2024 the LPSC voted to approve the application, and in June 2024 the LPSC issued an order reflecting that approval.
Resilience and Grid Hardening
As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC seeking a public interest finding regarding Phase I of Entergy Louisiana’s Future Ready resilience plan and approval of a rider mechanism to recover the program’s costs. Phase I in the December 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. 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 with cost recovery via a forward-looking rider with semi-annual true-ups. The plan is subject to specified reporting requirements and includes a performance review of the hardened assets. The LPSC order approving the framework does not include any restrictions on Entergy Louisiana’s ability to file applications for approval of additional investments in resilience.
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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. A procedural schedule has been established with a hearing in December 2024.
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 are updates to that discussion.
Retail Rates
2023 Entergy Louisiana Rate Case and Formula Rate Plan Extension Request
As discussed in the Form 10-K, in August 2023, Entergy Louisiana filed an application for approval of a regulatory blueprint necessary for it to strengthen the electric grid for the State of Louisiana, which contains a dual-path request to update rates through either: (1) extension of Entergy Louisiana’s current formula rate plan (with certain modifications) for three years (the Rate Mitigation Proposal), which is Entergy Louisiana’s recommended path; or (2) implementation of rates resulting from a cost-of-service study (the Rate Case path). The application complies with Entergy Louisiana’s previous formula rate plan extension order requiring that for Entergy Louisiana to obtain another extension of its formula rate plan that included a rate reset, Entergy Louisiana would need to submit a full cost-of-service/rate case. Entergy Louisiana’s filing supports the need to extend Entergy Louisiana’s formula rate plan with credit supportive mechanisms needed to facilitate investment in the distribution, transmission, and generation functions.
A status conference was held in October 2023 at which a procedural schedule was adopted that included three technical conferences and a hearing in 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. In July 2024 the parties agreed to extend further the procedural schedule to facilitate the continuation of settlement negotiations, with the hearing commencing in December 2024.
In July 2024, Entergy Louisiana reached an agreement in principle with the LPSC staff and the intervenors in the proceeding and filed with the LPSC a joint motion to suspend the procedural schedule to allow for all parties to finalize a stipulated settlement agreement.
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Management’s Financial Discussion and Analysis
In August 2024, Entergy Louisiana and the LPSC staff jointly filed a global stipulated settlement agreement for consideration by the LPSC with key terms as follows:
•continuation of the formula rate plan for 2024-2026 (test years 2023-2025);
•a base formula rate plan revenue increase of $120 million for test year 2023, effective for rates beginning September 2024;
•a $140 million cumulative cap on base formula rate plan revenue increases, if needed, for test years 2024 and 2025, excluding outside the bandwidth items;
•$184 million of customer rate credits to be given over two years, including increasing customer sharing of income tax benefits resulting from the 2016-2018 IRS audit, to resolve any remaining disputed issues stemming from formula rate plan test years prior to test year 2023, including but not limited to the investigation into Entergy Services costs billed to Entergy Louisiana. As discussed in Note 3 to the financial statements in the Form 10-K, a $38 million regulatory liability was recorded in 2023 in connection with the 2016-2018 IRS audit;
•$75.8 million of customer rate credits, as provided for in the System Energy global settlement, to be credited over three years subject to and conditioned upon FERC approval of the System Energy global settlement. See “Complaints Against System Energy – System Energy Settlement with the LPSC” in Note 2 to the financial statements herein for further details of the System Energy global settlement;
•$5.8 million of customer rate credits provided for in the Entergy Louisiana formula rate plan global settlement agreement approved by the LPSC in November 2023 credited over one year. See Note 2 to the financial statements in the Form 10-K for the discussion of the November 2023 Entergy Louisiana formula rate plan global settlement agreement;
•an increase in the allowed midpoint return on common equity from 9.5% to 9.7%, with a bandwidth of 40 basis points above and below the midpoint, for the extended term of the formula rate plan, except that for test year 2023 in which the authorized return on common equity shall have no bearing on the change in base formula rate plan revenue described above and, for test year 2024, any earnings above the authorized return on common equity shall be returned to customers through a credit;
•an increase in nuclear depreciation rates by $15 million in each of the 2023, 2024, and 2025 test years outside of the formula rate plan bandwidth calculation; and
•for the transmission recovery mechanism and the distribution recovery mechanism, no change to the existing floors, but the caps for both would be $350 million for test year 2023, $375 million for test year 2024, and $400 million for test year 2025. LPSC-approved transmission projects will be exempt from the transmission recovery mechanism cap.
The terms of the global stipulated settlement agreement are subject to approval by the LPSC and will not go into effect unless/until such approval is obtained. Entergy Louisiana anticipates the global stipulated settlement agreement to be considered by the LPSC at its Business and Executive meeting on August 14, 2024.
Based on the July 2024 agreement in principle, in second quarter 2024 Entergy Louisiana recorded expenses of $151 million ($111 million net-of-tax) primarily consisting of regulatory charges to reflect the effects of the agreement in principle.
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.
117
Entergy Louisiana, 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. The following is an update to that discussion.
NRC Reactor Oversight Process
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 is currently in Column 1. Entergy expects the NRC to determine that Waterford 3 entered Column 2, effective second quarter 2024, based on exceeding the threshold for reactor scrams in June 2024. Waterford 3 will remain in Column 2 until a supplemental inspection is satisfactorily completed.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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, 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.
118
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED INCOME STATEMENTS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $1,261,444 | $1,191,909 | $2,434,237 | $2,511,661 | ||||||||||||||||||||||
| Natural gas | 14,680 | 13,703 | 44,327 | 39,159 | ||||||||||||||||||||||
| TOTAL | 1,276,124 | 1,205,612 | 2,478,564 | 2,550,820 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 246,571 | 230,365 | 486,658 | 605,635 | ||||||||||||||||||||||
| Purchased power | 166,868 | 133,376 | 367,148 | 328,310 | ||||||||||||||||||||||
| Nuclear refueling outage expenses | 20,041 | 12,588 | 37,554 | 27,861 | ||||||||||||||||||||||
| Other operation and maintenance | 275,168 | 249,717 | 536,147 | 496,088 | ||||||||||||||||||||||
| Decommissioning | 20,061 | 18,820 | 39,725 | 37,406 | ||||||||||||||||||||||
| Taxes other than income taxes | 70,629 | 61,663 | 140,468 | 125,618 | ||||||||||||||||||||||
| Depreciation and amortization | 190,861 | 181,247 | 380,405 | 357,342 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | 120,298 | (24,767) | 111,944 | 49,229 | ||||||||||||||||||||||
| TOTAL | 1,110,497 | 863,009 | 2,100,049 | 2,027,489 | ||||||||||||||||||||||
| OPERATING INCOME | 165,627 | 342,603 | 378,515 | 523,331 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 7,522 | 8,654 | 14,807 | 17,715 | ||||||||||||||||||||||
| Interest and investment income | 15,229 | 31,880 | 78,192 | 60,723 | ||||||||||||||||||||||
| Interest and investment income - affiliated | 80,075 | 81,877 | 160,479 | 137,303 | ||||||||||||||||||||||
| Miscellaneous - net | (20,646) | (42,583) | (67,821) | (90,668) | ||||||||||||||||||||||
| TOTAL | 82,180 | 79,828 | 185,657 | 125,073 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 98,536 | 94,931 | 195,731 | 192,102 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (2,593) | (4,321) | (5,070) | (8,714) | ||||||||||||||||||||||
| TOTAL | 95,943 | 90,610 | 190,661 | 183,388 | ||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 151,864 | 331,821 | 373,511 | 465,016 | ||||||||||||||||||||||
| Income taxes | 20,750 | 68,561 | 59,674 | (42,268) | ||||||||||||||||||||||
| NET INCOME | 131,114 | 263,260 | 313,837 | 507,284 | ||||||||||||||||||||||
| Net income attributable to noncontrolling interests | 788 | 819 | 1,583 | 1,373 | ||||||||||||||||||||||
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | $130,326 | $262,441 | $312,254 | $505,911 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
119
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (In Thousands) | (In Thousands) | ||||||||||||||||||||||
| Net Income | $131,114 | $263,260 | $313,837 | $507,284 | |||||||||||||||||||
| Other comprehensive loss | |||||||||||||||||||||||
| Pension and other postretirement adjustment (net of tax benefit of $745, $653, $1,491, and $943) | (2,023) | (1,773) | (4,047) | (2,559) | |||||||||||||||||||
| Other comprehensive loss | (2,023) | (1,773) | (4,047) | (2,559) | |||||||||||||||||||
| Comprehensive Income | 129,091 | 261,487 | 309,790 | 504,725 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | 788 | 819 | 1,583 | 1,373 | |||||||||||||||||||
| Comprehensive Income Applicable to Member’s Equity | $128,303 | $260,668 | $308,207 | $503,352 | |||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||
120
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $313,837 | $507,284 | ||||||||||||
| Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | 453,888 | 423,535 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 146,540 | 185 | ||||||||||||
| Changes in working capital: | ||||||||||||||
| Receivables | (161,001) | 67,807 | ||||||||||||
| Fuel inventory | 6,890 | (14,907) | ||||||||||||
| Accounts payable | (1,443) | (147,001) | ||||||||||||
| Taxes accrued | 27,677 | 48,015 | ||||||||||||
| Interest accrued | 14,163 | (5,396) | ||||||||||||
| Deferred fuel costs | 11,364 | 188,801 | ||||||||||||
| Other working capital accounts | (190,407) | (213,571) | ||||||||||||
| Changes in provisions for estimated losses | 9,519 | 3,909 | ||||||||||||
| Changes in other regulatory assets | (9,005) | 448,144 | ||||||||||||
| Changes in other regulatory liabilities | 286,036 | 217,746 | ||||||||||||
| Effect of securitization on regulatory asset | — | (491,150) | ||||||||||||
| Changes in pension and other postretirement funded status | (22,548) | (12,364) | ||||||||||||
| Other | (77,112) | (92,977) | ||||||||||||
| Net cash flow provided by operating activities | 808,398 | 928,060 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (685,206) | (889,118) | ||||||||||||
| Allowance for equity funds used during construction | 14,807 | 17,715 | ||||||||||||
| Nuclear fuel purchases | (52,992) | (88,403) | ||||||||||||
| Proceeds from sale of nuclear fuel | 38,822 | 16,733 | ||||||||||||
| Payments to storm reserve escrow account | (6,553) | (6,602) | ||||||||||||
| Purchase of preferred membership interests of affiliate | — | (1,457,676) | ||||||||||||
| Redemption of preferred membership interests of affiliate | 113,942 | 46,643 | ||||||||||||
| Proceeds from nuclear decommissioning trust fund sales | 333,149 | 229,972 | ||||||||||||
| Investment in nuclear decommissioning trust funds | (363,736) | (258,420) | ||||||||||||
| Changes in money pool receivable - net | (31,361) | (275,559) | ||||||||||||
| Insurance proceeds received for property damages | — | 6,184 | ||||||||||||
| Decrease in other investments | 33 | 396 | ||||||||||||
| Net cash flow used in investing activities | (639,095) | (2,658,135) | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of long-term debt | 1,825,954 | 833,484 | ||||||||||||
| Retirement of long-term debt | (1,061,918) | (851,617) | ||||||||||||
| Proceeds received by storm trust related to securitization | — | 1,457,676 | ||||||||||||
| Capital contribution from parent | — | 1,457,676 | ||||||||||||
| Changes in money pool payable - net | (156,166) | (226,114) | ||||||||||||
| Common equity distributions paid | (664,100) | (160,250) | ||||||||||||
| Other | 69,936 | 19,633 | ||||||||||||
| Net cash flow provided by financing activities | 13,706 | 2,530,488 | ||||||||||||
| Net increase in cash and cash equivalents | 183,009 | 800,413 | ||||||||||||
| Cash and cash equivalents at beginning of period | 2,772 | 56,613 | ||||||||||||
| Cash and cash equivalents at end of period | $185,781 | $857,026 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid (received) during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $177,455 | $192,861 | ||||||||||||
| Income taxes | $58 | ($6,037) | ||||||||||||
| Non-cash investing activities: | ||||||||||||||
| Accrued construction expenditures | $81,177 | $138,522 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
121
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $474 | $2,255 | ||||||||||||
| Temporary cash investments | 185,307 | 517 | ||||||||||||
| Total cash and cash equivalents | 185,781 | 2,772 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 302,489 | 264,776 | ||||||||||||
| Allowance for doubtful accounts | (3,361) | (6,156) | ||||||||||||
| Associated companies | 205,140 | 82,292 | ||||||||||||
| Other | 68,394 | 74,685 | ||||||||||||
| Accrued unbilled revenues | 237,470 | 202,173 | ||||||||||||
| Total accounts receivable | 810,132 | 617,770 | ||||||||||||
| Deferred fuel costs | 13,436 | 24,800 | ||||||||||||
| Fuel inventory - at average cost | 50,928 | 57,818 | ||||||||||||
| Materials and supplies - at average cost | 732,270 | 652,180 | ||||||||||||
| Deferred nuclear refueling outage costs | 66,810 | 96,047 | ||||||||||||
| Prepayments and other | 240,739 | 71,613 | ||||||||||||
| TOTAL | 2,100,096 | 1,523,000 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Investment in affiliate preferred membership interests | 4,382,304 | 4,496,245 | ||||||||||||
| Decommissioning trust funds | 2,292,174 | 2,107,384 | ||||||||||||
| Non-utility property - at cost (less accumulated depreciation) | 404,313 | 404,043 | ||||||||||||
| Storm reserve escrow account | 250,372 | 243,819 | ||||||||||||
| Other | 9,587 | 9,367 | ||||||||||||
| TOTAL | 7,338,750 | 7,260,858 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 28,341,063 | 27,800,467 | ||||||||||||
| Natural gas | 324,169 | 315,658 | ||||||||||||
| Construction work in progress | 514,882 | 592,803 | ||||||||||||
| Nuclear fuel | 249,813 | 333,472 | ||||||||||||
| TOTAL UTILITY PLANT | 29,429,927 | 29,042,400 | ||||||||||||
| Less - accumulated depreciation and amortization | 10,776,257 | 10,570,707 | ||||||||||||
| UTILITY PLANT - NET | 18,653,670 | 18,471,693 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets | 1,657,857 | 1,648,852 | ||||||||||||
| Deferred fuel costs | 168,122 | 168,122 | ||||||||||||
| Other | 52,426 | 36,945 | ||||||||||||
| TOTAL | 1,878,405 | 1,853,919 | ||||||||||||
| TOTAL ASSETS | $29,970,921 | $29,109,470 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
122
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $1,300,000 | $1,400,000 | ||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | 132,514 | 283,016 | ||||||||||||
| Other | 406,932 | 467,414 | ||||||||||||
