__________________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
 
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the Quarterly Period Ended June 30, 2013
 
                                       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
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
         
         
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
 
0-05807
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
         
         
0-20371
ENTERGY GULF STATES LOUISIANA, L.L.C.
(a Louisiana limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
74-0662730
 
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 981-2000
61-1435798
         
         
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
75-3206126
 
1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
         

__________________________________________________________________________________________


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 þ No o

Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 
Large
accelerated
filer
 
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
Entergy Corporation
Ö
           
Entergy Arkansas, Inc.
       
Ö
   
Entergy Gulf States Louisiana, L.L.C.
       
Ö
   
Entergy Louisiana, LLC
       
Ö
   
Entergy Mississippi, Inc.
       
Ö
   
Entergy New Orleans, Inc.
       
Ö
   
Entergy Texas, Inc.
       
Ö
   
System Energy Resources, Inc.
       
Ö
   

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No þ

Common Stock Outstanding
 
Outstanding at July 31, 2013
Entergy Corporation
($0.01 par value)
178,282,400

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2012 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2013

 
Page Number
   
iii
v
Entergy Corporation and Subsidiaries
 
1
24
25
26
28
30
31
32
84
Entergy Arkansas, Inc. and Subsidiaries
 
85
95
97
98
100
101
Entergy Gulf States Louisiana, L.L.C.
 
102
111
112
113
114
116
117
Entergy Louisiana, LLC and Subsidiaries
 
118
127
128
129
130
132
133
Entergy Mississippi, Inc.
 
134
140
141
142
144
145


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2013

 
Page Number
   
Entergy New Orleans, Inc.
 
146
151
153
154
156
157
Entergy Texas, Inc. and Subsidiaries
 
158
164
165
166
168
169
System Energy Resources, Inc.
 
170
173
175
176
178
 
179
179
179
182
186




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, 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,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake 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 those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) 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 negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
·  
the termination of Entergy Arkansas’s and Entergy Mississippi’s participation in the System Agreement in December 2013 and November 2015, respectively, and the potential for other Entergy operating companies to terminate participation in the System Agreement by providing notice pursuant to the current 96-month notice period and/or by seeking an amendment to the System Agreement that would allow for an Entergy operating company to terminate its participation in less than 96 months;
·  
regulatory and operating challenges and uncertainties associated with the Utility operating companies’ proposal to move to the MISO RTO;
·  
risks associated with the proposed spin-off and subsequent merger of Entergy’s electric transmission business into a subsidiary of ITC Holdings Corp., including the risk that Entergy and the Utility operating companies may not be able to timely satisfy the conditions or obtain the approvals required to complete such transaction or such approvals may contain material restrictions or conditions, and the risk that if completed, the transaction may not achieve its anticipated results;
·  
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC;
·  
changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those owned or operated by the Entergy Wholesale Commodities business, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
·  
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications of nuclear generating facilities;
·  
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at 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;
·  
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward, or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;


FORWARD-LOOKING INFORMATION (Concluded)

·  
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
·  
volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities;
·  
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, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, greenhouse gases, mercury, and other regulated air emissions, and changes in costs of compliance with environmental and other laws and regulations;
·  
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal;
·  
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
·  
effects of climate change;
·  
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 and operation and maintenance costs;
·  
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 the Northeast United States and events that could influence economic conditions in those areas;
·  
the effects of Entergy’s strategies to reduce tax payments;
·  
changes in the financial markets, particularly those affecting the availability of capital and Entergy’s ability to refinance existing debt, execute share repurchase programs, 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;
·  
the effect of litigation and government investigations or proceedings;
·  
advances in technology;
·  
the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, including increased security costs, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
·  
Entergy’s ability to attract and retain talented management and directors;
·  
changes in accounting standards and corporate governance;
·  
declines in the market prices of marketable securities and resulting funding requirements for Entergy’s defined benefit pension and other postretirement benefit plans;
·  
future wage and employee benefit 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 or cost to decommission nuclear plant sites;
·  
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;
·  
factors that could lead to impairment of long-lived assets; and
·  
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture.


DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
 
Abbreviation or Acronym
 
 
Term
AFUDC
Allowance for Funds Used During Construction
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
ASLB
Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council or Council
Council of the City of New Orleans, Louisiana
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a 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.
Entergy Texas
Entergy Texas, Inc., a company 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 (EWC)
Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers
 
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2012 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service
ISO
Independent System Operator


DEFINITIONS (Concluded)

Abbreviation or Acronym
 
Term
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
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)
Net debt to net capital ratio
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
SMEPA
South Mississippi Electric Power Association, which owns a 10% interest in Grand Gulf
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
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by 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 business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather






ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.

·  
The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.  As discussed in more detail in “ Plan to Spin Off the Utility’s Transmission Business ,” herein and in the Form 10-K, in December 2011, Entergy entered into an agreement to spin off its transmission business and merge it with a newly-formed subsidiary of ITC Holdings Corp.
·  
The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  This business also provides services to other nuclear power plant owners.  Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Results of Operations

Second Quarter 2013 Compared to Second Quarter 2012

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 2013 to the second quarter 2012 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
 
Entergy
Wholesale
Commodities
 
 
Parent &
Other (a)
 
 
 
Entergy
   
(In Thousands)
                 
2nd Quarter 2012 Consolidated Net Income (Loss)
 
$308,525 
 
$70,759 
 
($8,701)
 
$370,583 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
 
 
 
219,043 
 
 
 
(61,192)
 
 
 
2,618 
 
 
 
160,469 
Other operation and maintenance expenses
 
65,119 
 
3,890 
 
2,305 
 
71,314 
Taxes other than income taxes
 
7,095 
 
(307)
 
(11)
 
6,777 
Depreciation and amortization
 
20,634 
 
2,233 
 
(106)
 
22,761 
Other income
 
4,133 
 
(4,212)
 
(819)
 
(898)
Interest expense
 
9,989 
 
(1,700)
 
1,555 
 
9,844 
Other expenses
 
4,922 
 
51,167 
 
- 
 
56,089 
Income taxes
 
223,387 
 
(61,459)
 
33,386 
 
195,314 
                 
2nd Quarter 2013 Consolidated Net Income (Loss)
 
$200,555 
 
$11,531 
 
($44,031)
 
$168,055 

(a)
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.

In the fourth quarter 2012, Entergy moved two subsidiaries from Parent & Other to the Entergy Wholesale Commodities segment to improve the alignment of certain intercompany items and income tax activity.  The prior period financial information in this Form 10-Q has been restated to reflect this change.
 

 
1
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


 
Net income for Utility in the second quarter 2012 was significantly affected by a settlement with the IRS related to the income tax treatment of the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs, which resulted in a reduction in income tax expense.  The net income effect was partially offset by a regulatory charge, which reduced net revenue in 2012, associated with the storm costs settlement to reflect the obligation to customers with respect to the settlement.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

  
 
Amount
  
 
(In Millions)
     
2012 net revenue
 
$1,152 
Louisiana Act 55 financing savings obligation
 
167 
Retail electric price
 
58 
Grand Gulf recovery
 
33 
Volume/weather
 
(38)
Other
 
(1)
2013 net revenue
 
$1,371 

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2012 because Entergy Gulf States Louisiana and Entergy Louisiana are sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to:

·  
the recovery of Hinds plant costs through the power management rider at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of 2013.  The net income effect of the Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
·  
a formula rate plan increase at Entergy Louisiana, effective January 2013, which includes an increase relating to the Waterford 3 steam generator replacement project, which was placed in service in December 2012.  The net income effect of the formula rate plan increase is limited to a portion representing an allowed return on equity with the remainder offset by costs included in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
·  
an increase in the capacity acquisition rider at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of December 2012, relating to the Hot Spring plant acquisition.  The net income effect of the Hot Spring plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hot Spring plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
·  
an annual base rate increase at Entergy Texas, effective July 2012, as a result of the PUCT’s order in the December 2011 rate case that was issued in September 2012; and
·  
an increase in the energy efficiency rider, as approved by the APSC, effective July 2012.  Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have no effect on net income.

See Note 2 to the financial statements herein and in the Form 10-K for a discussion of rate proceedings.
 
 
2
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

           The Grand Gulf recovery variance is primarily due to increased recovery of higher costs resulting from the Grand Gulf uprate.

The volume/weather variance is primarily due to decreased electricity usage in the second quarter 2013 compared to the same period in the prior year, including the effect of less favorable weather on residential and commercial sales.  Billed electricity usage decreased a total of 1,100 GWh, or 4%, across all customer classes.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

  
 
Amount
  
 
(In Millions)
     
2012 net revenue
 
$444 
Nuclear volume
 
(31)
Nuclear realized price changes
 
(7)
Other
 
(23)
2013 net revenue
 
$383 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $61 million in the second quarter 2013 compared to the second quarter 2012 primarily due to:

·  
lower volume in its nuclear fleet resulting from more unplanned and refueling outage days in 2013 compared to the same period in 2012 and the exercise of resupply options provided for in purchase power agreements whereby Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running;
·  
the effect of lower power prices on electricity derivative instruments that are not designated as hedges, included in Other in the table above.  See Note 8 to the financial statements herein for discussion of derivative instruments; and
·  
lower energy prices, partially offset by higher capacity prices.

Following are key performance measures for Entergy Wholesale Commodities for the second quarter 2013 and 2012:

   
2013
 
2012
         
Owned capacity
 
6,612
 
6,612
GWh billed
 
11,172
 
11,674
Average realized revenue per MWh
 
$47.36
 
$48.27
         
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor
 
82%
 
85%
GWh billed
 
9,789
 
10,426
Average realized revenue per MWh
 
$46.40
 
$48.67
Refueling Outage Days:
       
Indian Point 2
 
-
 
1
Palisades
 
-
 
34
Pilgrim
 
45
 
-
Vermont Yankee
 
5
 
-

 
3
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

 
Realized Revenue per MWh Trend for Entergy Wholesale Commodities Nuclear Plants

The economic downturn and negative trends in the energy commodity markets have resulted over the past few years in lower natural gas prices and lower market prices for electricity in the New York and New England power regions, which is where five of the six Entergy Wholesale Commodities nuclear power plants are located.  Entergy Wholesale Commodities’s nuclear business experienced a decrease in realized price per MWh to $50.29 in 2012 from $54.73 in 2011 and $59.16 in 2010.  As shown in the contracted sale of energy table in “ Market and Credit Risk Sensitive Instruments ,” Entergy Wholesale Commodities has sold forward 83% of its planned nuclear energy output for the remainder of 2013 for an expected average contracted energy price of $46 per MWh based on market prices at June 30, 2013.  In addition, Entergy Wholesale Commodities has sold forward 77% of its planned nuclear energy output for 2014 for an expected average contracted energy price of $46 per MWh based on market prices at June 30, 2013.  These near-term price trends present a challenging economic situation for the Entergy Wholesale Commodities plants.  The challenge is greater for some of these plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the investment required to maintain the safety and integrity of the plants.  If, in the future, economic conditions or regulatory activity no longer support the continued operation of a plant by Entergy it could adversely affect Entergy’s results of operations through impairment charges, increased depreciation rates, transitional costs, or accelerated decommissioning costs.  Impairment of long-lived assets and nuclear decommissioning costs, and the factors that influence these items, are both discussed in detail in the Form 10-K in “ Critical Accounting Estimates .”  See also the discussion below in “ Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants ” regarding Entergy Wholesale Commodities nuclear plant operating license and related activity.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $522 million for the second quarter 2012 to $587 million for the second quarter 2013 primarily due to:

·  
an increase of $22 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done during plant outages as compared to the prior year.  Also contributing to the increase are the acquisitions of the Hot Spring plant by Entergy Arkansas and the Hinds plant by Entergy Mississippi in November 2012.  Costs related to the Hot Spring and Hinds plants are recovered through the capacity acquisition rider and power management rider, respectively, as previously discussed;
·  
an increase of $14 million resulting from costs related to the generator stator incident at ANO, including an offset for expected insurance proceeds.  See “ ANO Damage and Outage ” below for further discussion of the incident;
·  
the prior year deferral, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced 2012 expenses by $12 million; and
·  
an increase of $9 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Hot Spring and Hinds plant acquisitions in 2012 and the completion of the Waterford 3 steam generator replacement project and the Grand Gulf uprate project in 2012.  Also contributing to the increase is an increase in depreciation rates as a result of the rate order approved by the PUCT in September 2012.

Interest expense increased primarily due to net debt issuances by certain of the Utility operating companies.


 
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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Entergy Wholesale Commodities

           Other expenses increased primarily due to a credit to decommissioning expense of $49 million in the second quarter 2012 resulting from a reduction in the decommissioning cost liability for a plant as a result of a revised decommissioning cost study.  See “ Critical Accounting Estimates – Nuclear Decommissioning Costs ” in the Form 10-K for further discussion.

Income Taxes

The effective income tax rate was 30.3% for the second quarter 2013.  The difference in the effective income tax rate for the second quarter 2013 versus the statutory rate of 35% was primarily due to lower state income taxes resulting from a state deferred tax adjustment.  Also contributing to the lower rate were book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items.
 
The effective income tax rate was (49.2%) for the second quarter 2012. The difference in the effective income tax rate versus the statutory rate of 35% for the second quarter 2012 was related to (1) an IRS settlement on how to treat the Louisiana Act 55 Financing of the Hurricane Katrina and Hurricane Rita storm costs, as discussed further in Note 3 to the financial statements in the Form 10-K; and (2) a unanimous court decision from the U.S. Court of Appeals for the Fifth Circuit affirming an earlier decision of the U.S. Tax Court holding that Entergy was entitled to claim a credit against its U.S. tax liability for the U.K. windfall tax that it paid, both of which enabled Entergy to reverse provisions for uncertain tax positions.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2013 to the six months ended June 30, 2012 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
 
Entergy
Wholesale
Commodities
 
 
Parent &
Other (a)
 
 
 
Entergy
   
(In Thousands)
                 
2012 Consolidated Net Income (Loss)
 
$375,738 
 
($105,192)
 
($46,702)
 
$223,844 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
 
 
 
336,688 
 
 
 
(19,765)
 
 
 
4,169 
 
 
 
321,092 
Other operation and maintenance expenses
 
94,651 
 
2,494 
 
6,791 
 
103,936 
Asset impairment
 
- 
 
(355,524)
 
- 
 
(355,524)
Taxes other than income taxes
 
18,059 
 
2,672 
 
(28)
 
20,703 
Depreciation and amortization
 
43,078 
 
403 
 
(60)
 
43,421 
Other income
 
(8,121)
 
(3,040)
 
388 
 
(10,773)
Interest expense
 
16,779 
 
(4,839)
 
8,512 
 
20,452 
Other expenses
 
8,592 
 
45,534 
 
- 
 
54,126 
Income taxes
 
194,755 
 
87,617 
 
29,639 
 
312,011 
                 
2013 Consolidated Net Income (Loss)
 
$328,391 
 
$93,646 
 
($86,999)
 
$335,038 

(a)
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.
 
 
5
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


In the fourth quarter 2012, Entergy moved two subsidiaries from Parent & Other to the Entergy Wholesale Commodities segment to improve the alignment of certain intercompany items and income tax activity.  The prior period financial information in this Form 10-Q has been restated to reflect this change.

As discussed in more detail in Note 1 to the financial statements in the Form 10-K, results of operations for the six months ended June 30, 2012 include a $355.5 million ($223.5 million after-tax) impairment charge to write down the carrying values of Vermont Yankee and related assets to their fair values.  Also, net income for Utility for the six months ended June 30, 2012 was significantly affected by a settlement with the IRS related to the income tax treatment of the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs, which resulted in a reduction in income tax expense.  The net income effect was partially offset by a regulatory charge, which reduced net revenue in 2012, associated with the storm costs settlement to reflect the obligation to customers with respect to the settlement.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

  
 
Amount
  
 
(In Millions)
     
2012 net revenue
 
$2,257 
Louisiana Act 55 financing savings obligation
 
169 
Retail electric price
 
118 
Grand Gulf recovery
 
66 
Volume/weather
 
(17)
Other
 
1 
2013 net revenue
 
$2,594 

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2012 because Entergy Gulf States Louisiana and Entergy Louisiana are sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to:

·  
the recovery of Hinds plant costs through the power management rider at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of 2013.  The net income effect of the Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
·  
a formula rate plan increase at Entergy Louisiana, effective January 2013, which includes an increase relating to the Waterford 3 steam generator replacement project, which was placed in service in December 2012.  The net income effect of the formula rate plan increase is limited to a portion representing an allowed return on equity with the remainder offset by costs included in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;

 
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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



·  
an increase in the capacity acquisition rider at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of December 2012, relating to the Hot Spring plant acquisition.  The net income effect of the Hot Spring plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hot Spring plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
·  
an annual base rate increase at Entergy Texas, effective July 2012, as a result of the PUCT’s order in the December 2011 rate case that was issued in September 2012; and
·  
an increase in the energy efficiency rider, as approved by the APSC, effective July 2012.  Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have no effect on net income.

See Note 2 to the financial statements herein and in the Form 10-K for a discussion of rate proceedings.

The Grand Gulf recovery variance is primarily due to increased recovery of higher costs resulting from the Grand Gulf uprate.

The volume/weather variance is primarily due to a decrease of 496 GWh, or 1%, in weather-adjusted usage across all customer classes.  The decrease in weather-adjusted usage in the residential class was almost entirely offset by the effect of more favorable weather on residential sales in the first half of 2013 compared to the same period in the prior year.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

  
 
Amount
  
 
(In Millions)
     
2012 net revenue
 
$895 
Nuclear volume
 
(56)
Nuclear realized price changes
 
58 
Other
 
(21)
2013 net revenue
 
$876 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $19 million in the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
lower volume in its nuclear fleet resulting from more unplanned and refueling outage days in 2013 compared to the same period in 2012 and the exercise of resupply options provided for in purchase power agreements whereby Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running; and
·  
the effect of lower power prices on electricity derivative instruments that are not designated as hedges, included in Other in the table above.  See Note 8 to the financial statements herein for discussion of derivative instruments.

These decreases were partially offset by higher energy and capacity prices.



 
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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2013 and 2012:

   
2013
 
2012
         
Owned capacity
 
6,612
 
6,612
GWh billed
 
21,559
 
22,955
Average realized revenue per MWh
 
$52.80
 
$48.77
         
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor
 
82%
 
87%
GWh billed
 
19,035
 
20,264
Average realized revenue per MWh
 
$51.95
 
$49.47
Refueling Outage Days:
       
Indian Point 2
 
-
 
28
Indian Point 3
 
28
 
-
Palisades
 
-
 
34
Pilgrim
 
45
 
-
Vermont Yankee
 
27
 
-

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,012 million for the six months ended June 30, 2012 to $1,107 million for the six months ended June 30, 2013 primarily due to:

·  
an increase of $29 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done during plant outages as compared to the prior year.  Also contributing to the increase are the acquisitions of the Hot Spring plant by Entergy Arkansas and the Hinds plant by Entergy Mississippi in November 2012.  Costs related to the Hot Spring and Hinds plants are recovered through the capacity acquisition rider and power management rider, respectively, as previously discussed;
·  
an increase of $24 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
·  
an increase of $13 million in nuclear expenses, primarily due to higher labor costs, including higher contract labor;
·  
an increase of $14 million resulting from costs related to the generator stator incident at ANO, including an offset for expected insurance proceeds.  See “ ANO Damage and Outage ” below for further discussion of the ANO incident; and
·  
the prior year deferral, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced 2012 expenses by $10 million.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from a higher 2013 assessment as compared to 2012 as well as an increase in local franchise taxes resulting from higher residential and commercial revenues as compared with prior year.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Hot Spring and Hinds plant acquisitions in 2012 and the completion of the Waterford 3 steam generator replacement project and the Grand Gulf uprate project in 2012.  Also contributing to the increase is an increase in depreciation rates as a result of the rate order approved by the PUCT in September 2012.
 
 
8
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Interest expense increased primarily due to net debt issuances by certain of the Utility operating companies.

Entergy Wholesale Commodities

The asset impairment variance is due to a $355.5 million ($223.5 million after-tax) impairment charge recorded in first quarter 2012 to write down the carrying values of Vermont Yankee and related assets to their fair values.  See Note 1 to the financial statements in the Form 10-K for further discussion of this charge.

Other expenses increased primarily due to a credit to decommissioning expense of $49 million in the second quarter 2012 resulting from a reduction in the decommissioning cost liability for a plant as a result of a revised decommissioning cost study.  See “ Critical Accounting Estimates – Nuclear Decommissioning Costs ” in the Form 10-K for further discussion.

Income Taxes

The effective income tax rate was 36.2% for the six months ended June 30, 2013.  The difference in the effective income tax rate for the six months ended June 30, 2013 versus the statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction and lower state income taxes resulting from a state deferred tax adjustment.

The effective income tax rate was (120.6%) for the six months ended June 30, 2012.  The difference in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2012 was related to (1) an IRS settlement on how to treat the Louisiana Act 55 Financing of the Hurricane Katrina and Hurricane Rita storm costs, as discussed further in Note 3 to the financial statements in the Form 10-K; and (2) a unanimous court decision from the U.S. Court of Appeals for the Fifth Circuit affirming an earlier decision of the U.S. Tax Court holding that Entergy was entitled to claim a credit against its U.S. tax liability for the U.K. windfall tax that it paid, both of which enabled Entergy to reverse provisions for uncertain tax positions.

Plan to Spin Off the Utility’s Transmission Business

See the Form 10-K for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp.  On April 16, 2013, the ITC shareholders approved the ITC merger proposals.  On June 28, 2013, Entergy and ITC mutually agreed to extend the term of the Merger Agreement to December 31, 2013.  Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Entergy will distribute the TransCo common units to its shareholders, excluding any TransCo common units contributed to an exchange trust if Entergy makes the exchange trust election.  At Entergy’s election, it may distribute the TransCo common units by means of a pro rata dividend in a spin-off or pursuant to an exchange offer in a split-off, or a combination of a split-off and a spin-off (the Distribution).  On July 24, 2013, Mid South TransCo LLC (TransCo) filed a registration statement with the SEC on Forms S-1/S-4 under which the Distribution would occur by means of a combination of a split-off and a spin-off.

Filings with Retail Regulators

See the Form 10-K for a discussion of the applications that each of the Utility operating companies has filed with their respective retail regulators seeking approval for the proposal to spin off and merge the transmission business with ITC.

In each retail jurisdiction, the Utility operating companies and ITC have offered certain commitments for consideration should the retail regulators deem it appropriate to impose conditions on the approval of the transaction, including a commitment to mitigate certain effects on customer rates for a period of at least five years.  In the offered commitments, the Utility operating companies and ITC proposed an initial five-year period of wholesale rate discounts and retail bill credits totaling $127.5 million for Entergy Arkansas customers, $45.6 million for Entergy Gulf States Louisiana customers, $56.2 million for Entergy Louisiana customers, $70.8 million for Entergy Mississippi customers, $20.0 million for Entergy New Orleans customers, and $67.0 million for Entergy Texas
 
 
 
 
9
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


customers.  The share of the rate mitigation to be borne will vary by Utility operating company, but the Utility is expected to bear, on an aggregate basis, over the initial five-year period, approximately 65 to 70% of the wholesale rate discounts and retail bill credits, with ITC expected to bear the remainder.  Following the first five years after closing of the transaction, the economic and performance benefits of ITC’s ownership will be measured and verified by an independent auditor to determine if they offset the ownership cost increase resulting from ITC’s weighted average cost of capital.  If the benefits exceed such costs, rate mitigation will cease.  If they do not, wholesale rate discounts and retail bill credits will continue until they do.

In addition, the Utility operating companies have offered the following additional retail bill credits to address the effects of moving to a forward test year: $6.9 million for Entergy Arkansas customers, $5.4 million for Entergy Gulf States Louisiana customers, $7.2 million for Entergy Louisiana customers, $6.7 million for Entergy Mississippi customers, $0.4 million for Entergy New Orleans customers, and $13.1 million for Entergy Texas customers.  Lastly, Entergy Texas customers will also experience net avoided costs of $10.0 million due to the effects of eliminating transmission cost allocation under the Entergy System Agreement.  Entergy Gulf States Louisiana and Entergy Louisiana customers will also experience net avoided costs of $4.1 million and $12.2 million, respectively, due to the effects of both eliminating transmission cost allocation under the Entergy System Agreement and moving to MISO’s transmission pricing zone structure.

These offered commitments may change as the regulatory proceedings evolve.

In April 2013, the LPSC staff, APSC staff, and other parties filed testimony in the proceedings pending at the LPSC and APSC, respectively, identifying concerns with the proposed transaction and concluding that the transaction in its current form does not satisfy the applicable criteria for approval.  The LPSC staff testimony also included a comprehensive set of conditions should the LPSC determine that the transaction is in the public interest.  Conditions were also recommended by the Arkansas Attorney General should the APSC consider approving the transaction.  In April and May 2013, various parties and the PUCT staff respectively filed testimony in the PUCT proceeding identifying concerns with the proposed transaction and concluding that the transaction in its current form does not satisfy the applicable criteria for approval.  Certain parties also included a comprehensive set of conditions should the PUCT determine that the transaction is in the public interest.   In May 2013 the City Council advisors filed testimony identifying concerns with the proposed transaction and concluding that the transaction in its current form does not satisfy the applicable criteria for approval.   In June 2013 the MPSC staff and other parties filed testimony in the MPSC proceeding identifying concerns with the proposed transaction and concluding that the transaction in its current form does not satisfy the applicable criteria for approval.   The MPSC staff also included a comprehensive set of conditions should the MPSC determine that the transaction is in the public interest.

The PUCT hearing on the joint application was held before the ALJs in May 2013.  On July 8, 2013, the ALJs issued a proposal for decision that recommended the denial of the joint application.  The ALJs further recommended that if the PUCT approved the joint application, that the PUCT impose certain conditions on Entergy Texas and ITC.  Exceptions to the proposal for decision were filed in July 2013, and the PUCT is expected to rule on the joint application in August 2013.

The APSC postponed a previously-scheduled July 9, 2013 hearing, which has been rescheduled for September 2013, to allow the parties to pursue more details regarding the rate mitigation commitments described above.  LPSC hearings were held in July 2013 and post-hearing briefs will be submitted in August 2013.  At its July 31, 2013 meeting the LPSC also voted to allow a 45-day discovery period regarding the mitigation commitments offered by the Utility operating companies and ITC.  The MPSC postponed a previously-scheduled August 2013 hearing, and will instead consider the matter based on the submission of pre-filed evidence after briefing concludes in August 2013.  The City Council modified its procedural schedule, with an evidentiary hearing scheduled to commence on August 27, 2013 and certification of the record to the City Council no later than September 6, 2013.

Because Entergy Arkansas also owns limited transmission facilities in Missouri, on February 14, 2013, Entergy Arkansas, ITC, and certain other related parties filed, out of an abundance of caution, a joint application with the Missouri Public Service Commission related to the transaction, although the Missouri Public Service Commission is not a retail regulator of Entergy Arkansas.  On April 18, 2013, the Missouri Public Service Commission consolidated for purposes of a hearing, in June 2013, Entergy
 
 
10
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Arkansas’s separate MISO case that is related to Entergy Arkansas’s notice of its intent to integrate into MISO with the Entergy and ITC case that is related to the proposal to spin off and merge the transmission business with ITC.  The hearing before the Missouri Public Service Commission took place in June 2013, and post-hearing briefs were filed in July and early August 2013.  It is anticipated that the matter will be submitted to the Missouri Public Service Commission in August 2013.

Filings with the FERC

See the Form 10-K for a discussion of the series of filings with the FERC made by Entergy, ITC, and certain of their subsidiaries to obtain regulatory approvals related to the proposed transfer to ITC subsidiaries of the transmission assets owned by the Utility operating companies.

On September 24, 2012, ITC and Entergy filed a joint application with the FERC seeking all necessary approvals under sections 203 and 205 of the Federal Power Act and the necessary declaration under section 305(a) of the Federal Power Act.   On June 20, 2013, the FERC issued an order authorizing the transactions under section 203 of the Federal Power Act, and also issued a declaration that section 305(a) of the Federal Power Act is not implicated by the transactions because the concerns underlying section 305(a) of the Federal Power Act are not present in the transactions. The FERC order also stated that the exchange trust election will not undermine or interfere with the independence of ITC.  The FERC order rejected, without prejudice, the request to extend by six months the deadline for new employees of ITC to dispose of their Entergy common stock.

The FERC issued a separate order on June 20, 2013, addressing the rate formula proposed by ITC in the September 24, 2012 application, as well as certain ancillary agreements also submitted for FERC’s approval with the application.  In that order, the FERC summarily approved certain aspects of ITC’s rate proposal, such as the 12.38% return on equity, a capital structure of 60% equity/40% debt, and use of a forward-looking formula rate.  However, the FERC found that other aspects of the rate proposal raised issues of material fact that cannot be resolved based on the record before the FERC, and thus ordered hearing and settlement judge procedures.  The FERC also accepted certain transaction-related agreements for filing, but included the transition services agreements and certain other ancillary agreements in the ordered hearing and settlement judge procedures.  The FERC consolidated the issues set for hearing and settlement judge procedures with two other Section 205 proceedings related to the transactions: (1) a proposed ratemaking treatment for certain pension and post-retirement welfare plan costs that relate to the Entergy employees that will become employees of ITC; and (2) the Attachment O formula rate templates filed by Entergy Services, on behalf of the Utility operating companies, on February 15, 2013, which includes the basis for the initial charges to be collected by the new operating subsidiaries of ITC post-closing, as well as the rates proposed to apply under the MISO Tariff in the event the transactions fail to close and Entergy retains its transmission assets.

On June 20, 2013, the FERC also issued an order accepting MISO’s proposed amendment to the MISO Tariff to enable the integration of the new ITC Operating Companies’ transmission facilities into MISO prior to the Utility operating companies becoming market participants in MISO.  In addition, on June 20, 2013, the FERC issued an order accepting Entergy Services’s application under the Federal Power Act section 205 to cancel System Agreement Service Schedule MSS-2 (Transmission Equalization) effective upon closing of the ITC transaction.

In October 2012, Entergy, ITC, and certain subsidiaries submitted filings with the FERC to obtain regulatory approvals under Federal Power Act section 204 for the various financings being undertaken as part of the transaction.  On May 16, 2013, the FERC issued an order authorizing the proposed financings for the ITC Transaction under Federal Power Act section 204 subject to the closing of the transaction.

Other Filings

In July 2012, Entergy Corporation submitted a request to the Internal Revenue Service seeking a private letter ruling substantially to the effect that certain requirements for the tax-free treatment of the distribution of the transmission business are met.  In May 2013, Entergy obtained IRS rulings regarding the tax-free treatment of certain aspects of the transactions.  While the May 2013 IRS rulings provide sufficient guidance for Entergy to execute the spin-merge in a tax-free manner, Entergy expects to request additional IRS rulings regarding certain other aspects of the transactions during the third quarter of 2013.  In September 2012, Entergy submitted an application to the NRC for approval of certain nuclear plant license transfers and amendments as part of the steps to complete the spin-off and merger.  In May 2013, the NRC issued orders approving the license transfers and amendments.


 
11
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants

See the Form 10-K for a discussion of the NRC operating licenses for Indian Point 2 and Indian Point 3 and the NRC license renewal applications in process for these plants.  Following are two updates to the discussion regarding the NRC proceedings.  First, in July 2013 Entergy filed a motion to dismiss Riverkeeper’s Endangered Species Act contention on the ground that the NRC Staff’s issuance of the supplemental FSEIS in June 2013 rendered that contention moot.  Second, the original expiration date of the NRC license for Indian Point Unit 2 is September 28, 2013.  That license will be extended by law under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been timely filed with the licensing agency.  The Indian Point license renewal application qualifies for timely renewal protection because it met NRC regulatory standards for timely filing.

