(1)	Parent & Other includes eliminations, which are primarily intersegment activity.

 

 

 

 

Refer to " ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS " for further information with respect to operating statistics.

The retail electric price variance is primarily due to:

·	a base rate increase at Entergy Arkansas effective July 2010;

·	rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and

·	formula rate plan increases at Entergy Louisiana effective September 2010 and May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K and herein for further discussion of these proceedings.

The volume/weather variance is primarily due to an increase of 730 GWh in billed electricity usage in all sectors, including the effect of more favorable weather on the residential and commercial sectors.  Industrial sales growth leveled off somewhat after significant growth since the beginning of 2010.  Entergy’s service territory continues to benefit from expansions, while there has been some pullback in the paper and wood segments and small industrials.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $56 million, or 11%, in the second quarter 2011 compared to the second quarter 2010 primarily due to lower pricing in its contracts to sell power.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the second quarter 2011 and 2010:

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 10,652 GWh in the second quarter 2011 and 10,498 GWh in the second quarter 2010, with average realized revenue per MWh of $52.32 in the second quarter 2011 and $58.15 in the second quarter 2010.

Realized Price per MWh

See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $59.16 in 2010 from $61.07 for 2009.  Entergy Wholesale Commodities’ nuclear business is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 96% of its planned nuclear energy output for the remainder of 2011 for an average contracted energy price of $54 per MWh.  In addition, Entergy Wholesale Commodities has sold forward 87% of its planned nuclear energy output for 2012 for an average contracted energy price of $49 per MWh.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $471 million for the second quarter 2010 to $485 million for the second quarter 2011 primarily due to:

·	an increase of $13 million in nuclear expenses primarily due to higher labor costs;

·	an increase of $5 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services;

·	an increase of $4 million in legal expenses due to the deferral in 2010 of certain litigation expenses in accordance with regulatory treatment; and

·	an increase of $3 million due to the deferral in 2010 of 2009 Entergy Arkansas rate case expenses.

These increases were partially offset by a decrease of $11 million in fossil expenses resulting from a greater number and scope of outages in second quarter 2010 compared to second quarter 2011.

Other income increased due to:

·

an increase in distributions of $6 million earned by Entergy Louisiana and $3 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy’s net income because the investment is in another Entergy subsidiary.  See Note 2 to the financial statements in the Form 10-K for discussion of these investments in preferred membership interests; and

·	an increase of $5 million in realized earnings on decommissioning trust fund investments.

These increases were partially offset by a decrease due to $8 million in carrying charges on storm restoration costs recorded in the second quarter 2010.

Interest expense decreased primarily due to the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies.  Also contributing to the decrease was interest expense accrued in 2010 related to the expected result of the LPSC staff audit of the fuel adjustment clause for the period 1995 through 2004.

Entergy Wholesale Commodities

           Other operation and maintenance expenses decreased from $250 million for the second quarter 2010 to $231 million for the second quarter 2011 primarily due to:

·	a decrease in costs related to spin-off dis-synergies;

·	a decrease of $7 million due to the absence of expenses from the Harrison County plant, which was sold in December 2010; and

·	a decrease in spending on tritium remediation work.

Parent & Other

The increase in other operation and maintenance expenses is primarily due to activity, which eliminates in consolidation, between the parent company and the two reportable business segments.

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.

Income Taxes

The effective income tax rates for the second quarters 2011 and 2010 were 32% and 38.9%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the second quarter 2011 is primarily due to a settlement regarding an issue which had previously been considered an uncertain tax position.  These factors were partially offset by a Michigan tax law change that repealed the business tax and enacted a corporate income tax, which eliminates a deduction that was available under the business tax; state income taxes; and certain book and tax differences for Utility plant items.   The difference in the effective income tax rate versus the statutory rate of 35% for the second quarter 2010 was primarily due to state income taxes and certain book and tax differences for Utility plant items.

(1)	Parent & Other includes eliminations, which are primarily intersegment activity.

 

Refer to “ ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS ” for further information with respect to operating statistics.