| Customer deposits | 172,428 | 167,905 | ||||||||||||
| Taxes accrued | 94,140 | 66,463 | ||||||||||||
| Interest accrued | 105,819 | 91,656 | ||||||||||||
| Other | 107,516 | 87,468 | ||||||||||||
| TOTAL | 2,319,349 | 2,563,922 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 2,525,735 | 2,391,442 | ||||||||||||
| Accumulated deferred investment tax credits | 90,961 | 93,242 | ||||||||||||
| Regulatory liability for income taxes - net | 194,618 | 193,754 | ||||||||||||
| Other regulatory liabilities | 1,692,861 | 1,407,689 | ||||||||||||
| Decommissioning | 1,896,968 | 1,836,240 | ||||||||||||
| Accumulated provisions | 273,388 | 263,869 | ||||||||||||
| Pension and other postretirement liabilities | 249,718 | 271,928 | ||||||||||||
| Long-term debt | 8,888,393 | 8,020,689 | ||||||||||||
| Other | 619,985 | 493,176 | ||||||||||||
| TOTAL | 16,432,627 | 14,972,029 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||
| EQUITY | ||||||||||||||
| Member’s equity | 11,122,661 | 11,473,614 | ||||||||||||
| Accumulated other comprehensive income | 50,751 | 54,798 | ||||||||||||
| Noncontrolling interests | 45,533 | 45,107 | ||||||||||||
| TOTAL | 11,218,945 | 11,573,519 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $29,970,921 | $29,109,470 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
123
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Noncontrolling Interests | Member’s Equity | Accumulated Other Comprehensive Income | Total | ||||||||||||||||||||
| Balance at December 31, 2022 | $31,735 | $9,406,343 | $55,370 | $9,493,448 | |||||||||||||||||||
| Net income | 554 | 243,470 | — | 244,024 | |||||||||||||||||||
| Other comprehensive loss | — | — | (786) | (786) | |||||||||||||||||||
| Capital contribution from parent | — | 1,457,676 | — | 1,457,676 | |||||||||||||||||||
| Common equity distributions | — | (160,250) | — | (160,250) | |||||||||||||||||||
| Beneficial interest in storm trust | 14,577 | — | — | 14,577 | |||||||||||||||||||
| Distribution to LURC | (470) | — | — | (470) | |||||||||||||||||||
| Other | — | (28) | — | (28) | |||||||||||||||||||
| Balance at March 31, 2023 | 46,396 | 10,947,211 | 54,584 | 11,048,191 | |||||||||||||||||||
| Net income | 819 | 262,441 | — | 263,260 | |||||||||||||||||||
| Other comprehensive loss | — | — | (1,773) | (1,773) | |||||||||||||||||||
| Other | — | 15 | — | 15 | |||||||||||||||||||
| Balance at June 30, 2023 | $47,215 | $11,209,667 | $52,811 | $11,309,693 | |||||||||||||||||||
| Balance at December 31, 2023 | $45,107 | $11,473,614 | $54,798 | $11,573,519 | |||||||||||||||||||
| Net income | 795 | 181,928 | — | 182,723 | |||||||||||||||||||
| Other comprehensive loss | — | — | (2,024) | (2,024) | |||||||||||||||||||
| Non-cash contribution from parent | — | 976 | — | 976 | |||||||||||||||||||
| Common equity distributions | — | (97,500) | — | (97,500) | |||||||||||||||||||
| Distributions to LURC | (858) | — | — | (858) | |||||||||||||||||||
| Other | — | (43) | — | (43) | |||||||||||||||||||
| Balance at March 31, 2024 | 45,044 | 11,558,975 | 52,774 | 11,656,793 | |||||||||||||||||||
| Net income | 788 | 130,326 | — | 131,114 | |||||||||||||||||||
| Other comprehensive loss | — | — | (2,023) | (2,023) | |||||||||||||||||||
| Common equity distributions | — | (566,600) | — | (566,600) | |||||||||||||||||||
| Distributions to LURC | (299) | — | — | (299) | |||||||||||||||||||
| Other | — | (40) | — | (40) | |||||||||||||||||||
| Balance at June 30, 2024 | $45,533 | $11,122,661 | $50,751 | $11,218,945 | |||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||
124
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income increased $21.3 million primarily due to higher volume/weather and higher retail electric price.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Net income increased $27.8 million primarily due to higher retail electric price and higher volume/weather.
Operating Revenues
Second Quarter 2024 Compared to Second Quarter 2023
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $445.1 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (20.0) | ||||
| Retail electric price | 5.0 | ||||
| Volume/weather | 12.8 | ||||
| 2024 operating revenues | $442.9 | ||||
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 an increase in formula rate plan rates effective April 2024. See Note 2 to the financial statements herein for discussion of the formula rate plan filing.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales and an increase in weather-adjusted commercial usage.
125
Entergy Mississippi, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Total electric energy sales for Entergy Mississippi for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 1,397 | 1,323 | 6 | ||||||||||||||
| Commercial | 1,172 | 1,105 | 6 | ||||||||||||||
| Industrial | 596 | 565 | 5 | ||||||||||||||
| Governmental | 101 | 99 | 2 | ||||||||||||||
| Total retail | 3,266 | 3,092 | 6 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 970 | 1,209 | (20) | ||||||||||||||
| Total | 4,236 | 4,301 | (2) | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $857.6 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (22.3) | ||||
| Retail electric price | 13.8 | ||||
| Volume/weather | 8.7 | ||||
| 2024 operating revenues | $857.8 | ||||
Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to increases in formula rate plan rates effective April 2023 and April 2024. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales, partially offset by a decrease in weather-adjusted residential usage and a decrease in industrial usage. The decrease in industrial usage is primarily due to a decrease in demand from large industrial customers, primarily in the primary metals and wood products industries, and a decrease in demand from small industrial customers.
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Total electric energy sales for Entergy Mississippi for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 2,584 | 2,412 | 7 | ||||||||||||||
| Commercial | 2,135 | 2,120 | 1 | ||||||||||||||
| Industrial | 1,090 | 1,132 | (4) | ||||||||||||||
| Governmental | 188 | 192 | (2) | ||||||||||||||
| Total retail | 5,997 | 5,856 | 2 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 2,958 | 2,773 | 7 | ||||||||||||||
| Total | 8,955 | 8,629 | 4 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Second Quarter 2024 Compared to Second Quarter 2023
Other regulatory charges (credits) - net includes regulatory credits of $7.3 million, recorded in second quarter 2024, to reflect the effects of the joint stipulation reached in the 2024 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2024 formula rate plan filing.
Interest expense increased primarily due to the issuance of $300 million of 5.85% Series mortgage bonds in May 2024.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Other operation and maintenance expenses remained relatively unchanged, increasing $0.5 million, primarily due to:
•an increase of $3.4 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $2.8 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $1.4 million in energy efficiency expenses primarily due to the timing of recovery from customers.
The increase was substantially offset by a $7.1 million decrease in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for discussion of Entergy Mississippi’s storm damage provision.
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.
Other regulatory charges (credits) - net includes regulatory credits of $7.3 million, recorded in second quarter 2024, to reflect the effects of the joint stipulation reached in the 2024 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2024 formula rate plan filing.
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Interest expense increased primarily due to higher interest expense from carrying costs related to the deferred fuel balance and the issuance of $300 million of 5.85% Series mortgage bonds in May 2024.
Income Taxes
The effective income tax rates were 24.1% for the second quarter 2024 and 23.6% for the six months ended June 30, 2024. The differences in the effective income tax rates for the second quarter 2024 and the six months ended June 30, 2024 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rates were 25% for the second quarter 2023 and 24.8% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
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 six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Cash and cash equivalents at beginning of period | $6,630 | $16,979 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 185,304 | 173,548 | |||||||||
| Investing activities | (314,145) | (276,717) | |||||||||
| Financing activities | 125,324 | 94,643 | |||||||||
| Net decrease in cash and cash equivalents | (3,517) | (8,526) | |||||||||
| Cash and cash equivalents at end of period | $3,113 | $8,453 | |||||||||
Operating Activities
Net cash flow provided by operating activities increased $11.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to lower fuel costs and a decrease of $9.7 million in storm spending in 2024 as compared to 2023. The increase was partially offset by the timing of recovery of fuel and purchased power costs and the timing of payments to vendors. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery.
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Investing Activities
Net cash flow used in investing activities increased $37.4 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•an increase of $32 million in transmission construction expenditures primarily due to increased development in Entergy Mississippi’s service area;
•an increase of $27.9 million in non-nuclear generation construction expenditures primarily due to a higher scope of work on projects performed in 2024 as compared to 2023; and
•money pool activity.
The increase was partially offset by the substantial completion payment of approximately $30.4 million in April 2023 for the purchase of the Sunflower Solar facility by a consolidated tax equity partnership. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase.
Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased $26.9 million for the six months ended June 30, 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.
Financing Activities
Net cash flow provided by financing activities increased $30.7 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the repayment, prior to maturity, of $250 million of 3.10% Series mortgage bonds in June 2023;
•the repayment, prior to maturity, in May 2023, of $50 million of an unsecured term loan due December 2023; and
•a decrease of $17.7 million in common equity distributions paid in 2024 in order to maintain Entergy Mississippi’s capital structure.
The increase was partially offset by:
•money pool activity;
•the repayment, prior to maturity, of $100 million of 3.75% Series mortgage bonds in June 2024; and
•a capital contribution of $25.7 million received in April 2023 from the noncontrolling tax equity investor in MS Sunflower Partnership, LLC and used by the partnership for payments in the acquisition of the Sunflower Solar facility. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase.
Decreases in Entergy Mississippi’s payable to the money pool are a use of cash flow, and Entergy Mississippi’s payable to the money pool decreased $33.4 million for the six months ended June 30, 2024 compared to increasing by $104.6 million for the six months ended June 30, 2023.
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Capital Structure
Entergy Mississippi’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Mississippi is primarily due to the net issuance of long-term debt in 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 51.6 | % | 50.5 | % | |||||||
| Effect of subtracting cash | — | % | (0.1 | %) | |||||||
| Net debt to net capital (non-GAAP) | 51.6 | % | 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.
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. The following are updates to the information provided in the Form 10-K.
Following are the current annual amounts of Entergy Mississippi’s planned construction and other capital investments.
| 2024 | 2025 | 2026 | |||||||||||||||
| (In Millions) | |||||||||||||||||
| Planned construction and capital investment: | |||||||||||||||||
| Generation | $145 | $735 | $735 | ||||||||||||||
| Transmission | 160 | 170 | 185 | ||||||||||||||
| Distribution | 325 | 325 | 290 | ||||||||||||||
| Utility Support | 45 | 55 | 55 | ||||||||||||||
| Total | $675 | $1,285 | $1,265 | ||||||||||||||
The updated capital plan for 2024-2026 reflects incremental capital investments for potential generation projects. In addition to routine capital spending to maintain operations, the capital plan includes investments in generation projects to modernize, decarbonize, and diversify Entergy Mississippi’s portfolio, as well as to support customer growth; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments.
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Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| ($40,355) | ($73,769) | ($104,624) | $26,879 | |||||||||||||||||
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has a credit facility in the amount of $300 million scheduled to expire in June 2029. The credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of June 30, 2024, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO and for other purposes. As of June 30, 2024, $30.9 million in MISO letters of credit and $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.
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
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 2024 test year filing showed a $63.4 million rate increase was necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 7.10%, within the formula rate plan bandwidth. The 2023 look-back filing compared actual 2023 results to the approved benchmark return on rate base and reflected 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.
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 because the MPSC had not yet approved the proposed depreciation rates.
In June 2024, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2024 test year filing, with the exception of immaterial adjustments to certain operation and maintenance expenses. After performance adjustments, the formula rate plan reflected an earned return on rate base of 6.08% for calendar year 2024, which resulted in a total revenue increase of $64.6 million for 2024. The joint stipulation also recommended approval of a revised customer charge of $31.82 per month for residential customers and $53.10 per month for general service customers. Pursuant to the stipulation, Entergy Mississippi’s 2023 look-
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back filing reflected an earned return on rate base of 6.81%, resulting in an increase of $0.3 million in the formula rate plan revenues for 2023. Finally, the stipulation recommended approval of Entergy Mississippi’s proposed depreciation rates with those rates to be implemented upon request and approval at a later date. In June 2024 the MPSC approved the joint stipulation with rates effective in July 2024. The approval also included a reduction to the energy cost factor, resulting in a net bill decrease for a typical residential customer using 1,000 kWh per month. Also in June 2024, Entergy Mississippi recorded regulatory credits of $7.3 million to reflect the difference between interim rates placed in effect in April 2024 and the rates reflected in the joint stipulation.
Also, in May 2024, Entergy Mississippi received approval from the MPSC for formula rate plan revisions that were necessary for Entergy Mississippi to comply with recently passed state legislation. The legislation allows Entergy Mississippi to make interim rate adjustments to recover the non-fuel related annual ownership cost of certain facilities that directly or indirectly provide service to customers who own certain data processing center projects as specified in the legislation. Entergy Mississippi filed its interim facilities rate adjustment report in May 2024 to recover approximately $8.7 million of these costs over a six-month period with rates effective beginning in July 2024.