The New York State Department of Environmental Conservation (NYSDEC) has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process.  Entergy submitted its application for a water quality certification to the NYSDEC in April 2009, with a reservation of rights regarding the applicability of Section 401 in this case.  After Entergy submitted certain additional information in response to NYSDEC requests for additional information, in February 2010 the NYSDEC staff determined that Entergy’s water quality certification application was complete.  In April 2010 the NYSDEC staff issued a proposed notice of denial of Entergy’s water quality certification application (the Notice).  NYSDEC staff’s Notice triggered an administrative adjudicatory hearing before NYSDEC ALJs on the proposed Notice.  The NYSDEC staff decision does not restrict Indian Point operations, but the issuance of a certification is potentially required prior to NRC issuance of renewed unit licenses.  In June 2011, Entergy filed notice with the NRC that the NYSDEC, the agency that would issue or deny a water quality certification for the Indian Point license renewal process, has taken longer than one year to take final action on Entergy’s application for a water quality certification and, therefore, has waived its opportunity to require a certification under the provisions of Section 401 of the Clean Water Act.  The NYSDEC has notified the NRC that it disagrees with Entergy’s position and does not believe that it has waived the right to require a certification.  The NYSDEC ALJs overseeing the agency’s certification adjudicatory process stated in a ruling issued in July 2011 that while the waiver issue is pending before the NRC, the NYSDEC hearing process will continue on selected issues.  The judges held a Legislative Hearing (agency public comment session) and an Issues Conference (pre-trial conference) in July 2010.  Issue-by-issue hearings before the NYSDEC ALJs began in October 2011 and are expected to continue, on an episodic basis, into 2014 and perhaps longer.    After hearings and briefing on all issues, the ALJs will issue a recommended decision to the Commissioner or his delegate, who will then issue the final agency decision.  A party to the proceeding can appeal the decision of the Commissioner to state court.

In addition, the consistency of Indian Point’s operations with New York State’s coastal management policies must be resolved to the extent required by the Coastal Zone Management Act (CZMA).  Entergy has undertaken three independent initiatives to resolve CZMA issues.  First, on July 24, 2012, Entergy filed a supplement to the Indian Point license renewal application currently pending before the NRC.  The supplement states that, based on applicable federal law and in light of prior reviews by the State of New York, the NRC may issue the requested renewed operating licenses for Indian Point without the need for an additional consistency review by the State of New York under the CZMA.  On July 30, 2012, Entergy filed a motion for declaratory order with the ASLB seeking confirmation of its position that no further CZMA consistency determination is required before the NRC may issue renewed licenses.  On April 5, 2013, the State of New York and Riverkeeper filed answers opposing Entergy’s motion.  The State of New York also filed a cross-motion for declaratory order seeking confirmation that Indian Point had not been previously reviewed, and that only the New York State Department of State (NYSDOS) could conduct a CZMA review for NRC license renewal purposes.  On April 15, 2013, the NRC Staff filed answers recommending the ASLB deny both Entergy’s and the State of New York’s motions for declaratory order.  On June 12, 2013, the ASLB denied Entergy’s and the State of New York’s motions, without prejudice, on the ground that consultation on the matter of previous review among the NRC, Entergy (as applicant), and the State of New York had not taken place, as the ASLB determined to be required.  There is no prescribed schedule or deadline for the consultation process.
 
 
12
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Second, Entergy filed with the NYSDOS on November 7, 2012 a petition for declaratory order that Indian Point is grandfathered under either of two criteria prescribed by the New York Coastal Management Program (NYCMP), which sets forth the state coastal policies applied in a CZMA consistency review.   NYSDOS denied the motion by order dated January 9, 2013.  Entergy filed a petition for judicial review of NYSDOS’s decision with the New York State Supreme Court for Albany County on March 13, 2013.  NYSDOS’s opposition was filed on May 10, 2013.  Entergy’s reply was filed June 7, 2013.  Oral argument has been scheduled before the New York State Supreme Court for Albany County for September 18, 2013.  It is uncertain when the court will act on the petition for review.  The losing party may file an appeal as of right with the next level state appellate court.

Third, on December 17, 2012, Entergy filed with NYSDOS a consistency determination explaining why Indian Point satisfies all applicable NYCMP policies.  Entergy included in the consistency determination a “reservation of rights” clarifying that Entergy does not concede NYSDOS’s right to conduct a new CZMA review for Indian Point.    The six-month federal deadline for state decision on a consistency determination runs from the date the submission is complete.  On January 16, 2013, NYSDOS notified Entergy that it deemed the consistency determination incomplete because it did not include the final version of a further supplement to the Final Supplemental Environmental Impact Statement that was targeted for subsequent issuance by NRC staff.  On June 28, 2013, NYSDOS notified Entergy that NYSDOS had received a copy of the final version of the Final Supplement Environmental Impact Statement on June 20, 2013, and that NYSDOS’s review of the Indian Point consistency determination had begun on June 20, 2013.

ANO Damage and Outage

On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building.  The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building.  The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant.  Entergy Arkansas is in the process of repairing this damage and readying ANO 1 to return to operation.  ANO 2 reconnected to the grid on April 28, 2013.  Restoration and restart efforts with respect to ANO 1 are ongoing and are expected to be complete before September 30, 2013.  The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment is currently estimated to be in the range of $95 million to $120 million.   This estimate may change through the conclusion of restoration activities.  In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and is incurring incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage.  Each of the Utility operating companies has recovery mechanisms in place designed to recover its prudently-incurred fuel and purchased power costs.
 
Entergy Arkansas is assessing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action.  Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO.  NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO.  Entergy has responded that it disagrees with NEIL's position and is evaluating its options for enforcing its rights under the policy.  On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a general contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop.

In the second quarter 2013, Entergy Arkansas recorded an insurance receivable of $50 million based on the minimum amount that it expects to receive from NEIL.  This $50 million receivable completely offset the approximately $41 million of capital spending and also offset approximately $9 million of the operation and maintenance expense incurred for the recovery through June 30, 2013.  Entergy Arkansas has incurred approximately $14 million in operation and maintenance expense in excess of its insurance receivable as of June 30, 2013.


 
13
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Human Capital Management Strategic Imperative

Entergy is engaged in a strategic imperative that is intended to optimize the organization through a process known as human capital management.  In July 2013, management completed a comprehensive review of Entergy’s organization design and processes.  This effort resulted in a new internal organization structure, which management expects to result in the elimination of approximately 800 employee positions.  One-time costs associated with this phase of human capital management, primarily implementation costs, severance expenses, and the one-time effect on benefit plan expense, are expected to be in the range of $145 to $185 million.  The majority of these costs are expected to be incurred by the end of 2013.

Entergy Solutions District Energy Sales Agreement

Entergy Solutions District Energy, a business wholly-owned by Entergy in the Entergy Wholesale Commodities segment, owns and operates district energy assets serving the business districts in Houston and New Orleans.  In August 2013, Entergy signed agreements to sell Entergy Solutions District Energy for approximately $130 million, subject to adjustments.  Entergy Solutions District Energy’s book value as of June 30, 2013 was approximately $90 million.  The sale is expected to close in 2013.

Liquidity and Capital Resources

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

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.

   
June 30,
2013
 
December 31,
2012
         
Debt to capital
 
59.0% 
 
58.7% 
Effect of excluding the securitization bonds
 
(1.7%)
 
(1.8%)
Debt to capital, excluding securitization bonds (a)
 
57.3% 
 
56.9% 
Effect of subtracting cash
 
(0.6%)
 
(1.1%)
Net debt to net capital, excluding securitization bonds (a)
 
56.7% 
 
55.8% 

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

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, 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 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.


 
14
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2018.  Entergy Corporation has the ability to issue letters of credit against 50% of the total borrowing capacity of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2013:


 
Capacity (a)
 
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
             
$3,500
 
$190
 
$8
 
$3,302

(a)
The capacity decreases to $3,490 million in March 2017.

A covenant in Entergy Corporation’s credit facility requires Entergy 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 the covenant.  If Entergy fails to meet this ratio, or if Entergy 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 for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

See Note 4 to the financial statements for additional discussion of the Entergy Corporation commercial paper program.  As of June 30, 2013, Entergy Corporation had $948 million of commercial paper outstanding.  In July 2013 the Board increased the commercial paper program limit to $1.5 billion.

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 2013 through 2015.  As discussed in the Form 10-K, the planned amounts disclosed in the Form 10-K do not include costs for the capital projects that might result from the NRC’s post-Fukushima requirements.  The current preliminary cost estimate for post-Fukushima requirements is approximately $265 million for Utility, including approximately $230 million in capital and approximately $35 million in one-time operation and maintenance expenses, and approximately $345 million for Entergy Wholesale Commodities, including approximately $290 million in capital and approximately $55 million in one-time operation and maintenance expenses.  These costs are expected to be incurred over the 2012 through 2018 time period, and do not include any amounts for filtered vents, for which the NRC initiated a rulemaking in first quarter 2013, or any future NRC requirements (e.g., Tier 2 and 3 activities).  Also, Entergy now expects a delay in the spending associated with potential wedgewire screens at the Indian Point site from the timing reflected in the amounts in the table in the Form 10-K.

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 Entergy’s earnings, financial strength, and future investment opportunities.  At its July 2013 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.

 
15
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

 
Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Millions)
         
Cash and cash equivalents at beginning of period
 
$533 
 
$694 
         
Cash flow provided by (used in):
       
Operating activities
 
1,116 
 
1,188 
Investing activities
 
(1,305)
 
(1,500)
Financing activities
 
(33)
 
(99)
Net decrease in cash and cash equivalents
 
(222)
 
(411)
         
Cash and cash equivalents at end of period
 
$311 
 
$283 

Operating Activities

Net cash provided by operating activities decreased by $72 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
higher deferred fuel refunds in 2013 compared to the same period in prior year;
·  
an increase of $54 million in spending on nuclear refueling outages in 2013 compared to the same period in prior year;
·  
an increase of $46 million in income tax payments;
·  
approximately $36 million in storm restoration spending in 2013 resulting from the Arkansas December 2012 Winter storm and Hurricane Isaac; and
·  
approximately $25 million in spending related to the generator stator incident at ANO, as discussed previously.

These decreases in cash flow were partially offset by:

·  
higher Utility net revenues in 2013 resulting from additional generation investments made in 2012;
·  
a decrease of $54 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;
·  
proceeds of $34 million received from the U.S. Department of Energy in April 2013 resulting from litigation regarding the storage of spent nuclear fuel.  The litigation is discussed in more detail in Part II, Item 5, “Spent Nuclear Fuel”; and
·  
a refund of $31 million, including interest, paid to AmerenUE in June 2012.  The FERC ordered Entergy Arkansas to refund to AmerenUE the rough production cost equalization payments previously collected.  See Note 2 to the financial statements in the Form 10-K for further discussion of the FERC order.


 
16
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Investing Activities

Net cash used in investing activities decreased by $195 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
the withdrawal of a total of $260 million from storm reserve escrow accounts, primarily by Entergy Gulf States Louisiana and Entergy Louisiana, in 2013 after Hurricane Isaac.  See Note 2 to the financial statements herein and in the Form 10-K for a discussion of Hurricane Isaac;
·  
a decrease in nuclear fuel purchases because of 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; and
·  
a slight decrease in construction expenditures, primarily in the Utility business, resulting from spending in 2012 on the uprate project at Grand Gulf, substantially offset by storm restoration spending in 2013 resulting from the Arkansas December 2012 Winter storm and Hurricane Isaac, spending in 2013 on Ninemile 6 self-build project, and spending in 2013 related to the generator stator incident at ANO, as discussed previously.

The decrease was partially offset by a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as Entergy returned net deposits of $34 million in 2013 and received net deposits of $51 million in 2012.  Entergy Wholesale Commodities’s forward sales contracts are discussed in the Market and Credit Risk Sensitive Instruments   section below.

Financing Activities

Net cash used in financing activities decreased by $66 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to the following activity:

·  
long-term debt activity using approximately $36 million of cash in 2013 compared to providing $125 million of cash in 2012.  Included in the long-term debt activity in 2013 is $605 million repayment of borrowings on the Entergy Corporation long-term credit facility.  Entergy Corporation issued $283 million of commercial paper in 2013, in part,  to repay borrowings on its long-term credit facility; and
·  
$51 million in proceeds from the sale to a third party in 2012 of a portion of Entergy Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests.

For details of long-term debt activity and Entergy's commercial paper program in 2013 see Note 4 to the financial statements herein.

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.


 
17
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Federal Regulation

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

System Agreement

Utility Operating Company Notices of Termination of System Agreement Participation

As discussed in the Form 10-K, in February 2009, Entergy Arkansas and Entergy Mississippi filed with the FERC their notices of cancellation to terminate their participation in the System Agreement, effective December 18, 2013 and November 7, 2015, respectively.  In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96-month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal.  In February 2011, the FERC denied the LPSC’s and the City Council’s rehearing requests.  In September and October 2012, the U.S. Court of Appeals for the D.C. Circuit denied the LPSC’s and the City Council’s appeals of the FERC decisions.  In January 2013, the LPSC and the City Council filed a petition for a writ of certiorari with the U.S. Supreme Court.  On May 13, 2013, U.S. Supreme Court denied the petition for a writ of certiorari filed by the LPSC and the City Council seeking review of the D.C. Circuit’s decision to affirm the FERC’s orders accepting the notices of cancellation filed by Entergy Arkansas and Entergy Mississippi and determining that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96-month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal.

In November 2012 the Utility operating companies filed amendments to the System Agreement with the FERC pursuant to section 205 of the Federal Power Act.  The LPSC, MPSC, PUCT, and City Council filed protests at the FERC regarding the amendments and other aspects of the Utility operating companies’ future operating arrangements, including requests that the continued viability of the System Agreement in MISO (among other issues) be set for hearing by the FERC.  On March 12, 2013, the Utility operating companies filed an answer to the protests.  The answer proposed, among other things, that: (1) the FERC allow the System Agreement revisions to go into effect as of December 19, 2013, without a hearing and for an initial two-year transition period; (2) no later than October 18, 2013, Entergy Services submit a filing pursuant to section 205 of the Federal Power Act that provides Entergy Texas’s notice of cancellation to terminate participation in the System Agreement and responds to the PUCT’s position that Entergy Texas be allowed to terminate its participation prior to the end of the mandatory 96-month notice period; and (3) at least six months prior to the end of the two-year transition period, Entergy Services submits an additional filing under section 205 of the Federal Power Act that addresses the allocation of MISO charges and credits among the Utility operating companies that remain in the System Agreement.  Prior to the filing to be made no later than October 18, 2013, Entergy Services, Entergy Texas, and Entergy will exercise reasonable best efforts to engage the Utility operating companies and their retail regulators in searching for a consensual means of allowing Entergy Texas to exit the System Agreement prior to the end of the mandatory 96-month notice period.  If a consensual resolution is reached on such early termination, the filing will reflect such a resolution.  The matter remains pending at the FERC.

Entergy’s Proposal to Join MISO

See the Form 10-K for a discussion of the Utility operating companies’ proposal to join MISO.  Following are updates to that discussion.

On April 8, 2013, the APSC issued an order resolving the outstanding issues in Entergy Arkansas’s change of control docket and granted Entergy Arkansas’s application subject to the conditions set forth in the APSC’s October 2012 order.  On May 23, 2013, the FERC issued an order accepting the changes to Appendix K of the MISO Transmission Owners Agreement proposed by MISO and a majority of the MISO transmission owners to implement MISO governance enhancements consistent with the APSC’s October 2012 order.



 
18
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Because Entergy Arkansas also owns limited transmission facilities in Missouri, on February 14, 2013, Entergy Arkansas, ITC, and certain other related parties filed, out of an abundance of caution, a joint application with the Missouri Public Service Commission related to the transaction, although the Missouri Public Service Commission is not a retail regulator of Entergy Arkansas.  On April 18, 2013, the Missouri Public Service Commission consolidated for purposes of a hearing in June 2013 Entergy Arkansas’s separate MISO case that is related to Entergy Arkansas’s notice of its intent to integrate into MISO with the Entergy and ITC case that is related to the proposal to spin off and merge the transmission business with ITC.  The hearing before the Missouri Public Service Commission took place in June 2013, and post-hearing briefs were filed in July and early August 2013.  It is anticipated that the matter will be submitted to the Missouri Public Service Commission in August 2013.

On January 23, 2013, Entergy Arkansas filed a Motion to Discontinue Activities Necessary to Operate as a True Stand-Alone Electric Utility, with supporting testimony, in which Entergy Arkansas requested an order from the APSC authorizing it to drop the stand-alone option by March 1, 2013.  On April 8, 2013, the APSC issued an order granting Entergy Arkansas’s motion.

On April 3, 2013, the PUCT staff filed a study performed by its independent consultant assessing Entergy Texas’s January 2013 updated analysis of the effect of termination of certain power purchase agreements on Entergy Texas’s costs upon Entergy Texas’s exit from the System Agreement.  While the independent consultant study concluded that the adjustments made in Entergy Texas’s updated analysis were analytically correct, the consultant also recommended further study regarding the effect of the termination of the power purchase agreements on the benefits associated with Entergy Texas joining MISO.  On April 5, 2013, Entergy Texas filed a response to the consultant study, noting a number of errors in the analysis and recommending against any further study of this matter.  Entergy Texas has agreed to fund further analysis, which will be performed by a different independent consultant for the PUCT, regarding the effects of termination of these purchased power agreements.

In April 2012 the FERC conditionally accepted MISO’s proposal related to the allocation of transmission upgrade costs in connection with the transition and integration of the Utility operating companies into MISO.  In November 2012 the FERC issued an order denying the requests for rehearing of the April 2012 order, and conditionally accepting MISO’s May 2012 compliance filing, subject to a further compliance filing due within 30 days of the date of the November 2012 Order.  In December 2012, MISO and the MISO Transmission Owners submitted to FERC a request for rehearing and proposed revisions to the MISO Tariff in compliance with FERC’s November 2012 order.   On July 11, 2013, the FERC issued an order conditionally accepting MISO’s compliance filing and granting in part and denying in part the request for rehearing.

On February 15, 2013, Entergy Services, on behalf of the Utility operating companies, made a filing with the FERC requesting to adopt the standard Attachment O formula rate template used by transmission owners to establish transmission rates within MISO.  The filing proposed four transmission pricing zones for the Utility operating companies, one for Entergy Arkansas, one for Entergy Mississippi, one for Entergy Texas, and one for Entergy Louisiana, Entergy Gulf States Louisiana, and Entergy New Orleans.  On June 20, 2013, the FERC issued an order accepting the use of four transmission pricing zones, consolidated the proposed revisions to the Attachment O templates in this proceeding with certain other proceedings related to the ITC transaction, and set for hearing and settlement judge procedures those issues of material fact that FERC decided could not be resolved based on the existing record.  Several parties, including the City Council, filed requests for rehearing of the June 2013 order.

Also on February 15, 2013, MISO and Entergy Arkansas and Entergy Mississippi filed with the FERC proposed revisions to Attachment P of the MISO Tariff, to list the existing transmission and related agreements between each of Entergy Arkansas and Entergy Mississippi and each of their counterparties as grandfathered agreements.  On May 31, 2013, the FERC issued an order accepting the proposed revisions, effective December 19, 2013, as requested.
 
 
 
19
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


On March 28, 2013, the FERC issued an order conditionally accepting MISO’s proposed tariff changes related to the allocation of long-term transmission rights and auction revenue rights, subject to a further compliance filing.  The amendments are intended to address the anticipated integration of the Utility operating companies, as well as other load-serving entities and transmission-owning utilities, into the MISO RTO.  On April 29, 2013, MISO made the required compliance filing.

FERC Reliability Standards Investigation

On March 19, 2013, the FERC issued an order approving a settlement between Entergy Services and the FERC Enforcement Staff (the Staff) arising from the Staff’s November 20, 2012 “Notice of Alleged Violations” which stated that the Staff had concluded that Entergy Services’s practices in certain areas violated various requirements of the North American Electric Reliability Corporation reliability standards.  Under the terms of the settlement, Entergy Services neither admits nor denies the alleged violations, but agrees to pay a civil penalty of $975,000 and undertake certain mitigation activities agreed to during discussions with Staff.

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’s core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets.  In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’s forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, put and/or call options, to manage forward commodity price risk.  Certain hedge volumes have price downside and upside relative to market price movement.  The contracted minimum, expected value, and sensitivity are provided to show potential variations.  While the sensitivity reflects the minimum, it does not reflect the total maximum upside potential from higher market prices.  The information contained in the table below represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation.  Following is a summary of Entergy Wholesale Commodities’s current forward capacity and generation contracts as well as total revenue projections based on market prices as of June 30, 2013 (2013 represents the remaining two quarters of the year):

 
20
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis




Entergy Wholesale Commodities Nuclear Portfolio

   
2013
 
2014
 
2015
 
2016
 
2017
                     
Energy
                   
Percent of planned generation under contract (a):
                   
Unit-contingent (b)
 
40%
 
21%
 
12%
 
14%
 
12%
Unit-contingent with availability guarantees (c)
 
20%
 
16%
 
13%
 
13%
 
13%
Firm LD (d)
 
23%
 
60%
 
14%
 
-%
 
-%
Offsetting positions (e)
 
-%
 
(20)%
 
-%
 
-%
 
-%
Total
 
83%
 
77%
 
39%
 
27%
 
25%
Planned generation (TWh) (f) (g)
 
21
 
40
 
41
 
40
 
41
Average revenue per MWh on contracted volumes:
                   
Minimum
 
$45
 
$44
 
$45
 
$50
 
$51
Expected based on market prices as of June 30, 2013
 
$46
 
$46
 
$48
 
$50
 
$52
Sensitivity: -/+ $10 per MWh market price change
 
$45-$48
 
$44-$49
 
$45-$53
 
$50-$53
 
$51-$55
                     
Capacity
                   
Percent of capacity sold forward (h):
                   
Bundled capacity and energy contracts (i)
 
16%
 
16%
 
16%
 
16%
 
16%
Capacity contracts (j)
 
42%
 
19%
 
12%
 
18%
 
9%
Total
 
58%
 
35%
 
28%
 
34%
 
25%
Planned net MW in operation (g) (k)
 
5,011
 
5,011
 
5,011
 
5,011
 
5,011
Average revenue under contract per kW per month
(applies to capacity contracts only)
 
$2.8
 
$2.4
 
$3.2
 
$3.2
 
$3.2
                     
Total Nuclear Energy and Capacity Revenues
                   
Expected sold and market total revenue per MWh
 
$49
 
$47
 
$47
 
$48
 
$49
Sensitivity: -/+ $10 per MWh market price change
 
$47-$53
 
$44-$52
 
$40-$54
 
$41-$56
 
$42-$57

Entergy Wholesale Commodities Non-Nuclear Portfolio

   
2013
 
2014
 
2015
 
2016
 
2017
                     
Energy
                   
Percent of planned generation under contract (a):
                   
Cost-based contracts (l)
 
31%
 
32%
 
36%
 
33%
 
33%
Firm LD (d)
 
6%
 
6%
 
7%
 
7%
 
6%
Total
 
37%
 
38%
 
43%
 
40%
 
39%
Planned generation (TWh) (f) (m)
 
3
 
6
 
6
 
6
 
6
                     
Capacity
                   
Percent of capacity sold forward (h):
                   
Cost-based contracts (l)
 
24%
 
24%
 
24%
 
24%
 
26%
Bundled capacity and energy contracts (i)
 
8%
 
8%
 
8%
 
8%
 
8%
Capacity contracts (j)
 
52%
 
50%
 
52%
 
49%
 
21%
Total
 
84%
 
82%
 
84%
 
81%
 
55%
Planned net MW in operation (k) (m)
 
1,052
 
1,052
 
1,052
 
1,052
 
977


 
21
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights.
(b)
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, seller is generally not liable to buyer for any damages.
(c)
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.
(d)
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products.
(e)
Transactions for the purchase of energy, generally to offset a firm LD transaction.
(f)
Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that effect dispatch.
(g)
Assumes NRC license renewal for plants whose current licenses expire within five years and uninterrupted normal operation at all plants.  NRC license renewal applications are in process for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013) and Indian Point 3 (December 2015).  For a discussion regarding the continued operation of the Vermont Yankee plant, see “ Impairment of Long-Lived Assets ” in Note 11 to the financial statements herein and Note 1 to the financial statements in the Form 10-K.  For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “ Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants ” above.
(h)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(i)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(j)
A contract for the sale of an installed capacity product in a regional market.
(k)
Amount of capacity to be available to generate power and/or sell capacity considering uprates planned to be completed during the year.
(l)
Contracts priced in accordance with cost-based rates, a ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the service; these contracts are on owned non-utility resources located within Entergy’s Utility service area, which do not operate under market-based rate authority.  The percentage sold assumes approval of long-term transmission rights.  Includes sales to the Utility through 2013 of 121 MW of capacity and energy from Entergy Power sourced from Independence Steam Electric Station Unit 2.
(m)
Non-nuclear planned generation and net MW in operation include purchases from affiliated and non-affiliated counterparties under long-term contracts and exclude energy and capacity from Entergy Wholesale Commodities’s wind investment and from the 544 MW Ritchie plant that is not planned to operate.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2013 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $79 million for the remainder of 2013.


 
22
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis



Some of the agreements to sell the power produced by Entergy Wholesale Commodities’s power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At June 30, 2013, based on power prices at that time, Entergy had liquidity exposure of $184 million under the guarantees in place supporting Entergy Wholesale Commodities transactions, $20 million of guarantees that support letters of credit, and $27 million of posted cash collateral.  As of June 30, 2013, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $120 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2013, Entergy would have been required to provide approximately $54 million of additional cash or letters of credit under some of the agreements.

As of June 30, 2013, substantially all of the counterparties or their guarantors for 100% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2017 have public investment grade credit ratings.

Nuclear Matters

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters " in the Form 10-K for a discussion of nuclear matters.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets and trust fund investments, qualified pension and other postretirement benefits, and other contingencies.  Following is an update to that discussion.

Nuclear Decommissioning Costs

In the first quarter of 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for a nuclear site as a result of a revised decommissioning cost study.  The revised estimate resulted in a $46.6 million reduction in the decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset.

New Accounting Pronouncements

The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.  Final pronouncements that result from these projects could have a material effect on Entergy’s future net income, financial position, or cash flows.
 

 

   
 
CONSOLIDATED STATEMENTS OF INCOME
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
      (In Thousands, Except Share Data)  
                         
OPERATING REVENUES
                       
Electric
  $ 2,177,210     $ 1,934,550     $ 4,126,490     $ 3,719,392  
Natural gas
    33,881       23,879       87,202       69,886  
Competitive businesses
    527,117       560,171       1,133,390       1,112,982  
TOTAL
    2,738,208       2,518,600       5,347,082       4,902,260  
                                 
OPERATING EXPENSES
                               
Operating and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    489,608       437,157       999,940       975,994  
   Purchased power
    485,744       345,298       858,873       630,264  
   Nuclear refueling outage expenses
    66,464       57,822       127,183       121,706  
   Asset impairment
    -       -       -       355,524  
   Other operation and maintenance
    844,195       772,881       1,598,453       1,494,517  
Decommissioning
    59,389       11,942       118,494       69,845  
Taxes other than income taxes
    144,888       138,111       295,983       275,280  
Depreciation and amortization
    297,516       274,755       598,392       554,971  
Other regulatory charges
    3,892       137,650       9,207       138,032  
TOTAL
    2,391,696       2,175,616       4,606,525       4,616,133  
                                 
OPERATING INCOME
    346,512       342,984       740,557       286,127  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    16,249       28,282       29,000       52,590  
Interest and investment income
    40,541       29,285       78,847       70,276  
Miscellaneous - net
    (13,157 )     (13,036 )     (26,779 )     (31,025 )
TOTAL
    43,633       44,531       81,068       91,841  
                                 
INTEREST EXPENSE
                               
Interest expense
    155,768       149,616       308,918       296,361  
Allowance for borrowed funds used during construction
    (6,791 )     (10,483 )     (11,979 )     (19,874 )
TOTAL
    148,977       139,133       296,939       276,487  
                                 
INCOME BEFORE INCOME TAXES
    241,168       248,382       524,686       101,481  
                                 
Income taxes
    73,113       (122,201 )     189,648       (122,363 )
                                 
CONSOLIDATED NET INCOME
    168,055       370,583       335,038       223,844  
                                 
Preferred dividend requirements of subsidiaries
    4,332       5,582       9,915       10,526  
                                 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
  $ 163,723     $ 365,001     $ 325,123     $ 213,318  
                                 
                                 
Earnings per average common share:
                               
    Basic
  $ 0.92     $ 2.06     $ 1.83     $ 1.21  
    Diluted
  $ 0.92     $ 2.06     $ 1.82     $ 1.20  
Dividends declared per common share
  $ 0.83     $ 0.83     $ 1.66     $ 1.66  
                                 
Basic average number of common shares outstanding
    178,196,525       177,166,519       178,112,709       177,015,941  
Diluted average number of common shares outstanding
    178,614,383       177,565,351       178,534,201       177,470,486  
                                 
See Notes to Financial Statements.
                               
                                 



 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
      (In Thousands)  
                         
Net Income
  $ 168,055     $ 370,583     $ 335,038     $ 223,844  
                                 
Other comprehensive income (loss)
                               
   Cash flow hedges net unrealized gain (loss)
                               
     (net of tax expense (benefit) of $14,531, ($58,275), ($26,604), and $17,219)
    27,590       (108,090 )     (48,385 )     37,345  
   Pension and other postretirement liabilities
                               
     (net of tax expense of $5,885, $10,479, $11,754, and $14,355)
    9,779       17,060       19,574       23,327  
   Net unrealized investment gains (losses)
                               
     (net of tax expense (benefit) of ($9,325), ($11,749), $44,986, and $37,389)
    (8,033 )     (18,025 )     48,344       32,082  
   Foreign currency translation
                               
     (net of tax expense (benefit) of $11, ($113), ($405), and $54)
    19       (209 )     (753 )     101  
         Other comprehensive income (loss)
    29,355       (109,264 )     18,780       92,855  
                                 
Comprehensive Income
    197,410       261,319       353,818       316,699  
                                 
Preferred dividend requirements of subsidiaries
    4,332       5,582       9,915       10,526  
                                 
Comprehensive Income Attributable to Entergy Corporation
  $ 193,078     $ 255,737     $ 343,903     $ 306,173  
                                 
                                 
See Notes to Financial Statements.
                               
                                 



 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Consolidated net income
  $ 335,038     $ 223,844  
Adjustments to reconcile consolidated net income to net cash flow
               
 provided by operating activities:
               
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    948,950       832,662  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    162,189       (122,657 )
  Asset impairment
    -       355,524  
  Changes in working capital:
               
     Receivables
    (218,279 )     (52,185 )
     Fuel inventory
    6,190       (19,222 )
     Accounts payable
    151,993       8,339  
     Prepaid taxes and taxes accrued
    (58,176 )     (12,446 )
     Interest accrued
    (3,172 )     (6,978 )
     Deferred fuel costs
    (101,421 )     5,909  
     Other working capital accounts
    (133,575 )     (108,441 )
  Changes in provisions for estimated losses
    (250,343 )     (19,267 )
  Changes in other regulatory assets
    216,659       113,645  
  Changes in pensions and other postretirement liabilities
    24,955       (34,541 )
  Other
    34,897       23,733  
Net cash flow provided by operating activities
    1,115,905       1,187,919  
                 
  INVESTING ACTIVITIES
               
Construction/capital expenditures
    (1,244,859 )     (1,252,277 )
Allowance for equity funds used during construction
    30,977       54,417  
Nuclear fuel purchases
    (209,509 )     (240,804 )
Payment for purchase of plant
    -       (645 )
Changes in securitization account
    9,118       12,876  
NYPA value sharing payment
    (71,736 )     (72,000 )
Payments to storm reserve escrow account
    (3,855 )     (2,987 )
Receipts from storm reserve escrow account
    260,230       17,884  
Decrease (increase) in other investments
    (28,895 )     37,076  
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
    10,763       -  
Proceeds from nuclear decommissioning trust fund sales
    779,706       944,833  
Investment in nuclear decommissioning trust funds
    (837,114 )     (998,579 )
Net cash flow used in investing activities
    (1,305,174 )     (1,500,206 )
                 
See Notes to Financial Statements.
               