The retail electric price variance is primarily due to:

·	a base rate increase at Entergy Arkansas effective July 2010;

·	rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and

·	formula rate plan increases at Entergy Louisiana effective September 2010 and May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K for further discussion of these proceedings.

The volume/weather variance is primarily due to an increase of 1,202 GWh in weather-adjusted usage across all sectors.  Weather-adjusted residential retail sales growth reflected an increase in the number of customers.  Industrial sales have realized sustained growth since the beginning of 2010 and the first half of 2011 continued the trend.  Entergy’s service territory has benefitted from the national manufacturing economy as well as industrial facility expansions.  Industrial customers in Entergy’s service territory also have benefitted from the need to re-stock inventory and export trends.  The weather effect declined, despite the experience of favorable weather in the first half of 2011, primarily because the near-record-setting cold weather experienced in the first quarter 2010 was even more favorable.

The net gas revenue variance is primarily due to milder weather as compared to last year.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $96 million, or 9%, in the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily due to lower pricing in its contracts to sell power and lower volume resulting from an increase in forced outages for Entergy Wholesale Commodities’ nuclear fleet in 2011.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the six months ended June 30, 2011 and 2010:

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 21,171 GWh in the six months ended June 30, 2011 and 21,626 GWh in the six months ended June 30, 2010, with average realized revenue per MWh of $54.64 in the six months ended June 30, 2011 and $58.23 in the six months ended June 30, 2010.  See also the discussion in “ Realized Price per MWh ” in the Second Quarter 2011 Compared to Second Quarter 2010 section.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $906 million for the six months ended June 30, 2010 to $933 million for the six months ended June 30, 2011 primarily due to:

·	an increase of $17 million in nuclear expenses primarily due to higher labor and benefits costs;

·	an increase of $8 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services;

·	an increase of $6 million in transmission and distribution expenses primarily due to vegetation and maintenance expenses; and

·	several individually insignificant items.

 

These increases were partially offset by a decrease of $18 million in fossil expenses resulting from more outages in the first half of 2010 and an increase of $6 million in nuclear insurance refunds received in 2011 as compared to the same period in 2010.

Other income increased due to an increase in distributions of $12 million earned by Entergy Louisiana and $7 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company.  The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy’s net income because the investment is in another Entergy subsidiary.  See Note 2 to the financial statements in the Form 10-K for discussion of these investments in preferred membership interests.  This was partially offset by a decrease due to $8 million in carrying charges on storm restoration costs recorded in the second quarter 2010.

Interest expense decreased primarily due to the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies.  Also contributing to the decrease was interest expense accrued in 2010 related to the expected result of the LPSC staff audit of Entergy Gulf States Louisiana’s fuel adjustment clause for the period 1995 through 2004.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $510 million for the six months ended June 30, 2010 to $440 million for the six months ended June 30, 2011 primarily due to:

·	the write-off of $32 million of capital costs in first quarter 2010, primarily for software that will not be utilized, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business;

·	a decrease of $13 million due to the absence of expenses from the Harrison County plant which was sold in December 2010;

·	a decrease in spending on tritium remediation work; and

·	several other individually insignificant factors.

Other income decreased primarily due to a decrease in interest income earned on loans to the parent company, Entergy Corporation, and a decrease of $9 million in realized earnings on decommissioning trust fund investments.

Interest expense decreased primarily due to the write-off of $37 million of debt financing costs in the first quarter 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.

Parent & Other

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.

 

Income Taxes

           The effective income tax rates for the six months ended June 30, 2011 and 2010 were 35.4% and 39.5%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2011 is primarily due to a settlement regarding an issue which had previously been considered an uncertain tax position.  This was partially offset by:

·	a Michigan tax law change that repealed the business tax and enacted a corporate income tax, which eliminates a deduction that was available under the business tax;

·	state income taxes; and

·	certain book and tax differences for Utility plant items.