Fuel and purchased power cost recovery
In June 2024 the MPSC approved a joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 2024 formula rate plan filing. The 2024 formula rate plan filing included the conclusion of the modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider, which were approved in October 2022 and allowed Entergy Mississippi to recover certain under-collected fuel balances. The stipulation provided for Entergy Mississippi to reduce its net energy cost factor. See “Retail Rates - 2024 Formula Rate Plan Filing” above for further discussion of the 2024 formula rate plan filing and the joint stipulation agreement.
Storm Cost Recovery Filings with Retail Regulators
As discussed in the Form 10-K, Entergy Mississippi had 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 exceeded $15 million, the collection of the storm damage provision ceased until such time that the accumulated storm damage provision became 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 subsequent filing by Entergy Mississippi in this proceeding. The storm damage reserve exceeded $15 million upon receipt of the 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 March 2024, Entergy Mississippi made a combined dual filing which included a Notice of Intent 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 per month. Furthermore, if Entergy Mississippi’s
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accumulated storm damage provision balance exceeds $70 million, collection of the storm damage provision would cease until such time that the accumulated storm damage provision becomes less than $60 million.
The Mississippi Public Utilities Staff reviewed the storm-related costs submitted by Entergy Mississippi and found them prudent. In June 2024 the MPSC considered and unanimously granted the relief sought by Entergy Mississippi. The new combined storm damage mitigation and restoration rider became effective with the July 2024 billing cycle. Additionally, Entergy Mississippi made a compliance filing to cease billing under the existing vegetation management rider schedule as of the same billing cycle.
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. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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, 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.
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| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED INCOME STATEMENTS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $442,894 | $445,130 | $857,750 | $857,558 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 63,977 | 140,530 | 181,827 | 301,815 | ||||||||||||||||||||||
| Purchased power | 66,847 | 59,140 | 134,502 | 122,954 | ||||||||||||||||||||||
| Other operation and maintenance | 67,700 | 68,600 | 138,906 | 138,418 | ||||||||||||||||||||||
| Taxes other than income taxes | 37,496 | 35,301 | 75,806 | 71,035 | ||||||||||||||||||||||
| Depreciation and amortization | 67,131 | 65,346 | 133,048 | 129,375 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | 9,873 | (25,947) | 3,382 | (58,790) | ||||||||||||||||||||||
| TOTAL | 313,024 | 342,970 | 667,471 | 704,807 | ||||||||||||||||||||||
| OPERATING INCOME | 129,870 | 102,160 | 190,279 | 152,751 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 3,094 | 2,169 | 5,012 | 4,053 | ||||||||||||||||||||||
| Interest and investment income | 948 | 1,319 | 1,141 | 1,783 | ||||||||||||||||||||||
| Miscellaneous - net | (1,772) | (3,438) | (3,393) | (5,521) | ||||||||||||||||||||||
| TOTAL | 2,270 | 50 | 2,760 | 315 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 28,499 | 25,433 | 54,896 | 49,377 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (1,204) | (902) | (1,951) | (1,685) | ||||||||||||||||||||||
| TOTAL | 27,295 | 24,531 | 52,945 | 47,692 | ||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 104,845 | 77,679 | 140,094 | 105,374 | ||||||||||||||||||||||
| Income taxes | 25,280 | 19,414 | 33,097 | 26,169 | ||||||||||||||||||||||
| NET INCOME | 79,565 | 58,265 | 106,997 | 79,205 | ||||||||||||||||||||||
| Net loss attributable to noncontrolling interest | (1,733) | (3,623) | (4,035) | (5,764) | ||||||||||||||||||||||
| EARNINGS APPLICABLE TO MEMBER'S EQUITY | $81,298 | $61,888 | $111,032 | $84,969 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
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| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $106,997 | $79,205 | ||||||||||||
| Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 133,048 | 129,375 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 24,931 | 26,736 | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Receivables | (26,254) | (6,155) | ||||||||||||
| Fuel inventory | (2,331) | (5,919) | ||||||||||||
| Accounts payable | 475 | (32,930) | ||||||||||||
| Taxes accrued | (48,627) | (45,044) | ||||||||||||
| Interest accrued | (1,845) | (724) | ||||||||||||
| Deferred fuel costs | 41,104 | 149,189 | ||||||||||||
| Other working capital accounts | (18,367) | (25,035) | ||||||||||||
| Provisions for estimated losses | (11,575) | 1,731 | ||||||||||||
| Other regulatory assets | 5,325 | (39,846) | ||||||||||||
| Other regulatory liabilities | (3,415) | (55,443) | ||||||||||||
| Pension and other postretirement funded status | (8,968) | (8,261) | ||||||||||||
| Other assets and liabilities | (5,194) | 6,669 | ||||||||||||
| Net cash flow provided by operating activities | 185,304 | 173,548 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (319,053) | (276,530) | ||||||||||||
| Allowance for equity funds used during construction | 5,012 | 4,053 | ||||||||||||
| Change in money pool receivable - net | — | 26,879 | ||||||||||||
| Payment for purchase of assets | — | (30,433) | ||||||||||||
| Increase in other investments | (104) | (686) | ||||||||||||
| Net cash flow used in investing activities | (314,145) | (276,717) | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of long-term debt | 396,105 | 396,861 | ||||||||||||
| Retirement of long-term debt | (200,000) | (400,000) | ||||||||||||
| Capital contribution from noncontrolling interest | — | 25,708 | ||||||||||||
| Changes in money pool payable - net | (33,414) | 104,624 | ||||||||||||
| Common equity distributions paid | (22,300) | (40,000) | ||||||||||||
| Other | (15,067) | 7,450 | ||||||||||||
| Net cash flow provided by financing activities | 125,324 | 94,643 | ||||||||||||
| Net decrease in cash and cash equivalents | (3,517) | (8,526) | ||||||||||||
| Cash and cash equivalents at beginning of period | 6,630 | 16,979 | ||||||||||||
| Cash and cash equivalents at end of period | $3,113 | $8,453 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $55,538 | $48,771 | ||||||||||||
| Income taxes | $2,356 | $— | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $22,334 | $66,818 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $30 | $30 | ||||||||||||
| Temporary cash investments | 3,083 | 6,600 | ||||||||||||
| Total cash and cash equivalents | 3,113 | 6,630 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 124,274 | 121,389 | ||||||||||||
| Allowance for doubtful accounts | (2,226) | (3,312) | ||||||||||||
| Associated companies | 7,807 | 4,997 | ||||||||||||
| Other | 22,637 | 17,697 | ||||||||||||
| Accrued unbilled revenues | 85,998 | 71,465 | ||||||||||||
| Total accounts receivable | 238,490 | 212,236 | ||||||||||||
| Fuel inventory - at average cost | 18,527 | 16,196 | ||||||||||||
| Materials and supplies - at average cost | 109,283 | 95,526 | ||||||||||||
| Prepayments and other | 13,108 | 12,740 | ||||||||||||
| TOTAL | 382,521 | 343,328 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Non-utility property - at cost (less accumulated depreciation) | 4,489 | 4,497 | ||||||||||||
| Storm reserve escrow account | 759 | 656 | ||||||||||||
| TOTAL | 5,248 | 5,153 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 7,617,717 | 7,455,145 | ||||||||||||
| Construction work in progress | 284,846 | 139,635 | ||||||||||||
| TOTAL UTILITY PLANT | 7,902,563 | 7,594,780 | ||||||||||||
| Less - accumulated depreciation and amortization | 2,435,037 | 2,346,327 | ||||||||||||
| UTILITY PLANT - NET | 5,467,526 | 5,248,453 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets | 573,751 | 579,076 | ||||||||||||
| Other | 77,054 | 51,996 | ||||||||||||
| TOTAL | 650,805 | 631,072 | ||||||||||||
| TOTAL ASSETS | $6,506,100 | $6,228,006 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
136
| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $— | $100,000 | ||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | 86,688 | 133,571 | ||||||||||||
| Other | 112,595 | 92,659 | ||||||||||||
| Customer deposits | 94,308 | 92,637 | ||||||||||||
| Taxes accrued | 66,507 | 115,134 | ||||||||||||
| Interest accrued | 19,692 | 21,537 | ||||||||||||
| Deferred fuel costs | 171,749 | 130,645 | ||||||||||||
| Other | 22,152 | 26,463 | ||||||||||||
| TOTAL | 573,691 | 712,646 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 849,315 | 821,744 | ||||||||||||
| Accumulated deferred investment tax credits | 13,373 | 13,811 | ||||||||||||
| Regulatory liability for income taxes - net | 183,083 | 188,714 | ||||||||||||
| Other regulatory liabilities | 35,912 | 33,696 | ||||||||||||
| Asset retirement cost liabilities | 30,309 | 8,229 | ||||||||||||
| Accumulated provisions | 27,906 | 39,481 | ||||||||||||
| Long-term debt | 2,426,614 | 2,129,510 | ||||||||||||
| Other | 72,986 | 71,961 | ||||||||||||
| TOTAL | 3,639,498 | 3,307,146 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||
| EQUITY | ||||||||||||||
| Member's equity | 2,278,193 | 2,189,461 | ||||||||||||
| Noncontrolling interest | 14,718 | 18,753 | ||||||||||||
| TOTAL | 2,292,911 | 2,208,214 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $6,506,100 | $6,228,006 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Noncontrolling Interest | Member's Equity | Total | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Balance at December 31, 2022 | $3,347 | $2,037,190 | $2,040,537 | ||||||||||||||
| Net income (loss) | (2,141) | 23,081 | 20,940 | ||||||||||||||
| Common equity distributions | — | (12,500) | (12,500) | ||||||||||||||
| Balance at March 31, 2023 | 1,206 | 2,047,771 | 2,048,977 | ||||||||||||||
| Net income (loss) | (3,623) | 61,888 | 58,265 | ||||||||||||||
| Common equity distributions | — | (27,500) | (27,500) | ||||||||||||||
| Capital contribution from noncontrolling interest | 25,708 | — | 25,708 | ||||||||||||||
| Balance at June 30, 2023 | $23,291 | $2,082,159 | $2,105,450 | ||||||||||||||
| Balance at December 31, 2023 | $18,753 | $2,189,461 | $2,208,214 | ||||||||||||||
| Net income (loss) | (2,302) | 29,734 | 27,432 | ||||||||||||||
| Balance at March 31, 2024 | 16,451 | 2,219,195 | 2,235,646 | ||||||||||||||
| Net income (loss) | (1,733) | 81,298 | 79,565 | ||||||||||||||
| Common equity distributions | — | (22,300) | (22,300) | ||||||||||||||
| Balance at June 30, 2024 | $14,718 | $2,278,193 | $2,292,911 | ||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income increased $7.3 million primarily due to higher volume/weather and higher retail electric price, partially offset by higher other operation and maintenance expenses.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Entergy New Orleans experienced a net loss of $27.8 million for the six months ended June 30, 2024 compared to net income of $24.0 million for the six months ended June 30, 2023 primarily due to 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 the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS audit. Also contributing to the net loss were higher other operation and maintenance expenses. 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.
Operating Revenues
Second Quarter 2024 Compared to Second Quarter 2023
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $188.0 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | 3.1 | ||||
| Volume/weather | 6.9 | ||||
| Retail electric price | 1.3 | ||||
| 2024 operating revenues | $199.3 | ||||
Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in weather-adjusted residential usage.
The retail electric price variance is primarily due to an increase in formula rate plan rates effective September 2023 in accordance with the terms of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing.
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Total electric energy sales for Entergy New Orleans for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 614 | 576 | 7 | ||||||||||||||
| Commercial | 531 | 508 | 5 | ||||||||||||||
| Industrial | 115 | 97 | 19 | ||||||||||||||
| Governmental | 198 | 187 | 6 | ||||||||||||||
| Total retail | 1,458 | 1,368 | 7 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 476 | 551 | (14) | ||||||||||||||
| Total | 1,934 | 1,919 | 1 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $396.8 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (11.1) | ||||
| Retail electric price | 2.8 | ||||
| Volume/weather | 3.8 | ||||
| 2024 operating revenues | $392.3 | ||||
Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to an increase in formula rate plan rates effective September 2023 in accordance with the terms of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales and an increase in weather-adjusted residential usage, partially offset by a decrease in weather-adjusted commercial usage.
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Total electric energy sales for Entergy New Orleans for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 1,094 | 1,030 | 6 | ||||||||||||||
| Commercial | 974 | 995 | (2) | ||||||||||||||
| Industrial | 200 | 196 | 2 | ||||||||||||||
| Governmental | 375 | 368 | 2 | ||||||||||||||
| Total retail | 2,643 | 2,589 | 2 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 981 | 1,594 | (38) | ||||||||||||||
| Total | 3,624 | 4,183 | (13) | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Second Quarter 2024 Compared to Second Quarter 2023
Other operation and maintenance expenses increased primarily due to an increase of $1.1 million in non-nuclear generation expenses primarily due to a higher scope of work during plant outages performed in 2024 as compared to 2023.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Other operation and maintenance expenses increased primarily due to:
•the recognition of $1.8 million in costs related to rate mitigation credits approved in the settlement of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing;
•an increase of $1.6 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $1.4 million in energy efficiency expenses primarily due to higher energy efficiency costs;
•an increase of $1.4 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•an increase of $1.2 million in non-nuclear generation expenses primarily due to a higher scope of work during plant outages performed in 2024 as compared to 2023; and
•several individually insignificant items.
Depreciation and amortization expenses increased primarily due to additions to plant in 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 decreased primarily due to lower interest earned on money pool investments.
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Management’s Financial Discussion and Analysis
Income Taxes
The effective income tax rates were 26.2% for the second quarter 2024 and 29.8% for the six months ended June 30, 2024. The differences in the effective income tax rates for the second quarter 2024 and the six months ended June 30, 2024 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes.