                 



ENTERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
   
2013
   
2012
 
   
(In Thousands)
 
             
FINANCING ACTIVITIES
           
Proceeds from the issuance of:
           
  Long-term debt
    1,973,866       1,325,162  
  Mandatorily redeemable preferred membership units of subsidiary
    -       51,000  
  Treasury stock
    16,634       34,628  
Retirement of long-term debt
    (2,010,111 )     (1,199,926 )
Changes in credit borrowings and commercial paper - net
    294,123       (4,615 )
Dividends paid:
               
  Common stock
    (297,054 )     (293,741 )
  Preferred stock
    (10,137 )     (11,165 )
Net cash flow used in financing activities
    (32,679 )     (98,657 )
                 
Effect of exchange rates on cash and cash equivalents
    751       (101 )
                 
Net decrease in cash and cash equivalents
    (221,197 )     (411,045 )
                 
Cash and cash equivalents at beginning of period
    532,569       694,438  
                 
Cash and cash equivalents at end of period
  $ 311,372     $ 283,393  
                 
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
  Cash paid during the period for:
               
    Interest - net of amount capitalized
  $ 261,277     $ 253,617  
    Income taxes
  $ 88,665     $ 42,450  
                 
                 
See Notes to Financial Statements.
               



 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 86,324     $ 112,992  
  Temporary cash investments
    225,048       419,577  
     Total cash and cash equivalents
    311,372       532,569  
Securitization recovery trust account
    36,922       46,040  
Accounts receivable:
               
  Customer
    651,863       568,871  
  Allowance for doubtful accounts
    (32,130 )     (31,956 )
  Other
    224,057       161,408  
  Accrued unbilled revenues
    378,643       303,392  
     Total accounts receivable
    1,222,433       1,001,715  
Deferred fuel costs
    158,461       150,363  
Accumulated deferred income taxes
    112,613       306,902  
Fuel inventory - at average cost
    207,640       213,831  
Materials and supplies - at average cost
    935,229       928,530  
Deferred nuclear refueling outage costs
    329,165       243,374  
System agreement cost equalization
    14,600       16,880  
Prepayments and other
    263,287       242,922  
TOTAL
    3,591,722       3,683,126  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliates - at equity
    41,491       46,738  
Decommissioning trust funds
    4,466,620       4,190,108  
Non-utility property - at cost (less accumulated depreciation)
    260,609       256,039  
Other
    183,609       436,234  
TOTAL
    4,952,329       4,929,119  
                 
PROPERTY, PLANT AND EQUIPMENT
               
Electric
    42,415,345       41,944,567  
Property under capital lease
    933,786       935,199  
Natural gas
    359,725       353,492  
Construction work in progress
    1,573,328       1,365,699  
Nuclear fuel
    1,634,366       1,598,430  
TOTAL PROPERTY, PLANT AND EQUIPMENT
    46,916,550       46,197,387  
Less - accumulated depreciation and amortization
    19,344,473       18,898,842  
PROPERTY, PLANT AND EQUIPMENT - NET
    27,572,077       27,298,545  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    754,870       742,030  
  Other regulatory assets (includes securitization property of
               
     $874,976 as of June 30, 2013 and $914,751 as of
               
     December 31, 2012)
    4,810,706       5,025,912  
  Deferred fuel costs
    172,202       172,202  
Goodwill
    377,172       377,172  
Accumulated deferred income taxes
    66,843       37,748  
Other
    964,364       936,648  
TOTAL
    7,146,157       7,291,712  
                 
TOTAL ASSETS
  $ 43,262,285     $ 43,202,502  
                 
See Notes to Financial Statements.
               



ENTERGY CORPORATION AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 525,622     $ 718,516  
Notes payable and commercial paper
    1,090,124       796,002  
Accounts payable
    1,170,405       1,217,180  
Customer deposits
    365,223       359,078  
Taxes accrued
    275,543       333,719  
Accumulated deferred income taxes
    22,103       13,109  
Interest accrued
    181,492       184,664  
Deferred fuel costs
    3,116       96,439  
Obligations under capital leases
    3,111       3,880  
Pension and other postretirement liabilities
    93,044       95,900  
System agreement cost equalization
    14,600       25,848  
Other
    239,571       261,986  
TOTAL
    3,983,954       4,106,321  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    8,339,892       8,311,756  
Accumulated deferred investment tax credits
    268,128       273,696  
Obligations under capital leases
    33,402       34,541  
Other regulatory liabilities
    997,421       898,614  
Decommissioning and asset retirement cost liabilities
    3,584,788       3,513,634  
Accumulated provisions
    112,450       362,226  
Pension and other postretirement liabilities
    3,753,697       3,725,886  
Long-term debt (includes securitization bonds of $927,441 as of
               
  June 30, 2013 and $973,480 as of December 31, 2012)
    12,094,752       11,920,318  
Other
    538,773       577,910  
TOTAL
    29,723,303       29,618,581  
                 
Commitments and Contingencies
               
                 
Subsidiaries' preferred stock without sinking fund
    186,511       186,511  
                 
EQUITY
               
Common Shareholders' Equity:
               
Common stock, $.01 par value, authorized 500,000,000 shares;
               
  issued 254,752,788 shares in 2013 and in 2012
    2,548       2,548  
Paid-in capital
    5,355,753       5,357,852  
Retained earnings
    9,733,990       9,704,591  
Accumulated other comprehensive loss
    (274,303 )     (293,083 )
Less - treasury stock, at cost (76,513,406 shares in 2013 and
               
  76,945,239 shares in 2012)
    5,543,471       5,574,819  
Total common shareholders' equity
    9,274,517       9,197,089  
Subsidiaries' preferred stock without sinking fund
    94,000       94,000  
TOTAL
    9,368,517       9,291,089  
                 
TOTAL LIABILITIES AND EQUITY
  $ 43,262,285     $ 43,202,502  
                 
See Notes to Financial Statements.
               



 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                                           
         
Common Shareholders' Equity
       
   
Subsidiaries'
Preferred Stock
   
Common Stock
   
Treasury Stock
   
Paid-in Capital
   
Retained Earnings
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
   
(In Thousands)
 
                                           
Balance at December 31, 2011
  $ 94,000     $ 2,548     $ (5,680,468 )   $ 5,360,682     $ 9,446,960     $ (168,452 )   $ 9,055,270  
                                                         
Consolidated net income (a)
    10,526       -       -       -       213,318       -       223,844  
Other comprehensive income
    -       -       -       -       -       92,855       92,855  
Common stock issuances related to stock plans
    -       -       60,817       (4,207 )     -       -       56,610  
Common stock dividends declared
    -       -       -       -       (294,057 )     -       (294,057 )
Preferred dividend requirements of subsidiaries (a)
    (10,526 )     -       -       -       -       -       (10,526 )
                                                         
Balance at June 30, 2012
  $ 94,000     $ 2,548     $ (5,619,651 )   $ 5,356,475     $ 9,366,221     $ (75,597 )   $ 9,123,996  
                                                         
                                                         
                                                         
Balance at December 31, 2012
  $ 94,000     $ 2,548     $ (5,574,819 )   $ 5,357,852     $ 9,704,591     $ (293,083 )   $ 9,291,089  
                                                         
Consolidated net income (a)
    9,915       -       -       -       325,123       -       335,038  
Other comprehensive income
    -       -       -       -       -       18,780       18,780  
Common stock issuances related to stock plans
    -       -       31,348       (2,099 )     -       -       29,249  
Common stock dividends declared
    -       -       -       -       (295,724 )     -       (295,724 )
Preferred dividend requirements of subsidiaries (a)
    (9,915 )     -       -       -       -       -       (9,915 )
                                                         
Balance at June 30, 2013
  $ 94,000     $ 2,548     $ (5,543,471 )   $ 5,355,753     $ 9,733,990     $ (274,303 )   $ 9,368,517  
                                                         
See Notes to Financial Statements.
                                                       
                                                         
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2013 and 2012 include $6.6 million and $7.2 million, respectively, of preferred dividends on subsidiaries' preferred stock without sinking fund that is not presented within equity.
 
                                                         
                                                         



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
   
%
 
   
(Dollars in Millions)
       
Utility Electric Operating Revenues:
                   
  Residential
  $ 729     $ 677     $ 52       8  
  Commercial
    574       523       51       10  
  Industrial
    598       506       92       18  
  Governmental
    53       47       6       13  
    Total retail
    1,954       1,753       201       11  
  Sales for resale
    47       21       26       124  
  Other
    176       161       15       9  
    Total
  $ 2,177     $ 1,935     $ 242       13  
                                 
Utility Billed Electric Energy Sales (GWh):
                         
  Residential
    7,377       7,940       (563 )     (7 )
  Commercial
    6,684       7,148       (464 )     (6 )
  Industrial
    10,357       10,408       (51 )     -  
  Governmental
    583       605       (22 )     (4 )
    Total retail
    25,001       26,101       (1,100 )     (4 )
  Sales for resale
    590       836       (246 )     (29 )
    Total
    25,591       26,937       (1,346 )     (5 )
                                 
                                 
Entergy Wholesale Commodities:
                         
Operating Revenues
  $ 534     $ 568     $ (34 )     (6 )
Billed Electric Energy Sales (GWh)
    11,172       11,674       (502 )     (4 )
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
   
%
 
   
(Dollars in Millions)
         
Utility Electric Operating Revenues:
                         
  Residential
  $ 1,480     $ 1,347     $ 133       10  
  Commercial
    1,097       1,026       71       7  
  Industrial
    1,142       995       147       15  
  Governmental
    105       95       10       11  
    Total retail
    3,824       3,463       361       10  
  Sales for resale
    99       60       39       65  
  Other
    203       196       7       4  
    Total
  $ 4,126     $ 3,719     $ 407       11  
                                 
Utility Billed Electric Energy Sales (GWh):
                         
  Residential
    15,721       15,700       21       -  
  Commercial
    13,105       13,561       (456 )     (3 )
  Industrial
    20,225       20,366       (141 )     (1 )
  Governmental
    1,167       1,184       (17 )     (1 )
    Total retail
    50,218       50,811       (593 )     (1 )
  Sales for resale
    1,219       1,568       (349 )     (22 )
    Total
    51,437       52,379       (942 )     (2 )
                                 
                                 
Entergy Wholesale Commodities:
                         
Operating Revenues
  $ 1,147     $ 1,128     $ 19       2  
Billed Electric Energy Sales (GWh)
    21,559       22,955       (1,396 )     (6 )
                                 
                                 



ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.  COMMITMENTS AND CONTINGENCIES  (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, 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 commissions, and governmental agencies in the ordinary course of business.  While management is unable to predict 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, discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein, and discusses proceedings involving Vermont Yankee in Note 1 to the financial statements in the Form 10-K and in Note 11 to the financial statements herein.

ANO Damage and Outage
 
      On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building.  The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building.  The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant.  Entergy Arkansas is in the process of repairing this damage and readying ANO 1 to return to operation.  ANO 2 reconnected to the grid on April 28, 2013.  Restoration and restart efforts with respect to ANO 1 are ongoing and are expected to be complete before September 30, 2013.  The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment is currently estimated to be in the range of $95 million to $120 million.   This estimate may change through the conclusion of restoration activities.  In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and is incurring incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage.  Each of the Utility operating companies has recovery mechanisms in place designed to recover its prudently-incurred fuel and purchased power costs.

Entergy Arkansas is assessing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action.  Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO.  NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO.  Entergy has responded that it disagrees with NEIL's position and is evaluating its options for enforcing its rights under the policy.  On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a general contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop.

In the second quarter 2013, Entergy Arkansas recorded an insurance receivable of $50 million based on the minimum amount that it expects to receive from NEIL.  This $50 million receivable completely offset the approximately $41 million of capital spending and also offset $9 million of the operation and maintenance expense incurred for the recovery through June 30, 2013.  Entergy Arkansas has incurred approximately $14 million in operation and maintenance expense in excess of its insurance receivable as of June 30, 2013.

 
32
Entergy Corporation and Subsidiaries
Notes to Financial Statements



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.

Conventional 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 Litigation

The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees and third parties not selected for open positions.  These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans.  Entergy and the Registrant Subsidiaries are responding to these lawsuits and proceedings and deny liability to the claimants.

Asbestos Litigation (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas.


NOTE 2.  RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Regulatory Assets

See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries.  The following are updates to that information.

Fuel and Purchased Power Cost Recovery

Entergy Louisiana

In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings.  The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009.  The LPSC Staff issued its audit report in January 2013.  The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates.  Two parties have intervened in the proceeding.  A procedural schedule has been established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC Staff report, with this process to be completed by October 4, 2013.  If any open issues remain, a procedural schedule will be established to address those issues.  Entergy Louisiana has recorded provisions for the estimated outcome of this proceeding.


 
33
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Texas

In November 2012, Entergy Texas filed a pleading seeking a PUCT finding that special circumstances exist for limited cost recovery of capacity costs associated with two power purchase agreements until such time that these costs are included in base rates or a purchased capacity recovery rider or other recovery mechanism.  In March 2013 the PUCT Staff and intervenors filed a joint motion to dismiss Entergy Texas’s application seeking special circumstances recovery of these capacity costs.  Entergy Texas filed to withdraw this case without prejudice and the judge granted the request in June 2013.
 
      At its April 11, 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity rider was good public policy.  The PUCT issued an order on May 28, 2013 adopting the rule allowing for a purchased power capacity rider, subject to an offsetting adjustment for load growth.  The rule, as adopted, also includes a process for obtaining pre-approval by the PUCT of purchased power agreements.  Entergy Texas has the option to recover its capacity costs under the new rider mechanism or could proceed with a full base rate proceeding.

Retail Rate Proceedings

See Note 2 to the financial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies.  The following are updates to that information.

Filings with the APSC (Entergy Arkansas)

Retail Rates

2013 Base Rate Filing

In March 2013, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs.  Recognizing that the final structure of Entergy Arkansas’s transmission business has not been determined, the filing presents two alternative scenarios for the APSC to establish the appropriate level of rates for Entergy Arkansas.  In the primary scenario, which assumes that Entergy Arkansas will transition to MISO in December 2013, Entergy Arkansas requests a rate increase of $174 million, including $49 million of revenue being transferred from collection in riders to base rates.  The alternate scenario, which also assumes completion of the proposed spin-merge of the transmission business with ITC, reflects a $218 million total rate increase request.  Both scenarios propose a new transmission rider and a capacity cost recovery rider.  The filing requests a 10.4% return on common equity.  The APSC established a procedural schedule that includes hearings in the proceeding beginning in October 2013. New rates are expected to become effective by January 2014.

Filings with the LPSC

Retail Rates - Electric

(Entergy Gulf States Louisiana)

In November 2011 the LPSC approved a one-year extension of Entergy Gulf States Louisiana’s formula rate plan.  In May 2012, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2011 test year.  The filing reflected an 11.94% earned return on common equity, which is above the earnings bandwidth and would indicate a $6.5 million cost of service rate decrease was necessary under the formula rate plan.  The filing also reflected a $22.9 million rate decrease for the incremental capacity rider.  Subsequently, in August 2012, Entergy Gulf States Louisiana submitted a revised filing that reflected an earned return on common equity of 11.86% indicating a $5.7 million cost of service rate decrease is necessary under the formula rate plan.  The revised filing also indicates that a reduction of $20.3 million should be reflected in the incremental capacity rider.  The rate reductions were implemented, subject to refund, effective for bills rendered the first billing cycle of September 2012.  Subsequently, in December 2012, Entergy Gulf States Louisiana submitted a revised evaluation report that reflects expected retail jurisdictional cost of $16.9 million for the first-year capacity charges for the purchase from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy.  This rate change was implemented effective with the first billing cycle of January 2013.  The 2011 test year filings, as revised, were approved by the LPSC in February 2013.  In April 2013, Entergy Gulf States Louisiana submitted a revised evaluation report increasing the incremental capacity rider by approximately $7.3 million to reflect the cost of an additional capacity contract.
 
 
34
Entergy Corporation and Subsidiaries
Notes to Financial Statements



See Note 2 to the financial statements in the Form 10-K for a discussion of the base rate case filed by Entergy Gulf States Louisiana with the LPSC in February 2013.  In April 2013 the LPSC established a procedural schedule providing for hearings in November 2013, with a decision by the LPSC expected in 2014.  On July 26, 2013, with the concurrence of Entergy Gulf States Louisiana based upon an expected 60-day delay of the procedural schedule, the ALJ suspended the procedural schedule pending resolution of the appeal by Entergy Gulf States Louisiana, Entergy Louisiana and the LPSC staff regarding the ALJ’s denial of a motion to consolidate the rate cases of Entergy Gulf States Louisiana and Entergy Louisiana.  At its July 31, 2013 meeting the LPSC deferred the agenda item relating to the appeal and directed the LPSC staff to develop a plan for consolidation, to be considered by the LPSC in August 2013.

(Entergy Louisiana)

In November 2011 the LPSC approved a one-year extension of Entergy Louisiana’s formula rate plan.  In May 2012, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2011 test year.  The filing reflected a 9.63% earned return on common equity, which is within the earnings bandwidth and results in no cost of service rate change under the formula rate plan.  The filing also reflected an $18.1 million rate increase for incremental capacity costs.  In August 2012, Entergy Louisiana submitted a revised filing that reflects an earned return on common equity of 10.38%, which is still within the earnings bandwidth, resulting in no cost of service rate change.  The revised filing also indicates that an increase of $15.9 million should be reflected in the incremental capacity rider.  The rate change was implemented, subject to refund, effective for bills rendered the first billing cycle of September 2012.  Subsequently, in December 2012, Entergy Louisiana submitted a revised evaluation report that reflects two items: 1) a $17 million reduction for the first-year capacity charges for the purchase by Entergy Gulf States Louisiana from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy, and 2) an $88 million increase for the first-year retail revenue requirement associated with the Waterford 3 replacement steam generator project, which was in-service in December 2012.  These rate changes were implemented, subject to refund, effective with the first billing cycle of January 2013.  In April 2013, Entergy Louisiana and the LPSC staff filed a joint report resolving the 2011 test year formula rate plan and recovery related to the Grand Gulf uprate.  This report was approved by the LPSC in April 2013.  With completion of the Waterford 3 replacement steam generator project, the LPSC is conducting a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.

See Note 2 to the financial statements in the Form 10-K for a discussion of the base rate case filed by Entergy Louisiana with the LPSC in February 2013.  In April 2013 the LPSC established a procedural schedule providing for hearings in December 2013, with a decision by the LPSC expected in 2014.  On July 26, 2013, with the concurrence of Entergy Louisiana based upon an expected 60-day delay of the procedural schedule, the ALJ suspended the procedural schedule pending resolution of the appeal by Entergy Gulf States Louisiana, Entergy Louisiana and the LPSC staff regarding the ALJ’s denial of a motion to consolidate the rate cases of Entergy Gulf States Louisiana and Entergy Louisiana.  At its July 31, 2013 meeting the LPSC deferred the agenda item relating to the appeal and directed the LPSC staff to develop a plan for consolidation, to be considered by the LPSC in August 2013.

Retail Rates - Gas (Entergy Gulf States Louisiana)

In January 2013, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2012.  The filing showed an earned return on common equity of 11.18%, which resulted in a $43 thousand rate reduction.  In March 2013 the LPSC Staff issued its proposed findings and recommended two adjustments.  The first is to normalize property insurance expense, and the second is to modify the return on equity for gas operations to reflect the return on equity that ultimately is approved by the LPSC in the investigation previously initiated by the LPSC to review the return on equity for Louisiana gas utilities.  Entergy Gulf States Louisiana and the LPSC Staff reached agreement regarding the LPSC Staff’s proposed
 
 
35
Entergy Corporation and Subsidiaries
Notes to Financial Statements


adjustments.  As reflected in an unopposed joint report of proceedings filed by Entergy Gulf States Louisiana and the LPSC Staff on May 16, 2013, Entergy Gulf States Louisiana accepted, with modification, the LPSC Staff’s proposed adjustment to property insurance expense and agreed to: (1) a three-year extension of the gas rate stabilization plan with a midpoint return on equity of 9.95%, with a first year midpoint reset; (2) dismissal of the docket initiated by the LPSC to evaluate the allowed return on equity for Entergy Gulf States Louisiana’s gas rate stabilization plan; and (3) presentation to the LPSC by November 2014 by Entergy Gulf States Louisiana and the LPSC Staff of their recommendation for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment.  The LPSC approved the agreement in May 2013.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan Filings

In March 2013, Entergy Mississippi submitted its formula rate plan 2012 test year filing.  The filing requested a $36.3 million revenue increase to reset Entergy Mississippi's return on common equity to 10.55%, which is a point within the formula rate plan bandwidth.  On June 6, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, in which both parties agreed that the MPSC should approve a $22.3 million rate increase for Entergy Mississippi which, with other adjustments reflected in the stipulation, would have the effect of resetting Entergy Mississippi’s return on common equity to 10.59% when adjusted for performance under the formula rate plan.  An amended scheduling order was issued on July 22, 2013, setting a final MPSC order to be issued on or before August 15, 2013 and new rates to begin billing on August 28, 2013.

Filings with the City Council

(Entergy Louisiana)

In March 2013, Entergy Louisiana filed a rate case for the Algiers area, which is in New Orleans and is regulated by the City Council.  Entergy Louisiana is requesting a rate increase of $13 million over three years, including a 10.4% return on common equity and a formula rate plan mechanism identical to its LPSC request.  New rates are currently expected to become effective in second quarter 2014.

(Entergy New Orleans)

As discussed in the Form 10-K, in May 2012, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports for the 2011 test year.   The City Council had approved a procedural schedule to resolve disputed items that included a hearing in April 2013, but that hearing was postponed.  On August 1, 2013, the Utility Committee of the City Council unanimously approved a settlement of all issues in the formula rate plan proceeding.  Under the terms of the settlement, Entergy New Orleans will implement an approximately $1.625 million net decrease to the electric rates that were in effect prior to the electric rate increase implemented in October 2012, with no change in gas rates.  Entergy New Orleans will refund to customers approximately $6.0 million over the four-month period from September 2013 through December 2013 to make the electric rate decrease effective as of the first billing cycle of October 2012.  Entergy New Orleans had previously recorded provisions for the majority of the refund to customers, but recorded an additional $1.1 million provision in second quarter 2013 as a result of the settlement.  The Utility Committee’s approval will be presented to the City Council for consideration later in August 2013.

System Agreement Cost Equalization Proceedings

See Note 2 to the financial statements in the Form 10-K for a discussion of the proceedings regarding the System Agreement.  Following are updates to that discussion.

 
36
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Rough Production Cost Equalization Rates

2008 Rate Filing Based on Calendar Year 2007 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding.  In March 2013 the LPSC filed a petition for review with the U.S. Court of Appeals for the Fifth Circuit seeking appellate review of the FERC’s earlier orders addressing the ALJ’s initial decision.

2009 Rate Filing Based on Calendar Year 2008 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding.  In January 2013 the LPSC filed a protest of Entergy’s July 2012 compliance filing submitted in response to the FERC’s May 2012 order.

2013 Rate Filing Based on Calendar Year 2012 Production Costs

In May 2013, Entergy filed with the FERC the 2013 rates in accordance with the FERC’s orders in the System Agreement proceeding.  The filing shows the following payments/receipts among the Utility operating companies for 2013, based on calendar year 2012 production costs, commencing for service in June 2013, are necessary to achieve rough production cost equalization under the FERC’s orders:

 
Payments or
(Receipts)
 
(In Millions)
Entergy Arkansas
$-  
Entergy Gulf States Louisiana
$-  
Entergy Louisiana
$-  
Entergy Mississippi
$-  
Entergy New Orleans
($15)
Entergy Texas
$15  

Several parties intervened in the proceeding at the FERC, including the LPSC, which filed a protest as well.  The City Council intervened and filed comments related to including the outcome of a related FERC proceeding in the 2013 cost equalization calculation.  The FERC has not yet issued an order addressing the filing.

Interruptible Load Proceeding

See Note 2 to the financial statements in the Form 10-K for a discussion of the proceeding regarding the treatment under the System Agreement of the Utility operating companies’ interruptible loads.  On March 21, 2013, the FERC issued an order denying the LPSC's request for rehearing of the FERC's June 2011 order wherein the FERC concluded it would exercise its discretion and not order refunds in the interruptible load proceeding.  Based on its review of the LPSC’s request for rehearing and the briefs filed as part of the paper hearing established in October 2011, the FERC affirmed its earlier ruling and declined to order refunds under the circumstances of the case.  On May 2, 2013, the LPSC filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking review of FERC’s prior orders in the Interruptible Load Proceeding concluding that it would exercise its discretion and not order refunds in the proceeding.  The appeal is pending.

Storm Cost Recovery Filings with Retail Regulators

Entergy Gulf States Louisiana and Entergy Louisiana

Hurricane Isaac

See Note 2 to the financial statements in the Form 10-K for a discussion of Hurricane Isaac and the damage caused to portions of Entergy’s service area in Louisiana.  In January 2013, Entergy Gulf States Louisiana and Entergy Louisiana withdrew $65 million and $187 million, respectively, from their storm reserve escrow accounts.  In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs.  Specifically, Entergy
 
 
37
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Gulf States Louisiana and Entergy Louisiana requested that the LPSC determine the amount of such costs that were prudently incurred and are, thus, eligible for recovery from customers.  Including carrying costs and additional storm escrow funds, Entergy Gulf States Louisiana is seeking an LPSC determination that $73.8 million in system restoration costs were prudently incurred and Entergy Louisiana is seeking an LPSC determination that $247.7 million in system restoration costs were prudently incurred.  Entergy Gulf States Louisiana and Entergy Louisiana intend to replenish their storm escrow accounts to $90 million and $200 million, respectively, primarily through traditional debt markets and have requested special rate treatment of any borrowings for that purpose.  In May 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a supplemental application proposing a specific means to finance system restoration costs and related requests.  Entergy Gulf States Louisiana and Entergy Louisiana are proposing to finance Hurricane Isaac restoration costs through Louisiana Act 55 financing, which was the same method they used for Hurricanes Katrina, Rita, Gustav, and Ike.

Entergy Mississippi

On July 1, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, wherein both parties agreed that approximately $32 million in storm restoration costs incurred in 2011 and 2012 were prudently incurred and chargeable to the storm damage reserve, while approximately $700,000 in prudently incurred costs were more properly recoverable through the formula rate plan.  Entergy Mississippi and the Mississippi Public Utilities Staff also agreed that the storm damage accrual should be increased from $750,000 per month to $1.75 million per month.  The joint stipulation is pending approval of the MPSC.
 
 
Texas Power Price Lawsuit

See Note 2 to the financial statements in the Form 10-K for a discussion of the lawsuit filed in August 2003 in the district court of Chambers County, Texas by Texas residents on behalf of a purported class of the Texas retail customers of Entergy Gulf States, Inc. who were billed and paid for electric power from January 1, 1994 to the present.  The case is pending in state district court, and in March 2012 the court found that the case met the requirements to be maintained as a class action under Texas law.  In April 2012 the court entered an order certifying the class.  The defendants have appealed the order to the Texas Court of Appeals – First District.  The appeal is pending, and proceedings in district court are stayed until the appeal is resolved.  Oral arguments before the court of appeals were conducted on April 23, 2013, and the matter awaits that court’s decision.

Entergy Arkansas Opportunity Sales Proceeding

See Note 2 to the financial statements in the Form 10-K for a discussion of the Entergy Arkansas opportunity sales proceeding.  As required by the procedural schedule established in the calculation proceeding, Entergy filed its direct testimony that included a proposed illustrative re-run, consistent with the directives in FERC’s order, of intra-system bills for 2003, 2004, and 2006, the three years with the highest volume of opportunity sales.  Entergy’s proposed illustrative re-run of intra-system bills shows that the potential cost for Entergy Arkansas would be up to $12 million for the years 2003, 2004, and 2006, and the potential benefit would be significantly less than that for each of the other Utility operating companies.  Entergy’s proposed illustrative re-run of the intra-system bills also shows an offsetting potential benefit to Entergy Arkansas for the years 2003, 2004, and 2006 resulting from the effects of the FERC’s order on System Agreement Service Schedules MSS-1, MSS-2, and MSS-3, and the potential offsetting cost would be significantly less than that for each of the other Utility operating companies.  Entergy provided to the LPSC an illustrative intra-system bill recalculation as specified by the LPSC for the years 2003, 2004, and 2006, and the LPSC then filed answering testimony in December 2012.  In its testimony the LPSC claims that the damages that should be paid by Entergy Arkansas to the other Utility operating companies’ customers for 2003, 2004, and 2006 are $42 million to Entergy Gulf States, Inc., $7 million to Entergy
 
 
 
 
38
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Louisiana, $23 million to Entergy Mississippi, and $4 million to Entergy New Orleans; and that Entergy Arkansas “shareholders” should pay Entergy Arkansas customers $34 million.  The FERC staff and certain intervenors filed direct and answering testimony in February 2013.  In April 2013, Entergy filed its rebuttal testimony in that proceeding, including a revised illustrative re-run of the intra-system bills for the years 2003, 2004, and 2006.  The revised calculation determines the re-pricing of the opportunity sales based on consideration of moveable resources only and the removal of exchange energy received by Entergy Arkansas, which increases the potential cost for Entergy Arkansas over the three years 2003, 2004, and 2006 by $2.3 million from the potential costs identified in the Utility operating companies’ prior filings in September and October 2012.  A hearing was held in May 2013 to quantify the effect of repricing the opportunity sales in accordance with the FERC’s decision.  Post-hearing briefs have been filed in the proceeding, and the ALJ’s initial decision on the calculation of the effects is due by August 28, 2013.


NOTE 3.  EQUITY  (Entergy Corporation, Entergy Gulf States Louisiana, and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:

   
For the Three Months Ended June 30,
   
2013
 
2012
   
(In Millions, Except Per Share Data)
                         
Basic earnings per share
 
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
                         
Net income attributable to
Entergy Corporation
 
 
$163.7
 
 
178.2
 
 
$0.92
 
 
$365.0
 
 
177.2
 
 
$2.06
Average dilutive effect of:
                       
Stock options
     
0.1
 
- 
     
0.4
 
- 
Other equity plans
     
0.3
 
- 
 
 
 
-
 
 - 
                         
Diluted earnings per share
 
$163.7
 
178.6
 
$0.92 
 
$365.0
 
177.6
 
$2.06
     
     
   
For the Six Months Ended June 30,
   
2013
 
2012
   
(In Millions, Except Per Share Data)
                         
Basic earnings per share
 
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
                         
Net income attributable to
Entergy Corporation
 
 
$325.1
 
 
178.1
 
 
$1.83 
 
 
$213.3
 
 
177.0
 
 
$1.21
Average dilutive effect of:
                       
Stock options
     
0.1
 
- 
     
0.4
 
(0.01)
Other equity plans
     
0.3
 
(0.01)
 
 
 
0.1
 
 - 
                         
Diluted earnings per share
 
$325.1
 
178.5
 
$1.82 
 
$213.3
 
177.5
 
$1.20
 
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 8.9 million for the three and six months ended June 30, 2013, and 8.5 million and 8.4 million for the three and six months ended June 30, 2012, respectively.

Entergy’s stock options and other equity compensation plans are discussed in Note 5 herein and in Note 12 to the financial statements in the Form 10-K.
 
 
39
Entergy Corporation and Subsidiaries
Notes to Financial Statements



Treasury Stock

During the six months ended June 30, 2013, Entergy Corporation issued 431,833 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, 2013.

Retained Earnings

On July 26, 2013, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.83 per share, payable on September 3, 2013 to holders of record as of August 8, 2013.