 

The difference in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2010 was primarily due to:

·

a charge of $16 million recorded in first quarter 2010 resulting from a change in tax law associated with the federal healthcare legislation enacted in March 2010.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K for a discussion of the federal healthcare legislation; and

·	state income taxes; and

·	certain book and tax differences for Utility plant items.

These factors were partially offset by:

·	a $19 million tax benefit recorded first quarter 2010 in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and

·	book and tax differences related to the allowance for equity funds used during construction.

Liquidity and Capital Resources

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources " in the Form 10-K for a discussion of Entergy’s capital structure, capital expenditure plans and other uses of capital, and sources of capital.  Following are updates to that discussion.

(1)	Calculation excludes the Arkansas and Texas securitization bonds, which are non-recourse to Entergy Arkansas and Entergy Texas, respectively.

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents. Entergy uses the 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’s financial condition.

 

As discussed in the Form 10-K, Entergy Corporation has in place a revolving credit facility that expires in August 2012.  Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of the facility.  As of June 30, 2011, the capacity and amounts outstanding under the credit facility are:

 

Entergy Corporation’s credit facility requires it to maintain a consolidated debt ratio 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 this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’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.

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," that sets forth the amounts of planned construction and other capital investments by operating segment for 2011 through 2013.  Following are updates to the discussion in the Form 10-K.

Acadia Unit 2 Purchase Agreement

See the Form 10-K for a discussion of the agreement Entergy Louisiana signed to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer.  Entergy Louisiana acquired the plant on April 29, 2011.

Summer 2009 Long-Term Request for Proposal

As discussed in the Form 10-K, the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal were included in the 2011-2013 capital expenditure estimates in the Form 10-K.  In addition to the self-build option at Entergy Louisiana’s Ninemile site noted in the Form 10-K, in April 2011 two Entergy Utility operating companies announced that they have signed agreements to acquire the other two resources, the 620 MW Hot Spring Energy Facility and the 450 MW Hinds Energy Facility.

Ninemile Point Unit 6 Self-Build Project

In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  Ninemile 6 will be a nominally-sized 550 MW unit that is estimated to cost approximately $721 million to construct, excluding interconnection and transmission upgrades.  Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35% of the capacity and energy generated by Ninemile 6.  The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Entergy New Orleans has filed a request with the City Council to approve its purchase under a life-of-unit power purchase agreement of this capacity and energy.  If the City Council does not approve this power purchase agreement in a timely manner, then an allocation of 65% to Entergy Louisiana and 35% to Entergy Gulf States Louisiana is proposed.  If approvals are obtained from the LPSC and other permitting agencies, Ninemile 6 construction is expected to begin in 2012, and the unit is expected to commence commercial operation by mid-2015.

 

Hot Spring Energy Facility Purchase Agreement

In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $253 million.  Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million.  A transmission study estimates that the acquisition could require investment for supplemental upgrades in the Entergy transmission system, but there are still uncertainties associated with the results of this study that must be resolved.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Arkansas filed its application with the APSC requesting approval of the acquisition and full cost recovery.

 

Hinds Energy Facility Purchase Agreement

In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $206 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million.  A transmission study estimates that the acquisition could require investment for supplemental upgrades in the Entergy transmission system, but there are still uncertainties associated with the results of this study that must be resolved.   The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery.

Waterford 3 Steam Generator Replacement Project

See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project.  With regard to the delay in the delivery of the steam generators, Entergy Louisiana worked with the manufacturer to fully develop and evaluate repair options, and expects the replacement steam generators to be delivered in time for the Fall 2012 refueling outage.  Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011.  The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators.  Entergy Louisiana is required to report formally its findings to the NRC through a report made 180 days after plant start up.  At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated.  Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.

Entergy Louisiana’s existing formula rate plan provides for rate treatment of the Waterford 3 project costs, including in-service rate recovery without regulatory lag and treatment outside of the formula rate plan earnings sharing formula; however, these provisions contemplated the project being placed in service during the term of the current formula rate plan and will not apply at the time of the expected in-service date in the Fall 2012.  Entergy Louisiana will seek to reestablish comparable rate recovery provisions for the project through renewal or extension of the current formula rate plan provisions or through a base rate filing.