The effective income tax rates were 29.4% for the second quarter 2023 and 30.5% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were 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.
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 discussion of the planned sale of Entergy New Orleans’s gas distribution business. The following is an update to that discussion.
In July 2024 the LPSC staff issued a report recommending LPSC approval of the application of Delta States Utilities LA, LLC (a Bernhard Capital Partners Management LP affiliate) and Entergy Louisiana and the transaction described therein as being in the public interest and proposing certain conditions. Entergy Louisiana anticipates that the LPSC will review the matter at its August Business and Executive meeting.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Cash and cash equivalents at beginning of period | $26 | $4,464 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 45,416 | 100,950 | |||||||||
| Investing activities | (74,449) | 12,900 | |||||||||
| Financing activities | 35,565 | 23,057 | |||||||||
| Net increase in cash and cash equivalents | 6,532 | 136,907 | |||||||||
| Cash and cash equivalents at end of period | $6,558 | $141,371 | |||||||||
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Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreased $55.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due 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. See Note 2 to the financial statements in the Form 10-K for further discussion of the refund and the related proceedings;
•lower collections from customers; and
•the timing of payments to vendors.
The decrease was partially offset by 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.
Investing Activities
Entergy New Orleans’s investing activities used $74.4 million of cash for the six months ended June 30, 2024 compared to providing $12.9 million of cash for the six months ended June 30, 2023 primarily due to the following activity:
•money pool activity;
•a decrease of $5.0 million in distribution construction expenditures primarily due to a lower scope of work on projects in 2024 as compared to 2023, partially offset by higher capital expenditures for storm restoration in 2024; and
•a decrease of $14.0 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.
Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $1.1 million for the six months ended June 30, 2024 compared to decreasing by $101.8 million for the six months ended June 30, 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.
Financing Activities
Net cash flow provided by financing activities increased $12.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the issuance in May 2024 of (1) $35 million of 6.25% Series mortgage bonds, (2) $65 million of 6.41% Series mortgage bonds, and (3) $50 million of 6.54% mortgage bonds. The increase was partially offset by:
•the repayment, at maturity, of an $85 million unsecured term loan in June 2024;
•money pool activity;
•additional borrowings of $15 million in May 2023 on the unsecured term loan repaid in June 2024; and
•a $15 million advance received in 2023 related to Entergy New Orleans’s construction of the New Orleans Sewerage and Water Board Sullivan substation.
Decreases in Entergy New Orleans’s payable to the money pool are a use of cash flow, and Entergy New Orleans’s payable to the money pool decreased by $21.7 million for the six months ended June 30, 2024.
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Management’s Financial Discussion and Analysis
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.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 48.8 | % | 45.8 | % | |||||||
| Effect of excluding securitization bonds | — | % | (0.2 | %) | |||||||
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | 48.8 | % | 45.6 | % | |||||||
| Effect of subtracting cash | (0.2 | %) | — | % | |||||||
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 48.6 | % | 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 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. The 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:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| $1,110 | ($21,651) | $45,487 | $147,254 | |||||||||||||||||
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 2027. 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 June 30, 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 June 30, 2024, a $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.
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Management’s Financial Discussion and Analysis
Resilience and Grid 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. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council approval of the first phase (five years and $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 required 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 with the City Council for approval 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. In July 2024 the City Council held a technical conference regarding Entergy New Orleans’s three-year resilience plan.
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.
Retail Rates
2024 Formula Rate Plan Filing
In April 2024, Entergy New Orleans submitted to the City Council its formula rate plan 2023 test year filing. Without the requested rate change in 2024, the 2023 test year evaluation report produced an electric earned return on equity of 8.66% and a gas earned return on equity of 5.87% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $12.6 million rate increase based on the formula set by the City Council in the 2018 rate case and approved again by the City Council in 2023. The formula would result in an increase in authorized electric revenues of $7.0 million and an increase in authorized gas revenues of $5.6 million. Following City Council review, the City Council’s advisors issued a report in July 2024 seeking a reduction in Entergy New Orleans’s requested formula rate plan revenues in an aggregate amount of approximately $1.6 million for electric and gas together due to alleged errors. The City Council’s advisors’ report began a 35-day period to resolve any disputes among the parties regarding the formula rate plan. Resulting rates will be effective with the first billing cycle of September 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.
Reliability Investigation
As discussed in the Form 10-K, in August 2017 the City Council established a docket to investigate the reliability of the Entergy New Orleans distribution system and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. The City Council also approved a resolution that opened a
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Management’s Financial Discussion and Analysis
prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation asserting that it had been prudent in managing system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed. Entergy New Orleans disagreed with the recommendation and submitted rebuttal testimony and rebuttal comments in June 2019. In November 2019 the City Council passed a resolution that penalized Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. In December 2019, Entergy New Orleans filed suit in Louisiana state court seeking judicial review of the City Council’s resolution. In June 2022 the Orleans Civil District Court issued a written judgment that the penalty be set aside, reversed, and vacated. In August 2022 the Orleans Civil District Court issued written reasons for its judgment and also granted a post-judgment motion to remand for the City Council to take actions consistent with its judgment.
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 imposed in 2019. In May 2023, Entergy New Orleans filed with the Orleans Civil District Court a petition for judicial review and (or alternatively) declaratory judgment of, together with a request for injunctive relief from, the City Council’s April 2023 resolution. In June 2023 the City Council filed exceptions requesting the Orleans Civil District Court dismiss the suit as premature, and a hearing date was set on the exceptions. In September 2023, Entergy New Orleans filed an unopposed motion to continue the hearing on the City Council’s exceptions without date, which was granted. In May 2024 the City Council approved a settlement in which Entergy New Orleans agreed to $500 thousand in unrecovered distribution investment and will recover all verifiable regulatory costs associated with any reliability-related investigation, as well as any costs associated with the judicial reviews. In June 2024, Entergy New Orleans filed with the Orleans Civil District Court an unopposed motion to dismiss with prejudice and an order regarding its petition for judicial review. In July 2024 the dismissal order was signed.
Renewable Portfolio Standard Rulemaking
As discussed in the Form 10-K, in May 2021 the City Council established the Renewable and Clean Portfolio Standard. In May 2023, Entergy New Orleans submitted its compliance demonstration report to the City Council for the 2022 compliance year, which describes and demonstrates Entergy New Orleans’s compliance with the Renewable and Clean Portfolio Standard in 2022 and satisfies certain informational requirements. Entergy New Orleans requested, among other things, that the City Council determine that Entergy New Orleans achieved the target under the portfolio standard for 2022 and remains within the customer protection cost cap, and that the City Council approve a proposal to recover costs associated with 2022 compliance. In April 2024 the City Council approved a resolution finding Entergy New Orleans was in compliance with the 2022 requirements and that Entergy New Orleans did not exceed the customer protection cost cap, as well as approving Entergy New Orleans’s proposal to recover costs.
Income Tax Audits
As discussed in Note 3 to the financial statements herein and in the Form 10-K, in November 2023 the IRS completed its examination of the 2016 through 2018 tax years and 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 share with customers $138 million of income tax benefits from the resolution of the 2016–2018 IRS audit. Based on this settlement in principle, in first quarter 2024, Entergy New Orleans increased 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 principle requires that the regulatory liability be amortized over 25 years with the unamortized balance included in rate base and the amortization treated
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as a reduction to Entergy New Orleans’s retail revenue requirement. In May 2024 the City Council approved the settlement.
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. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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, 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.
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| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $178,664 | $168,216 | $335,605 | $337,911 | ||||||||||||||||||||||
| Natural gas | 20,677 | 19,800 | 56,697 | 58,925 | ||||||||||||||||||||||
| TOTAL | 199,341 | 188,016 | 392,302 | 396,836 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 18,314 | 18,974 | 49,139 | 70,998 | ||||||||||||||||||||||
| Purchased power | 64,318 | 65,929 | 124,700 | 132,549 | ||||||||||||||||||||||
| Other operation and maintenance | 41,720 | 38,961 | 85,052 | 72,188 | ||||||||||||||||||||||
| Taxes other than income taxes | 14,187 | 14,480 | 29,609 | 30,904 | ||||||||||||||||||||||
| Depreciation and amortization | 21,130 | 20,064 | 42,044 | 39,639 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | 1,659 | 2,288 | 83,179 | 1,187 | ||||||||||||||||||||||
| TOTAL | 161,328 | 160,696 | 413,723 | 347,465 | ||||||||||||||||||||||
| OPERATING INCOME (LOSS) | 38,013 | 27,320 | (21,421) | 49,371 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 511 | 280 | 889 | 730 | ||||||||||||||||||||||
| Interest and investment income | 316 | 2,400 | 457 | 4,451 | ||||||||||||||||||||||
| Miscellaneous - net | 381 | (517) | 352 | (744) | ||||||||||||||||||||||
| TOTAL | 1,208 | 2,163 | 1,698 | 4,437 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 10,810 | 10,003 | 20,336 | 19,622 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (214) | (136) | (371) | (355) | ||||||||||||||||||||||
| TOTAL | 10,596 | 9,867 | 19,965 | 19,267 | ||||||||||||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 28,625 | 19,616 | (39,688) | 34,541 | ||||||||||||||||||||||
| Income taxes | 7,492 | 5,759 | (11,841) | 10,542 | ||||||||||||||||||||||
| NET INCOME (LOSS) | $21,133 | $13,857 | ($27,847) | $23,999 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
148
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income (loss) | ($27,847) | $23,999 | ||||||||||||
| Adjustments to reconcile net income (loss) to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 42,044 | 39,639 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | (19,560) | 10,247 | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Receivables | (111,913) | 23,357 | ||||||||||||
| Fuel inventory | 544 | 3,868 | ||||||||||||
| Accounts payable | (10,311) | (24,536) | ||||||||||||
| Prepaid taxes and taxes accrued | 7,345 | (657) | ||||||||||||
| Interest accrued | (1,220) | 194 | ||||||||||||
| Deferred fuel costs | (51) | 4,315 | ||||||||||||
| Other working capital accounts | (8,120) | (14,016) | ||||||||||||
| Provisions for estimated losses | 2,473 | 3,550 | ||||||||||||
| Other regulatory assets | 11,073 | 2,930 | ||||||||||||
| Other regulatory liabilities | 167,529 | 30,722 | ||||||||||||
| Pension and other postretirement funded status | (3,876) | (2,454) | ||||||||||||
| Other assets and liabilities | (2,694) | (208) | ||||||||||||
| Net cash flow provided by operating activities | 45,416 | 100,950 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (72,409) | (88,480) | ||||||||||||
| Allowance for equity funds used during construction | 889 | 730 | ||||||||||||
| Changes in money pool receivable - net | (1,110) | 101,767 | ||||||||||||
| Payments to storm reserve escrow account | (2,939) | (1,723) | ||||||||||||
| Changes in securitization account | 1,120 | 555 | ||||||||||||
| Decrease in other investments | — | 51 | ||||||||||||
| Net cash flow provided by (used in) investing activities | (74,449) | 12,900 | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of long-term debt | 149,075 | 14,641 | ||||||||||||
| Retirement of long-term debt | (91,245) | (6,073) | ||||||||||||
| Contribution from customer for construction | — | 15,000 | ||||||||||||
| Change in money pool payable - net | (21,651) | — | ||||||||||||
| Other | (614) | (511) | ||||||||||||
| Net cash flow provided by financing activities | 35,565 | 23,057 | ||||||||||||
| Net increase in cash and cash equivalents | 6,532 | 136,907 | ||||||||||||
| Cash and cash equivalents at beginning of period | 26 | 4,464 | ||||||||||||
| Cash and cash equivalents at end of period | $6,558 | $141,371 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $20,159 | $18,719 | ||||||||||||
| Income taxes | $2,598 | $2 | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $4,263 | $8,496 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $26 | $26 | ||||||||||||
| Temporary cash investments | 6,532 | — | ||||||||||||
| Total cash and cash equivalents | 6,558 | 26 | ||||||||||||
| Securitization recovery trust account | 1,306 | 2,426 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 71,412 | 67,258 | ||||||||||||
| Allowance for doubtful accounts | (5,824) | (7,770) | ||||||||||||
| Associated companies | 102,291 | 1,657 | ||||||||||||
| Other | 6,883 | 5,270 | ||||||||||||
| Accrued unbilled revenues | 35,763 | 31,087 | ||||||||||||
| Total accounts receivable | 210,525 | 97,502 | ||||||||||||
| Deferred fuel costs | 6,199 | 6,148 | ||||||||||||
| Fuel inventory - at average cost | 2,754 | 3,298 | ||||||||||||
| Materials and supplies - at average cost | 32,846 | 30,019 | ||||||||||||
| Prepaid taxes | — | 1,574 | ||||||||||||
| Prepayments and other | 19,146 | 11,482 | ||||||||||||
| TOTAL | 279,334 | 152,475 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Non-utility property - at cost (less accumulated depreciation) | 832 | 832 | ||||||||||||
| Storm reserve escrow account | 81,670 | 78,731 | ||||||||||||
| TOTAL | 82,502 | 79,563 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 2,078,423 | 2,046,928 | ||||||||||||
| Natural gas | 408,508 | 401,846 | ||||||||||||
| Construction work in progress | 40,512 | 25,424 | ||||||||||||
| TOTAL UTILITY PLANT | 2,527,443 | 2,474,198 | ||||||||||||
| Less - accumulated depreciation and amortization | 879,838 | 858,672 | ||||||||||||
| UTILITY PLANT - NET | 1,647,605 | 1,615,526 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets (includes securitization property of $— as of June 30, 2024 and $506 as of December 31, 2023) | 171,294 | 182,367 | ||||||||||||
| Deferred fuel costs | 4,080 | 4,080 | ||||||||||||
| Other | 84,269 | 63,964 | ||||||||||||
| TOTAL | 259,643 | 250,411 | ||||||||||||
| TOTAL ASSETS | $2,269,084 | $2,097,975 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $78,000 | $85,000 | ||||||||||||
| Payable due to associated company | 1,275 | 1,275 | ||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | 43,275 | 76,736 | ||||||||||||
| Other | 38,150 | 39,813 | ||||||||||||
| Customer deposits | 33,324 | 32,420 | ||||||||||||
| Taxes accrued | 5,771 | — | ||||||||||||
| Interest accrued | 7,314 | 8,534 | ||||||||||||
| Other | 11,003 | 8,953 | ||||||||||||
| TOTAL | 218,112 | 252,731 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 176,689 | 195,615 | ||||||||||||
| Accumulated deferred investment tax credits | 15,672 | 16,457 | ||||||||||||
| Regulatory liability for income taxes - net | 34,411 | 36,061 | ||||||||||||
| Other regulatory liabilities | 259,613 | 90,434 | ||||||||||||
| Accumulated provisions | 90,597 | 88,124 | ||||||||||||
| Long-term debt (includes securitization bonds of $— as of June 30, 2024 and $5,415 as of December 31, 2023) | 650,197 | 584,171 | ||||||||||||
| Long-term payable due to associated company | 7,004 | 7,004 | ||||||||||||
| Other | 37,882 | 20,624 | ||||||||||||
| TOTAL | 1,272,065 | 1,038,490 | ||||||||||||
| Commitments and Contingencies | ||||||||||||||
| EQUITY | ||||||||||||||
| Member's equity | 778,907 | 806,754 | ||||||||||||
| TOTAL | 778,907 | 806,754 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $2,269,084 | $2,097,975 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY | ||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||
| (Unaudited) | ||||||||
| Member's Equity | ||||||||
| (In Thousands) | ||||||||
| Balance at December 31, 2022 | $702,816 | |||||||
| Net income | 10,142 | |||||||
| Balance at March 31, 2023 | 712,958 | |||||||
| Net income | 13,857 | |||||||
| Balance at June 30, 2023 | $726,815 | |||||||
| Balance at December 31, 2023 | $806,754 | |||||||
| Net loss | (48,980) | |||||||
| Balance at March 31, 2024 | 757,774 | |||||||
| Net income | 21,133 | |||||||
| Balance at June 30, 2024 | $778,907 | |||||||
| See Notes to Financial Statements. | ||||||||
152
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income increased $1.8 million primarily due to higher volume/weather and higher other income, partially offset by higher other operation and maintenance expenses and higher depreciation and amortization expenses.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Net income decreased $3.2 million primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher volume/weather, higher retail electric price, and higher other income.