Comprehensive Income

Accumulated other comprehensive loss is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana.  The following table presents changes in accumulated other comprehensive loss for Entergy for the three months ended June 30, 2013 by component:

 
Cash flow
hedges
net
unrealized
gain
 
Pension
and
other
postretirement
liabilities
 
 
Net
unrealized
investment
gains
 
 
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Loss
 
(In Thousands)
                   
Beginning balance, March 31, 2013
$3,930 
 
($580,917)
 
$270,924 
 
$2,405 
 
($303,658)
                   
Other comprehensive income (loss)
before reclassifications
 
30,023 
 
 
- 
 
 
(7,176)
 
 
19 
 
 
22,866 
Amounts reclassified from
accumulated other comprehensive
income (loss)
 
 
(2,433)
 
 
 
9,779 
 
 
 
(857)
 
 
 
- 
 
 
 
6,489 
Net other comprehensive income (loss) for the period
 
27,590 
 
 
9,779 
 
 
(8,033)
 
 
19 
 
 
29,355 
                   
Ending balance, June 30, 2013
$31,520 
 
($571,138)
 
$262,891  
 
$2,424 
 
($274,303)

 
40
Entergy Corporation and Subsidiaries
Notes to Financial Statements


 
The following table presents changes in accumulated other comprehensive loss for Entergy for the six months ended June 30, 2013 by component:

 
Cash flow
hedges
net
unrealized
gain
 
Pension
and
other
postretirement
liabilities
 
 
Net
unrealized
investment
gains
 
 
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Loss
 
(In Thousands)
                   
Beginning balance, December 31, 2012
$79,905 
 
($590,712)
 
$214,547 
 
$3,177 
 
($293,083)
                   
Other comprehensive income (loss)
before reclassifications
 
(47,538)
 
 
- 
 
 
50,196 
 
 
(753)
 
 
1,905 
Amounts reclassified from
accumulated other comprehensive
income (loss)
 
 
(847)
 
 
 
19,574 
 
 
 
(1,852)
 
 
 
- 
 
 
 
16,875 
Net other comprehensive income (loss) for the period
 
(48,385)
 
 
19,574 
 
 
48,344 
 
 
(753)
 
 
18,780 
                   
Ending balance, June 30, 2013
$31,520 
 
($571,138)
 
$262,891  
 
$2,424 
 
($274,303)

The following table presents changes in accumulated other comprehensive loss for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended June 30, 2013:

   
Pension and Other
Postretirement Liabilities
   
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
   
(In Thousands)
         
Beginning balance, March 31, 2013
 
($64,274)
 
($45,454)
         
Amounts reclassified from accumulated other
comprehensive income
 
 
962 
 
 
683 
Net other comprehensive income for the period
 
962 
 
683 
         
Ending balance, June 30, 2013
 
($63,312)
 
($44,771)
 
 
41
Entergy Corporation and Subsidiaries
Notes to Financial Statements



The following table presents changes in accumulated other comprehensive loss for Entergy Gulf States Louisiana and Entergy Louisiana for the six months ended June 30, 2013:

   
Pension and Other
Postretirement Liabilities
   
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
   
(In Thousands)
         
Beginning balance, December 31, 2012
 
($65,229)
 
($46,132)
         
Amounts reclassified from accumulated other
comprehensive income
 
 
1,917 
 
 
1,361 
Net other comprehensive income for the period
 
1,917 
 
1,361 
         
Ending balance, June 30, 2013
 
($63,312)
 
($44,771)


Total reclassifications out of accumulated other comprehensive loss (AOCI) for Entergy for the three months ended June 30, 2013 are as follows:

   
Amounts
reclassified
from
AOCI
 
 
 
 
Income Statement Location
   
(In Thousands)
   
         
Cash flow hedges net unrealized gain
       
Power contracts
 
$4,309 
 
Competitive business operating revenues
Interest rate swaps
 
(399)
 
Miscellaneous - net
Total realized gains on cash flow hedges
 
3,910 
   
   
(1,477)
 
Income taxes
Total realized gains on cash flow hedges (net of tax)
 
$2,433 
   
         
Pension and other postretirement liabilities
       
Amortization of prior-service costs
 
$2,383 
 
(a)
Amortization of loss
 
(18,047)
 
(a)
Total amortization
 
(15,664)
   
   
5,885 
 
Income taxes
Total amortization (net of tax)
 
($9,779)
   
         
Net unrealized investment gains
       
Realized gains
 
$1,681 
 
Interest and investment income
   
(824)
 
Income taxes
Total realized investment gains (net of tax)
 
$857 
   
         
Total reclassifications for the period (net of tax)
 
($6,489)
   

(a)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.  See Note 6 to the financial statements for additional details.



 
42
Entergy Corporation and Subsidiaries
Notes to Financial Statements



Total reclassifications out of accumulated other comprehensive loss (AOCI) for Entergy for the six months ended June 30, 2013 are as follows:

   
Amounts
reclassified
from
AOCI
 
 
 
 
Income Statement Location
   
(In Thousands)
   
         
Cash flow hedges net unrealized gain
       
Power contracts
 
$2,192 
 
Competitive business operating revenues
Interest rate swaps
 
(804)
 
Miscellaneous - net
Total realized gains  on cash flow hedges
 
1,388 
   
   
(541)
 
Income taxes
Total realized gains on cash flow hedges (net of tax)
 
$847 
   
         
Pension and other postretirement liabilities
       
Amortization of prior-service costs
 
4,767 
 
(a)
Amortization of loss
 
(36,095)
 
(a)
Total amortization
 
(31,328)
   
   
11,754 
 
Income taxes
Total amortization (net of tax)
 
($19,574)
   
         
Net unrealized investment gains
       
Realized gains
 
$3,631 
 
Interest and investment income
   
(1,779)
 
Income taxes
Total realized investment gains (net of tax)
 
$1,852 
   
         
Total reclassifications for the period (net of tax)
 
($16,875)
   

(a)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.  See Note 6 to the financial statements for additional details.

Total reclassifications out of accumulated other comprehensive loss (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended June 30, 2013 are as follows:

   
Amounts reclassified
from AOCI
   
   
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
 
Income Statement Location
   
(In Thousands)
   
             
Pension and other postretirement liabilities
           
Amortization of prior-service costs
 
$205 
 
$62 
 
(a)
Amortization of loss
 
(1,945)
 
(1,287)
 
(a)
Total amortization
 
(1,740)
 
(1,225)
   
   
778 
 
542 
 
Income taxes
Total amortization (net of tax)
 
(962)
 
(683)
   
             
Total reclassifications for the period (net of tax)
 
($962)
 
($683)
   

(a)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.  See Note 6 to the financial statements for additional details.
 
 
 
43
Entergy Corporation and Subsidiaries
Notes to Financial Statements



Total reclassifications out of accumulated other comprehensive loss (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the six months ended June 30, 2013 are as follows:

   
Amounts reclassified
from AOCI
   
   
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
 
Income Statement Location
   
(In Thousands)
   
             
Pension and other postretirement liabilities
           
Amortization of prior-service costs
 
$411 
 
$124 
 
(a)
Amortization of loss
 
(3,892)
 
(2,574)
 
(a)
Total amortization
 
(3,481)
 
(2,450)
   
   
1,564 
 
1,089 
 
Income taxes
Total amortization (net of tax)
 
(1,917)
 
(1,361)
   
             
Total reclassifications for the period (net of tax)
 
($1,917)
 
($1,361)
   

(a)
These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.  See Note 6 to the financial statements for additional details.


NOTE 4.  REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT   (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2018.  Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.275% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the six months ended June 30, 2013 was 1.97% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2013.

 
Capacity (a)
 
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
             
$3,500
 
$190
 
$8
 
$3,302

(a)
The capacity decreases to $3,490 million in March 2017.

Entergy Corporation’s facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization.  Entergy is in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.

Entergy Corporation has a commercial paper program with a program limit of up to $1 billion.  As of June 30, 2013, Entergy Corporation had $948 million of commercial paper outstanding.  The weighted-average interest rate for the six months ended June 30, 2013 was 0.84%.  In July 2013 the Board increased the commercial paper program limit to $1.5 billion.


 
44
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 2013 as follows:

 
 
 
Company
 
 
 
 
Expiration Date
 
 
 
Amount of
Facility
 
 
 
 
Interest Rate (a)
 
Amount Drawn
as of
June 30,
2013
                 
Entergy Arkansas
 
April 2014
 
$20 million (b)
 
1.78%
 
$-
Entergy Arkansas
 
March 2018
 
$150 million (c)
 
1.70%
 
$-
Entergy Gulf States Louisiana
 
March 2018
 
$150 million (d)
 
1.70%
 
$100 million
Entergy Louisiana
 
March 2018
 
$200 million (e)
 
1.70%
 
$100 million
Entergy Mississippi
 
May 2014
 
$37.5 million (f)
 
3.25%
 
$28.4 million
Entergy Mississippi
 
May 2014
 
$35 million (f)
 
3.25%
 
$26.5 million
Entergy Mississippi
 
May 2014
 
$20 million (f)
 
3.25%
 
$15.1 million
Entergy New Orleans
 
November 2013
 
$25 million (g)
 
1.67%
 
$-
Entergy Texas
 
March 2018
 
$150 million (h)
 
1.95%
 
$-

(a)
The interest rate is the rate as of June 30, 2013 that would most likely apply to outstanding borrowings under the facility.
(b)
The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization.  Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable.
(c)
The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of June 30, 2013, no letters of credit were outstanding.  The credit facility requires Entergy Arkansas to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(d)
The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  As of June 30, 2013, no letters of credit were outstanding.  The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(e)
The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  As of June 30, 2013, no letters of credit were outstanding.  The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization.
(f)
The credit facilities require Entergy Mississippi to maintain a debt ratio of 65% or less of its total capitalization.  Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.
(g)
The credit facility requires Entergy New Orleans to maintain a debt ratio of 65% or less of its total capitalization.
(h)
The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of June 30, 2013, no letters of credit were outstanding.  The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization.

The commitment fees on the credit facilities range from 0.125% to 0.275% of the undrawn commitment amount.

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits are effective through October 31, 2013.  In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from the money pool 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, 2013 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:

 
45
Entergy Corporation and Subsidiaries
Notes to Financial Statements





   
Authorized
 
Borrowings
   
(In Millions)
         
Entergy Arkansas
 
$250
 
$-
Entergy Gulf States Louisiana
 
$200
 
$36
Entergy Louisiana
 
$250
 
$-
Entergy Mississippi
 
$175
 
$70
Entergy New Orleans
 
$100
 
$-
Entergy Texas
 
$200
 
$-
System Energy
 
$200
 
$51

Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through October 31, 2013.  Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2015.  Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2014.

Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)

See Note 18 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE).  The nuclear fuel company variable interest entities have credit facilities and also issue commercial paper to finance the acquisition and ownership of nuclear fuel as follows as of June 30, 2013:

 
 
 
 
 
Company
 
 
 
 
 
Expiration
Date
 
 
 
 
Amount
of
Facility
 
Weighted
Average
Interest
Rate on
Borrowings
(a)
 
 
Amount
Outstanding
as of
June 30,
2013
   
(Dollars in Millions)
                 
Entergy Arkansas VIE
 
June 2016
 
$85
 
1.58%
 
$29.9
Entergy Gulf States Louisiana VIE
 
June 2016
 
$100
 
1.38%
 
$44.7
Entergy Louisiana VIE
 
 June 2016
 
$90
 
1.58%
 
$41.9
System Energy VIE
 
June 2016
 
$125
 
1.58%
 
$1.1

(a)
Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy.  The nuclear fuel company variable interest entity for Entergy Gulf States Louisiana does not issue commercial paper, but borrows directly on its bank credit facility.

Amounts outstanding on the Entergy Gulf States Louisiana nuclear fuel company variable interest entity’s credit facility, if any, are included in long-term debt on its balance sheet and commercial paper outstanding for the other nuclear fuel company variable interest entities is classified as a current liability on the respective balance sheets.  The commitment fees on the credit facilities are 0.125% of the undrawn commitment amount.  Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio of 70% or less of its total capitalization.


 
46
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of June 30, 2013 as follows:

Company
 
Description
 
Amount
         
Entergy Arkansas VIE
 
5.69% Series I due July 2014
 
$70 million
Entergy Arkansas VIE
 
3.23% Series J due July 2016
 
$55 million
Entergy Arkansas VIE
 
2.62% Series K due December 2017
 
$60 million
Entergy Gulf States Louisiana VIE
 
3.25% Series Q due July 2017
 
$75 million
Entergy Gulf States Louisiana VIE
 
3.38% Series R due August 2020
 
$70 million
Entergy Louisiana VIE
 
5.69% Series E due July 2014
 
$50 million
Entergy Louisiana VIE
 
3.30% Series F due March 2016
 
$20 million
Entergy Louisiana VIE
 
3.25% Series G due July 2017
 
$25 million
System Energy VIE
 
6.29% Series F due September 2013
 
$70 million
System Energy VIE
 
5.33% Series G due April 2015
 
$60 million
System Energy VIE
 
4.02% Series H due February 2017
 
$50 million

In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.

Debt Issuances and Redemptions

(Entergy Arkansas)

In January 2013, Entergy Arkansas arranged for the issuance by (i) Independence County, Arkansas of $45 million of 2.375% Pollution Control Revenue Refinancing Bonds (Entergy Arkansas, Inc. Project) Series 2013 due January 2021, and (ii) Jefferson County, Arkansas of $54.7 million of 1.55% Pollution Control Revenue Refunding Bonds (Entergy Arkansas, Inc. Project) Series 2013 due October 2017, each of which series is secured by a separate series of non-interest bearing first mortgage bonds of Entergy Arkansas.  The proceeds of these issuances were applied to the refunding of outstanding series of pollution control revenue bonds previously issued by the respective issuers.

In May 2013, Entergy Arkansas issued $250 million of 3.05% Series first mortgage bonds due June 2023. Entergy Arkansas used the proceeds to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

In June 2013, Entergy Arkansas issued $125 million of 4.75% Series first mortgage bonds due June 2063. Entergy Arkansas used the proceeds to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

In June 2013, the Entergy Arkansas nuclear fuel company variable interest entity redeemed, at maturity, its $30 million 9% Series H notes.

In July 2013, Entergy Arkansas entered into a $250 million credit facility terminating January 26, 2015 with the collateral support of a series of $255 million non-interest bearing Entergy Arkansas first mortgage bonds.  On July 31, 2013, Entergy Arkansas borrowed $250 million against the credit facility.  Entergy Arkansas used the borrowings to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

(Entergy Gulf States Louisiana)

In February 2013, the Entergy Gulf States Louisiana nuclear fuel company variable interest entity issued $70 million of 3.38% Series R notes due August 2020.  The Entergy Gulf States Louisiana nuclear fuel company variable interest entity used the proceeds primarily to purchase additional nuclear fuel.
 
 
47
Entergy Corporation and Subsidiaries
Notes to Financial Statements



In May 2013, the Entergy Gulf States Louisiana nuclear fuel company variable interest entity redeemed, at maturity, its $75 million 5.56% Series N notes.

(Entergy Louisiana)

In May 2013, Entergy Louisiana issued $100 million of 4.70% Series first mortgage bonds due June 2063. Entergy Louisiana used the proceeds for general corporate purposes.

(Entergy Mississippi)

           In February 2013, Entergy Mississippi redeemed, at maturity, its $100 million 5.15% Series first mortgage bonds.

(Entergy New Orleans)

In June 2013, Entergy New Orleans issued $100 million of 3.90% Series first mortgage bonds due July 2023.  Entergy New Orleans used the proceeds to pay, at maturity, its $70 million 5.25% Series first mortgage bonds due August 2013 and for general corporate purposes.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of June 30, 2013 are as follows:
   
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
   
(In Thousands)
         
Entergy
 
$12,620,374
 
$12,576,682 
Entergy Arkansas
 
$2,462,111
 
$2,265,544 
Entergy Gulf States Louisiana
 
$1,657,248
 
$1,715,151 
Entergy Louisiana
 
$3,007,262
 
$2,964,920 
Entergy Mississippi
 
$1,139,591
 
$1,170,851 
Entergy New Orleans
 
$295,938
 
$294,081 
Entergy Texas
 
$1,584,877
 
$1,754,086 
System Energy
 
$742,954
 
$650,918 

(a)
The values exclude lease obligations of $151 million at Entergy Louisiana and $98 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $111 million at Entergy, and include debt due within one year.
(b)
Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.


 
48
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2012 were as follows:

   
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
   
(In Thousands)
         
Entergy
 
$12,638,834
 
$12,849,330
Entergy Arkansas
 
$2,123,895
 
$1,876,335
Entergy Gulf States Louisiana
 
$1,517,429
 
$1,668,819
Entergy Louisiana
 
$2,826,095
 
$2,921,322
Entergy Mississippi
 
$1,169,519
 
$1,230,714
Entergy New Orleans
 
$196,300
 
$200,725
Entergy Texas
 
$1,617,813
 
$1,885,672
System Energy
 
$783,799
 
$664,670

(a)
The values exclude lease obligations of $163 million at Entergy Louisiana and $139 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $110 million at Entergy, and include debt due within one year.
(b)
Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.
 
 
  NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

Entergy grants stock awards, which are described more fully in Note 12 to the financial statements in the Form 10-K.  Awards under Entergy’s plans generally vest over three years.

Stock Options

Entergy granted 600,700 stock options during the first quarter 2013 with a weighted-average fair value of $8.00 per option.  At June 30, 2013, there are 9,602,168 stock options outstanding with a weighted-average exercise price of $79.95.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the difference in the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2013.  Because Entergy’s stock price at June 30, 2013 is less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of June 30, 2013 is zero.  The intrinsic value of “in the money” stock options is $12.3 million as of June 30, 2013.

The following table includes financial information for stock options for the second quarters of 2013 and 2012:

 
2013
 
2012
 
(In Millions)
       
Compensation expense included in Entergy’s net income
$0.9
 
$1.9
Tax benefit recognized in Entergy’s net income
$0.4
 
$0.7
Compensation cost capitalized as part of fixed assets and inventory
$0.2
 
$0.4


 
49
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The following table includes financial information for stock options for the six months ended June 30, 2013 and 2012:

 
2013
 
2012
 
(In Millions)
       
Compensation expense included in Entergy’s net income
$2.2
 
$3.9
Tax benefit recognized in Entergy’s net income
$0.9
 
$1.5
Compensation cost capitalized as part of fixed assets and inventory
$0.4
 
$0.8

Other Equity Plans

In January 2013 the Board approved and Entergy granted 361,700 restricted stock awards and 201,474 long-term incentive awards under the 2011 Equity Ownership and Long-term Cash Incentive Plan.  The restricted stock awards were made effective as of January 31, 2013 and were valued at $64.60 per share, which was the closing price of Entergy’s common stock on that date.  One-third of the restricted stock awards will vest upon each anniversary of the grant date.  The long-term incentive awards are granted in the form of performance units, which are equal to the cash value of shares of Entergy Corporation at the end of the performance period, which is the last day of the year.  The performance units were made effective as of January 31, 2013 and were valued at $65.36 per share.  Entergy considers various factors, primarily market conditions, in determining the value of the performance units.  Shares of the restricted stock awards 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.  Shares of the performance units have the same dividend 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.

The following table includes financial information for other equity plans for the second quarters of 2013 and 2012:

 
2013
 
2012
 
(In Millions)
       
Compensation expense included in Entergy’s net income
$5.9
 
$3.6
Tax benefit recognized in Entergy’s net income
$2.3
 
$1.4
Compensation cost capitalized as part of fixed assets and inventory
$1.1
 
$0.8


 The following table includes financial information for other equity plans for the six months ended June 30, 2013 and 2012:

 
2013
 
2012
 
(In Millions)
       
Compensation expense included in Entergy’s net income
$11.8
 
$7.4
Tax benefit recognized in Entergy’s net income
$4.6
 
$2.8
Compensation cost capitalized as part of fixed assets and inventory
$1.8
 
$1.3



 
50
Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 6.  RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Components of Qualified Net Pension Cost

Entergy’s qualified pension cost, including amounts capitalized, for the second quarters of 2013 and 2012, included the following components:

   
2013
 
2012
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$44,051 
 
$37,691 
Interest cost on projected benefit obligation
 
65,266 
 
65,232 
Expected return on assets
 
(81,748)
 
(79,356)
Amortization of prior service cost
 
567 
 
683 
Amortization of loss
 
54,951 
 
41,820 
Net pension costs
 
$83,087 
 
$66,070 

Entergy’s qualified pension cost, including amounts capitalized, for the six months ended June 30, 2013 and 2012, included the following components:

   
2013
 
2012
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$88,102 
 
$75,382 
Interest cost on projected benefit obligation
 
130,532 
 
130,464 
Expected return on assets
 
(163,496)
 
(158,712)
Amortization of prior service cost
 
1,134 
 
1,366 
Amortization of loss
 
109,902 
 
83,640 
Net pension costs
 
$166,174 
 
$132,140 

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for the second quarters of 2013 and 2012, included the following components:

 
 
2013
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$6,371 
 
$3,599 
 
$4,334 
 
$1,842 
 
$832 
 
$1,637 
 
$1,836 
Interest cost on projected
                           
  benefit obligation
 
13,550 
 
6,657 
 
8,644 
 
3,930 
 
1,849
 
4,055 
 
3,016 
Expected return on assets
 
(16,717)
 
(8,734)
 
(10,454)
 
(5,279)
 
(2,270)
 
(5,566)
 
(4,299)
Amortization of prior service
                           
  cost
 
6 
 
2 
 
21 
 
2 
 
- 
 
2 
 
3 
Amortization of loss
 
12,543 
 
5,934 
 
8,727 
 
3,344 
 
2,011 
 
3,373 
 
2,429 
Net pension cost
 
$15,753 
 
$7,458 
 
$11,272 
 
$3,839 
 
$2,422 
 
$3,501 
 
$2,985 


 
51
Entergy Corporation and Subsidiaries
Notes to Financial Statements



 
 
2012
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$5,542 
 
$3,068 
 
$3,669 
 
$1,602 
 
$706 
 
$1,421 
 
$1,480 
Interest cost on projected
                           
  benefit obligation
 
13,922 
 
6,420 
 
8,800 
 
4,070 
 
1,902
 
4,206 
 
3,247 
Expected return on assets
 
(16,441)
 
(8,593)
 
(10,209)
 
(5,236)
 
(2,215)
 
(5,581)
 
(4,109)
Amortization of prior service
                           
  cost
 
50 
 
5 
 
52 
 
7 
 
2 
 
4 
 
3 
Amortization of loss
 
10,193 
 
4,043 
 
7,050 
 
2,633 
 
1,719 
 
2,544 
 
2,251 
Net pension cost
 
$13,266 
 
$4,943 
 
$9,362 
 
$3,076 
 
$2,114 
 
$2,594 
 
$2,872 

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for the six months ended June 30, 2013 and 2012, included the following components:

 
 
2013
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$12,742 
 
$7,198
 
$8,668 
 
$3,684 
 
$1,664 
 
$3,274 
 
$3,672 
Interest cost on projected
                           
  benefit obligation
 
27,100 
 
13,314 
 
17,288 
 
7,860 
 
3,698
 
8,110 
 
6,032 
Expected return on assets
 
(33,434)
 
(17,468)
 
(20,908)
 
(10,558)
 
(4,540)
 
(11,132)
 
(8,598)
Amortization of prior service
                           
  cost
 
12 
 
4 
 
42 
 
4 
 
- 
 
4 
 
6 
Amortization of loss
 
25,087 
 
11,867 
 
17,454 
 
6,688 
 
4,022 
 
6,746 
 
4,858 
Net pension cost
 
$31,507 
 
$14,915 
 
$22,544 
 
$7,678 
 
$4,844 
 
$7,002 
 
$5,970 


 
 
2012
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
 Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$11,084 
 
$6,136 
 
$7,338 
 
$3,204 
 
$1,412 
 
$2,842 
 
$2,960 
Interest cost on projected
                           
  benefit obligation
 
27,844 
 
12,840 
 
17,600 
 
8,140 
 
3,804 
 
8,412 
 
6,494 
Expected return on assets
 
(32,882)
 
(17,186)
 
(20,418)
 
(10,472)
 
(4,430)
 
(11,162)
 
(8,218)
Amortization of prior service
                           
  cost
 
100 
 
10 
 
104 
 
14 
 
4 
 
8 
 
6 
Amortization of loss
 
20,386 
 
8,086 
 
14,100 
 
5,266 
 
3,438 
 
5,088 
 
4,502 
Net pension cost
 
$26,532 
 
$9,886 
 
$18,724 
 
$6,152 
 
$4,228 
 
$5,188 
 
$5,744 



 
52
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy recognized $5.5 million and $5.1 million in pension cost for its non-qualified pension plans in the second quarters of 2013 and 2012, respectively.  Entergy recognized $10.9 million and $10.2 million in pension cost for it non-qualified pension plans for the six months ended June 30, 2013 and 2012, respectively.

The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the second quarters of 2013 and 2012:

   
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
   
(In Thousands)
Non-qualified pension cost
 second quarter 2013
 
 
$102
 
 
$37
 
 
$3
 
 
$46
 
 
$22
 
 
$148
Non-qualified pension cost
 second quarter 2012
 
 
$107
 
 
$39
 
 
$3
 
 
$46
 
 
$19
 
 
$163

The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans for the six months ended June 30, 2013 and 2012:

   
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
   
(In Thousands)
Non-qualified pension cost
 six months ended June 30, 2013
 
 
$205
 
 
$75
 
 
$6
 
 
$93
 
 
$45
 
 
$297
Non-qualified pension cost
 six months ended June 30, 2012
 
 
$214
 
 
$78
 
 
$6
 
 
$92
 
 
$38
 
 
$326

Components of Net Other Postretirement Benefit Cost

Entergy’s other postretirement benefit cost, including amounts capitalized, for the second quarters of 2013 and 2012, included the following components:

   
2013
 
2012
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$18,917 
 
$17,221 
Interest cost on accumulated postretirement benefit
     obligation (APBO)
 
 
19,766 
 
 
20,640 
Expected return on assets
 
(9,950)
 
(8,626)
Amortization of transition obligation
 
- 
 
794 
Amortization of prior service cost
 
(3,334)
 
(4,541)
Amortization of loss
 
11,304 
 
9,113 
Net other postretirement benefit cost
 
$36,703 
 
$34,601 



 
53
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy’s other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2013 and 2012, included the following components:

   
2013
 
2012
   
(In Thousands)
         
Service cost - benefits earned during the period
 
$37,834 
 
$34,442 
Interest cost on accumulated postretirement benefit
     obligation (APBO)
 
 
39,532 
 
 
41,280 
Expected return on assets
 
(19,900)
 
(17,252)
Amortization of transition obligation
 
- 
 
1,588 
Amortization of prior service cost
 
(6,668)
 
(9,082)
Amortization of loss
 
22,608 
 
18,226 
Net other postretirement benefit cost
 
$73,406 
 
$69,202 

The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for the second quarters of 2013 and 2012, included the following components:

 
 
2013
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$2,414 
 
$2,001 
 
$2,172 
 
$819 
 
$447 
 
$950 
 
$907 
Interest cost on APBO
 
3,360 
 
2,226 
 
2,349 
 
1,074 
 
785 
 
1,515 
 
729 
Expected return on assets
 
(4,149)
 
- 
 
- 
 
(1,317)
 
(1,014)
 
(2,321)
 
(825)
Amortization of prior service
                           
  cost
 
(133)
 
(206)
 
(62)
 
(35)
 
10 
 
(107)
 
(16)
Amortization of loss
 
2,042 
 
1,173 
 
1,286 
 
663 
 
397 
 
975 
 
479 
Net other postretirement
                           
  benefit cost
 
$3,534 
 
$5,194 
 
$5,745 
 
$1,204 
 
$625 
 
$1,012 
 
$1,274 

 
 
2012
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$2,272 
 
$1,880 
 
$1,949 
 
$773 
 
$422 
 
$913 
 
$823 
Interest cost on APBO
 
3,613 
 
2,398 
 
2,445 
 
1,179 
 
856 
 
1,663 
 
757 
Expected return on assets
 
(3,507)
 
- 
 
- 
 
(1,130)
 
(928)
 
(2,104)
 
(650)
Amortization of transition
                           
  obligation
 
205 
 
60 
 
96 
 
88 
 
297 
 
47 
 
2 
Amortization of prior service
                           
  cost
 
(133)
 
(206)
 
(62)
 
(35)
 
10 
 
(107)
 
(16)
Amortization of loss
 
2,077 
 
1,184 
 
1,090 
 
730 
 
390 
 
1,079 
 
493 
Net other postretirement
                           
  benefit cost
 
$4,527 
 
$5,316 
 
$5,518 
 
$1,605 
 
$1,047 
 
$1,491 
 
$1,409 



 
54
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2013 and 2012, included the following components:

 
 
2013
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$4,828 
 
$4,002 
 
$4,344 
 
$1,638 
 
$894 
 
$1,900 
 
$1,814 
Interest cost on APBO
 
6,720 
 
4,452 
 
4,698 
 
2,148 
 
1,570 
 
3,030 
 
1,458 
Expected return on assets
 
(8,298)
 
- 
 
- 
 
(2,634)
 
(2,028)
 
(4,642)
 
(1,650)
Amortization of prior service
                           
  cost
 
(266)
 
(412)
 
(124)
 
(70)
 
20 
 
(214)
 
(32)
Amortization of loss
 
4,083 
 
2,347 
 
2,573 
 
1,325 
 
793 
 
1,951 
 
958 
Net other postretirement
                           
  benefit cost
 
$7,067 
 
$10,389 
 
$11,491 
 
$2,407 
 
$1,249 
 
$2,025 
 
$2,548 

 
 
2012
 
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Service cost - benefits earned
                           
  during the period
 
$4,544 
 
$3,760 
 
$3,898 
 
$1,546 
 
$844 
 
$1,826 
 
$1,646 
Interest cost on APBO
 
7,226 
 
4,796 
 
4,890 
 
2,358 
 
1,712 
 
3,326 
 
1,514 
Expected return on assets
 
(7,014)
 
- 
 
- 
 
(2,260)
 
(1,856)
 
(4,208)
 
(1,300)
Amortization of transition
                           
  obligation
 
410 
 
120 
 
192 
 
176 
 
594 
 
94 
 
4 
Amortization of prior service
                           
  cost
 
(266)
 
(412)
 
(124)
 
(70)
 
20 
 
(214)
 
(32)
Amortization of loss
 
4,154 
 
2,368 
 
2,180 
 
1,460 
 
780 
 
2,158 
 
986 
Net other postretirement
                           
  benefit cost
 
$9,054 
 
$10,632 
 
$11,036 
 
$3,210 
 
$2,094 
 
$2,982 
 
$2,818 


 
55
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Reclassification out of Accumulated Other Comprehensive Income

Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) for the second quarter 2013:

   
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
   
 
 
Total
   
(In Thousands)
     
  Entergy
                 
Amortization of prior service cost
 
($503)
 
$3,007 
 
($121)
   
$2,383 
Amortization of loss
 
(11,845)
 
(5,485)
 
(717)
   
(18,047)
   
($12,348)
 
($2,478)
 
($838)
   
($15,664)
                   
  Entergy Gulf States Louisiana
                 
Amortization of prior service cost
 
($1)
 
$206 
 
$- 
   
$205 
Amortization of loss
 
(771)
 
(1,172)
 
(2)
   
(1,945)
   
($772)
 
($966)
 
($2)
   
($1,740)
  Entergy Louisiana
                 
Amortization of prior service cost
 
$- 
 
$62 
 
$- 
   
$62 
Amortization of loss
 
- 
 
(1,287)
 
- 
   
(1,287)
   
$- 
 
($1,225)
 
$- 
   
($1,225)

Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) for the six months ended June 30, 2013:

   
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
   
 
 
Total
   
(In Thousands)
     
  Entergy
                 
Amortization of prior service cost
 
($1,005)
 
$6,014 
 
($242)
   
$4,767 
Amortization of loss
 
(23,690)
 
(10,971)
 
(1,434)
   
(36,095)
   
($24,695)
 
($4,957)
 
($1,676)
   
($31,328)
                   
  Entergy Gulf States Louisiana
                 
Amortization of prior service cost
 
($1)
 
$412 
 
$- 
   
$411 
Amortization of loss
 
(1,542)
 
(2,346)
 
(4)
   
(3,892)
   
($1,543)
 
($1,934)
 
($4)
   
($3,481)
  Entergy Louisiana
                 
Amortization of prior service cost
 
$- 
 
$124 
 
$- 
   
$124 
Amortization of loss
 
- 
 
(2,574)
 
- 
   
(2,574)
   
$- 
 
($2,450)
 
$- 
   
($2,450)


 
56
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Employer Contributions

Based on current assumptions, Entergy expects to contribute $163.4 million to its qualified pension plans in 2013.  As of June 30, 2013, Entergy had contributed $43.7 million to its pension plans.  Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans in 2013:

   
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
   
(In Thousands)
Expected 2013 pension
  contributions
 
 
$35,382
 
 
$11,550
 
 
$21,151
 
 
$8,152
 
 
$4,175
 
 
$6,880
 
 
$8,304
Pension contributions made
  through June 2013
 
 
$8,076
 
 
$2,714
 
 
$5,535
 
 
$1,914
 
 
$1,094
 
 
$1,660
 
 
$2,045
Remaining estimated pension
  contributions to be made in 2013
 
 
$27,306
 
 
$8,836
 
 
$15,616
 
 
$6,238
 
 
$3,081
 
 
$5,220
 
 
$6,259


NOTE 7.  BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation

Entergy’s reportable segments as of June 30, 2013 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity, including the earnings on the proceeds of sales of previously-owned businesses.