 

Dividends and Stock Repurchases

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 Entergy’s earnings, financial strength, and future investment opportunities.  At its January, April, and July 2011 meetings, the Board declared dividends of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.

 

Operating Activities

Entergy's cash flow provided by operating activities decreased by $491 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010, primarily due to a decrease in deferred fuel cost collections and an increase of $163 million in pension contributions.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.  A $42 million increase in incentive compensation payments, which occur in the first quarter, and the decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed to the decrease, as well as several other individually insignificant factors.

Investing Activities

Net cash used in investing activities increased by $654 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily due to:

·	the purchase of the Acadia Power Plant by Entergy Louisiana for approximately $300 million in April 2011;

·	an increase in nuclear fuel purchases, as more plants were preparing for refueling outages in the spring 2011 than in the spring 2010;

·

a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line, as Entergy received net deposits from Entergy Wholesale Commodities’ counterparties during 2010 and made net collateral deposits in 2011.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the Market and Credit Risk Sensitive Instruments section below; and

 

 

·

an increase in construction expenditures, primarily in the Utility business.  Entergy’s construction spending plans for 2011 through 2013 are discussed in the Form 10-K.  April 2011 storms that caused damage to transmission and distribution lines, equipment, poles, and other facilities, primarily in Arkansas, also contributed to the increase.  The estimated capital cost of repairing that damage is approximately $55 million.

 

Financing Activities

Financing activities provided $86 million of cash for the six months ended June 30, 2011 compared to using $670 million of cash for the six months ended June 30, 2010 primarily because long-term debt activity provided approximately $519 million of cash in 2011 and used approximately $249 million of cash in 2010. For details of Entergy's long-term debt activity in 2011 see Note 4 to the financial statements herein.  Offsetting these increases in sources of cash, Entergy repurchased $160 million of its common stock in the six months ended June 30, 2011 and repurchased $138 million of its common stock in the six months ended June 30, 2010.  Entergy’s share repurchase programs are discussed in the Form 10-K.

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 the Form 10-K for a discussion of federal regulatory proceedings.  Following are updates to that discussion .

System Agreement and Independent Coordinator of Transmission (ICT)

As discussed in the Form 10-K, in November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures.  In addition, in December 2010 the FERC issued an order that granted the Entergy Regional State Committee (E-RSC) additional authority over transmission upgrades and cost allocation.  The E-RSC, comprised of one representative from each of the Utility operating company retail regulators, was formed in 2009 to consider several of the issues related to the Entergy transmission system.  The Utility operating companies expect that the E-RSC will review the cost-benefit analysis, discussed below, that the Utility operating companies submitted in May 2011 to each of their respective retail regulators comparing the ICT arrangement to joining the SPP RTO or the Midwest Independent Transmission System Operator (MISO).

Also as discussed in the Form 10-K, in February 2010 the APSC issued a show cause order opening an inquiry to conduct an investigation regarding the prudence of Entergy Arkansas’s entering a successor pooling agreement with the other Entergy Utility operating companies, as opposed to becoming a standalone entity upon exit from the System Agreement in December 2013, and whether Entergy Arkansas, as a standalone utility, should join the SPP RTO.  The APSC subsequently added evaluation of Entergy Arkansas joining MISO on a standalone basis as an alternative to be considered.  In August 2010, the APSC directed Entergy Arkansas and all parties to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of MISO.