Operating Revenues
Second Quarter 2024 Compared to Second Quarter 2023
Following is an analysis of the change in operating revenues comparing the second quarter 2024 to the second quarter 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $464.4 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | 32.5 | ||||
| Volume/weather | 22.6 | ||||
| Retail electric price | (0.4) | ||||
| 2024 operating revenues | $519.1 | ||||
Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales and an increase in weather-adjusted residential and commercial usage. The increase in weather-adjusted residential usage is primarily due to an increase in customers.
The retail electric price variance is insignificant and primarily due to the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective over three months beginning in May 2023, substantially offset by an increase in base rates effective June 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the generation cost recovery rider filings and the 2022 base rate case.
153
Total electric energy sales for Entergy Texas for the three months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 1,778 | 1,667 | 7 | ||||||||||||||
| Commercial | 1,234 | 1,181 | 4 | ||||||||||||||
| Industrial | 2,404 | 2,399 | — | ||||||||||||||
| Governmental | 68 | 67 | 1 | ||||||||||||||
| Total retail | 5,484 | 5,314 | 3 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 229 | 136 | 68 | ||||||||||||||
| Total | 5,713 | 5,450 | 5 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2024 to the six months ended June 30, 2023:
| Amount | |||||
| (In Millions) | |||||
| 2023 operating revenues | $971.9 | ||||
| Fuel, rider, and other revenues that do not significantly affect net income | (40.8) | ||||
| Retail electric price | 9.2 | ||||
| Volume/weather | 23.3 | ||||
| 2024 operating revenues | $963.6 | ||||
Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to an increase in base rates effective June 2023, partially offset by the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective over three months beginning in May 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case and the generation cost recovery rider filings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in weather-adjusted residential usage. The increase in weather-adjusted residential usage is primarily due to an increase in customers.
154
Total electric energy sales for Entergy Texas for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | % Change | |||||||||||||||
| (GWh) | |||||||||||||||||
| Residential | 3,089 | 2,914 | 6 | ||||||||||||||
| Commercial | 2,317 | 2,241 | 3 | ||||||||||||||
| Industrial | 4,458 | 4,592 | (3) | ||||||||||||||
| Governmental | 131 | 130 | 1 | ||||||||||||||
| Total retail | 9,995 | 9,877 | 1 | ||||||||||||||
| Sales for resale: | |||||||||||||||||
| Non-associated companies | 346 | 239 | 45 | ||||||||||||||
| Total | 10,341 | 10,116 | 2 | ||||||||||||||
See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Second Quarter 2024 Compared to Second Quarter 2023
Other operation and maintenance expenses increased primarily due to:
•a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;
•an increase of $2.3 million in power delivery expenses primarily due to higher transmission line inspection costs and higher transmission and distribution repairs and maintenance costs, partially offset by lower vegetation maintenance costs;
•an increase of $2.0 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $2.0 million in storm damage provisions;
•an increase of $1.8 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024; and
•an increase of $1.6 million in non-nuclear generation expenses primarily due to a higher scope of work performed in 2024 as compared to 2023.
Depreciation and amortization expenses increased primarily due to:
•the recognition of $13.8 million in depreciation expense in second 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 2024, including the Orange County Advanced Power Station project.
155
Interest expense increased primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023, partially offset by an increase in 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.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Other operation and maintenance expenses increased primarily due to:
•a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;
•an increase of $5.1 million in power delivery expenses primarily due to higher transmission and distribution repairs and maintenance costs, higher reliability costs, and higher transmission line inspection costs, partially offset by lower vegetation maintenance costs;
•an increase of $4.5 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•an increase of $3.7 million in storm damage provisions;
•an increase of $3.6 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $2.8 million in non-nuclear generation expenses primarily due to a higher scope of work performed in 2024 as compared to 2023; and
•several individually insignificant items.
Depreciation and amortization expenses increased primarily due to:
•the recognition of $27.6 million in depreciation expense in 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 2024, including the Orange County Advanced Power Station project, and higher interest earned on money pool investments. The increase was partially offset by an increase of $4 million in net periodic pension and other postretirement benefit non-service costs as a result of an increase in amortizations of the previously deferred surplus and deferrals of the deficit in the annual amount of actuarially determined pension and other postretirement benefits chargeable under the Entergy Texas reserve. See Note 11 to the financial statements in the Form 10-K for further discussion of the Entergy Texas reserve.
Interest expense increased primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023, partially offset by an increase in 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.
Income Taxes
The effective income tax rates were 18.4% for the second quarter 2024 and 18.6% for the six months ended June 30, 2024. The differences in the effective income tax rates for the second quarter 2024 and the six months ended June 30, 2024 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.
156
The effective income tax rates were 19.6% for the second quarter 2023 and 19.4% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items, 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 six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Cash and cash equivalents at beginning of period | $21,986 | $3,497 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 292,420 | 308,266 | |||||||||
| Investing activities | (215,942) | (319,798) | |||||||||
| Financing activities | 26,442 | 10,857 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 102,920 | (675) | |||||||||
| Cash and cash equivalents at end of period | $124,906 | $2,822 | |||||||||
Operating Activities
Net cash flow provided by operating activities decreased $15.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to the timing of payments to vendors, lower collections from customers, and an increase of $12.5 million in interest paid. The decrease was partially offset by a decrease of $24.6 million in income taxes paid in 2024 as a result of lower estimated income tax payments in comparison to 2023 and a decrease of $9.7 million in storm spending in 2024 as compared to 2023.
Investing Activities
Net cash flow used in investing activities decreased $103.9 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to money pool activity and a decrease of $23.3 million in non-nuclear generation construction expenditures primarily due to lower spending on the Orange County Advanced Power Station project in 2024 as compared to 2023, partially offset by higher spending on the Legend Power Station and Lone Star Power Station projects in 2024. The decrease was partially offset by:
•an increase of $55.2 million in transmission construction expenditures primarily due to increased spending on various transmission projects in 2024;
•an increase of $50.8 million in distribution construction expenditures primarily due to higher capital expenditures as a result of increased development in Entergy Texas’s service area and higher capital expenditures for storm restoration in 2024;
157
•cash collateral of $12.7 million posted in 2024 to support Entergy Texas’s obligations to MISO; and
•the partial sale of a service center in April 2023 for $11 million as part of an eminent domain proceeding.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased $296.7 million for the six months ended June 30, 2024 compared to decreasing by $98.6 million for the six months ended June 30, 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.
Financing Activities
Net cash flow provided by financing activities increased $15.6 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to an increase of $16.3 million in prepaid deposits related to contributions-in-aid-of-construction primarily for customer and generator interconnection agreements.
Capital Structure
Entergy Texas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Texas is primarily due to net income in 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 49.9 | % | 50.9 | % | |||||||
| Effect of excluding securitization bonds | (2.0 | %) | (2.1 | %) | |||||||
| Debt to capital, excluding securitization bonds (non-GAAP) (a) | 47.9 | % | 48.8 | % | |||||||
| Effect of subtracting cash | (1.1 | %) | (0.2 | %) | |||||||
| Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 46.8 | % | 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.
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Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
Following are the current annual amounts of Entergy Texas’s planned construction and other capital investments.
| 2024 | 2025 | 2026 | |||||||||||||||
| (In Millions) | |||||||||||||||||
| Planned construction and capital investment: | |||||||||||||||||
| Generation | $435 | $800 | $825 | ||||||||||||||
| Transmission | 315 | 320 | 375 | ||||||||||||||
| Distribution | 470 | 415 | 360 | ||||||||||||||
| Utility Support | 45 | 25 | 45 | ||||||||||||||
| Total | $1,265 | $1,560 | $1,605 | ||||||||||||||
The updated capital plan for 2024-2026 reflects a change in the timing of capital investment in certain potential generation projects. In addition to routine capital spending to maintain operations, the capital plan includes investments in generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, including Orange County Advanced Power Station, Lone Star Power Station, Segno Solar, and Votaw Solar; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments.
Entergy Texas’s receivables from the money pool were as follows:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| $21,212 | $317,882 | $899 | $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 $300 million scheduled to expire in June 2029. 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 June 30, 2024, there were no cash borrowings and $1.1 million in 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 June 30, 2024, $79.7 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.
Legend Power Station and Lone Star Power Station
In June 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Legend Power Station, a 754 MW combined-cycle combustion turbine facility, which will be enabled with both carbon capture and storage and hydrogen co-firing optionality, to be located in Jefferson County, Texas, and the Lone Star Power Station, a 453 MW simple-cycle combustion turbine facility, which will be enabled with hydrogen co-firing optionality, to be located in Liberty County, Texas. Legend Power Station will cost an estimated $1.46 billion and Lone Star Power Station will cost an estimated $735.3 million, in each case inclusive of the estimated costs of the generation
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facilities, interconnection costs, transmission network upgrades, and an allowance for funds used during construction. As described in the application, Entergy Texas is considering alternative financing approaches for Legend Power Station and plans to pursue the financing option that is in the best interest of customers. In July 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and, also in July 2024, the ALJ with the State Office of Administrative Hearings adopted a procedural schedule, with a hearing on the merits scheduled to begin in October 2024. Subject to receipt of required regulatory approval and other conditions, both facilities are expected to be in service by mid-2028.
Segno Solar and Votaw Solar
In July 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Segno Solar facility, a 170 MW solar facility to be located in Polk County, Texas, and the Votaw Solar facility, a 141 MW solar facility to be located in Hardin County, Texas. The Segno Solar facility will cost an estimated $351.6 million, and the Votaw Solar facility will cost an estimated $303.8 million, in each case inclusive of estimated transmission interconnection and upgrade costs. Subject to receipt of required regulatory approval and other conditions, the Segno Solar facility is expected to be in service by early 2027, and the Votaw Solar facility is expected to be in service by mid-2028.
Resilience and Grid Hardening
In June 2024, Entergy Texas filed an application with the PUCT requesting approval of Phase I of its Texas Future Ready Resiliency Plan, a cost-effective set of measures to begin accelerating the resiliency of Entergy Texas’s transmission and distribution system. Phase I is comprised of projects totaling approximately $335.1 million, including approximately $198 million of projects contingent upon Entergy Texas’s receipt of grant funds in that amount from the Texas Energy Fund. The projects in Phase I include distribution and transmission hardening and modernization projects and targeted vegetation management projects to mitigate the risk of wildfire. Work on these projects is expected to commence within approximately three years of PUCT approval. The PUCT referred the proceeding to the State Office of Administrative Hearings in June 2024. In July 2024, Entergy Texas filed a motion, on behalf of the parties to the proceeding, requesting the ALJ with the State Office of Administrative Hearings adopt an agreed proposed procedural schedule, with a hearing on the merits scheduled for September 2024. A PUCT decision is expected in fourth quarter 2024.
Hurricane Beryl
In July 2024, Hurricane Beryl caused extensive damage to Entergy Texas’s service area. The storm resulted in widespread power outages, as a result of extensive debris and damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy Texas’s electric facilities damaged by Hurricane Beryl are currently estimated to be in the range of $75 million to $85 million. Based on the historic treatment of such costs in Entergy Texas’s service area, management believes that recovery of restoration costs is probable. There are well established mechanisms and precedent for addressing these catastrophic events and providing for recovery of prudently incurred storm costs in accordance with applicable regulatory and legal principles. Because Entergy Texas has not gone through the regulatory process regarding these storm costs, however, there is an element of risk, and Entergy Texas is unable to predict with certainty the degree of success it may have in its recovery initiatives, the amount of restoration costs that it may ultimately recover, or the timing of such recovery.