In the fourth quarter 2012, Entergy moved two subsidiaries from All Other to the Entergy Wholesale Commodities segment to improve the alignment of certain intercompany items and income tax activity.  The 2012 information in the table below has been restated to reflect the change.

Entergy’s segment financial information for the second quarters of 2013 and 2012 is as follows:

 
 
 
Utility
 
Entergy
Wholesale
Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Entergy
 
(In Thousands)
2013
                 
Operating revenues
$2,212,336 
 
$533,523 
 
$987  
 
($8,638)
 
$2,738,208 
Income taxes (benefit)
$98,926 
 
($14,567)
 
($11,246)
 
$- 
 
$73,113 
Consolidated net income (loss)
$200,555 
 
$11,531 
 
($17,636)
 
($26,395)
 
$168,055 
                   
2012
                 
Operating revenues
$1,959,576 
 
$567,674 
 
$1,008 
 
($9,658)
 
$2,518,600 
Income taxes (benefit)
($124,461)
 
$46,892 
 
($44,632)
 
$- 
 
($122,201)
Consolidated net income
$308,525 
 
$70,759 
 
$17,694 
 
($26,395)
 
$370,583 
 
 
 
57
Entergy Corporation and Subsidiaries
Notes to Financial Statements



Entergy’s segment financial information for the six months ended June 30, 2013 and 2012 is as follows:

 
 
 
Utility
 
Entergy
Wholesale
Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Entergy
 
(In Thousands)
2013
                 
Operating revenues
$4,215,777 
 
$1,147,256 
 
$1,987 
 
($17,938)
 
$5,347,082 
Income taxes (benefit)
$170,001 
 
$42,368 
 
($22,721)
 
$- 
 
$189,648 
Consolidated net income (loss)
$328,391 
 
$93,646 
 
($34,208)
 
($52,791)
 
$335,038 
                   
2012
                 
Operating revenues
$3,791,216 
 
$1,127,925 
 
$1,967 
 
($18,848)
 
$4,902,260 
Income taxes (benefit)
($24,754)
 
($45,249)
 
($52,360)
 
$- 
 
($122,363)
Consolidated net income (loss)
$375,738 
 
($105,192)
 
$6,727 
 
($53,429)
 
$223,844 

Businesses marked with * are sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity.

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 is 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.

 
 
NOTE 8.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, 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 instrument or commodity.  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 hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.

As a wholesale generator, Entergy Wholesale Commodities’s core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy and capacity in the day ahead or spot markets.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, put and/or call options, to mitigate forward commodity price risk.  When market price falls, the combination of instruments is expected to settle in gains offsetting lower revenue from generation and resulting in a more predictable cash flow.


 
58
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity.  For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk.  A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk.  Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace.  Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies.  Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods.  These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.

Derivatives

Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps.  Entergy will occasionally enter into financially settled swap and option contracts to manage market risk under certain hedging transactions which may or may not be designated as hedging instruments.

Entergy enters into derivatives only to manage natural risks inherent in its physical or financial assets or liabilities.  The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at June 30, 2013 is approximately 2.5 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 83% for the remaining two quarters of 2013, of which approximately 50% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2013 is 21 TWh.

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana and Entergy Louisiana) and Entergy Mississippi primarily through the purchase of short-term natural gas swaps that financially settle against NYMEX futures.  These swaps are marked-to-market 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 for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana.  The total volume of natural gas swaps outstanding as of June 30, 2013 is 35,585,000 MMBtu for Entergy, 11,530,000 MMBtu for Entergy Gulf States Louisiana, 14,910,000 MMBtu for Entergy Louisiana, 8,860,000 MMBtu for Entergy Mississippi, and 285,000 MMBtu for Entergy New Orleans.  Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.



 
59
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2013 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting arrangements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.

Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
       
(In Millions)
   
                     
Derivatives designated as hedging instruments
                   
                     
Assets:
                   
Electricity swaps and options
 
Prepayments and other (current portion)
 
$70
 
($21)
 
$49
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$27
 
($8)
 
$19
 
Entergy Wholesale Commodities
                     
Liabilities:
                   
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$20
 
($13)
 
$7
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$9
 
($8)
 
$1
 
Entergy Wholesale Commodities

Derivatives not designated as hedging instruments
                   
                     
Assets:
                   
Electricity swaps and options
 
Prepayments and other (current portion)
 
$39
 
($16)
 
$23
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$8
 
($5)
 
$3
 
Entergy Wholesale Commodities
                     
Liabilities:
                   
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$24
 
($23)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$6
 
($4)
 
$2
 
Entergy Wholesale Commodities
Natural gas swaps
 
    Other current liabilities
 
$7
 
($-)
 
$7
 
Utility


 
60
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2012 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting arrangements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.

Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
       
(In Millions)
   
                     
Derivatives designated as hedging instruments
                   
                     
Assets:
                   
Electricity swaps and options
 
Prepayments and other (current portion)
 
$123
 
($-)
 
$123
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$46
 
($10)
 
$36
 
Entergy Wholesale Commodities
                     
Liabilities:
                   
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$18
 
($11)
 
$7
 
Entergy Wholesale Commodities

Derivatives not designated as hedging instruments
                   
                     
Assets:
                   
Electricity swaps and options
 
Prepayments and other (current portion)
 
$22
 
($-)
 
$22
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$24
 
($14)
 
$10
 
Entergy Wholesale Commodities
                     
Liabilities:
                   
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$19
 
($13)
 
$6
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$8
 
($-)
 
$8
 
Utility
 
 
(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 Consolidated Balance Sheets
(d)
Excludes cash collateral in the amounts of $29 million and $56 million held as of June 30, 2013 and December 31, 2012, respectively


 
61
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended June 30, 2013 and 2012 are as follows:

 
 
Instrument
 
Amount of gain (loss)
recognized in other
comprehensive income
 
 
 
Income Statement location
 
Amount of gain
 reclassified from
AOCI into income
             
2013
           
Electricity swaps and options
 
$54 million
 
Competitive businesses operating revenues
 
$4 million
             
2012
           
Electricity swaps and options
 
($63) million
 
Competitive businesses operating revenues
 
$101 million

The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the six months ended June 30, 2013 and 2012 are as follows:

 
 
Instrument
 
Amount of gain (loss)
recognized in other
comprehensive income
 
 
 
Income Statement location
 
Amount of gain
 reclassified from
AOCI into income
             
2013
           
Electricity swaps and options
 
($74) million
 
Competitive businesses operating revenues
 
$2 million
             
2012
           
Electricity swaps and options
 
$228 million
 
Competitive businesses operating revenues
 
$171 million

Electricity over-the-counter instruments that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  Unrealized gains or losses recorded in other comprehensive income result from hedging power output at the Entergy Wholesale Commodities power plants.  The related gains or losses from hedging power are included in operating revenues when realized.  Gains totaling approximately $4 million and $101 million were realized on the maturity of cash flow hedges, before taxes of $2 million and $35 million, for the three months ended June 30, 2013 and 2012, respectively.  Gains totaling approximately $2 million and $171 million were realized on the maturity of cash flow hedges, before taxes of $1 million and $60 million, for the six months ended June 30, 2013 and 2012, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended June 30, 2013 and 2012 was $0.8 million and ($0.6) million, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the six months ended June 30, 2013 and 2012 was ($0.5) million and ($0.4) million, respectively. The ineffective portion of cash flow hedges is recorded in competitive businesses operating revenues.

Based on market prices as of June 30, 2013, unrealized gains recorded in AOCI on cash flow hedges relating to power sales totaled $58 million of net unrealized gains.  Approximately $40 million is expected to be reclassified from AOCI to operating revenues in the next twelve months.  The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations when the current market prices exceed the contracted power prices.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guarantee.  As of June 30, 2013, hedge contracts with four counterparties were in a liability position (approximately $10 million total), but were
 
 
62
Entergy Corporation and Subsidiaries
Notes to Financial Statements


significantly below the amount of the guarantee provided under the contract and no cash collateral was required. As of June 30, 2012, there were no hedge contracts with counterparties in a liability position.  If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is typically ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.

Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation.  Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction settles. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.

The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended June 30, 2013 and 2012 is as follows:

 
Instrument
 
Amount of loss
recognized in AOCI
 
Income Statement
location
 
Amount of gain (loss)
recorded in income
             
2013
           
Natural gas swaps
 
$-
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$29 million
Electricity swaps and options de-designated as hedged items
 
($1) million
 
Competitive business operating revenues
 
($9) million
             
2012
           
Natural gas swaps
 
$-
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$16 million
Electricity swaps and options de-designated as hedged items
 
($2) million
 
Competitive business operating revenues
 
$3 million

The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the six months ended June 30, 2013 and 2012 is as follows:

 
Instrument
 
Amount of gain
recognized in AOCI
 
Income Statement
location
 
Amount of gain (loss)
recorded in income
             
2013
           
Natural gas swaps
 
$-
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$9 million
Electricity swaps and options de-designated as hedged items
 
$-
 
Competitive business operating revenues
 
($10) million
             
2012
           
Natural gas swaps
 
$-
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($35) million
Electricity swaps and options de-designated as hedged items
 
$-
 
Competitive business operating revenues
 
$1 million
 
 
63
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Due to regulatory treatment, the natural gas swaps 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 are settled are recovered or refunded through fuel cost recovery mechanisms.

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2013 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value
 
Registrant
             
Liabilities:
           
Natural gas swaps
 
Gas hedge contracts
 
$2.1 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Gas hedge contracts
 
$2.8 million
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$1.7 million
 
Entergy Mississippi
Natural gas swaps
 
Other current liabilities
 
$0.1 million
 
Entergy New Orleans

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2012 are as follows:

Instrument
 
Balance Sheet Location
 
Fair Value
 
Registrant
             
Liabilities:
           
Natural gas swaps
 
Gas hedge contracts
 
$2.6 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Gas hedge contracts
 
$3.4 million
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$2.2 million
 
Entergy Mississippi

The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2013 and 2012 are as follows:

 
 
Instrument
 
 
 
Income Statement Location
 
Amount of gain
(loss) recorded
in income
 
 
 
Registrant
             
2013
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$9.0 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$12.2 million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$7.9 million
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.1) million
 
Entergy New Orleans
             
2012
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$4.7 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$6.5 million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$4.5 million
 
Entergy Mississippi


 
64
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2013 and 2012 are as follows:

 
 
Instrument
 
 
 
Income Statement Location
 
Amount of gain
(loss) recorded
in income
 
 
 
Registrant
             
2013
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$2.8 million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$3.9 million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$2.5 million
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.1) million
 
Entergy New Orleans
             
2012
           
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($10.3) million
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($14.2) million
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($8.9) million
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.5) million
 
Entergy New Orleans

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using 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 other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not accrue to the benefit or detriment of shareholders.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement.  Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value.  The inputs can be readily observable, corroborated by market data, or generally unobservable.  Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.

Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.  The three levels of the fair value hierarchy are:

·  
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas hedge contracts. See Note 1 to the financial statements in the Form 10-K for a discussion of cash and cash equivalents.
 
 
 
65
Entergy Corporation and Subsidiaries
Notes to Financial Statements



·  
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 or shares in common trusts.  Common trust funds are stated at estimated fair value based on the fair market value of the underlying investments.

·  
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 derivative power contracts used as cash flow hedges of power sales at merchant power plants.

The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Entergy Wholesale Commodities Risk Control group and sent to the Entergy Wholesale Commodities Back Office and Entergy Nuclear Finance groups for evaluation.  The primary functions of the Entergy Wholesale Commodities Risk Control Group include: gathering, validating and reporting market data, providing market and credit risk analyses and valuations in support of Entergy Wholesale Commodities’s commercial transactions, developing and administering protocols for the management of market and credit risks, implementing and maintaining controls around changes to market data in the energy trading and risk management system, reviewing creditworthiness of counterparties, supporting contract negotiations with new counterparties, administering credit support for contracts, and managing the daily margining process.  The primary functions of the Entergy Wholesale Commodities Back Office are managing the energy trading and risk management system, forecasting revenues, forward positions and analysis, performing contract administration, market and counterparty settlements and revenue reporting and analysis along with maintaining related controls for Entergy Wholesale Commodities.  Both Entergy Wholesale Commodities Risk Control and Entergy Wholesale Commodities Back Office report to the Entergy Wholesale Commodities VP, Finance & Risk Group.  Entergy Nuclear Finance is primarily responsible for the financial planning of Entergy’s utility and non-utility nuclear businesses and has a significant role in accounting for the activities and transactions of the associated companies.  The VP, Chief Financial Officer – Nuclear Operations within Entergy Nuclear Finance reports to the Chief Accounting Officer.

The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable or payable by Entergy if the contracts were settled at that date.  These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business.  The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices.  The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities.  For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
 
 
 
66
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes.  Inputs to the valuation  include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and US Treasury rates for a risk-free return rate.  As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.  As of June 30, 2013, Entergy had in-the-money derivative contracts with a fair value of $94 million with counterparties or their guarantor who are all currently investment grade.  $11 million of the derivative contracts as of June 30, 2013 are out-of-the-money contracts supported by corporate guarantees, which would require additional cash or letters of credit in the event of a decrease in Entergy Corporation’s credit rating to below investment grade.

On a daily basis, Entergy Wholesale Commodities calculates the mark-to-market for all derivative transactions.  Entergy Wholesale Commodities Risk Control Group also validates forward market prices by comparing them to other sources of forward market prices and/or to settlement prices of actual market transactions.  Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices and/or settlement prices of actual market transactions.  Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available, and using multiple sources of market implied volatilities.  Moreover, on at least a monthly basis the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis.  The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities.  Finally, for all proposed derivative transactions an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’s portfolio.  In particular, the credit, liquidity, and financial metrics impacts are calculated for this analysis.  This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.

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, 2013 and December 31, 2012.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$225
 
$-
 
$-
 
$225
Decommissioning trust funds (a):
               
Equity securities
 
394
 
2,341
 
-
 
2,735
Debt securities
 
742
 
990
 
-
 
1,732
Power contracts
 
-
 
-
 
94
 
94
Securitization recovery trust account
 
37
 
-
 
-
 
37
Escrow accounts
 
132
 
-
 
-
 
132
   
$1,530
 
$3,331
 
$94
 
$4,955
                 
Liabilities:
               
Power contracts
 
$-
 
$-
 
$11
 
$11
Gas hedge contracts
 
7
 
-
 
-
 
7
   
$7
 
$-
 
$11
 
$18


 
67
Entergy Corporation and Subsidiaries
Notes to Financial Statements



2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$420
 
$-
 
$-
 
$420
Decommissioning trust funds (a):
               
Equity securities
 
358
 
2,101
 
-
 
2,459
Debt securities
 
769
 
962
 
-
 
1,731
Power contracts
 
-
 
-
 
191
 
191
Securitization recovery trust account
 
46
 
-
 
-
 
46
Escrow accounts
 
386
 
-
 
-
 
386
   
$1,979
 
$3,063
 
$191
 
$5,233
                 
Liabilities:
               
Power contracts
 
$-
 
$-
 
$13
 
$13
Gas hedge contracts
 
8
 
-
 
-
 
8
   
$8
 
$-
 
$13
 
$21

(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 for additional information on the investment portfolios.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2013 and 2012:

   
2013
 
2012
 
   
(In Millions)
           
Balance as of April 1,
 
$52 
 
$528 
 
           
Unrealized gains (losses) from price changes
 
44 
 
(58)
 
Unrealized gains on originations
 
- 
 
6 
 
Realized losses included in earnings
 
(9)
 
(1)
 
Realized gains on settlements
 
(4)
 
(100)
 
           
Balance as of June 30,
 
$83 
 
$375 
 

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2013 and 2012:

   
2013
 
2012
 
   
(In Millions)
           
Balance as of January 1,
 
$178 
 
$312 
 
           
Unrealized gains (losses) from price changes
 
(71)
 
228 
 
Unrealized gains on originations
 
1 
 
7 
 
Realized losses included in earnings
 
(23)
 
(1)
 
Realized gains on settlements
 
(2) 
 
(171)
 
           
Balance as of June 30,
 
$83 
 
$375 
 
 
 
68
Entergy Corporation and Subsidiaries
Notes to Financial Statements



The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy, and the valuation techniques and significant unobservable inputs to each which cause that classification, as of June 30, 2013:

 
 
 
Transaction Type
 
Fair Value
as of
June 30,
2013
 
 
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
 
 
Effect on
Fair Value
                 
Electricity swaps
 
$47 million
 
Unit contingent discount
 
+/-3%
 
$2 million
Electricity options
 
$36 million
 
Implied volatility
 
+/-16%
 
$15 million

The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:

Significant
Unobservable
Input
 
 
 
Transaction Type
 
 
 
Position
 
 
 
Change to Input
 
 
Effect on
Fair Value
                 
Unit contingent
discount
 
 
Electricity swaps
 
 
Sell
 
 
Increase (Decrease)
 
 
Decrease (Increase)
Implied volatility
 
Electricity options
 
Sell
 
Increase (Decrease)
 
Increase (Decrease)
Implied volatility
 
Electricity options
 
Buy
 
Increase (Decrease)
 
Increase (Decrease)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of June 30, 2013 and December 31, 2012.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.

Entergy Arkansas

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$34.4
 
$-
 
$-
 
$34.4
Decommissioning trust funds (a):
               
Equity securities
 
7.1
 
403.2
 
-
 
410.3
Debt securities
 
76.7
 
159.5
 
-
 
236.2
Securitization recovery trust account
 
3.6
 
-
 
-
 
3.6
Escrow accounts
 
38.0
 
-
 
-
 
38.0
   
$159.8
 
$562.7
 
$-
 
$722.5

2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$24.9
 
$-
 
$-
 
$24.9
Decommissioning trust funds (a):
               
Equity securities
 
9.5
 
374.5
 
-
 
384.0
Debt securities
 
94.3
 
122.3
 
-
 
216.6
Securitization recovery trust account
 
4.4
 
-
 
-
 
4.4
Escrow accounts
 
38.0
 
-
 
-
 
38.0
   
$171.1
 
$496.8
 
$-
 
$667.9
 
 
69
Entergy Corporation and Subsidiaries
Notes to Financial Statements



Entergy Gulf States Louisiana

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$0.6
 
$-
 
$-
 
$0.6
Decommissioning trust funds (a):
               
Equity securities
 
4.6
 
323.3
 
-
 
327.9
Debt securities
 
53.4
 
134.7
 
-
 
188.1
Escrow accounts
 
21.5
 
-
 
-
 
21.5
   
$80.1
 
$458.0
 
$-
 
$538.1
                 
Liabilities:
               
Gas hedge contracts
 
$2.1
 
$-
 
$-
 
$2.1

2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$0.6
 
$-
 
$-
 
$0.6
Decommissioning trust funds (a):
               
Equity securities
 
5.5
 
283.0
 
-
 
288.5
Debt securities
 
49.5
 
139.4
 
-
 
188.9
Escrow accounts
 
87.0
 
-
 
-
 
87.0
   
$142.6
 
$422.4
 
$-
 
$565.0
                 
Liabilities:
               
Gas hedge contracts
 
$2.6
 
$-
 
$-
 
$2.6

Entergy Louisiana

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$2.6
 
$-
 
$-
 
$2.6
Decommissioning trust funds (a):
               
Equity securities
 
1.8
 
197.9
 
-
 
199.7
Debt securities
 
51.9
 
60.1
 
-
 
112.0
Securitization recovery trust account
 
4.7
 
-
 
-
 
4.7
   
$61.0
 
$258.0
 
$-
 
$319.0
                 
Liabilities:
               
Gas hedge contracts
 
$2.8
 
$-
 
$-
 
$2.8


 
70
Entergy Corporation and Subsidiaries
Notes to Financial Statements



2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$29.3
 
$-
 
$-
 
$29.3
Decommissioning trust funds (a):
               
Equity securities
 
2.0
 
173.5
 
-
 
175.5
Debt securities
 
52.6
 
59.3
 
-
 
111.9
Securitization recovery trust account
 
4.4
 
-
 
-
 
4.4
Escrow accounts
 
187.0
 
-
 
-
 
187.0
   
$275.3
 
$232.8
 
$-
 
$508.1
                 
Liabilities:
               
Gas hedge contracts
 
$3.4
 
$-
 
$-
 
$3.4

Entergy Mississippi

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$2.0
 
$-
 
$-
 
$2.0
Escrow accounts
 
61.8
 
-
 
-
 
61.8
   
$63.8
 
$-
 
$-
 
$63.8
                 
Liabilities:
               
Gas hedge contracts
 
$1.7
 
$-
 
$-
 
$1.7

2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$52.4
 
$-
 
$-
 
$52.4
Escrow accounts
 
61.8
 
-
 
-
 
61.8
   
$114.2
 
$-
 
$-
 
$114.2
                 
Liabilities:
               
Gas hedge contracts
 
$2.2
 
$-
 
$-
 
$2.2

Entergy New Orleans

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$27.3
 
$-
 
$-
 
$27.3
Escrow accounts
 
6.7
 
-
 
-
 
6.7
   
$34.0
 
$-
 
$-
 
$34.0
                 
Liabilities:
               
Gas hedge contracts
 
$0.1
 
$-
 
$-
 
$0.1


 
71
Entergy Corporation and Subsidiaries
Notes to Financial Statements



2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$9.1
 
$-
 
$-
 
$9.1
Escrow accounts
 
10.6
 
-
 
-
 
10.6
   
$19.7
 
$-
 
$-
 
$19.7

Entergy Texas

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets :
               
Temporary cash investments
 
$16.6
 
$-
 
$-
 
$16.6
Securitization recovery trust account
 
28.5
 
-
 
-
 
28.5
   
$45.1
 
$-
 
$-
 
$45.1

2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets :
               
Temporary cash investments
 
$59.7
 
$-
 
$-
 
$59.7
Securitization recovery trust account
 
37.3
 
-
 
-
 
37.3
   
$97.0
 
$-
 
$-
 
$97.0

System Energy

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Decommissioning trust funds (a):
               
Equity securities
 
$0.6
 
$323.5
 
$-
 
$324.1
Debt securities
 
145.5
 
68.0
 
-
 
213.5
   
$146.1
 
$391.5
 
$-
 
$537.6

2012
 
Level 1
 
Level 2
 
Level 3
 
Total
   
(In Millions)
Assets:
               
Temporary cash investments
 
$83.5
 
$-
 
$-
 
$83.5
Decommissioning trust funds (a):
               
Equity securities
 
1.6
 
282.0
 
-
 
283.6
Debt securities
 
141.1
 
65.9
 
-
 
207.0
   
$226.2
 
$347.9
 
$-
 
$574.1

(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 for additional information on the investment portfolios.
 
 


 
72
Entergy Corporation and Subsidiaries
Notes to Financial Statements


NOTE 9.  DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)

Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick).  The funds are invested primarily in equity securities, fixed-rate fixed-income securities, and cash and cash equivalents.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits.  Decommissioning trust funds for Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale.  Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The securities held as of June 30, 2013 and December 31, 2012 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
             
2013
           
Equity Securities
 
$2,735
 
$929
 
$1
Debt Securities
 
1,732
 
63
 
25
  Total
 
$4,467
 
$992
 
$26

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
             
2012
           
Equity Securities
 
$2,459
 
$662
 
$1
Debt Securities
 
1,731
 
116
 
5
  Total
 
$4,190
 
$778
 
$6

Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $256 million and $211 million as of June 30, 2013 and December 31, 2012, respectively.  The amortized cost of debt securities was $1,701 million as of June 30, 2013 and $1,637 million as of December 31, 2012.  As of June 30, 2013, the debt securities have an average coupon rate of approximately 3.62%, an average duration of approximately 5.19 years, and an average maturity of approximately 7.99 years.  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 securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
 
 
73
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2013:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$29
 
$1
 
$700
 
$22
More than 12 months
 
-
 
-
 
37
 
3
  Total
 
$29
 
$1
 
$737
 
$25

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2012:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$37
 
$1
 
$175
 
$1
More than 12 months
 
20
 
-
 
48
 
4
  Total
 
$57
 
$1
 
$223
 
$5

The unrealized losses in excess of twelve months on equity securities above relate to Entergy’s Utility operating companies and System Energy.

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2013 and December 31, 2012 are as follows:

   
2013
 
2012
   
(In Millions)
less than 1 year
 
$78
 
$53
1 year - 5 years
 
692
 
681
5 years - 10 years
 
555
 
562
10 years - 15 years
 
150
 
164
15 years - 20 years
 
64
 
61
20 years+
 
193
 
210
  Total
 
$1,732
 
$1,731

During the three months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $382 million and $409 million, respectively.  During the three months ended June 30, 2013 and 2012, gross gains of $16 million and $11 million, respectively, and gross losses of $1 million and $2 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.


 
74
Entergy Corporation and Subsidiaries
Notes to Financial Statements


During the six months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $780 million and $945 million, respectively.  During the six months ended June 30, 2013 and 2012, gross gains of $22 million and $23 million, respectively, and gross losses of $3 million and $4 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2013 and December 31, 2012 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2013
           
Equity Securities
 
$410.3
 
$158.8
 
$-
Debt Securities
 
236.2
 
6.9
 
4.0
Total
 
$646.5
 
$165.7
 
$4.0
             
2012
           
Equity Securities
 
$384.0
 
$116.1
 
$-
Debt Securities
 
216.6
 
14.5
 
0.2
Total
 
$600.6
 
$130.6
 
$0.2

The amortized cost of debt securities was $233.4 million as of June 30, 2013 and $202.3 million as of December 31, 2012.  As of June 30, 2013, the debt securities have an average coupon rate of approximately 2.82%, an average duration of approximately 5.25 years, and an average maturity of approximately 6.01 years.  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 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 equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2013:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.3
 
$-
 
$132.4
 
$3.9
More than 12 months
 
-
 
-
 
2.4
 
0.1
Total
 
$0.3
 
$-
 
$134.8
 
$4.0

           The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2012:

 
75
Entergy Corporation and Subsidiaries
Notes to Financial Statements



   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.2
 
$-
 
$24.4
 
$0.2
More than 12 months
 
-
 
-
 
1.0
 
-
Total
 
$0.2
 
$-
 
$25.4
 
$0.2

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2013 and December 31, 2012 are as follows:

   
2013
 
2012
   
(In Millions)
         
less than 1 year
 
$7.6
 
$8.8
1 year - 5 years
 
100.9
 
98.6
5 years - 10 years
 
115.2
 
93.1
10 years - 15 years
 
3.3
 
5.1
15 years - 20 years
 
0.9
 
-
20 years+
 
8.3
 
11.0
Total
 
$236.2
 
$216.6

During the three months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $87 million and $33.7 million, respectively.  During the three months ended June 30, 2013 and 2012, gross gains of $7.3 million and $0.7 million, respectively, and gross losses of $.01 million and $0.04 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $143.1 million and $88.4 million, respectively.  During the six months ended June 30, 2013 and 2012, gross gains of $8.7 million and $2.7 million, respectively, and gross losses of $0.1 million and $0.04 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Gulf States Louisiana

Entergy Gulf States Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2013 and December 31, 2012 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2013
           
Equity Securities
 
$327.9
 
$101.5
 
$0.4
Debt Securities
 
188.1
 
9.0
 
2.4
Total
 
$516.0
 
$110.5
 
$2.8
             
2012
           
Equity Securities
 
$288.5
 
$69.8
 
$-
Debt Securities
 
188.9
 
15.8
 
0.1
Total
 
$477.4
 
$85.6
 
$0.1
             
 
 
 
76
Entergy Corporation and Subsidiaries
Notes to Financial Statements



The amortized cost of debt securities was $179.9 million as of June 30, 2013 and $174.1 million as of December 31, 2012.  As of June 30, 2013, the debt securities have an average coupon rate of approximately 4.61%, an average duration of approximately 5.45 years, and an average maturity of approximately 8.17 years.  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 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 equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2013:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$11.7
 
$0.4
 
$59.8
 
$2.4
More than 12 months
 
-
 
-
 
-
 
-
  Total
 
$11.7
 
$0.4
 
$59.8
 
$2.4

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2012:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$1.2
 
$-
 
$9.1
 
$0.1
More than 12 months
 
1.0
 
-
 
-
 
-
  Total
 
$2.2
 
$-
 
$9.1
 
$0.1

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2013 and December 31, 2012 are as follows:

   
2013
 
2012
   
(In Millions)
         
less than 1 year
 
$9.4
 
$8.0
1 year - 5 years
 
40.8
 
43.5
5 years - 10 years
 
63.3
 
63.5
10 years - 15 years
 
55.9
 
55.8
15 years - 20 years
 
8.9
 
8.5
20 years+
 
9.8
 
9.6
  Total
 
$188.1
 
$188.9

During the three months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $23.4 million and $22.7 million, respectively.  During the three months ended June 30, 2013 and 2012, gross gains of $5.2 million and $0.9 million, respectively, and gross losses of $0.01 million and $0.03 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
 
 
 
77
Entergy Corporation and Subsidiaries
Notes to Financial Statements



During the six months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $46.7 million and $60.8 million, respectively.  During the six months ended June 30, 2013 and 2012, gross gains of $6.3 million and $2.4 million, respectively, and gross losses of $0.01 million and $0.03 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2013 and December 31, 2012 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2013
           
Equity Securities
 
$199.7
 
$71.2
 
$-
Debt Securities
 
112.0
 
5.9
 
1.3
Total
 
$311.7
 
$77.1
 
$1.3
             
2012
           
Equity Securities
 
$175.5
 
$48.9
 
$0.1
Debt Securities
 
111.9
 
9.4
 
0.1
Total
 
$287.4
 
$58.3
 
$0.2

The amortized cost of debt securities was $107.3 million as of June 30, 2013 and $102.6 million as of December 31, 2012.  As of June 30, 2013, the debt securities have an average coupon rate of approximately 3.53%, an average duration of approximately 5.07 years, and an average maturity of approximately 9 years.  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 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 equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2013:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.3
 
$-
 
$29.0
 
$1.2
More than 12 months
 
-
 
-
 
0.4
 
0.1
  Total
 
$0.3
 
$-
 
$29.4
 
$1.3
 
 
 
 
78
Entergy Corporation and Subsidiaries
Notes to Financial Statements



The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2012:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.7
 
$-
 
$3.4
 
$-
More than 12 months
 
5.6
 
0.1
 
0.5
 
0.1
  Total
 
$6.3
 
$0.1
 
$3.9
 
$0.1

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2013 and December 31, 2012 are as follows:

   
2013
 
2012
   
(In Millions)
         
less than 1 year
 
$13.4
 
$1.9
1 year - 5 years
 
33.6
 
42.3
5 years - 10 years
 
25.6
 
24.9
10 years - 15 years
 
16.0
 
18.8
15 years - 20 years
 
2.4
 
1.7
20 years+
 
21.0
 
22.3
  Total
 
$112.0
 
$111.9

During the three months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $5.9 million and $3.5 million, respectively.  During the three months ended June 30, 2013 and 2012, gross gains of $0.01 million and $0.01 million, respectively, and gross losses of $0.01 million and $0.03 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $9.5 million and $10.3 million, respectively.  During the six months ended June 30, 2013 and 2012, gross gains of $0.05 million and $0.04 million, respectively, and gross losses of $0.02 million and $0.03 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.