On April 25, 2011, Entergy announced that each of the Utility operating companies propose joining MISO, which is expected to provide long-term benefits for the customers of each of the Utility operating companies.  MISO is a regional transmission organization that operates in 13 U.S. states (Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, Ohio, Pennsylvania, South Dakota, and Wisconsin) and also in Canada.  The Utility operating companies provided analysis in May 2011 to their retail regulators supporting this decision.  The APSC has requested additional information from both Entergy and MISO.  The APSC’s procedural schedule for the proceeding includes an evidentiary hearing scheduled for September 7, 2011.  Entergy’s May 2011 filings estimate that the expected transition and implementation costs of joining MISO are approximately $105 million if all of the Utility operating companies join MISO, most of which will be spent in late 2012 and 2013.  Maintaining the viability of the alternatives of Entergy Arkansas joining MISO alone or standing alone within an ICT arrangement is expected to result in an additional cost of approximately $35 million, for a total cost of approximately $140 million.  This amount could increase with extended litigation in various regulatory proceedings.  It is expected that costs will be incurred to obtain regulatory approvals, to revise or implement commercial and legal agreements, to integrate transmission and generation facilities, to develop back-office accounting and settlement systems, and to build out communications infrastructure.  The Utility operating companies also expect to make filings later in 2011 with their retail regulators regarding the transfer of control of their transmission assets to MISO.  The target implementation date for joining MISO is December 2013.

In June 2011, MISO filed with the FERC a request for a transitional waiver of provisions of its open access transmission energy and operating reserve markets tariff regarding allocation of transmission network upgrade costs, in order to establish a transition for the integration of the Utility operating companies.  Several parties have intervened in the proceeding, including Entergy, the APSC, the LPSC, and the City Council, and some of the parties have also filed comments or protests.  A procedural schedule has not been established.

(1)

A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.

 

 

 

 

 

 

 

 

 

 

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)
		Three Months Ended								Six Months Ended
		2011				2010				2011				2010
		(In Thousands, Except Share Data)
OPERATING REVENUES
Electric		$	2,212,038			$	2,214,108			$	4,077,936			$	4,221,038
Natural gas			28,891				31,136				100,014				127,163
Competitive businesses			562,350				617,706				1,166,538				1,274,095
TOTAL			2,803,279				2,862,950				5,344,488				5,622,296
OPERATING EXPENSES
Operating and Maintenance:
Fuel, fuel-related expenses, and
gas purchased for resale			563,333				631,546				1,071,026				1,190,214
Purchased power			451,227				416,458				813,845				891,361
Nuclear refueling outage expenses			62,966				64,221				126,951				126,510
Other operation and maintenance			712,496				700,204				1,368,245				1,402,692
Decommissioning			55,497				52,467				110,762				104,043
Taxes other than income taxes			129,215				126,968				254,449				262,380
Depreciation and amortization			264,206				255,567				529,090				524,771
Other regulatory charges (credits) - net			5,601				(10,722	)			491				17,370
TOTAL			2,244,541				2,236,709				4,274,859				4,519,341
OPERATING INCOME			558,738				626,241				1,069,629				1,102,955
OTHER INCOME
Allowance for equity funds used during construction			20,753				17,630				38,042				30,926
Interest and investment income			35,921				34,955				62,668				83,164
Miscellaneous - net			(16,962	)			(16,780	)			(26,360	)			(17,302	)
TOTAL			39,712				35,805				74,350				96,788
INTEREST EXPENSE
Interest expense			136,049				148,179				272,183				327,379
Allowance for borrowed funds used during construction			(9,150	)			(10,323	)			(17,684	)			(18,325	)
TOTAL			126,899				137,856				254,499				309,054
INCOME BEFORE INCOME TAXES			471,551				524,190				889,480				890,689
Income taxes			150,953				203,907				315,203				351,592
CONSOLIDATED NET INCOME			320,598				320,283				574,277				539,097
Preferred dividend requirements of subsidiaries			5,015				5,017				10,031				10,033
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION		$	315,583			$	315,266			$	564,246			$	529,064
Earnings per average common share:
Basic		$	1.77			$	1.67			$	3.16			$	2.80
Diluted		$	1.76			$	1.65			$	3.14			$	2.77
Dividends declared per common share		$	0.83			$	0.83			$	1.66			$	1.58
Basic average number of common shares outstanding			177,808,890				188,776,240				178,318,784				188,988,284
Diluted average number of common shares outstanding			178,925,180				190,717,958				179,502,551				190,999,699
See Notes to Financial Statements.