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State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates
2022 Base Rate Case
As discussed in the Form 10-K, in August 2023 the PUCT issued an order severing issues related to electric vehicle charging infrastructure in the 2022 base rate case proceeding to a separate proceeding. In December 2023 the PUCT referred the separate proceeding to resolve the issues related to electric vehicle charging infrastructure to the State Office of Administrative Hearings. A hearing on the merits was held in April 2024. In June 2024 the ALJ with the State Office of Administrative Hearings issued a proposal for decision concluding that it is appropriate for a vertically integrated electric utility, and Entergy Texas specifically, to own vehicle-charging facilities or other transportation electrification and charging infrastructure and recommending that both of Entergy Texas’s proposed transportation electrification riders be approved. A PUCT decision is expected in third quarter 2024.
Distribution Cost Recovery Factor (DCRF) Rider
In June 2024, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $40.3 million annually based on its capital invested in distribution between January 1, 2022 and March 31, 2024. The PUCT adopted a procedural schedule in July 2024. A PUCT decision is expected in third quarter 2024.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for 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. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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
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accounting for utility regulatory accounting, 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.
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| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||
| CONSOLIDATED INCOME STATEMENTS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $519,077 | $464,430 | $963,568 | $971,936 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 115,520 | 63,526 | 211,657 | 231,056 | ||||||||||||||||||||||
| Purchased power | 88,713 | 112,883 | 183,056 | 220,641 | ||||||||||||||||||||||
| Other operation and maintenance | 83,176 | 63,071 | 161,136 | 127,501 | ||||||||||||||||||||||
| Taxes other than income taxes | 22,979 | 28,717 | 47,546 | 56,713 | ||||||||||||||||||||||
| Depreciation and amortization | 90,824 | 66,009 | 180,329 | 125,400 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | (12,477) | 1,526 | (13,452) | 12,450 | ||||||||||||||||||||||
| TOTAL | 388,735 | 335,732 | 770,272 | 773,761 | ||||||||||||||||||||||
| OPERATING INCOME | 130,342 | 128,698 | 193,296 | 198,175 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 10,834 | 6,760 | 20,082 | 11,849 | ||||||||||||||||||||||
| Interest and investment income | 2,791 | 846 | 6,695 | 2,263 | ||||||||||||||||||||||
| Miscellaneous - net | (3,186) | (1,941) | (5,498) | (1,502) | ||||||||||||||||||||||
| TOTAL | 10,439 | 5,665 | 21,279 | 12,610 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 34,483 | 26,847 | 66,449 | 53,809 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (4,219) | (2,517) | (7,821) | (4,413) | ||||||||||||||||||||||
| TOTAL | 30,264 | 24,330 | 58,628 | 49,396 | ||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 110,517 | 110,033 | 155,947 | 161,389 | ||||||||||||||||||||||
| Income taxes | 20,295 | 21,576 | 28,981 | 31,259 | ||||||||||||||||||||||
| NET INCOME | 90,222 | 88,457 | 126,966 | 130,130 | ||||||||||||||||||||||
| Preferred dividend requirements | 518 | 518 | 1,036 | 1,036 | ||||||||||||||||||||||
| EARNINGS APPLICABLE TO COMMON STOCK | $89,704 | $87,939 | $125,930 | $129,094 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
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| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $126,966 | $130,130 | ||||||||||||
| Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation and amortization | 180,329 | 125,400 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 21,112 | 23,480 | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Receivables | (64,108) | 12,534 | ||||||||||||
| Fuel inventory | 1,877 | (18,082) | ||||||||||||
| Accounts payable | 13,853 | (5,725) | ||||||||||||
| Taxes accrued | (21,155) | (45,549) | ||||||||||||
| Interest accrued | (561) | (604) | ||||||||||||
| Deferred fuel costs | 80,220 | 98,042 | ||||||||||||
| Other working capital accounts | (9,386) | 3,129 | ||||||||||||
| Provisions for estimated losses | (1,384) | 455 | ||||||||||||
| Other regulatory assets | 40,197 | (19,688) | ||||||||||||
| Other regulatory liabilities | (26,028) | (9,929) | ||||||||||||
| Pension and other postretirement funded status | (8,190) | (4,191) | ||||||||||||
| Other assets and liabilities | (41,322) | 18,864 | ||||||||||||
| Net cash flow provided by operating activities | 292,420 | 308,266 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (522,890) | (448,550) | ||||||||||||
| Allowance for equity funds used during construction | 20,082 | 11,849 | ||||||||||||
| Proceeds from sale of assets | — | 11,000 | ||||||||||||
| Changes in money pool receivable - net | 296,670 | 98,569 | ||||||||||||
| Changes in securitization account | 2,856 | 7,248 | ||||||||||||
| Decrease (increase) in other investments | (12,660) | 86 | ||||||||||||
| Net cash flow used in investing activities | (215,942) | (319,798) | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Retirement of long-term debt | (9,104) | (8,856) | ||||||||||||
| Preferred stock dividends paid | (1,036) | (1,036) | ||||||||||||
| Other | 36,582 | 20,749 | ||||||||||||
| Net cash flow provided by financing activities | 26,442 | 10,857 | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | 102,920 | (675) | ||||||||||||
| Cash and cash equivalents at beginning of period | 21,986 | 3,497 | ||||||||||||
| Cash and cash equivalents at end of period | $124,906 | $2,822 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $65,529 | $53,019 | ||||||||||||
| Income taxes | $5,862 | $30,500 | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $343,525 | $138,771 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $26 | $1,497 | ||||||||||||
| Temporary cash investments | 124,880 | 20,489 | ||||||||||||
| Total cash and cash equivalents | 124,906 | 21,986 | ||||||||||||
| Securitization recovery trust account | 2,340 | 5,195 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Customer | 119,885 | 88,468 | ||||||||||||
| Allowance for doubtful accounts | (933) | (1,484) | ||||||||||||
| Associated companies | 31,932 | 329,941 | ||||||||||||
| Other | 39,732 | 24,416 | ||||||||||||
| Accrued unbilled revenues | 90,934 | 72,771 | ||||||||||||
| Total accounts receivable | 281,550 | 514,112 | ||||||||||||
| Deferred fuel costs | 58,799 | 139,019 | ||||||||||||
| Fuel inventory - at average cost | 48,970 | 50,847 | ||||||||||||
| Materials and supplies - at average cost | 146,412 | 123,020 | ||||||||||||
| Prepayments and other | 41,518 | 35,232 | ||||||||||||
| TOTAL | 704,495 | 889,411 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Investments in affiliates - at equity | 130 | 214 | ||||||||||||
| Non-utility property - at cost (less accumulated depreciation) | 376 | 376 | ||||||||||||
| Other | 15,246 | 15,068 | ||||||||||||
| TOTAL | 15,752 | 15,658 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 8,144,778 | 7,931,340 | ||||||||||||
| Construction work in progress | 1,215,214 | 857,707 | ||||||||||||
| TOTAL UTILITY PLANT | 9,359,992 | 8,789,047 | ||||||||||||
| Less - accumulated depreciation and amortization | 2,472,681 | 2,363,919 | ||||||||||||
| UTILITY PLANT - NET | 6,887,311 | 6,425,128 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets (includes securitization property of $243,478 as of June 30, 2024 and $250,324 as of December 31, 2023) | 556,409 | 596,606 | ||||||||||||
| Other | 159,392 | 129,769 | ||||||||||||
| TOTAL | 715,801 | 726,375 | ||||||||||||
| TOTAL ASSETS | $8,323,359 | $8,056,572 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY TEXAS, INC. AND SUBSIDIARIES | ||||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | $56,359 | $74,423 | ||||||||||||
| Other | 238,679 | 195,703 | ||||||||||||
| Customer deposits | 40,988 | 39,999 | ||||||||||||
| Taxes accrued | 57,732 | 78,887 | ||||||||||||
| Interest accrued | 30,724 | 31,285 | ||||||||||||
| Other | 23,979 | 16,237 | ||||||||||||
| TOTAL | 448,461 | 436,534 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 843,464 | 814,905 | ||||||||||||
| Accumulated deferred investment tax credits | 7,589 | 7,963 | ||||||||||||
| Regulatory liability for income taxes - net | 103,806 | 114,759 | ||||||||||||
| Other regulatory liabilities | 27,938 | 43,013 | ||||||||||||
| Asset retirement cost liabilities | 17,228 | 11,743 | ||||||||||||
| Accumulated provisions | 8,096 | 9,480 | ||||||||||||
| Long-term debt (includes securitization bonds of $248,670 as of June 30, 2024 and $257,592 as of December 31, 2023) | 3,216,909 | 3,225,092 | ||||||||||||
| Other | 405,276 | 274,421 | ||||||||||||
| TOTAL | 4,630,306 | 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 | 1,956,265 | 1,830,335 | ||||||||||||
| Total common shareholder's equity | 3,205,842 | 3,079,912 | ||||||||||||
| Preferred stock without sinking fund | 38,750 | 38,750 | ||||||||||||
| TOTAL | 3,244,592 | 3,118,662 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $8,323,359 | $8,056,572 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| ENTERGY TEXAS, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 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 | ||||||||||||||||||||||||
| Net income | — | — | — | 88,457 | 88,457 | ||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | (518) | (518) | ||||||||||||||||||||||||
| Balance at June 30, 2023 | $38,750 | $49,452 | $1,050,125 | $1,670,228 | $2,808,555 | ||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||
| Net income | — | — | — | 90,222 | 90,222 | ||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | (518) | (518) | ||||||||||||||||||||||||
| Balance at June 30, 2024 | $38,750 | $49,452 | $1,200,125 | $1,956,265 | $3,244,592 | ||||||||||||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||||||||||||||
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SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
System Energy’s principal asset 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 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).
Results of Operations
Net Income
Second Quarter 2024 Compared to Second Quarter 2023
Net income decreased $0.9 million primarily due to the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council, substantially offset by an increase in operating revenues resulting from changes in rate base. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Net income increased $2.7 million primarily due to an increase in operating revenues resulting from changes in rate base, partially offset by the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.
Income Taxes
The effective income tax rates were 23.2% for the second quarter 2024 and 21.7% for the six months ended June 30, 2024. The difference in the effective income tax rate for the second quarter 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rates were 22.8% for the second quarter 2023 and 23.2% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
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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 six months ended June 30, 2024 and 2023 were as follows:
| 2024 | 2023 | ||||||||||
| (In Thousands) | |||||||||||
| Cash and cash equivalents at beginning of period | $60 | $2,940 | |||||||||
| Net cash provided by (used in): | |||||||||||
| Operating activities | 27,420 | 60,571 | |||||||||
| Investing activities | (216,666) | 11,262 | |||||||||
| Financing activities | 220,264 | (26,518) | |||||||||
| Net increase in cash and cash equivalents | 31,018 | 45,315 | |||||||||
| Cash and cash equivalents at end of period | $31,078 | $48,255 | |||||||||
Operating Activities
Net cash flow provided by operating activities decreased $33.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 primarily due to:
•the refund of $92 million made in May 2024 to Entergy Arkansas as a result of the settlement with the APSC. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC;
•an increase in spending of $20.1 million on nuclear refueling outage costs in 2024 as compared to 2023; and
•the timing of collection of receivables.
The decrease was partially offset by:
•aggregate refunds 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 in the Form 10-K for further discussion of the refunds and the related proceedings; and
•refunds of $19.3 million included in May 2023 service month bills under the Unit Power Sales Agreement to reflect the effects of the partial settlement agreement approved by the FERC in April 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the Unit Power Sales Agreement complaint.
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Investing Activities
System Energy’s investing activities used $216.7 million of cash for the six months ended June 30, 2024 compared to providing $11.3 million of cash for the six months ended June 30, 2023 primarily due to the following activity:
•an increase in cash used of $108.8 million as a result of fluctuations in nuclear fuel activity due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
•money pool activity; and
•an increase of $38.1 million in nuclear construction expenditures primarily due to higher spending in 2024 on Grand Gulf outage projects and upgrades.
Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased $5.2 million for the six months ended June 30, 2024 compared to decreasing by $80.1 million for the six months ended June 30, 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.
Financing Activities
System Energy’s financing activities provided $220.3 million of cash for the six months ended June 30, 2024 compared to using $26.5 million of cash for the six months ended June 30, 2023 primarily due to the following activity:
•the repayment, at maturity, of $250 million of 4.10% Series mortgage bonds in April 2023;
•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 $82.6 million in 2024 compared to net repayments of $34.8 million in 2023 on the nuclear fuel company variable interest entity’s credit facility;
•the repayment, prior to maturity, in March 2023 of a $50 million term loan due in November 2023;
•the issuance of $325 million of 6.00% Series mortgage bonds in March 2023; and
•money pool activity.
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 six months ended June 30, 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 decrease in the debt to capital ratio for System Energy 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 2024.
| June 30, 2024 | December 31, 2023 | ||||||||||
| Debt to capital | 42.9 | % | 45.4 | % | |||||||
| Effect of subtracting cash | (0.9 | %) | — | % | |||||||
| Net debt to net capital (non-GAAP) | 42.0 | % | 45.4 | % | |||||||
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Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. 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. The 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:
| June 30, 2024 | December 31, 2023 | June 30, 2023 | December 31, 2022 | |||||||||||||||||
| (In Thousands) | ||||||||||||||||||||
| $5,238 | ($12,246) | $14,880 | $94,981 | |||||||||||||||||
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 2027. As of June 30, 2024, $104.1 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. 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. Settlements that resolve all significant aspects of these complaints have been reached with the MPSC and the APSC and approved by the FERC. A settlement has been reached with the City Council and is pending FERC approval, as described in “System Energy Settlement with the City Council” below. An agreement in principle has been reached with the LPSC staff, as described in “System Energy Settlement with the LPSC” below. If the settlement with the City Council is approved by the FERC and the settlement with the LPSC staff is approved by the LPSC and
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the FERC, it would resolve all significant aspects of these pending complaints. The following are updates to the discussion in the Form 10-K.