 
79
Entergy Corporation and Subsidiaries
Notes to Financial Statements


System Energy

System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2013 and December 31, 2012 are summarized as follows:

   
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
   
(In Millions)
2013
           
Equity Securities
 
$324.1
 
$99.9
 
$-
Debt Securities
 
213.5
 
4.6
 
1.8
Total
 
$537.6
 
$104.5
 
$1.8
             
2012
           
Equity Securities
 
$283.6
 
$63.6
 
$0.2
Debt Securities
 
207.0
 
9.3
 
0.1
Total
 
$490.6
 
$72.9
 
$0.3

The amortized cost of debt securities was $210.5 million as of June 30, 2013 and $197.8 million as of December 31, 2012.  As of June 30, 2013, the debt securities have an average coupon rate of approximately 2.54%, an average duration of approximately 4.41 years, and an average maturity of approximately 5.98 years.  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 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 equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2013:

   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$0.8
 
$-
 
$92.2
 
$1.8
More than 12 months
 
-
 
-
 
-
 
-
  Total
 
$0.8
 
$-
 
$92.2
 
$1.8


 
80
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2012:


   
Equity Securities
 
Debt Securities
   
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
Fair
Value
 
Gross
Unrealized
Losses
   
(In Millions)
                 
Less than 12 months
 
$1.4
 
$-
 
$15.5
 
$0.1
More than 12 months
 
13.0
 
0.2
 
-
 
-
  Total
 
$14.4
 
$0.2
 
$15.5
 
$0.1

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2013 and December 31, 2012 are as follows:

   
2013
 
2012
   
(In Millions)
         
less than 1 year
 
$1.7
 
$1.3
1 year - 5 years
 
138.2
 
128.7
5 years - 10 years
 
51.1
 
53.9
10 years - 15 years
 
2.1
 
2.3
15 years - 20 years
 
1.6
 
1.4
20 years+
 
18.8
 
19.4
  Total
 
$213.5
 
$207.0

During the three months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $65.6 million and $97.8 million, respectively.  During the three months ended June 30, 2013 and 2012, gross gains of $0.8 million and $1.8 million, respectively, and gross losses of $0.3 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2013 and 2012, proceeds from the dispositions of securities amounted to $91.2 million and $223.2 million, respectively.  During the six months ended June 30, 2013 and 2012, gross gains of $0.8 million and $3.0 million, respectively, and gross losses of $0.4 million and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

Other-than-temporary impairments and unrealized gains and losses

Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy evaluate unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and six months ended June 30, 2013 and 2012.  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment
 
 
 
81
Entergy Corporation and Subsidiaries
Notes to Financial Statements


will recover its value within a reasonable period of time.  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Entergy did not record material charges to other income in the three and six months ended June 30, 2013 and 2012, respectively, resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.


NOTE 10.  INCOME TAXES   (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Income Tax Litigation , 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 proceedings, income tax audits, and other income tax matters involving Entergy.  As discussed in the Form 10-K, oral argument in PPL’s U.K. Windfall Tax case at the United States Supreme Court was heard in February 2013.  On May 20, 2013, the Supreme Court issued a unanimous decision in PPL’s favor, holding that the U.K. Windfall Tax is a creditable tax for U.S. federal income tax purposes.  On May 28, 2013, the Supreme Court denied the petition for certiorari filed by the Commissioner of Internal Revenue in Entergy’s U.K. Windfall Tax case, allowing Entergy’s favorable decision from the United States Court of Appeals for the Fifth Circuit to become final.

In March 2013, Entergy Louisiana distributed to its parent, Entergy Louisiana Holdings, Inc., Louisiana income tax credits of $20.6 million which resulted in a decrease in Entergy Louisiana’s member’s equity account.


NOTE 11.  PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at June 30, 2013 are $141.9 million for Entergy, $31.9 million for Entergy Arkansas, $17.3 million for Entergy Gulf States Louisiana, $34.5 million for Entergy Louisiana, $1.8 million for Entergy Mississippi, $2.7 million for Entergy New Orleans, $1.1 million for Entergy Texas, and $5.9 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2012 are $267 million for Entergy, $56.3 million for Entergy Arkansas, $9.7 million for Entergy Gulf States Louisiana, $110.4 million for Entergy Louisiana, $4.8 million for Entergy Mississippi, $1.9 million for Entergy New Orleans, $8.6 million for Entergy Texas, and $13.5 million for System Energy.

Impairment of Long-Lived Assets

See “ Impairment of Long-Lived Assets ” in Note 1 to the financial statements in the Form 10-K for a discussion of the periodic reviews that Entergy performs whenever events or changes in circumstances indicate that the recoverability of long-lived assets is uncertain.  Following are updates to that discussion regarding the Vermont Yankee nuclear power plant.

First, as discussed in the Form 10-K, Entergy is seeking a Certificate of Public Good from the Vermont Public Service Board (VPSB) for operation of Vermont Yankee until March 2032.  In June 2013, the VPSB completed hearings on that petition and established a schedule providing for proposals for decision and initial briefs to be filed in August 2013 and reply briefs to be filed in September 2013.  Second, as discussed in the Form 10-K, the New England Coalition in December 2012 filed a complaint in the Vermont Supreme Court seeking an order to shut down Vermont Yankee while its Certificate of Public Good application is pending, and Entergy moved to dismiss that complaint.  On March 25, 2013, the Vermont Supreme Court granted Entergy’s motion and dismissed the complaint.  Third, as discussed in the Form 10-K, Entergy appealed a January 2013 order of the VPSB that made ripe for appeal two earlier orders in which the VPSB had found that the state’s timely renewal law, 3 V.S.A. § 814(b), did not apply to certain conditions in the orders issued by the VPSB in 2002 and 2006 precluding Vermont Yankee’s operation after March 21, 2012.  Briefing of this appeal has been completed and the Vermont Supreme Court has scheduled oral argument for October 2, 2013. 
 
 
82
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Fourth, as discussed in the Form 10-K, in February 2013, the VPSB issued a notice allowing comments to be filed regarding Vermont Yankee’s petition for a Certificate of Public Good to install a diesel generator to enable it to comply with the NRC’s station blackout requirements.  On June 6, 2013, the VPSB issued a Certificate of Public Good for the diesel generator, allowing construction to begin on a schedule that is expected to enable Vermont Yankee to meet the September 1, 2013 deadline for compliance with these NRC requirements.

Impairment of Vermont Yankee in First Quarter 2012

See the Form 10-K for a discussion of the impairment charge recorded for the Vermont Yankee plant in the first quarter 2012.


NOTE 12.  VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 18 to the financial statements in the Form 10-K for a discussion of variable interest entities.  See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facility and commercial paper borrowings and long-term debt.

Entergy Louisiana and System Energy are each considered to hold a variable interest in the lessors from which they lease, respectively, undivided interests representing approximately 9.3% of the Waterford 3 and 11.5% of the Grand Gulf nuclear plants.  Entergy Louisiana and System Energy are the lessees under these arrangements, which are described in more detail in Note 10 to the financial statements in the Form 10-K.  Entergy Louisiana made payments on its lease, including interest, of $18.5 million and $26.8 million in the six months ended June 30, 2013 and 2012, respectively.  System Energy made payments on its lease, including interest, of $46.8 million and $48.1 million in the six months ended June 30, 2013 and 2012, respectively.

 
NOTE 13.  ASSET RETIREMENT OBLIGATIONS  (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, 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.  Following is an update to that discussion.

 In the first quarter of 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for a nuclear site as a result of a revised decommissioning cost study.  The revised estimate resulted in a $46.6 million reduction in the decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset.
__________________________________

In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, 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.  The business of the Registrant Subsidiaries is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter.  The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.


Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2013, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO).  The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures.  Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ 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, 2013 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

 


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt and preferred securities.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $5.3 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, and higher interest expense, partially offset by higher other income.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $4.4 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, higher interest expense, and higher depreciation and amortization expenses, partially offset by higher net revenue and higher other income.
 
 
Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

  
 
Amount
   
(In Millions)
     
2012 net revenue
 
$327.2 
Volume/weather
 
(15.5)
ANO decommissioning trust
 
(7.6)
Retail electric price
 
10.3 
MISO deferral
 
11.1 
2013 net revenue
 
$325.5 
 
The volume/weather variance is primarily due to a decrease of 178 GWh, or 4%, in weather-adjusted usage across all customer classes.  The decrease in weather-adjusted usage in the residential class was partially offset by the effect of more favorable weather on residential sales in the second quarter 2013 compared to the same period in the prior year.

The ANO decommissioning trust variance is primarily due to the deferral of investment gains from the ANO 1 decommissioning trust in 2013 in accordance with regulatory treatment.  The gains resulted in an increase in 2013 in other income and a corresponding increase in regulatory charges with no effect on net income.

 
85
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis



The retail electric price variance is primarily due to:

·  
an increase in the capacity acquisition rider, as approved by the APSC, effective with the first billing cycle of December 2012, relating to the Hot Spring plant acquisition.  The net income effect of the Hot Spring plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hot Spring plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes; and
·  
an increase in the energy efficiency rider, as approved by the APSC,  effective July 2012.  Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have no effect on net income.
 
The MISO deferral variance is due to the deferral in April 2013, as approved by the APSC, of costs incurred since March 2010 related to the transition and implementation of joining the MISO RTO.

Gross operating revenues, fuel and purchased power expenses, and other regulatory credits

Gross operating revenues increased primarily due to:

·  
the June 2012 AmerenUE refund of $30.6 million, including interest, in rough production cost equalization payments collected from AmerenUE.  Entergy Arkansas had previously recorded a regulatory provision for the potential refund to AmerenUE.  The result of the refund in 2012 was a decrease in gross revenues with an offsetting increase in other regulatory credits.  See Note 2 to the financial statements in the Form 10-K for a discussion of the FERC order in the System Agreement Cost Equalization Proceedings;
·  
an increase of $9.7 million primarily due to the increase in the capacity acquisition rider, as discussed above; and
·  
an increase of $5 million in rider revenues due to an increase in the energy efficiency rider effective July 2012, as discussed above.

The increase was partially offset by a decrease of $25.8 million in fuel cost recovery revenues as a result of lower fuel rates and the decrease related to volume/weather, as discussed above.

Fuel and purchased power expenses decreased primarily due to a decrease in the recovery from customers of deferred fuel costs, partially offset by increased purchased power costs and gas-fired generation due to an increase in demand as a result of the ANO extended outage and an increase in the average market prices of purchased power and natural gas.

Other regulatory credits decreased primarily due to the June 2012 refund to AmerenUE, as discussed above, partially offset by the deferral of MISO costs in April 2013, as discussed above.
 
 
86
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis



Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

  
 
Amount
   
(In Millions)
     
2012 net revenue
 
$590.0 
Retail electric price
 
25.5 
MISO deferral
 
11.1 
ANO decommissioning trust
 
(6.8)
Volume/weather
 
(8.6)
Other
 
 3.1 
2013 net revenue
 
$614.3 

The retail electric price variance is primarily due to:

·  
an increase in the capacity acquisition rider, as approved by the APSC, effective with the first billing cycle of December 2012, relating to the Hot Spring plant acquisition.  The net income effect of the Hot Spring plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hot Spring plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes; and
·  
an increase in the energy efficiency rider, as approved by the APSC, effective July 2012.  Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have no effect on net income.

The MISO deferral variance is due to the deferral in April 2013, as approved by the APSC, of costs incurred since March 2010 related to the transition and implementation of joining the MISO RTO.

The ANO decommissioning trust variance is primarily due to the deferral of investment gains from the ANO 1 decommissioning trust in 2013 in accordance with regulatory treatment.  The gains resulted in an increase in 2013 in other income and a corresponding increase in regulatory charges with no effect on net income.

The volume/weather variance is primarily due to a decrease of 236 GWh, or 2%, in weather-adjusted usage across all customer classes.  The decrease in weather-adjusted usage in the residential class was more than offset by the effect of more favorable weather on residential sales in 2013 compared to the same period in the prior year.

Gross operating revenues, fuel and purchased power expenses, and other regulatory credits

Gross operating revenues increased primarily due to:

·  
the June 2012 AmerenUE refund of $30.6 million, including interest, in rough production cost equalization payments collected from AmerenUE.  Entergy Arkansas had previously recorded a regulatory provision for the potential refund to AmerenUE.  The result of the refund in 2012 was a decrease in gross revenues with an offsetting increase in other regulatory credits.  See Note 2 to the financial statements in the Form 10-K for a discussion of the FERC order in the System Agreement Cost Equalization Proceedings;
·  
an increase of $25.9 million in gross wholesale revenues primarily due to increased sales to affiliated customers and higher prices;
·  
an increase of $19.7 million primarily due to the increase in the capacity acquisition rider, as discussed above;
·  
an increase of $12.3 million in rider revenues primarily due to an increase in the Grand Gulf rate effective January 2013;
 
 
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Management’s Financial Discussion and Analysis


 
·  
an increase of $12.1 million in rider revenues related to higher System Agreement production cost equalization payments.  These revenues are offset in deferred fuel expenses.  See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the FERC orders in the System Agreement production cost equalization proceedings; and
·  
an increase of $10.9 million in rider revenues due to an increase in the energy efficiency rider effective July 2012, as discussed above.

The increase was partially offset by a decrease of $31.3 million in fuel cost recovery revenues as a result of lower fuel rates, and the decrease related to volume/weather, as discussed above.

Fuel and purchased power expenses increased primarily due to:

·  
increased purchased power costs and gas-fired generation due to an increase in demand as a result of the ANO extended outage as well as increases in the average market prices of purchased power and natural gas; and
·  
higher costs related to System Agreement production cost equalization payments, as discussed above.

The increase was partially offset by a decrease in the recovery from customers of deferred fuel costs.

Other regulatory credits decreased primarily due to the June 2012 refund to AmerenUE, as discussed above, partially offset by the deferral of MISO costs in April 2013, as discussed above.

Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to an increase of $14 million resulting from costs related to the generator stator incident at ANO, including an offset for expected insurance proceeds.  See “ ANO Damage and Outage ” below for further discussion of the incident.  The increase was partially offset by the effects of recording the final court decision in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal.  The damages awarded include the reimbursement of approximately $3.2 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense.  The spent nuclear fuel disposal litigation is discussed in more detail in Part II, Item 5, “Spent Nuclear Fuel.”

Interest expense increased primarily due to the issuance of $200 million of 4.9% Series first mortgage bonds in December 2012.

Depreciation and amortization expenses decreased primarily due to the effects of recording the final court decision in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal.  The damages awarded include the reimbursement of approximately $3.6 million of spent nuclear fuel storage costs previously recorded as depreciation expense.  This decrease was substantially offset by the increase in depreciation and amortization expenses due to the acquisition of the Hot Spring plant in November 2012.  The spent nuclear fuel disposal litigation is discussed in more detail in Part II, Item 5, “Spent Nuclear Fuel.”

Other income increased primarily due to higher realized gains in 2013 on the ANO 1 decommissioning trust fund investments.  There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.
 
 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis



Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $14 million resulting from costs related to the generator stator incident at ANO, including an offset for expected insurance proceeds.  See “ ANO Damage and Outage ” below for further discussion of the incident;
·  
an increase of $9.3 million in fossil-fueled generation expenses primarily due to the addition of the Hot Spring plant in November 2012; and
 
·  
an increase of $4.4 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.

The increase was partially offset by the effects of recording the final court decision in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal.  The damages awarded include the reimbursement of approximately $3.2 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense.  The spent nuclear fuel disposal litigation is discussed in more detail in Part II, Item 5, “Spent Nuclear Fuel.”

Depreciation and amortization expenses increased primarily due to the acquisition of the Hot Spring plant in November 2012, partially offset by the effects of recording the final court decision in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal.  The damages awarded include the reimbursement of approximately $3.6 million of spent nuclear fuel storage costs previously recorded as depreciation expense.    The spent nuclear fuel disposal litigation is discussed in more detail in Part II, Item 5, “Spent Nuclear Fuel.”

Interest expense increased primarily due to the issuance of $200 million of 4.9% Series first mortgage bonds in December 2012.

Other income increased primarily due to higher realized gains in 2013 on the ANO 1 decommissioning trust fund investments.  There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.

Income Taxes

The effective income tax rate was 43.4% for the second quarter 2013 and 44.7% for the six months ended June 30, 2013.  The differences in the effective income tax rates for the second quarter 2013 and the six months ended June 30, 2013 versus the federal statutory rate of 35% were due to state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 35.5% for the second quarter 2012 and 38.3% for the six months ended June 30, 2012.  The difference in the effective income tax rate for the second quarter 2012 versus the statutory rate of 35% was primarily due to state income taxes and book and tax differences related to the allowance for equity funds used during construction.  The difference in the effective income tax rate for the six months ended June 30, 2012 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items, partially offset by the reversal of a portion of the provision for uncertain tax positions.

ANO Damage and Outage
 
On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building.  The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building.  The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant.  Entergy Arkansas is in the process of repairing this damage and readying ANO 1 to return to operation.  ANO 2 reconnected to the grid on April 28, 2013.  Restoration and restart efforts with respect to ANO 1 are ongoing and are expected to be complete before September 30, 2013.  The total cost of assessment, restoration
 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


 
of off-site power, site restoration, debris removal, and replacement of damaged property and equipment is currently estimated to be in the range of $95 million to $120 million.   This estimate may change through the conclusion of restoration activities.  In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and is incurring incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage.  Each of the Utility operating companies has recovery mechanisms in place designed to recover its prudently-incurred fuel and purchased power costs.
 
Entergy Arkansas is assessing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action.  Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO.  NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO.  Entergy has responded that it disagrees with NEIL's position and is evaluating its options for enforcing its rights under the policy.  On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a general contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop.

In the second quarter 2013, Entergy Arkansas recorded an insurance receivable of $50 million based on the minimum amount that it expects to receive from NEIL.  This $50 million receivable completely offset the approximately $41 million of capital spending and also offset approximately $9 million of the operation and maintenance expenses incurred for the recovery through June 30, 2013.  Entergy Arkansas has incurred approximately $14 million in operation and maintenance expense in excess of its insurance receivable as of June 30, 2013.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$34,533 
 
$22,599 
         
Cash flow provided by (used in):
       
 
Operating activities
 
15,047 
 
145,931 
 
Investing activities
 
(312,498)
 
(155,234)
 
Financing activities
 
305,920 
 
2,119 
Net increase (decrease) in cash and cash equivalents
 
8,469 
 
(7,184)
         
Cash and cash equivalents at end of period
 
$43,002 
 
$15,415 

Operating Activities

           Net cash flow provided by operating activities decreased $130.9 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
income tax payments of $211.4 million in 2013 compared to income tax refunds of $6.9 million in 2012.  Entergy Arkansas had income tax payments in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement.  The income tax payments in 2013 resulted primarily from the reversal of temporary differences for which Entergy Arkansas had previously claimed a tax deduction;
 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


 
·  
approximately $25 million in spending related to the generator stator incident at ANO, as discussed above;
·  
$22.6 million in storm restoration spending in 2013 resulting from the December 2012 Winter storm which caused significant damage to Entergy Arkansas’s distribution lines, equipment, poles and other facilities; and
·  
decreased recovery of deferred fuel costs from customers.

These decreases were offset by:

·  
a $156 million System Agreement bandwidth remedy payment made in January 2012 as a result of the payment required to implement the FERC’s remedy for the period June – December 2005;
·  
a $30.6 million June 2012 refund to AmerenUE, as discussed above; and
·  
an $11.9 million decrease in pension contributions in 2013 compared to the same period in prior year.

See Note 2 to the financial statements in the Form 10-K for a discussion of the System Agreement bandwidth remedy payment. See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities increased $157.3 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
money pool activity;
·  
approximately $41 million in spending related to the generator stator incident at ANO, as discussed above; and
·  
an increase of $39.6 million in distribution construction expenditures due to the December 2012 winter storm.

The increase was partially offset by a decrease in transmission construction expenditures due to higher reliability work performed in 2012.

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 by $75.8 million for the six months ended June 30, 2013 compared to decreasing by $17.4 million for the six months ended June 30, 2012.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $303.8 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to the issuance of $250 million of 3.05% Series first mortgage bonds in May 2013 and $125 million of 4.75% Series first mortgage bonds in June 2013, and a decrease in the net repayment of borrowings from the Entergy Arkansas nuclear fuel company variable interest entity credit facility. The increase was partially offset by money pool activity and the retirement, at maturity, of $30 million 9% Series H notes by the Entergy Arkansas nuclear fuel company variable interest entity in June 2013.

Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to the money pool increased by $46.2 million for the six months ended June 30, 2013.


 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


Capital Structure

Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.  The increase in the debt to capital ratio for Entergy Arkansas as of June 30, 2013 is primarily due to an increase in long-term debt as a result of the issuance of $250 million of 3.05% Series first mortgage bonds in May 2013 and $125 million of 4.75% Series first mortgage bonds in June 2013.

   
June 30,
 2013
 
December 31,
2012
         
Debt to capital
 
59.0% 
 
56.0% 
Effect of excluding the securitization bonds
 
(1.0%)
 
(1.2%)
Debt to capital, excluding securitization bonds (a)
 
58.0% 
 
54.8% 
Effect of subtracting cash
 
(0.4%)
 
(0.4%)
Net debt to net capital, excluding securitization bonds (a)
 
57.6% 
 
54.4% 

(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas.

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, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Arkansas 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 Arkansas’s financial condition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Arkansas 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 Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources "   in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital.  Following are additional updates to the information provided in the Form 10-K.

As discussed in the Form 10-K, the planned construction and capital investment amounts in the table do not include significant costs for the capital projects that might result from the NRC post-Fukushima requirements.  The current preliminary cost estimate for post-Fukushima requirements for Entergy Arkansas is approximately $100 million, including approximately $80 million in capital and $20 million in one-time operation and maintenance expenses.  These costs are expected to be incurred over the 2012 through 2018 time period, and do not include amounts for any future NRC requirements (e.g., Tier 2 and 3 activities).

Entergy Arkansas has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up to the aggregate amount, at any one time outstanding, of $250 million.  See Note 4 to the financial statements for further discussion of Entergy Arkansas’s short-term borrowing limits.  Entergy Arkansas has also obtained an order from the APSC authorizing long-term securities issuances through December 2015.  Entergy Arkansas has also obtained long-term financing authorization from the FERC that extends through October 2013 for issuances by its nuclear fuel company variable interest entity.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
$83,877
 
$8,035
 
($46,219)
 
$17,362
 
 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis



See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in March 2018.  Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2014.  No borrowings were outstanding under the credit facilities as of June 30, 2013.  See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $85 million scheduled to expire in June 2016.  As of June 30, 2013, $30 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Arkansas nuclear fuel company variable interest entity.  See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facility.

In January 2013, Entergy Arkansas arranged for the issuance by (i) Independence County, Arkansas of $45 million of 2.375% Pollution Control Revenue Refinancing Bonds (Entergy Arkansas, Inc. Project) Series 2013 due January 2021, and (ii) Jefferson County, Arkansas of $54.7 million of 1.55% Pollution Control Revenue Refunding Bonds (Entergy Arkansas, Inc. Project) Series 2013 due October 2017, each of which series is secured by a separate series of non-interest bearing first mortgage bonds of Entergy Arkansas.  The proceeds of these issuances were applied to the refunding of outstanding series of pollution control revenue bonds previously issued by the respective issuers.

In May 2013, Entergy Arkansas issued $250 million of 3.05% Series first mortgage bonds due June 2023. Entergy Arkansas used the proceeds to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

In June 2013, Entergy Arkansas issued $125 million of 4.75% Series first mortgage bonds due June 2063. Entergy Arkansas used the proceeds to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

In June 2013, the Entergy Arkansas nuclear fuel company variable interest entity redeemed, at maturity, its $30 million 9% Series H notes.

In July 2013, Entergy Arkansas entered into a $250 million credit facility terminating January 26, 2015 with the collateral support of a series of $255 million non-interest bearing Entergy Arkansas first mortgage bonds.  On July 31, 2013, Entergy Arkansas borrowed $250 million against the credit facility.  Entergy Arkansas used the borrowings to pay, at maturity, a portion of its $300 million 5.40% Series first mortgage bonds due August 2013 and for general corporate purposes.

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.  Following are updates to that discussion.

2013 Base Rate Filing

In March 2013, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs.  Recognizing that the final structure of Entergy Arkansas’s transmission business has not been determined, the filing presents two alternative scenarios for the APSC to establish the appropriate level of rates for Entergy Arkansas.  In the primary scenario, which assumes that Entergy Arkansas will transition to MISO in December 2013, Entergy Arkansas requests a rate increase of $174 million, including $49 million of revenue being transferred from collection in riders to base rates.  The alternate scenario, which also assumes completion of the proposed spin-merge of the transmission business with ITC, reflects a $218 million total rate increase request.  Both scenarios propose a new transmission rider and a capacity cost recovery rider.  The filing requests a 10.4% return on common equity.  The APSC established a procedural schedule that includes hearings in the proceeding beginning in October 2013. New rates are expected to become effective by January 2014.
 
 
 
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Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis



Opportunity Sales Proceeding

See Note 2 to the financial statements for an update to the discussion of the opportunity sales proceeding.

Federal Regulation

See “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

Nuclear Matters

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters " in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.


 
CONSOLIDATED INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 508,653     $ 502,022     $ 1,051,045     $ 977,200  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    60,077       112,126       207,850       246,928  
   Purchased power
    131,593       94,373       237,907       173,169  
   Nuclear refueling outage expenses
    8,088       11,763       19,628       23,550  
   Other operation and maintenance
    148,888       140,458       290,508       265,831  
Decommissioning
    10,680       10,042       21,197       19,930  
Taxes other than income taxes
    21,518       21,713       44,770       42,397  
Depreciation and amortization
    55,340       55,364       113,976       110,605  
Other regulatory credits - net
    (8,473 )     (31,716 )     (9,047 )     (32,925 )
TOTAL
    427,711       414,123       926,789       849,485  
                                 
OPERATING INCOME
    80,942       87,899       124,256       127,715  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    2,724       2,508       4,950       4,233  
Interest and investment income
    11,111       1,515       16,886       7,372  
Miscellaneous - net
    (779 )     (1,190 )     (1,944 )     (2,643 )
TOTAL
    13,056       2,833       19,892       8,962  
                                 
INTEREST EXPENSE
                               
Interest expense
    23,458       20,425       46,037       41,175  
Allowance for borrowed funds used during construction
    (953 )     (634 )     (1,729 )     (1,076 )
TOTAL
    22,505       19,791       44,308       40,099  
                                 
INCOME BEFORE INCOME TAXES
    71,493       70,941       99,840       96,578  
                                 
Income taxes
    31,010       25,186       44,638       36,949  
                                 
NET INCOME
    40,483       45,755       55,202       59,629  
                                 
Preferred dividend requirements
    1,718       1,718       3,437       3,437  
                                 
EARNINGS APPLICABLE TO
                               
COMMON STOCK
  $ 38,765     $ 44,037     $ 51,765     $ 56,192  
                                 
See Notes to Financial Statements.
                               
                                 
 
 

 
 
 
 
 
 
 
 
 
 
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CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 55,202     $ 59,629  
Adjustments to reconcile net income to net cash flow provided by operating activities:
 
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    170,650       178,020  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    53,955       35,685  
  Changes in assets and liabilities:
               
    Receivables
    (59,410 )     (40,737 )
    Fuel inventory
    20,035       2,539  
    Accounts payable
    (6,041 )     (100,250 )
    Prepaid taxes and taxes accrued
    (222,835 )     (730 )
    Interest accrued
    (359 )     (2,090 )
    Deferred fuel costs
    39,437       75,835  
    Other working capital accounts
    (18,641 )     27,362  
    Provisions for estimated losses
    4       245  
    Other regulatory assets
    8,883       38,729  
    Pension and other postretirement liabilities
    (10,210 )     (22,427 )
    Other assets and liabilities
    (15,623 )     (105,879 )
Net cash flow provided by operating activities
    15,047       145,931  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (233,856 )     (183,154 )
Allowance for equity funds used during construction
    6,928       6,060  
Nuclear fuel purchases
    (42,231 )     (41,104 )
Proceeds from sale of nuclear fuel
    36,478       49,879  
Proceeds from nuclear decommissioning trust fund sales
    143,106       88,424  
Investment in nuclear decommissioning trust funds
    (147,842 )     (92,706 )
Changes in money pool receivable - net
    (75,842 )     17,362  
Remittances to transition charge account
    (6,594 )     (7,459 )
Payments from transition charge account
    7,355       7,464  
Net cash flow used in investing activities
    (312,498 )     (155,234 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    467,042       -  
Retirement of long-term debt
    (135,893 )     (5,987 )
Changes in short-term borrowings - net
    (6,792 )     (33,887 )
Change in money pool payable - net
    -       46,219  
Dividends paid:
               
  Common stock
    (15,000 )     -  
  Preferred stock
    (3,437 )     (3,437 )
Other
    -       (789 )
Net cash flow provided by financing activities
    305,920       2,119  
                 
Net increase (decrease) in cash and cash equivalents
    8,469       (7,184 )
                 
Cash and cash equivalents at beginning of period
    34,533       22,599  
                 
Cash and cash equivalents at end of period
  $ 43,002     $ 15,415  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         
Cash paid (received) during the period for:
               
  Interest - net of amount capitalized
  $ 43,706     $ 40,714  
  Income taxes
  $ 211,421     $ (6,897 )
                 
See Notes to Financial Statements.
               



 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 8,611     $ 9,597  
  Temporary cash investments
    34,391       24,936  
    Total cash and cash equivalents
    43,002       34,533  
Securitization recovery trust account
    3,642       4,403  
Accounts receivable:
               
  Customer
    100,046       98,036  
  Allowance for doubtful accounts
    (28,301 )     (28,343 )
  Associated companies
    134,287       67,277  
  Other
    124,767       71,956  
  Accrued unbilled revenues
    96,552       72,902  
    Total accounts receivable
    427,351       281,828  
Accumulated deferred income taxes
    67,767       72,196  
Deferred fuel costs
    57,868       97,305  
Fuel inventory - at average cost
    28,940       48,975  
Materials and supplies - at average cost
    153,078       148,682  
Deferred nuclear refueling outage costs
    44,148       38,410  
Prepaid taxes
    7,865       -  
Prepayments and other
    61,076       10,586  
TOTAL
    894,737       736,918  
                 
OTHER PROPERTY AND INVESTMENTS
               
Decommissioning trust funds
    646,531       600,578  
Non-utility property - at cost (less accumulated depreciation)
    1,668       1,671  
Other
    41,182       41,182  
TOTAL
    689,381       643,431  
                 
UTILITY PLANT
               
Electric
    8,746,097       8,693,659  
Property under capital lease
    1,111       1,154  
Construction work in progress
    226,372       205,982  
Nuclear fuel
    274,489       303,825  
TOTAL UTILITY PLANT
    9,248,069       9,204,620  
Less - accumulated depreciation and amortization
    4,153,577       4,104,882  
UTILITY PLANT - NET
    5,094,492       5,099,738  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    76,853       80,751  
Other regulatory assets (includes securitization property of
         
       $87,672 as of June 30, 2013 and $93,238 as of
               
       December 31, 2012)
    1,216,652       1,221,636  
Other
    45,776       36,971  
TOTAL
    1,339,281       1,339,358  
                 
TOTAL ASSETS
  $ 8,017,891     $ 7,819,445  
                 
See Notes to Financial Statements.
               