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 $25.3 million, which includes interest through June 30, 2024, and the estimated resulting annual rate reduction would be approximately $15 million. As a result of the settlement agreements with the MPSC and the APSC, both the estimated refund and rate reduction exclude Entergy Mississippi's 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 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.
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-
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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.
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 initiated a sixty-day period in which aggrieved parties could 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 the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial lease 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
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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. In June 2024 counsel for the FERC filed the respondent’s brief, arguing that the FERC’s August 2023 rehearing order concerning the sale-leaseback and depreciation rate remedy issues should be affirmed and arguing that the dispute over the uncertain tax position issue is not yet ripe. In July 2024, System Energy and the LPSC each filed separate reply briefs.
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.
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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 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.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolved the following issues raised in the Unit Power Sales Agreement complaint: advance collection of lease payments, aircraft costs, executive incentive compensation, money pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of the capital funds agreement. The settlement provided that System Energy would provide a black box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provided that if the APSC, the City Council, or the LPSC agrees to the 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 addressed other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement was included in the May 2023 service month bills under the Unit Power Sales Agreement.
In May 2023 the presiding ALJ issued an initial decision finding that System Energy 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 $69.9 million plus $97.8 million of interest through June 30, 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
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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 LPSC’s mandamus request 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. In July 2024 the Fifth Circuit held oral argument on the petition. During oral argument, the FERC’s counsel represented that the FERC intends to issue an order in the return on equity and capital structure proceeding by the end of the year. Later in July 2024 the Fifth Circuit issued an order denying the LPSC’s petition.
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” 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 remaining 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 paid the remaining black box refund of $92 million to Entergy Arkansas in May 2024.
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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” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In May 2024, System Energy, Entergy New Orleans, additional named Entergy parties, and the City Council filed the settlement agreement and supporting materials with the FERC. 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 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’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.
System Energy Settlement with the LPSC
In July 2024, System Energy and the LPSC staff reached a settlement in principle to globally resolve all of the LPSC’s actual and potential claims in multiple docketed proceedings pending before the FERC (including all docketed proceedings resolved by the MPSC, the APSC, and the City Council settlements) 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” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. The settling parties intend to file the settlement for approval by the FERC following the LPSC’s approval of the settlement.
The terms of the settlement with the LPSC staff 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, between System Energy and the APSC in November 2023, and between System Energy and the City Council in April 2024. The settlement in principle provides for Entergy Louisiana to receive a black box refund of $95 million from System Energy, inclusive of approximately $15 million already received by Entergy Louisiana from System Energy. In June 2024 the remaining $80 million black box refund to Entergy Louisiana 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 $95 million described above, beginning with the September 2024 service month, the settlement provides for Entergy Louisiana’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.
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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. System Energy’s remaining regulatory liability related to complaints against System Energy as of December 31, 2023 was $178 million. As discussed above in “System Energy 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. As discussed above in “System Energy Settlement with the LPSC,” in second quarter 2024 the $80 million black box refund to Entergy Louisiana was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2022 Calendar Year Bills
In February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2022. The formal challenge alleges: (1) that the equity ratio charged in rates was excessive; and (2) that all issues in the pending Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2022 bills. These allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 and 2021 bills.
In 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.
Pension Costs Amendment Proceeding
As discussed in the Form 10-K, in October 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to include in the rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Energy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony was filed through April 2024, and the hearing occurred from late May through early June 2024. The presiding ALJ’s initial decision is expected in September 2024.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
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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, 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.
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| SYSTEM ENERGY RESOURCES, INC. | ||||||||||||||||||||||||||
| INCOME STATEMENTS | ||||||||||||||||||||||||||
| For the Three and Six Months Ended June 30, 2024 and 2023 | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (In Thousands) | (In Thousands) | |||||||||||||||||||||||||
| OPERATING REVENUES | ||||||||||||||||||||||||||
| Electric | $145,934 | $138,384 | $298,554 | $309,956 | ||||||||||||||||||||||
| OPERATING EXPENSES | ||||||||||||||||||||||||||
| Operation and Maintenance: | ||||||||||||||||||||||||||
| Fuel, fuel-related expenses, and gas purchased for resale | 17,120 | 18,783 | 30,237 | 37,630 | ||||||||||||||||||||||
| Nuclear refueling outage expenses | 4,136 | 6,692 | 10,797 | 13,311 | ||||||||||||||||||||||
| Other operation and maintenance | 45,746 | 46,986 | 97,169 | 97,186 | ||||||||||||||||||||||
| Decommissioning | 10,815 | 10,391 | 21,522 | 20,678 | ||||||||||||||||||||||
| Taxes other than income taxes | 6,892 | 7,728 | 14,101 | 15,010 | ||||||||||||||||||||||
| Depreciation and amortization | 30,443 | 35,303 | 60,121 | 72,440 | ||||||||||||||||||||||
| Other regulatory charges (credits) - net | 27,188 | (32,415) | 22,215 | (38,874) | ||||||||||||||||||||||
| TOTAL | 142,340 | 93,468 | 256,162 | 217,381 | ||||||||||||||||||||||
| OPERATING INCOME | 3,594 | 44,916 | 42,392 | 92,575 | ||||||||||||||||||||||
| OTHER INCOME | ||||||||||||||||||||||||||
| Allowance for equity funds used during construction | 1,451 | 1,605 | 3,885 | 3,423 | ||||||||||||||||||||||
| Interest and investment income | 38,967 | 1,638 | 46,940 | 7,402 | ||||||||||||||||||||||
| Miscellaneous - net | (165) | (1,613) | 72 | (10,691) | ||||||||||||||||||||||
| TOTAL | 40,253 | 1,630 | 50,897 | 134 | ||||||||||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||||||
| Interest expense | 12,072 | 13,635 | 23,243 | 24,126 | ||||||||||||||||||||||
| Allowance for borrowed funds used during construction | (594) | (436) | (1,453) | (791) | ||||||||||||||||||||||
| TOTAL | 11,478 | 13,199 | 21,790 | 23,335 | ||||||||||||||||||||||
| INCOME BEFORE INCOME TAXES | 32,369 | 33,347 | 71,499 | 69,374 | ||||||||||||||||||||||
| Income taxes | 7,521 | 7,588 | 15,533 | 16,070 | ||||||||||||||||||||||
| NET INCOME | $24,848 | $25,759 | $55,966 | $53,304 | ||||||||||||||||||||||
| See Notes to Financial Statements. | ||||||||||||||||||||||||||
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| SYSTEM ENERGY RESOURCES, INC. | ||||||||||||||
| STATEMENTS OF CASH FLOWS | ||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $55,966 | $53,304 | ||||||||||||
| Adjustments to reconcile net income to net cash flow provided by operating activities: | ||||||||||||||
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | 106,652 | 125,741 | ||||||||||||
| Deferred income taxes, investment tax credits, and non-current taxes accrued | 28,258 | 17,865 | ||||||||||||
| Changes in assets and liabilities: | ||||||||||||||
| Receivables | (9,335) | 13,558 | ||||||||||||
| Accounts payable | 74,527 | (26,332) | ||||||||||||
| Prepaid taxes and taxes accrued | (19,301) | (10,704) | ||||||||||||
| Interest accrued | (620) | 3,035 | ||||||||||||
| Other working capital accounts | (27,233) | 5,569 | ||||||||||||
| Other regulatory assets | 21,178 | (16,683) | ||||||||||||
| Other regulatory liabilities | (115,256) | 27,611 | ||||||||||||
| Pension and other postretirement funded status | (6,952) | (4,758) | ||||||||||||
| Other assets and liabilities | (80,464) | (127,635) | ||||||||||||
| Net cash flow provided by operating activities | 27,420 | 60,571 | ||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Construction expenditures | (87,410) | (54,140) | ||||||||||||
| Allowance for equity funds used during construction | 3,885 | 3,423 | ||||||||||||
| Nuclear fuel purchases | (115,544) | (31,822) | ||||||||||||
| Proceeds from sale of nuclear fuel | 21 | 25,091 | ||||||||||||
| Decrease (increase) in other investments | 23 | (4) | ||||||||||||
| Proceeds from nuclear decommissioning trust fund sales | 455,082 | 151,463 | ||||||||||||
| Investment in nuclear decommissioning trust funds | (467,485) | (162,850) | ||||||||||||
| Changes in money pool receivable - net | (5,238) | 80,101 | ||||||||||||
| Net cash flow provided by (used in) investing activities | (216,666) | 11,262 | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from the issuance of long-term debt | 544,736 | 585,898 | ||||||||||||
| Retirement of long-term debt | (462,226) | (612,416) | ||||||||||||
| Capital contribution from parent | 150,000 | — | ||||||||||||
| Change in money pool payable - net | (12,246) | — | ||||||||||||
| Net cash flow provided by (used in) financing activities | 220,264 | (26,518) | ||||||||||||
| Net increase in cash and cash equivalents | 31,018 | 45,315 | ||||||||||||
| Cash and cash equivalents at beginning of period | 60 | 2,940 | ||||||||||||
| Cash and cash equivalents at end of period | $31,078 | $48,255 | ||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||||
| Cash paid (received) during the period for: | ||||||||||||||
| Interest - net of amount capitalized | $25,231 | $20,289 | ||||||||||||
| Income taxes | ($2,326) | $— | ||||||||||||
| Noncash investing activities: | ||||||||||||||
| Accrued construction expenditures | $24,234 | $17,741 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| SYSTEM ENERGY RESOURCES, INC. | ||||||||||||||
| BALANCE SHEETS | ||||||||||||||
| ASSETS | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT ASSETS | ||||||||||||||
| Cash and cash equivalents: | ||||||||||||||
| Cash | $240 | $60 | ||||||||||||
| Temporary cash investments | 30,838 | — | ||||||||||||
| Total cash and cash equivalents | 31,078 | 60 | ||||||||||||
| Accounts receivable: | ||||||||||||||
| Associated companies | 71,436 | 54,544 | ||||||||||||
| Other | 4,542 | 6,861 | ||||||||||||
| Total accounts receivable | 75,978 | 61,405 | ||||||||||||
| Materials and supplies - at average cost | 164,087 | 155,565 | ||||||||||||
| Deferred nuclear refueling outage costs | 28,625 | 8,603 | ||||||||||||
| Prepayments and other | 8,512 | 3,373 | ||||||||||||
| TOTAL | 308,280 | 229,006 | ||||||||||||
| OTHER PROPERTY AND INVESTMENTS | ||||||||||||||
| Decommissioning trust funds | 1,450,321 | 1,342,317 | ||||||||||||
| TOTAL | 1,450,321 | 1,342,317 | ||||||||||||
| UTILITY PLANT | ||||||||||||||
| Electric | 5,597,910 | 5,495,728 | ||||||||||||
| Construction work in progress | 84,886 | 130,866 | ||||||||||||
| Nuclear fuel | 205,975 | 160,655 | ||||||||||||
| TOTAL UTILITY PLANT | 5,888,771 | 5,787,249 | ||||||||||||
| Less - accumulated depreciation and amortization | 3,525,638 | 3,493,299 | ||||||||||||
| UTILITY PLANT - NET | 2,363,133 | 2,293,950 | ||||||||||||
| DEFERRED DEBITS AND OTHER ASSETS | ||||||||||||||
| Regulatory assets: | ||||||||||||||
| Other regulatory assets | 425,182 | 446,360 | ||||||||||||
| Other | 12,895 | 730 | ||||||||||||
| TOTAL | 438,077 | 447,090 | ||||||||||||
| TOTAL ASSETS | $4,559,811 | $4,312,363 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| SYSTEM ENERGY RESOURCES, INC. | ||||||||||||||
| BALANCE SHEETS | ||||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| June 30, 2024 and December 31, 2023 | ||||||||||||||
| (Unaudited) | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| (In Thousands) | ||||||||||||||
| CURRENT LIABILITIES | ||||||||||||||
| Currently maturing long-term debt | $72 | $57 | ||||||||||||
| Accounts payable: | ||||||||||||||
| Associated companies | 187,787 | 118,523 | ||||||||||||
| Other | 43,623 | 73,580 | ||||||||||||
| Taxes accrued | 8,100 | 27,401 | ||||||||||||
| Interest accrued | 12,334 | 12,954 | ||||||||||||
| Other | 4,351 | 4,354 | ||||||||||||
| TOTAL | 256,267 | 236,869 | ||||||||||||
| NON-CURRENT LIABILITIES | ||||||||||||||
| Accumulated deferred income taxes and taxes accrued | 434,863 | 405,744 | ||||||||||||
| Accumulated deferred investment tax credits | 45,278 | 46,960 | ||||||||||||
| Regulatory liability for income taxes - net | 106,805 | 107,458 | ||||||||||||
| Other regulatory liabilities | 668,309 | 782,912 | ||||||||||||
| Decommissioning | 1,105,756 | 1,084,234 | ||||||||||||
| Pension and other postretirement liabilities | 24,711 | 19,491 | ||||||||||||
| Long-term debt | 822,762 | 738,402 | ||||||||||||
| Other | 555 | 1,754 | ||||||||||||
| TOTAL | 3,209,039 | 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) | 27,655 | (28,311) | ||||||||||||
| TOTAL | 1,094,505 | 888,539 | ||||||||||||
| TOTAL LIABILITIES AND EQUITY | $4,559,811 | $4,312,363 | ||||||||||||
| See Notes to Financial Statements. | ||||||||||||||
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| SYSTEM ENERGY RESOURCES, INC. | |||||||||||||||||
| STATEMENTS OF CHANGES IN COMMON EQUITY | |||||||||||||||||
| For the Six Months Ended June 30, 2024 and 2023 | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Common Stock | Retained Earnings (Accumulated Deficit) | Total | |||||||||||||||
| (In Thousands) | |||||||||||||||||
| Balance at December 31, 2022 | $1,086,850 | ($137,083) | $949,767 | ||||||||||||||
| Net income | — | 27,545 | 27,545 | ||||||||||||||
| Balance at March 31, 2023 | 1,086,850 | (109,538) | 977,312 | ||||||||||||||
| Net income | — | 25,759 | 25,759 | ||||||||||||||
| Balance at June 30, 2023 | $1,086,850 | ($83,779) | $1,003,071 | ||||||||||||||
| Balance at December 31, 2023 | $916,850 | ($28,311) | $888,539 | ||||||||||||||
| Net income | — | 31,118 | 31,118 | ||||||||||||||
| Capital contribution from parent | 150,000 | — | 150,000 | ||||||||||||||
| Balance at March 31, 2024 | 1,066,850 | 2,807 | 1,069,657 | ||||||||||||||
| Net income | — | 24,848 | 24,848 | ||||||||||||||
| Balance at June 30, 2024 | $1,066,850 | $27,655 | $1,094,505 | ||||||||||||||
| See Notes to Financial Statements. | |||||||||||||||||
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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 (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 $ Amount of Shares that May Yet be Purchased Under a Plan (2) | ||||||||||||||||||||||
| 4/01/2024-4/30/2024 | — | $— | — | $350,052,918 | ||||||||||||||||||||||
| 5/01/2024-5/31/2024 | — | $— | — | $350,052,918 | ||||||||||||||||||||||
| 6/01/2024-6/30/2024 | — | $— | — | $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 2024, Entergy withheld 101,960 shares of its common stock at $99.31 per share, 75,018 shares of its common stock at $98.86 per share, 1,731 shares of its common stock at $103.94 per share, 316 shares of its common stock at $102.64 per share, 232 shares of its common stock at $102.77 per share, 41 shares of its common stock at $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.