 
 
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 300,000     $ 330,000  
Short-term borrowings
    29,943       36,735  
Accounts payable:
               
  Associated companies
    46,738       39,288  
  Other
    156,241       200,964  
Customer deposits
    85,948       85,198  
Taxes accrued
    -       214,969  
Accumulated deferred income taxes
    3,529       5,927  
Interest accrued
    28,059       28,418  
Other
    59,696       45,208  
TOTAL
    710,154       986,707  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    1,881,613       1,829,281  
Accumulated deferred investment tax credits
    39,953       40,947  
Other regulatory liabilities
    166,306       143,901  
Decommissioning
    701,909       680,712  
Accumulated provisions
    5,826       5,822  
Pension and other postretirement liabilities
    604,521       614,805  
Long-term debt (includes securitization bonds of $95,363 as of
         
June 30, 2013 and $101,547 as of December 31, 2012)
    2,162,111       1,793,895  
Other
    12,767       27,409  
TOTAL
    5,575,006       5,136,772  
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    116,350       116,350  
                 
COMMON EQUITY
               
Common stock, $0.01 par value, authorized 325,000,000
         
shares; issued and outstanding 46,980,196 shares in 2013
         
  and 2012
    470       470  
Paid-in capital
    588,444       588,444  
Retained earnings
    1,027,467       990,702  
TOTAL
    1,616,381       1,579,616  
                 
TOTAL LIABILITIES AND EQUITY
  $ 8,017,891     $ 7,819,445  
                 
See Notes to Financial Statements.
               


 

 
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 470     $ 588,444     $ 855,210     $ 1,444,124  
                                 
Net income
    -       -       59,629       59,629  
Preferred stock dividends
    -       -       (3,437 )     (3,437 )
                                 
Balance at June 30, 2012
  $ 470     $ 588,444     $ 911,402     $ 1,500,316  
                                 
                                 
Balance at December 31, 2012
  $ 470     $ 588,444     $ 990,702     $ 1,579,616  
                                 
Net income
    -       -       55,202       55,202  
Common stock dividends
    -       -       (15,000 )     (15,000 )
Preferred stock dividends
    -       -       (3,437 )     (3,437 )
                                 
Balance at June 30, 2013
  $ 470     $ 588,444     $ 1,027,467     $ 1,616,381  
                                 
See Notes to Financial Statements.
                               
                                 


 

 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
 
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                   
  Residential
  $ 159     $ 162     $ (3 )     (2 )
  Commercial
    108       114       (6 )     (5 )
  Industrial
    98       104       (6 )     (6 )
  Governmental
    5       6       (1 )     (17 )
    Total retail
    370       386       (16 )     (4 )
  Sales for resale:
                               
     Associated companies
    72       73       (1 )     (1 )
     Non-associated companies
    20       (8 )     28       350  
  Other
    47       51       (4 )     (8 )
    Total
  $ 509     $ 502     $ 7       1  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,622       1,637       (15 )     (1 )
  Commercial
    1,381       1,483       (102 )     (7 )
  Industrial
    1,607       1,682       (75 )     (4 )
  Governmental
    58       63       (5 )     (8 )
    Total retail
    4,668       4,865       (197 )     (4 )
  Sales for resale:
                               
     Associated companies
    1,418       1,758       (340 )     (19 )
     Non-associated companies
    173       243       (70 )     (29 )
    Total
    6,259       6,866       (607 )     (9 )
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
 
%
 
   
(Dollars In Millions)
         
Electric Operating Revenues:
                         
  Residential
  $ 360     $ 337     $ 23       7  
  Commercial
    217       216       1       -  
  Industrial
    197       198       (1 )     (1 )
  Governmental
    10       11       (1 )     (9 )
    Total retail
    784       762       22       3  
  Sales for resale:
                               
     Associated companies
    178       150       28       19  
     Non-associated companies
    37       9       28       311  
  Other
    52       56       (4 )     (7 )
    Total
  $ 1,051     $ 977     $ 74       8  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    3,797       3,624       173       5  
  Commercial
    2,736       2,823       (87 )     (3 )
  Industrial
    3,162       3,281       (119 )     (4 )
  Governmental
    115       126       (11 )     (9 )
    Total retail
    9,810       9,854       (44 )     -  
  Sales for resale:
                               
     Associated companies
    4,108       3,869       239       6  
     Non-associated companies
    358       508       (150 )     (30 )
    Total
    14,276       14,231       45       -  
                                 
                                 
                                 
                                 



ENTERGY GULF STATES LOUISIANA, L.L.C.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt and preferred securities.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $20.7 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses, partially offset by higher net revenue.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $21.9 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses, partially offset by higher net revenue.

Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$210.5 
Louisiana Act 55 financing savings obligation
 
28.2 
Retail electric price
 
(6.2)
River Bend decommissioning trust
 
(4.4)
Volume/weather
 
(4.2)
Other
 
(0.6)
2013 net revenue
 
$223.3 

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to increased affiliate purchased power capacity costs recovered through base rates set in the annual formula rate plan mechanism. Entergy Gulf States Louisiana’s formula rate plan is discussed in Note 2 to the financial statements herein and in the Form 10-K.
 
 
102
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis



The River Bend decommissioning trust variance is primarily due to the deferral of investment gains from the River Bend decommissioning trust in 2013 in accordance with regulatory treatment.  The gains resulted in an increase in 2013 in other income and a corresponding increase in regulatory charges with no effect on net income.

The volume/weather variance is primarily due to the effect of less favorable weather in the second quarter 2013, as compared to the same period in prior year, on residential and commercial sales.

Gross operating revenues, fuel and purchased power expenses, and other regulatory charges

Gross operating revenues increased primarily due to an increase of $68.4 million in fuel cost recovery revenues primarily due to higher fuel rates and an increase of $18.2 million in rider revenues primarily due to
System Agreement credits to customers in 2012. Entergy Gulf States Louisiana’s fuel and purchased power recovery mechanism is discussed in Note 2 to the financial statements in the Form 10-K.

Fuel and purchased power expenses increased primarily due to:

·  
an increase in the average market price of purchased power; and
·  
an increase in deferred fuel expense due to the timing of receipt of System Agreement payments and credits to customers and higher fuel cost recovery revenues as compared to the prior year. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings.

Other regulatory charges decreased primarily due to a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.
 
 
Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$414.4 
Louisiana Act 55 financing savings obligation
 
28.7 
Retail electric price
 
(6.6)
Volume/weather
 
(4.1)
Other
 
0.5 
2013 net revenue
 
$432.9 

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to increased affiliate purchased power capacity costs recovered through base rates set in the annual formula rate plan mechanism. Entergy Gulf States Louisiana’s formula rate plan is discussed in Note 2 to the financial statements herein and in the Form 10-K.


 
103
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis


The volume/weather variance is primarily due to the effect of less favorable weather, as compared to the same period in prior year, on residential and commercial sales, and a decrease of 180 GWh, or 2%, in weather-adjusted usage across all sectors.

Gross operating revenues, fuel and purchased power expenses, and other regulatory charges

Gross operating revenues increased primarily due to:

·  
an increase of $77.6 million in fuel cost recovery revenues primarily due to higher fuel rates;
·  
an increase of $18.1 million in rider revenues primarily due to System Agreement credits to customers in 2012; and
·  
an increase of $12.1 million in gross wholesale revenues primarily due to higher prices.

Entergy Gulf States Louisiana’s fuel and purchased power recovery mechanism is discussed in Note 2 to the financial statements in the Form 10-K.

Fuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power and increased demand.

Other regulatory charges decreased primarily due to a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to:

·  
the deferral recorded in the second quarter 2012, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced expenses by $4.8 million in 2012; and
·  
an increase of $2.2 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.

Other income increased primarily due to higher realized gains in 2013 on the River Bend decommissioning trust fund investments.  There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $5.9 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;

 
104
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis



·  
the deferral recorded in the second quarter 2012, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced expenses by $4.2 million in 2012;
·  
an increase of $3.1 million in nuclear generation expenses primarily due to higher contract labor costs;
·  
an increase of $1.8 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages as compared to the prior year; and
·  
an increase of $1.8 million in insurance expenses primarily due to increased premiums.

Income Taxes

The effective income tax rate was 37.6% for the second quarter 2013 and 36.8% for the six months ended June 30, 2013.  The differences in the effective income tax rates for the second quarter 2013 and the six months ended June 30, 2013 versus the federal statutory rate of 35% were primarily due to state income taxes and the provision for uncertain tax positions, partially offset by book and tax differences related to the non-taxable income distributions earned on preferred membership interests.

The effective income tax rate was (12.4%) for the second quarter 2012 and 13.3% for the six months ended June 30, 2012.  The differences in the effective income tax rates for the second quarter 2012 and the six months ended June 30, 2012 versus the federal statutory rate of 35% were primarily due to the reversal of the provision for uncertain tax positions related to an IRS settlement on how to treat the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs and book and tax differences related to the non-taxable income distributions earned on preferred membership interests.

Hurricane Isaac

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Isaac " in the Form 10-K for a discussion of Hurricane Isaac and the damage caused to Entergy Gulf States Louisiana’s service area in August 2012.  In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs.  Specifically, Entergy Gulf States Louisiana requested that the LPSC determine the amount of such costs that were prudently incurred and are, thus, eligible for recovery from customers.  Including carrying costs and additional storm escrow funds, Entergy Gulf States Louisiana is seeking determination that $73.8 million in system restoration costs were prudently incurred.  Entergy Gulf States Louisiana intends to replenish its storm escrow accounts to $90 million primarily through traditional debt markets and has requested special rate treatment of any borrowings for that purpose.  In May 2013, Entergy Gulf States Louisiana filed a supplemental application proposing a specific means to finance system restoration costs and related requests.  Entergy Gulf States Louisiana is proposing to finance Hurricane Isaac restoration costs through Louisiana Act 55 financing, which was the same method it used for Hurricanes Katrina, Rita, Gustav, and Ike.


 
105
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis


Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$35,686 
 
$24,845 
         
Cash flow provided by (used in):
       
 
Operating activities
 
102,336 
 
289,413 
 
Investing activities
 
(184,820)
 
(196,317)
 
Financing activities
 
47,709 
 
(60,474)
Net increase (decrease) in cash and cash equivalents
 
(34,775)
 
32,622 
         
Cash and cash equivalents at end of period
 
$911 
 
$57,467 

Operating Activities

Net cash flow provided by operating activities decreased $187.1 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
the receipt, in January 2012, of $75 million in System Agreement bandwidth remedy payments required to implement the FERC’s remedy in an October 2011 order for the period June – December 2005.  See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings;
·  
income tax payments of $61.7 million in the six months ended June 30, 2013. Entergy Gulf States Louisiana had income tax payments in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments resulted primarily from the reversal of temporary differences for which Entergy Gulf States Louisiana had previously claimed a tax deduction; and
·  
higher nuclear refueling outage spending at River Bend.  River Bend had a refueling outage in 2013 and did not have one in 2012.

Investing Activities

Net cash flow used in investing activities decreased $11.5 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to:

·  
money pool activity;
·  
the withdrawal of $65.5 million from the storm reserve escrow account in 2013; and
·  
a decrease in fossil-fueled generation construction expenditures as a result of decreased scope of work in 2013.

The decrease was offset by:

·  
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
·  
$51 million in proceeds in 2012 from the sale of a portion of Entergy Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests to a third party;
·  
an increase in nuclear construction expenditures as a result of spending on nuclear projects during the River Bend refueling outage in 2013; and
·  
an increase in transmission construction expenditures due to additional reliability work performed in 2013.
 
 
 
106
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis


Increases in Entergy Gulf States Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s receivable from the money pool increased by $122.1 million for the six months ended June 30, 2012. The money pool is an inter-company borrowing arrangement designed to reduce the Utility operating companies’ need for external short-term borrowings.

Financing Activities

Financing activities provided cash of $47.7 million for the six months ended June 30, 2013 compared to using cash of $60.5 million for the six months ended June 30, 2012 primarily due to:

·  
an increase of $144.7 million in credit borrowings for the six months ended June 30, 2013 compared to payments of $25.9 million on credit borrowings for the six months ended June 30, 2012 against the nuclear fuel company variable interest entity credit facility;
·  
the issuance of $70 million of 3.38% Series R notes by the nuclear fuel company variable interest entity in February 2013; and
·  
money pool activity.

Cash flows provided by financing activities were offset by an increase of $97.3 million in common equity distributions and the retirement, at maturity, of $75 million of 5.56% Series N notes by the nuclear fuel company variable interest entity in May 2013.

Increases in Entergy Gulf States Louisiana’s payable to the money pool are a source of cash flow, and Entergy Gulf States Louisiana’s payable to the money pool increased by $28.5 million for the six months ended June 30, 2013.

Capital Structure

Entergy Gulf States Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.  The increase in the debt to capital ratio for Entergy Gulf States Louisiana as of June 30, 2013 is primarily due to an increase in long-term debt as a result of an increase in borrowings against Entergy Gulf States Louisiana’s credit facilities and a decrease in member’s equity as a result of an increase of $97.3 million in common equity distributions.

   
June 30,
2013
 
December 31,
2012
         
Debt to capital
 
55.6% 
 
52.3% 
Effect of subtracting cash
 
-% 
 
(0.6%)
Net debt to net capital
 
55.6% 
 
51.7% 

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 equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Gulf States 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 Gulf States Louisiana’s financial condition.  Entergy Gulf States Louisiana 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 Gulf States Louisiana’s financial condition because net debt indicates Entergy Gulf States 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 Gulf States Louisiana’s uses and sources of capital.  Following are updates to the information provided in the Form 10-K.
 
 
107
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis



As discussed in the Form 10-K, the planned construction and capital investment amounts in the table do not include significant costs for the capital projects that might result from the NRC post-Fukushima requirements.  The current preliminary cost estimate for post-Fukushima requirements for Entergy Gulf States Louisiana is approximately $50 million, including approximately $45 million in capital and $5 million in one-time operation and maintenance expenses.  These costs are expected to be incurred over the 2012 through 2018 time period, and do not include amounts for any future NRC requirements (e.g., Tier 2 and 3 activities).

Entergy Gulf States Louisiana obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up to the aggregate amount, at any one time outstanding, of $200 million.  See Note 4 to the financial statements for further discussion of Entergy Gulf States Louisiana’s short-term borrowing limits.  Entergy Gulf States Louisiana has also obtained an order from the FERC authorizing long-term securities issuances through October 2013.  Entergy Gulf States Louisiana has also obtained long-term financing authorization from the FERC that extends through September 2014 for issuances by its nuclear fuel company variable interest entity.

Entergy Gulf States Louisiana’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
($35,603)
 
($7,074)
 
$145,687
 
$23,596

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Gulf States Louisiana has a credit facility in the amount of $150 million scheduled to expire in March 2018.  As of June 30, 2013, $100 million was outstanding on the credit facility.  See Note 4 to the financial statements herein for additional discussion of the credit facility.

The Entergy Gulf States Louisiana nuclear fuel company variable interest entity has a credit facility in the amount of $100 million scheduled to expire in June 2016.  As of June 30, 2013, $44.7 million was outstanding on the variable interest entity credit facility.  See Note 4 to the financial statements for additional discussion of the variable interest entity credit facility.

In February 2013, the Entergy Gulf States Louisiana nuclear fuel company variable interest entity issued $70 million of 3.38% Series R notes due August 2020.  The Entergy Gulf States Louisiana nuclear fuel company variable interest entity used the proceeds principally to purchase additional nuclear fuel.

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 .   Following are updates to that discussion.

Retail Rates - Electric

In November 2011 the LPSC approved a one-year extension of Entergy Gulf States Louisiana’s formula rate plan.  In May 2012, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2011 test year.  The filing reflected an 11.94% earned return on common equity, which is above the earnings bandwidth and would indicate a $6.5 million cost of service rate change was necessary under the formula rate plan.  The filing also reflected a $22.9 million rate decrease for incremental capacity costs.  Subsequently, in August 2012, Entergy Gulf States Louisiana submitted a revised filing that reflected an earned return on common equity of 11.86% indicating a $5.7 million cost of service rate decrease is necessary under the formula rate plan.  The revised filing also indicates that a reduction of $20.3 million should be reflected in the incremental capacity rider.  The rate reductions were implemented, subject to refund, effective for bills rendered the first billing cycle of September 2012.  Subsequently, in December
 
 
 
108
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis


 
2012, Entergy Gulf States Louisiana submitted a revised evaluation report that reflects expected retail jurisdictional cost of $16.9 million for the first-year capacity charges for the purchase from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy.  This rate change was implemented effective with the first billing cycle of January 2013.  The 2011 test year filings, as revised, were approved by the LPSC in February 2013.  In April 2013, Entergy Gulf States Louisiana submitted a revised evaluation report increasing the incremental capacity rider by approximately $7.3 million to reflect the cost of an additional capacity contract.

See Note 2 to the financial statements in the Form 10-K for a discussion of the base rate case filed by Entergy Gulf States Louisiana with the LPSC in February 2013.  In April 2013 the LPSC established a procedural schedule providing for hearings in November 2013, with a decision by the LPSC expected in 2014.  On July 26, 2013, with the concurrence of Entergy Gulf States Louisiana based upon an expected 60-day delay of the procedural schedule, the ALJ suspended the procedural schedule pending resolution of the appeal by Entergy Gulf States Louisiana, Entergy Louisiana and the LPSC staff regarding the ALJ’s denial of a motion to consolidate the rate cases of Entergy Gulf States Louisiana and Entergy Louisiana.  At its July 31, 2013 meeting the LPSC deferred the agenda item relating to the appeal and directed the LPSC staff to develop a plan for consolidation, to be considered by the LPSC in August 2013.

Retail Rates - Gas

In January 2013, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2012.  The filing showed an earned return on common equity of 11.18%, which resulted in a $43 thousand rate reduction.  In March 2013 the LPSC Staff issued its proposed findings and recommended two adjustments.  The first is to normalize property insurance expense, and the second is to modify the return on equity for gas operations to reflect the return on equity that ultimately is approved by the LPSC in the investigation previously initiated by the LPSC to review the return on equity for Louisiana gas utilities.  Entergy Gulf States Louisiana and the LPSC Staff reached agreement regarding the LPSC Staff’s proposed adjustments.  As reflected in an unopposed joint report of proceedings filed by Entergy Gulf States Louisiana and the LPSC Staff on May 16, 2013, Entergy Gulf States Louisiana accepted, with modification, the LPSC Staff’s proposed adjustment to property insurance expense and agreed to: (1) a three-year extension of the gas rate stabilization plan with a midpoint return on equity of 9.95%, with a first year midpoint reset; (2) dismissal of the docket initiated by the LPSC to evaluate the allowed return on equity for Entergy Gulf States Louisiana’s gas rate stabilization plan; and (3) presentation to the LPSC by November 2014 by Entergy Gulf States Louisiana and the LPSC Staff of their recommendation for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment.  The LPSC approved the agreement in May 2013.

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 “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

Nuclear Matters

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters " in the Form 10-K for a discussion of nuclear matters.
 
 
 
109
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis


Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States Louisiana’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

 

 
INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 479,895     $ 392,993     $ 879,032     $ 775,179  
Natural gas
    12,466       8,363       33,284       25,799  
TOTAL
    492,361       401,356       912,316       800,978  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    60,500       25,130       108,338       96,427  
   Purchased power
    203,999       137,347       366,076       261,511  
   Nuclear refueling outage expenses
    5,210       4,367       9,536       8,732  
   Other operation and maintenance
    102,183       92,424       194,905       178,059  
Decommissioning
    3,948       3,728       7,840       7,404  
Taxes other than income taxes
    20,145       17,692       39,383       36,587  
Depreciation and amortization
    37,927       36,290       75,299       72,387  
Other regulatory charges - net
    4,593       28,341       5,000       28,608  
TOTAL
    438,505       345,319       806,377       689,715  
                                 
OPERATING INCOME
    53,856       56,037       105,939       111,263  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    1,809       2,490       3,459       4,752  
Interest and investment income
    13,956       8,670       24,811       19,908  
Miscellaneous - net
    (2,400 )     (2,485 )     (5,040 )     (5,112 )
TOTAL
    13,365       8,675       23,230       19,548  
                                 
INTEREST EXPENSE
                               
Interest expense
    20,274       20,836       40,473       41,891  
Allowance for borrowed funds used during construction
    (660 )     (965 )     (1,351 )     (1,864 )
TOTAL
    19,614       19,871       39,122       40,027  
                                 
INCOME BEFORE INCOME TAXES
    47,607       44,841       90,047       90,784  
                                 
Income taxes
    17,887       (5,548 )     33,162       12,036  
                                 
NET INCOME
    29,720       50,389       56,885       78,748  
                                 
Preferred distribution requirements and other
    206       206       412       412  
                                 
                                 
EARNINGS APPLICABLE TO COMMON EQUITY
  $ 29,514     $ 50,183     $ 56,473     $ 78,336  
                                 
See Notes to Financial Statements.
                               
                                 


 

 
STATEMENTS OF COMPREHENSIVE INCOME
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
 
 
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
Net Income
  $ 29,720     $ 50,389     $ 56,885     $ 78,748  
Other comprehensive income
                               
   Pension and other postretirement liabilities
                               
     (net of tax expense of $778, $6,763, $1,564, and $7,544)
    962       10,507       1,917       11,535  
         Other comprehensive income
    962       10,507       1,917       11,535  
Comprehensive Income
  $ 30,682     $ 60,896     $ 58,802     $ 90,283  
                                 
                                 
See Notes to Financial Statements.
                               
                                 
                                 



 
STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 56,885     $ 78,748  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    108,028       102,930  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    44,828       16,197  
  Changes in working capital:
               
    Receivables
    (54,074 )     63,010  
    Fuel inventory
    (5,537 )     (10,399 )
    Accounts payable
    44,284       18,656  
    Prepaid taxes and taxes accrued
    (50,487 )     62,389  
    Interest accrued
    (565 )     (1,280 )
    Deferred fuel costs
    (31,661 )     (34,570 )
    Other working capital accounts
    (32,018 )     (6,475 )
  Changes in provisions for estimated losses
    (62,747 )     (4,625 )
  Changes in other regulatory assets
    39,396       3,691  
  Changes in pension and other postretirement liabilities
    5,455       (291 )
  Other
    40,549       1,432  
Net cash flow provided by operating activities
    102,336       289,413  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (148,160 )     (128,809 )
Allowance for equity funds used during construction
    3,459       4,752  
Nuclear fuel purchases
    (115,370 )     (21,983 )
Proceeds from the sale of nuclear fuel
    19,401       26,820  
Payment to storm reserve escrow account
    (21 )     (36 )
Receipts from storm reserve escrow account
    65,475       3,364  
Proceeds from nuclear decommissioning trust fund sales
    46,735       60,821  
Investment in nuclear decommissioning trust funds
    (56,339 )     (70,155 )
Change in money pool receivable - net
    -       (122,091 )
Proceeds from the sale of investment
    -       51,000  
Net cash flow used in investing activities
    (184,820 )     (196,317 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    69,792       -  
Retirement of long-term debt
    (75,000 )     (10,840 )
Change in money pool payable - net
    28,529       -  
Changes in credit borrowings - net
    144,700       (25,900 )
Distributions paid:
               
  Common equity
    (119,900 )     (22,600 )
  Preferred membership interests
    (412 )     (412 )
Other
    -       (722 )
Net cash flow provided by (used in) financing activities
    47,709       (60,474 )
                 
Net increase (decrease) in cash and cash equivalents
    (34,775 )     32,622  
                 
Cash and cash equivalents at beginning of period
    35,686       24,845  
                 
Cash and cash equivalents at end of period
  $ 911     $ 57,467  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 39,598     $ 41,633  
  Income taxes
  $ 61,688     $ -  
                 
See Notes to Financial Statements.
               



 
BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 284     $ 35,085  
  Temporary cash investments
    627       601  
        Total cash and cash equivalents
    911       35,686  
Accounts receivable:
               
  Customer
    79,458       53,480  
  Allowance for doubtful accounts
    (600 )     (711 )
  Associated companies
    82,776       71,697  
  Other
    25,345       18,736  
  Accrued unbilled revenues
    61,883       51,586  
    Total accounts receivable
    248,862       194,788  
Deferred fuel costs
    30,713       -  
Fuel inventory - at average cost
    32,504       26,967  
Materials and supplies - at average cost
    121,886       121,289  
Deferred nuclear refueling outage costs
    36,940       5,953  
Prepaid taxes
    29,466       -  
Prepayments and other
    11,200       7,911  
TOTAL
    512,482       392,594  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliate preferred membership interests
    289,664       289,664  
Decommissioning trust funds
    516,047       477,391  
Non-utility property - at cost (less accumulated depreciation)
    171,930       165,410  
Storm reserve escrow account
    21,530       86,984  
Other
    13,946       13,404  
TOTAL
    1,013,117       1,032,853  
                 
UTILITY PLANT
               
Electric
    7,342,458       7,279,953  
Natural gas
    139,334       135,723  
Construction work in progress
    131,427       125,448  
Nuclear fuel
    218,499       146,768  
TOTAL UTILITY PLANT
    7,831,718       7,687,892  
Less - accumulated depreciation and amortization
    4,052,589       4,003,385  
UTILITY PLANT - NET
    3,779,129       3,684,507  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    170,837       171,051  
  Other regulatory assets
    370,471       409,653  
  Deferred fuel costs
    100,124       100,124  
Other
    14,220       12,337  
TOTAL
    655,652       693,165  
                 
TOTAL ASSETS
  $ 5,960,380     $ 5,803,119  
                 
See Notes to Financial Statements.
               



ENTERGY GULF STATES LOUISIANA, L.L.C.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ -     $ 75,000  
Accounts payable:
               
  Associated companies
    142,863       89,377  
  Other
    107,563       97,509  
Customer deposits
    50,694       48,265  
Taxes accrued
    -       21,021  
Accumulated deferred income taxes
    45,204       22,249  
Interest accrued
    24,872       25,437  
Deferred fuel costs
    -       948  
Pension and other postretirement liabilities
    8,014       7,803  
Gas hedge contracts
    2,130       2,620  
Other
    12,915       11,999  
TOTAL
    394,255       402,228  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    1,429,537       1,403,195  
Accumulated deferred investment tax credits
    76,804       78,312  
Other regulatory liabilities
    122,312       103,444  
Decommissioning and asset retirement cost liabilities
    391,795       380,822  
Accumulated provisions
    34,483       97,230  
Pension and other postretirement liabilities
    421,464       416,220  
Long-term debt
    1,657,248       1,442,429  
Long-term payables - associated companies
    28,571       29,510  
Other
    82,437       66,725  
TOTAL
    4,244,651       4,017,887  
                 
Commitments and Contingencies
               
                 
EQUITY
               
Preferred membership interests without sinking fund
    10,000       10,000  
Member's equity
    1,374,786       1,438,233  
Accumulated other comprehensive loss
    (63,312 )     (65,229 )
TOTAL
    1,321,474       1,383,004  
                 
TOTAL LIABILITIES AND EQUITY
  $ 5,960,380     $ 5,803,119  
                 
See Notes to Financial Statements.
               



 
STATEMENTS OF CHANGES IN EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
         
Common Equity
       
   
Preferred
Membership Interests
   
Member's Equity
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 10,000     $ 1,393,386     $ (69,610 )   $ 1,333,776  
                                 
Net income
    -       78,748       -       78,748  
Member contribution
    -       1,000       -       1,000  
Other comprehensive income
    -       -       11,535       11,535  
Distributions declared on common equity
    -       (22,600 )     -       (22,600 )
Distributions declared on preferred membership interests
    -       (412 )     -       (412 )
Other
    -       (12 )     -       (12 )
                                 
Balance at June 30, 2012
  $ 10,000     $ 1,450,110     $ (58,075 )   $ 1,402,035  
                                 
                                 
Balance at December 31, 2012
  $ 10,000     $ 1,438,233     $ (65,229 )   $ 1,383,004  
                                 
Net income
    -       56,885       -       56,885  
Other comprehensive income
    -       -       1,917       1,917  
Distributions declared on common equity
    -       (119,900 )     -       (119,900 )
Distributions declared on preferred membership interests
    -       (412 )     -       (412 )
Other
    -       (20 )     -       (20 )
                                 
Balance at June 30, 2013
  $ 10,000     $ 1,374,786     $ (63,312 )   $ 1,321,474  
                                 
See Notes to Financial Statements.
                               
                                 
                                 
                                 



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 104     $ 88     $ 16       18  
  Commercial
    102       82       20       24  
  Industrial
    135       92       43       47  
  Governmental
    5       4       1       25  
    Total retail
    346       266       80       30  
  Sales for resale:
                               
     Associated companies
    96       94       2       2  
     Non-associated companies
    11       11       -       -  
  Other
    27       22       5       23  
    Total
  $ 480     $ 393     $ 87       22  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,130       1,242       (112 )     (9 )
  Commercial
    1,242       1,325       (83 )     (6 )
  Industrial
    2,377       2,336       41       2  
  Governmental
    55       54       1       2  
    Total retail
    4,804       4,957       (153 )     (3 )
  Sales for resale:
                               
     Associated companies
    1,690       1,720       (30 )     (2 )
     Non-associated companies
    169       274       (105 )     (38 )
    Total
    6,663       6,951       (288 )     (4 )
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
   
%
 
   
(Dollars In Millions)
         
Electric Operating Revenues:
                               
  Residential
  $ 198     $ 176     $ 22       13  
  Commercial
    191       168       23       14  
  Industrial
    242       198       44       22  
  Governmental
    10       9       1       11  
    Total retail
    641       551       90       16  
  Sales for resale:
                               
     Associated companies
    181       178       3       2  
     Non-associated companies
    22       14       8       57  
  Other
    35       32       3       9  
    Total
  $ 879     $ 775     $ 104       13  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    2,242       2,301       (59 )     (3 )
  Commercial
    2,409       2,503       (94 )     (4 )
  Industrial
    4,435       4,531       (96 )     (2 )
  Governmental
    113       113       -       -  
    Total retail
    9,199       9,448       (249 )     (3 )
  Sales for resale:
                               
     Associated companies
    2,918       3,563       (645 )     (18 )
     Non-associated companies
    397       444       (47 )     (11 )
    Total
    12,514       13,455       (941 )     (7 )
                                 
                                 



ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt and preferred securities.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $69.3 million primarily due to the IRS tax settlement, in June 2012, related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing, which resulted in a $142.7 million income tax benefit in 2012.  The prior year income tax benefit was partially offset by a $137.1 million ($84.3 million net-of-tax) regulatory charge, which reduced net revenue in 2012, because Entergy Louisiana is sharing the savings with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $57.3 million primarily due to the IRS tax settlement, in June 2012, related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing, which resulted in a $142.7 million income tax benefit in 2012.  The prior year income tax benefit was partially offset by a $137.1 million ($84.3 million net-of-tax) regulatory charge, which reduced net revenue in 2012, because Entergy Louisiana is sharing the savings with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$154.8 
Louisiana Act 55 financing savings obligation
 
138.6 
Retail electric price
 
21.4 
Volume/weather
 
 (11.9)
Other
 
7.4 
2013 net revenue
 
$310.3 


 
118
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis



The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to a formula rate plan increase effective January 2013.  See Note 2 to the financial statements herein and in the Form 10-K for more discussion of the formula rate plan increase.