(1)See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.
(2)Maximum 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.
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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 Arrangements
During the three months ended June 30, 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 May 6, 2024, Andrew S. Marsh, Chair of the Board and Chief Executive Officer of Entergy, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) with respect to options which will be expiring within the next two years. Mr. Marsh’s Rule 10b5-1 trading arrangement provides for (a) 24,000 shares to be acquired by option exercise and subsequently sold on or prior to January 29, 2025 (the date on which those options expire) and (b) 45,000 shares to be acquired by option exercise and subsequently sold on or prior to January 28, 2026 (the date on which those options expire), each in accordance with the terms specified in the trading arrangement. The term of Mr. Marsh’s Rule 10b5-1 trading arrangement expires on January 28, 2026. The first date that any transactions under Mr. Marsh’s Rule 10b5-1 trading arrangement can occur is August 5, 2024.
On May 8, 2024, Haley Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, terminated a Rule 10b5-1 trading arrangement he had previously adopted on March 6, 2024, which was intended to satisfy the affirmative defense of Rule 10b5-1(c), had a term expiring on December 31, 2024, and provided for the sale of up to 1,000 shares of Entergy’s common stock pursuant to the terms of the trading arrangement. As of the date of termination of the trading arrangement, Mr. Fisackerly had not sold any shares of common stock under its terms.
On May 10, 2024, Peter S. Norgeot, Jr., Executive Vice President and Chief Operating Officer of Entergy and a director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas, adopted a Rule 10b5-1 trading arrangement that is intended to satisfy the affirmative defense of Rule 10b5-1(c) with respect to previously granted and fully vested options. Mr. Norgeot’s Rule 10b5-1 trading arrangement provides for up to 34,495 shares to be acquired by option exercise and subsequently sold until May 9, 2025 in accordance with the terms specified in the trading arrangement. The first date that any transactions under Mr. Norgeot’s Rule 10b5-1 trading arrangement can occur is August 8, 2024.
Regulation of the Nuclear Power Industry
The following is an update to the “Regulation of the Nuclear Power Industry” section of Part I, Item 1 of the Form 10-K.
NRC Reactor Oversight Process
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
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inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except Waterford 3. Entergy expects the NRC to determine that Waterford 3 entered Column 2, effective second quarter 2024, based on exceeding the threshold for reactor scrams in June 2024. Waterford 3 will remain in Column 2 until a supplemental inspection is satisfactorily completed.
Environmental Regulation
The following are updates to the “Environmental Regulation” section of Part I, Item 1 of the Form 10-K.
National Ambient Air Quality Standards
See the Form 10-K for discussion of the National Ambient Air Quality Standards (NAAQS) set by the EPA in accordance with the Clean Air Act. The following are updates to that discussion.
Revised Fine Particulate (PM2.5) NAAQS
In March 2024 the EPA issued a final rule which revised the primary annual NAAQS for fine particulate matter, also known as PM2.5, from 12 ug/m3 to 9 ug/m3. This new standard was 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 nonattainment requirements will be due within 18 months of the effective 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 excess of this new standard and monitors for several other areas reflect concentrations between 8-9 ug/m3. However, in May 2024 the EPA issued a retroactive data correction to eliminate a known bias in the ambient PM2.5 data generated by certain ambient PM2.5 monitors. Hinds County, Mississippi is expected to remain in attainment after this correction. Entergy will continue to work with state environmental agencies on appropriate methods for assessing attainment and nonattainment with this revised fine particulate NAAQS.
Hazardous Air Pollutants
As discussed in the Form 10-K, the EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which had a compliance date, with a widely granted one-year extension, of April 2016. The required controls have been installed and are operational at all affected Entergy units. In May 2024 the EPA issued a final rule revising portions of the MATS rule, including a reduction to the emission limit for filterable particulate matter. The revised standard will become effective July 2027 and could require additional capital investment and/or additional other operation and maintenance costs at Entergy’s coal-fired generating units. An additional one-year extension is possible for the installation of controls, if necessary. Entergy is currently evaluating its coal units to determine whether additional controls are necessary to comply with this new lower standard.
Good Neighbor Plan/Cross-State Air Pollution Rule
As discussed in the Form 10-K, in June 2023 the EPA published its final Federal Implementation Plan (FIP), known as the Good Neighbor Plan, to address interstate transport for the 2015 ozone NAAQS which would increase the stringency of the Cross-State Air Pollution Rule (CSAPR) program in all four of the states where the Utility operating companies operate. The FIP would significantly reduce ozone season NOx emission allowance
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budgets and allocations for electric generating units. Entergy is currently assessing its compliance options for the FIP. Prior to issuance of the FIP, in February 2023 the EPA issued related SIP disapprovals for many states, including the four states in which the Utility operating companies operate, and these SIP disapprovals are the subject of many legal challenges, including a petition for review filed by Entergy Louisiana challenging the disapproval of Louisiana’s SIP. Stays of the SIP disapprovals have been granted in all four states in which the Utility operating companies operate, and the FIP will not go into effect while the stays are in place. Decisions on the merits regarding the respective SIP disapprovals are expected in 2024. The FIP is also subject to numerous legal challenges in various federal circuit courts of appeals, and in June 2024 the U.S. Supreme Court issued an order, in challenges filed in the D.C. Circuit, staying enforcement of the FIP pending the D.C. Circuit Court’s review of the rule.
Greenhouse Gas Emissions
As discussed in the Form 10-K, in April 2021, President Biden announced a target for the United States in connection with the United Nations’ “Paris Agreement” on climate change. The target consists of a 50-52 percent reduction in economy-wide net greenhouse gas emissions from 2005 levels by 2030. President Biden has also stated that a goal of his administration is for the electric power industry to decarbonize fully by 2035.
Consistent with the Biden administration’s stated climate goals, in May 2024 the EPA finalized rules regulating greenhouse gas emissions from new combustion turbine electric generating units (EGUs) under Section 111(b) of the Clean Air Act and from certain existing coal- and gas-fired EGUs under Section 111(d) of the Clean Air Act.
For new gas combustion turbine EGUs, the final rule includes three subcategories of emission standards based on the unit’s annual capacity factor. Applicable emission standards for each subcategory are: a heat-input based CO2 emission standard for low load (<20% annual capacity factor) EGUs; an output-based CO2 efficiency standard for intermediate load (>20% but <40% annual capacity factor) EGUs; and, for base load (>40% annual capacity factor) EGUs, a Phase 1 output-based CO2 efficiency standard followed by a more stringent Phase 2 CO2 standard which will apply beginning January 1, 2032. The Phase 2 standard was established based on an EPA determination that carbon capture and sequestration (CCS) represents the best system of emission reduction (BSER) for new base load combustion turbine EGUs. The final rule allows for a possible one year extension to the compliance date for the Phase 2 standard in circumstances where a source faces a delay in installation of controls due to factors outside of the control of the EGU owner/operator.
For existing generating units, the final rule includes emission guidelines issued under Section 111(d) of the Clean Air Act and allows states two years to develop a plan to implement the new emission guidelines with respect to subject emission units within their state. The final emission guidelines require reductions in CO2 emissions from existing coal-fired generating units which plan to operate beyond January 1, 2032 and exempts coal-fired units which plan to permanently cease operations prior to this date. Due to Entergy’s commitment to cease burning coal by the end of 2030, Entergy’s coal-fired generating units are expected to be exempt from this aspect of the final rule. The emission guidelines also include CO2 efficiency standards for existing gas-fired steam EGUs. These emission standards will apply beginning January 1, 2030. Entergy’s existing gas-fired steam generating units are expected to meet these CO2 emission standards. The EPA did not finalize emission guidelines for existing gas turbine EGUs and has announced plans to conduct a subsequent rulemaking for such units.
In September 2020, Entergy announced a commitment to achieve net-zero greenhouse gas emissions by 2050 inclusive of all businesses, all applicable gases, and all emission scopes. In 2022, Entergy enhanced its commitment to include an interim goal of 50% carbon-free energy generating capacity by 2030 and expanded its interim emission rate goal to include all purchased power. Due to stronger than initially expected sales growth, likely necessitating the development of new generation capacity that is not carbon-free, Entergy expects that achievement of the 50% carbon-free energy generating capacity goal will be delayed for a period beyond 2030 that has not been determined. In addition, while current planning assumptions indicate the 2030 emission rate goal remains achievable, its achievement could also be challenged as a result of the forecasted sales growth. See “Risk
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Factors” in Part I, Item 1A of the Form 10-K for discussion of the risks associated with achieving these climate goals.
Coal Combustion Residuals
As discussed in the Form 10-K, in April 2015 the EPA published the final coal combustion residuals (CCR) rule regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes regulated under Resource Conservation and Recovery Act Subtitle D.
Pursuant to the 2015 CCR rule, Entergy operates groundwater monitoring systems surrounding its CCR landfills located at White Bluff, Independence, and Nelson. In May 2024 the EPA finalized a rule establishing management standards for legacy CCR surface impoundments (i.e., inactive surface impoundments at inactive power plants) and establishing a new class of units referred to as CCR management units (CCRMUs) (i.e., non-containerized CCR located at a regulated CCR facility). CCR utilized in roadbeds and embankments is excluded from the CCRMU definition. Entergy does not have any legacy impoundments; however, the definition of CCR management units includes on-site areas where CCR was beneficially used. This is contrary to the 2015 CCR rule which exempted beneficial uses that met certain criteria. Under this expanded rule, all facilities must identify and delineate any CCRMU greater than one ton and submit a facility evaluation report by February 2026. Any potential requirements for corrective action or operational changes under the various CCR rules continue to be assessed. Notably, ongoing litigation has resulted in the EPA’s continuing review of the rules. Consequently, the nature and cost of additional corrective action requirements may depend, in part, on the outcome of the litigation and further EPA review. Given the complexity and recency of the EPA guidance, Entergy is still evaluating the level of work that will ultimately be required to comply with the rule. Based on initial estimates of multiple possible remediation scenarios, Entergy recorded a $42 million increase in its decommissioning cost liabilities for White Bluff and Independence, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining useful lives of the unit. Entergy will continue to update the asset retirement obligation as the requirements of the 2024 CCR rule are clarified. As of June 30, 2024, Entergy has recorded asset retirement obligations related to CCR management of $71 million. Additionally, all three sites (White Bluff, Independence, and Nelson) are preparing to implement measures to meet the new and updated Effluent Limitation Guidelines discussed below.
Effluent Limitation Guidelines
The 2015 Steam Electric Effluent Limitations Guidelines required, among other things, that there be no discharge of bottom ash transport water. In 2020 the EPA finalized the Reconsideration Rule, allowing limited discharges of bottom ash transport water up to 10% of system volume, under certain defined circumstances including significant (10-year, 24-hour) rain events. The 2020 rule also created a subcategory for units that permanently cease coal combustion by December 31, 2028. Entergy’s White Bluff facility filed a notice of planned participation for this subcategory in October 2021. In May 2024 the EPA finalized a supplemental rule that retains the “retirement by 2028” subcategory, creates a new “retirement by 2034” subcategory, otherwise reinstates the zero-discharge requirement for bottom ash transport water, and imposes new requirements for leachate after the facility ceases to burn coal. Thus, units which permanently cease combustion of coal by December 31, 2028 or December 31, 2034 are exempt from the zero-discharge requirement. However, for units in the 2034 subcategory, the 10% discharge allowance must be incorporated into the facility’s discharge permit. To be covered by this exemption, both Independence and Nelson Unit 6 will need to file Notices of Planned Participation in the 2034 subcategory by December 31, 2025. To help ensure facilities cease combustion of coal by the required subcategory 2028 and 2034 dates, zero discharge of bottom ash transport water is required after April 30, 2029 and April 30, 2035, respectively. Entergy continues to evaluate the compliance pathways and obligations of this rule.
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Item 6. Exhibits
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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. | |||||||
| *101 SCH - | Inline XBRL Schema 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. | ||||
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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: August 2, 2024
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