The volume/weather variance is primarily due to the effect of less favorable weather as compared to the same period in prior year on residential and commercial sales.

Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)

Gross operating revenues increased primarily due to an increase of $60.3 million in fuel cost recovery revenues primarily due to higher fuel rates and the formula rate plan increase, as discussed above, partially offset by the decrease related to volume/weather, as discussed above.

Fuel and purchased power expenses increased primarily due to an increase in the average market prices of natural gas and purchased power.

Other regulatory charges decreased primarily due to a regulatory charge recorded in the second quarter 2012 because Entergy Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$390.4 
Louisiana Act 55 financing savings obligation
 
140.1 
Retail electric price
 
34.7 
Other
 
5.7 
2013 net revenue
 
$570.9 

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers.  See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

The retail electric price variance is primarily due to a formula rate plan increase effective January 2013.  See Note 2 to the financial statements herein and in the Form 10-K for more discussion of the formula rate plan increase.


 
119
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis


Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)

Gross operating revenues increased primarily due to an increase of $162.3 million in fuel cost recovery revenues primarily due to higher fuel rates and the formula rate plan increase, as discussed above.

Fuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power and an increase in the recovery from customers of deferred fuel costs.

Other regulatory charges decreased primarily due to a regulatory charge recorded in the second quarter 2012 because Entergy Louisiana is sharing the savings from an IRS settlement related to the uncertain tax position regarding the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing with customers. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax settlement and savings obligation.

Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to:

·  
the prior year deferral, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced 2012 expenses by $6.1 million;
·  
an increase of $3.3 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
·  
an increase of $2 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages compared to the prior year; and
·  
an increase of $1.9 million in nuclear generation expenses primarily due to higher labor and materials costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the completion of the Waterford 3 steam generator replacement project in December 2012.

Interest expense increased primarily due to the issuance of $200 million of 5.25% Series first mortgage bonds in July 2012 and the issuance of $200 million of 3.3% Series first mortgage bonds in December 2012.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $6.4 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
·  
the prior year deferral, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced 2012 expenses by $5.2 million; and
·  
an increase of $1.3 million in nuclear generation expenses primarily due to higher labor and materials costs.

The increase was partially offset by:

·  
a decrease of $4.2 million in fossil-fueled generation expenses due to an overall lower scope of work done during plant outages compared to the prior year;
 
 
 
120
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis


·  
a decrease of $2.6 million in insurance expenses primarily due to decreases in premiums; and
·  
a decrease of $1.5 million as a result of lower write-offs of uncollectible customer accounts in 2013.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the completion of the Waterford 3 steam generator replacement project in December 2012.

Interest expense increased primarily due to the issuance of $200 million of 5.25% Series first mortgage bonds in July 2012 and the issuance of $200 million of 3.3% Series first mortgage bonds in December 2012.

Income Taxes

The effective income tax rate was 25.4% for the second quarter 2013 and 23.6% for the six months ended June 30, 2013.  The differences in the effective income tax rates for the second quarter 2013 and the six months ended June 30, 2013 versus the federal statutory rate of 35% were due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 409.3% for the second quarter 2012 primarily because earnings before income taxes was a loss due to the regulatory charge resulting from the settlement of how to treat the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs and the reversal of the provision for the uncertain tax position related to that item.  The difference in the effective income tax rate for the second quarter 2012 versus the federal statutory rate of 35% was primarily due to the reversal of the provision for uncertain tax positions related to the IRS settlement and book and tax differences related to the non-taxable income distributions earned on preferred membership interests.

The effective income tax rate was 2,586.5% for the six months ended June 30, 2012 primarily because earnings before income taxes was a loss due to the regulatory charge resulting from the settlement of how to treat the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs and the reversal of the provision for the uncertain tax position related to that item.  The difference in the effective income tax rate for the six months ended June 30, 2012 versus the federal statutory rate of 35% was primarily due to the reversal of the provision for uncertain tax positions related to the settlement, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, book and tax differences related to the allowance for equity funds used during construction, and the amortization of investment tax credits.

Hurricane Isaac

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Isaac " in the Form 10-K for a discussion of Hurricane Isaac and the damage caused to Entergy Louisiana’s service area in August 2012.  In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs.  Specifically, Entergy Louisiana requested that the LPSC determine the amount of such costs that were prudently incurred and are, thus, eligible for recovery from customers.  Including carrying costs and additional storm escrow funds, Entergy Louisiana is seeking determination that $247.7 million in system restoration costs were prudently incurred.  Entergy Louisiana intends to replenish its storm escrow accounts to $200 million primarily through traditional debt markets and has requested special rate treatment of any borrowings for that purpose.  In May 2013, Entergy Louisiana filed a supplemental application proposing a specific means to finance system restoration costs and related requests.  Entergy Louisiana is proposing to finance Hurricane Isaac restoration costs through Louisiana Act 55 financing, which was the same method it used for Hurricanes Katrina, Rita, Gustav, and Ike.


 
121
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis



Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$30,086 
 
$878 
         
Cash flow provided by (used in):
       
 
Operating activities
 
233,394 
 
209,114 
 
Investing activities
 
(220,249)
 
(211,327)
 
Financing activities
 
(40,039)
 
11,316 
Net increase (decrease) in cash and cash equivalents
 
(26,894)
 
9,103 
         
Cash and cash equivalents at end of period
 
$3,192 
 
$9,981 

Operating Activities

Net cash flow provided by operating activities increased $24.3 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to the increased recovery of fuel costs due to an increase in the amount of deferred fuel to be recovered compared to last year and a decrease of $13.3 million in pension contributions, partially offset by $9 million in Hurricane Isaac storm restoration spending in 2013.  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.

Investing Activities

Net cash flow used in investing activities increased $8.9 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to an increase in fossil-fueled generation construction expenditures due to spending on the Ninemile Unit 6 self-build project, offset by receipts of $187 million from the storm reserve escrow account in 2013, compared to receipts of $14.4 million in 2012, and money pool activity.

Decreases in Entergy Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana’s receivable from the money pool decreased by $3 million for the six months ended June 30, 2013 compared to increasing by $20.9 million for the six months ended June 30, 2012.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Louisiana’s financing activities used cash of $40 million for the six months ended June 30, 2013 compared to providing cash of $11.3 million for the six months ended June 30, 2012 primarily due to an increase of $200.7 million in common equity dividends paid in 2013 and the issuance of $100 million of 4.7% Series first mortgage bonds in May 2013 compared to the issuance of $250 million of 1.875% Series first mortgage bonds in January 2012, partially offset by the following:

·  
money pool activity;
·  
borrowings of $100 million on Entergy Louisiana’s credit facility in 2013 compared to the net repayment of credit borrowings of $50 million in 2012;
 
 
 
122
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis


·  
the repayment of borrowings of $12.9 million on the nuclear fuel company variable interest entity’s credit facility in 2013 compared to the repayment of $31.8 million in 2012; and
·  
a principal payment of $12.2 million in 2013 for the Waterford 3 sale-leaseback obligation compared to a principal payment of $19.6 million in 2012.

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 by $118.4 million for the six months ended June 30, 2012.

Capital Structure

Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.  The increase in the debt to capital ratio for Entergy Louisiana as of June 30, 2013 is primarily due to an increase in long-term debt as a result of $100 million in borrowings on its long-term credit facility and a decrease in member’s equity resulting from an increase in common equity distributions partially offset by an increase in net income.

   
June 30,
2013
 
December 31,
2012
         
Debt to capital
 
50.8% 
 
48.4% 
Effect of excluding securitization bonds
 
(1.5%)
 
(1.6%)
Debt to capital, excluding securitization bonds (a)
 
49.3% 
 
46.8% 
Effect of subtracting cash
 
-% 
 
(0.3%)
Net debt to net capital, excluding securitization bonds (a)
 
49.3% 
 
46.5% 

(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.

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 member’s equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana 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 Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Louisiana 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 Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources " in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital.  Following are additional updates to the information provided in the Form 10-K.

As discussed in the Form 10-K, the planned construction and capital investment amounts in the table do not include significant costs for the capital projects that might result from the NRC post-Fukushima requirements.  The current preliminary cost estimate for post-Fukushima requirements for Entergy Louisiana is approximately $45 million, including approximately $40 million in capital and $5 million in one-time operation and maintenance expenses.   These costs are expected to be incurred over the 2012 through 2018 time period, and do not include amounts for any future NRC requirements (e.g., Tier 2 and 3 activities).

Entergy Louisiana obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up the aggregate amount, at any one time outstanding, of $250 million.  See Note 4 to the financial statements for further discussion of Entergy Louisiana’s short-term borrowing limits.  Entergy Louisiana has also obtained an order from the FERC authorizing long-term securities issuances through October 2013.  Entergy Louisiana has also obtained long-term financing authorization from the FERC that extends through January 2015 for issuances by its nuclear fuel company variable interest entity.


 
123
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis


Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
$6,410
 
$9,433
 
$20,910
 
($118,415)

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

In May 2013, Entergy Louisiana issued $100 million of 4.70% Series first mortgage bonds due June 2063. Entergy Louisiana used the proceeds for general corporate purposes.

Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in March 2018.  As of June 30, 2013, $100 million was outstanding on the facility.  See Note 4 to the financial statements herein for additional discussion of the credit facility.

The Entergy Louisiana nuclear fuel company variable interest entity has a credit facility in the amount of $90 million scheduled to expire in June 2016.  As of June 30, 2013, $41.9 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Louisiana nuclear fuel company variable interest entity.  See Note 4 to the financial statements for additional 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.  Following are updates to that discussion.

In November 2011 the LPSC approved a one-year extension of Entergy Louisiana’s formula rate plan.  In May 2012, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2011 test year.  The filing reflected a 9.63% earned return on common equity, which is within the earnings bandwidth and results in no cost of service rate change under the formula rate plan.  The filing also reflected an $18.1 million rate increase for incremental capacity costs.  In August 2012, Entergy Louisiana submitted a revised filing that reflects an earned return on common equity of 10.38%, which is still within the earnings bandwidth, resulting in no cost of service rate change.  The revised filing also indicates that an increase of $15.9 million should be reflected in the incremental capacity rider.  The rate change was implemented, subject to refund, effective for bills rendered the first billing cycle of September 2012.  Subsequently, in December 2012, Entergy Louisiana submitted a revised evaluation report that reflects two items: 1) a $17 million reduction for the first-year capacity charges for the purchase by Entergy Gulf States Louisiana from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy, and 2) an $88 million increase for the first-year retail revenue requirement associated with the Waterford 3 replacement steam generator project, which was in-service in December 2012.  These rate changes were implemented, subject to refund, effective with the first billing cycle of January 2013.  In April 2013, Entergy Louisiana and the LPSC staff filed a joint report resolving the 2011 test year formula rate plan and recovery related to the Grand Gulf uprate.  This report was approved by the LPSC in April 2013.  With completion of the Waterford 3 replacement steam generator project, the LPSC is conducting a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.
 
 
 
124
Entergy Louisiana, L.L.C and Subsidiaries
Management’s Financial Discussion and Analysis



See Note 2 to the financial statements in the Form 10-K for a discussion of the base rate case filed by Entergy Louisiana with the LPSC in February 2013.  In April 2013 the LPSC established a procedural schedule providing for hearings in December 2013, with a decision by the LPSC expected in 2014.  On July 26, 2013, with the concurrence of Entergy Louisiana based upon an expected 60-day delay of the procedural schedule, the ALJ suspended the procedural schedule pending resolution of the appeal by Entergy Gulf States Louisiana, Entergy Louisiana and the LPSC staff regarding the ALJ’s denial of a motion to consolidate the rate cases of Entergy Gulf States Louisiana and Entergy Louisiana.  At is July 31, 2013 meeting the LPSC deferred the agenda item relating to the appeal and directed the LPSC staff to develop a plan for consolidation, to be considered by the LPSC in August 2013.

In March 2013, Entergy Louisiana filed a rate case for the Algiers area, which is in New Orleans and is regulated by the City Council.  Entergy Louisiana is requesting a rate increase of $13 million over three years, including a 10.4% return on common equity and a formula rate plan mechanism identical to its LPSC request. New rates are currently expected to become effective in second quarter 2014.

Federal Regulation

See “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

Nuclear Matters

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters " in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)

 
 
 
CONSOLIDATED INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 635,805     $ 561,787     $ 1,241,890     $ 1,044,145  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    93,152       114,824       211,859       186,883  
   Purchased power
    236,413       158,905       465,422       337,118  
   Nuclear refueling outage expenses
    9,079       6,084       15,931       12,470  
   Other operation and maintenance
    127,225       112,295       232,352       228,036  
Decommissioning
    5,368       6,559       10,669       13,003  
Taxes other than income taxes
    18,987       16,927       37,787       34,209  
Depreciation and amortization
    60,907       54,153       120,745       107,832  
Other regulatory charges (credits) - net
    (4,017 )     133,293       (6,294 )     129,705  
TOTAL
    547,114       603,040       1,088,471       1,049,256  
                                 
OPERATING INCOME (LOSS)
    88,691       (41,253 )     153,419       (5,111 )
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    7,097       8,602       12,839       17,051  
Interest and investment income
    21,126       20,364       42,915       41,612  
Miscellaneous - net
    (793 )     (828 )     (1,653 )     (2,199 )
TOTAL
    27,430       28,138       54,101       56,464  
                                 
INTEREST EXPENSE
                               
Interest expense
    36,904       33,035       73,333       65,703  
Allowance for borrowed funds used during construction
    (3,036 )     (3,895 )     (5,484 )     (7,754 )
TOTAL
    33,868       29,140       67,849       57,949  
                                 
INCOME (LOSS) BEFORE INCOME TAXES
    82,253       (42,255 )     139,671       (6,596 )
                                 
Income taxes
    20,876       (172,969 )     32,918       (170,605 )
                                 
NET INCOME
    61,377       130,714       106,753       164,009  
                                 
Preferred distribution requirements and other
    1,738       1,738       3,475       3,475  
                                 
EARNINGS APPLICABLE TO
                               
COMMON EQUITY
  $ 59,639     $ 128,976     $ 103,278     $ 160,534  
                                 
See Notes to Financial Statements.
                               



 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
 
 
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
Net Income
  $ 61,377     $ 130,714     $ 106,753     $ 164,009  
Other comprehensive income
                               
   Pension and other postretirement liabilities
                               
     (net of tax expense of $542, $517, $1,089, and $987)
    683       607       1,361       1,260  
         Other comprehensive income
    683       607       1,361       1,260  
Comprehensive Income
  $ 62,060     $ 131,321     $ 108,114     $ 165,269  
                                 
                                 
See Notes to Financial Statements.
                               
                                 



 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 106,753     $ 164,009  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    163,907       153,929  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    69,345       (154,896 )
  Changes in working capital:
               
     Receivables
    (92,534 )     (53,346 )
     Fuel inventory
    538       248  
     Accounts payable
    (11,090 )     (10,615 )
     Prepaid taxes and taxes accrued
    8,345       10,711  
     Interest accrued
    (1,647 )     (4,200 )
     Deferred fuel costs
    (10,887 )     (27,835 )
     Other working capital accounts
    13,573       3,794  
  Changes in provisions for estimated losses
    (185,518 )     (13,780 )
  Changes in other regulatory assets
    82,219       16,784  
  Changes in other regulatory liabilities
    37,090       138,047  
  Changes in pension and other postretirement liabilities
    4,877       (11,627 )
  Other
    48,423       (2,109 )
Net cash flow provided by operating activities
    233,394       209,114  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (418,402 )     (223,780 )
Allowance for equity funds used during construction
    12,839       17,051  
Nuclear fuel purchases
    (21,887 )     (26,905 )
Proceeds from sale of nuclear fuel
    23,438       32,168  
Receipts from storm reserve escrow account
    186,985       14,399  
Remittances to transition charge account
    (9,119 )     (13,236 )
Payments from transition charge account
    8,758       15,473  
Proceeds from nuclear decommissioning trust fund sales
    9,492       10,343  
Investment in nuclear decommissioning trust funds
    (15,376 )     (15,930 )
Changes in money pool receivable - net
    3,023       (20,910 )
Net cash flow used in investing activities
    (220,249 )     (211,327 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    96,442       247,573  
Changes in credit borrowings - net
    87,202       (81,831 )
Retirement of long-term debt
    (18,954 )     (31,936 )
Changes in money pool payable - net
    -       (118,415 )
Distributions paid:
               
   Common equity
    (201,254 )     (600 )
   Preferred membership interests
    (3,475 )     (3,475 )
Net cash flow provided by (used in) financing activities
    (40,039 )     11,316  
                 
Net increase (decrease) in cash and cash equivalents
    (26,894 )     9,103  
                 
Cash and cash equivalents at beginning of period
    30,086       878  
                 
Cash and cash equivalents at end of period
  $ 3,192     $ 9,981  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid (received) during the period for:
               
  Interest - net of amount capitalized
  $ 72,320     $ 67,166  
  Income taxes
  $ (697 )   $ (3,601 )
                 
                 
See Notes to Financial Statements.
               



 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 563     $ 814  
  Temporary cash investments
    2,629       29,272  
    Total cash and cash equivalents
    3,192       30,086  
Securitization recovery trust account
    4,742       4,382  
Accounts receivable:
               
  Customer
    153,612       86,072  
  Allowance for doubtful accounts
    (1,125 )     (867 )
  Associated companies
    45,491       42,938  
  Other
    9,230       9,354  
  Accrued unbilled revenues
    99,154       79,354  
    Total accounts receivable
    306,362       216,851  
Accumulated deferred income taxes
    30,692       113,319  
Deferred fuel costs
    37,455       26,568  
Fuel inventory
    23,045       23,583  
Materials and supplies - at average cost
    150,613       152,170  
Deferred nuclear refueling outage costs
    31,599       44,457  
Prepaid taxes
    -       7,937  
Prepayments and other
    15,278       12,129  
TOTAL
    602,978       631,482  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investment in affiliate preferred membership interests
    807,423       807,423  
Decommissioning trust funds
    311,667       287,418  
Storm reserve escrow account
    -       186,985  
Non-utility property - at cost (less accumulated depreciation)
    487       578  
TOTAL
    1,119,577       1,282,404  
                 
UTILITY PLANT
               
Electric
    8,657,044       8,603,319  
Property under capital lease
    324,440       324,440  
Construction work in progress
    563,704       404,714  
Nuclear fuel
    170,386       204,019  
TOTAL UTILITY PLANT
    9,715,574       9,536,492  
Less - accumulated depreciation and amortization
    3,679,824       3,590,146  
UTILITY PLANT - NET
    6,035,750       5,946,346  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    201,691       193,114  
  Other regulatory assets (includes securitization property of
               
  $166,000 as of June 30, 2013 and
               
  $172,838 as of December 31, 2012)
    822,766       913,562  
  Deferred fuel costs
    67,998       67,998  
Other
    44,061       39,178  
TOTAL
    1,136,516       1,213,852  
                 
TOTAL ASSETS
  $ 8,894,821     $ 9,074,084  
                 
See Notes to Financial Statements.
               



ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 19,016     $ 14,236  
Short-term borrowings
    41,859       54,657  
Accounts payable:
               
  Associated companies
    77,241       103,454  
  Other
    191,659       266,904  
Customer deposits
    89,545       88,805  
Taxes accrued
    408       -  
Accumulated deferred income taxes
    5,030       -  
Interest accrued
    35,617       37,264  
Pension and other postretirement liabilities
    9,253       9,170  
Gas hedge contracts
    2,824       3,442  
Other
    15,567       13,382  
TOTAL
    488,019       591,314  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    926,808       930,606  
Accumulated deferred investment tax credits
    68,770       70,193  
Other regulatory liabilities
    413,891       376,801  
Decommissioning
    428,791       418,122  
Accumulated provisions
    10,956       196,474  
Pension and other postretirement liabilities
    544,497       539,703  
Long-term debt (includes securitization bonds of
               
  $174,843 as of June 30, 2013 and
               
  $181,553 as of December 31, 2012)
    2,988,246       2,811,859  
Other
    71,563       68,516  
TOTAL
    5,453,522       5,412,274  
                 
Commitments and Contingencies
               
                 
EQUITY
               
Preferred membership interests without sinking fund
    100,000       100,000  
Member's equity
    2,898,051       3,016,628  
Accumulated other comprehensive loss
    (44,771 )     (46,132 )
TOTAL
    2,953,280       3,070,496  
                 
TOTAL LIABILITIES AND EQUITY
  $ 8,894,821     $ 9,074,084  
                 
See Notes to Financial Statements.
               
                 



 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
         
Common Equity
       
   
Preferred
Membership Interests
   
Member's Equity
   
Accumulated Other Comprehensive Income (Loss)
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 100,000     $ 2,504,436     $ (39,507 )   $ 2,564,929  
                                 
Net income
    -       164,009       -       164,009  
Other comprehensive income
    -       -       1,260       1,260  
Distributions to parent
    -       (600 )     -       (600 )
Distributions declared on preferred membership interests
    -       (3,475 )     -       (3,475 )
                                 
Balance at June 30, 2012
  $ 100,000     $ 2,664,370     $ (38,247 )   $ 2,726,123  
                                 
Balance at December 31, 2012
  $ 100,000     $ 3,016,628     $ (46,132 )   $ 3,070,496  
                                 
Net income
    -       106,753       -       106,753  
Other comprehensive income
    -       -       1,361       1,361  
Distributions to parent
    -       (221,855 )     -       (221,855 )
Distributions declared on preferred membership interests
    -       (3,475 )     -       (3,475 )
                                 
Balance at June 30, 2013
  $ 100,000     $ 2,898,051     $ (44,771 )   $ 2,953,280  
                                 
See Notes to Financial Statements.
                               
                                 
                                 



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
 
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                   
  Residential
  $ 178     $ 168     $ 10       6  
  Commercial
    136       122       14       12  
  Industrial
    234       190       44       23  
  Governmental
    11       9       2       22  
    Total retail
    559       489       70       14  
  Sales for resale:
                               
     Associated companies
    31       32       (1 )     (3 )
  Other
    46       41       5       12  
    Total
  $ 636     $ 562     $ 74       13  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,881       2,088       (207 )     (10 )
  Commercial
    1,444       1,528       (84 )     (5 )
  Industrial
    4,210       4,184       26       1  
  Governmental
    122       121       1       1  
    Total retail
    7,657       7,921       (264 )     (3 )
  Sales for resale:
                               
     Associated companies
    408       631       (223 )     (35 )
     Non-associated companies
    10       7       3       43  
    Total
    8,075       8,559       (484 )     (6 )
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
 
%
 
   
(Dollars In Millions)
         
Electric Operating Revenues:
                         
  Residential
  $ 365     $ 314     $ 51       16  
  Commercial
    270       232       38       16  
  Industrial
    479       374       105       28  
  Governmental
    23       18       5       28  
    Total retail
    1,137       938       199       21  
  Sales for resale:
                               
     Associated companies
    50       53       (3 )     (6 )
  Other
    55       53       2       4  
    Total
  $ 1,242     $ 1,044     $ 198       19  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    3,883       3,978       (95 )     (2 )
  Commercial
    2,821       2,889       (68 )     (2 )
  Industrial
    8,412       8,291       121       1  
  Governmental
    247       237       10       4  
    Total retail
    15,363       15,395       (32 )     -  
  Sales for resale:
                               
     Associated companies
    617       1,067       (450 )     (42 )
     Non-associated companies
    17       18       (1 )     (6 )
    Total
    15,997       16,480       (483 )     (3 )
                                 
                                 

 

ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt and preferred securities.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income increased $3 million primarily due to higher net revenue, substantially offset by higher other operation and maintenance expenses.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income increased $8.3 million primarily due to higher net revenue, partially offset by higher other operation and maintenance expenses.

Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$145.2 
Retail electric price
 
15.6 
Reserve equalization
 
3.0 
Other
 
(0.3)
2013 net revenue
 
$163.5 

The retail electric price variance is primarily due to the recovery of Hinds plant costs through the power management rider, as approved by the MPSC, effective with the first billing cycle of 2013.  The net income effect of the Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes. 

The reserve equalization variance is primarily due to increased reserve equalization revenue resulting from the acquisition of the Hinds plant in November 2012.

 
134
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to:

·  
an increase of $27.2 million in gross wholesale revenues due to an increase in sales to affiliated customers;
·  
an increase of $13.9 million in power management rider revenue, as approved by the MPSC, primarily resulting from the acquisition of the Hinds plant in November 2012, as discussed above; and
·  
an increase of $7.7 million in rider revenue primarily due to an increase in the Grand Gulf rider effective October 2012.

Fuel and purchased power expenses increased primarily due to an increase in Grand Gulf capacity and energy purchases as a result of the Grand Gulf uprate and an increase in the average market price of natural gas.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$264.5 
Retail electric price
 
33.4 
Reserve equalization
 
7.4 
Other
 
(0.1)
2013 net revenue
 
$305.2 

The retail electric price variance is primarily due to the recovery of Hinds plant costs through the power management rider, as approved by the MPSC, effective with the first billing cycle of 2013.  The net income effect of the Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes. 

The reserve equalization variance is primarily due to increased reserve equalization revenue resulting from the acquisition of the Hinds plant in November 2012.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to:

·  
an increase of $39.9 million in gross wholesale revenues primarily due to an increase in sales to affiliated customers;
·  
an increase of $28.3 million in power management rider revenue, as approved by the MPSC, primarily resulting from the acquisition of the Hinds plant in November 2012, as discussed above; and
·  
an increase of $19.1 million in rider revenue primarily due to an increase in the Grand Gulf rider effective October 2012.

The increase was partially offset by a decrease of $9.9 million in fuel cost recovery revenues primarily due to lower fuel rates.
 
 


 
135
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Fuel and purchased power expenses increased primarily due to an increase in Grand Gulf capacity and energy purchases as a result of the Grand Gulf uprate and an increase in the average market price of natural gas, partially offset by a decrease in the recovery of deferred fuel costs from customers.

Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to an increase of $9.7 million in fossil-fueled generation expenses resulting from a higher scope of work done during plant outages in 2013 compared to the same period in 2012 and the acquisition of the Hinds plant in November 2012.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of a higher assessment in 2013 as compared to the prior year.
 
Depreciation and amortization expenses increased primarily due to an increase in plant in service, including the acquisition of the Hinds plant in November 2012.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to an increase of $21.5 million in fossil-fueled generation expenses resulting from a higher scope of work done during plant outages in 2013 compared to the same period in 2012 and the acquisition of the Hinds plant in November 2012.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of a higher assessment in 2013 as compared to the prior year.

Depreciation and amortization expenses increased primarily due to an increase in plant in service, including the acquisition of the Hinds plant in November 2012.

Income Taxes

The effective income tax rate was 41.4% for the second quarter 2013 and 39.8% for the six months ended June 30, 2013.  The difference in the effective income tax rate for the second quarter 2013 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items. The difference in the effective income tax rate for the six months ended June 30, 2013 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by the reversal of a portion of the provision for uncertain tax positions.

The effective income tax rate was 44.5% for the second quarter 2012 and 43% for the six months ended June 30, 2012.  The differences in the effective income tax rates for the second quarter 2012 and the six months ended June 30, 2012 versus the federal statutory rate of 35% were primarily due to state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions, partially offset by book and tax differences related to the allowance for equity funds used during construction.


 
136
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$52,970 
 
$16 
         
Cash flow provided by (used in):
       
 
Operating activities
 
60,954 
 
97,004 
 
Investing activities
 
(71,973)
 
(88,058)
 
Financing activities
 
(38,884)
 
(3,507)
Net increase (decrease) in cash and cash equivalents
 
(49,903)
 
5,439 
         
Cash and cash equivalents at end of period
 
$3,067 
 
$5,455 

Operating Activities

Net cash provided by operating activities decreased $36.1 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to a decrease in the recovery of fuel costs and the receipt of System Agreement bandwidth remedy payments of $33 million in January 2012 to implement the FERC’s remedy in an October 2011 order for the period June-December 2005.  See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings.

Investing Activities

Net cash used in investing activities decreased $16.1 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to money pool activity and decreased distribution construction expenditures primarily due to less reliability work performed in 2013 than in 2012, partially offset by increased fossil-fueled generation construction expenditures as a result of spending on fossil plant outages in 2013.

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 by $12 million for the six months ended June 30, 2013 compared to increasing by $10.4 million for the six months ended June 30, 2012. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash used in financing activities increased $35.4 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to the payment at maturity of $100 million of 5.15% Series first mortgage bonds in February 2013, partially offset by borrowings of $70 million on Entergy Mississippi’s credit facilities in 2013.  See Note 4 to the financial statements herein for a discussion of long-term debt and credit facilities.


 
137
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Capital Structure

Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.

   
June 30,
2013
 
December 31,
2012
         
Debt to capital
 
54.6% 
 
55.9% 
Effect of subtracting cash
 
(0.1%)
 
(1.2%)
Net debt to net capital
 
54.5% 
 
54.7% 

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and common 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.  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.  Following are additional updates to the information provided in the Form 10-K.

Entergy Mississippi has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up to the aggregate amount, at any one time outstanding, of $175 million.  See Note 4 to the financial statements for further discussion of Entergy Mississippi’s short-term borrowing limits.  Entergy Mississippi has also obtained an order from the FERC authorizing long-term securities issuances through October 2013.

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
$4,855
 
$16,878
 
$10,374
 
($1,999)

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

In May 2013, Entergy Mississippi renewed its three separate credit facilities through May 2014 and increased the aggregate amount available under these credit facilities to $92.5 million. As of June 30, 2013, there was an aggregate of $70 million in borrowings outstanding under these credit facilities.  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 the formula rate plan and fuel and purchased power cost recovery. Following are updates to that discussion.


 
138
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Formula Rate Plan

In March 2013, Entergy Mississippi submitted its formula rate plan 2012 test year filing.  The filing requested a $36.3 million revenue increase to reset Entergy Mississippi's return on common equity to 10.55%, which is a point within the formula rate plan bandwidth.  On June 6, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, in which both parties agreed that the MPSC should approve a $22.3 million rate increase for Entergy Mississippi which, with other adjustments reflected in the stipulation, would have the effect of resetting Entergy Mississippi’s return on common equity to 10.59% when adjusted for performance under the formula rate plan.  An amended scheduling order was issued on July 22, 2013, setting a final MPSC order to be issued on or before August 15, 2013 and new rates to begin billing on August 28, 2013.

In August 2012 the MPSC opened inquiries to review whether the current formulaic methodology used to calculate the return on common equity in both Entergy Mississippi’s formula rate plan and Mississippi Power Company’s annual formula rate plan is still appropriate or can be improved to better serve the public interest. The intent of this inquiry and review is for informational purposes only; the evaluation of any recommendations for changes to the existing methodology would take place in a general rate case or in the existing formula rate plan docket.  In March 2013 the Staff filed its consultant’s report which noted the return on common equity estimation methods used by Entergy Mississippi and Mississippi Power Company are commonly used throughout the electric utility industry.  The report suggested ways in which the methods used by Entergy Mississippi and Mississippi Power Company might be improved, but did not recommend specific changes in the return on common equity formulas or calculations at this time.

Storm Damage Accrual and Storm Cost Recovery

On July 1, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, wherein both parties agreed that approximately $32 million in storm restoration costs incurred in 2011 and 2012 were prudently incurred and chargeable to the storm damage reserve, while approximately $700,000 in prudently incurred costs were more properly recoverable through the formula rate plan.  Entergy Mississippi and the Mississippi Public Utilities Staff also agreed that the storm damage accrual should be increased from $750,000 per month to $1.75 million per month.  The joint stipulation is pending approval of the MPSC.

Federal Regulation

See “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

Nuclear Matters

See “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for unbilled revenue and qualified pension and other postretirement benefits.



 
INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 326,039     $ 277,204     $ 617,680     $ 538,964  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    71,188       62,914       144,749       147,473  
   Purchased power
    93,162       72,895       178,074       138,323  
   Other operation and maintenance
    69,609       60,261       127,559       108,597  
Taxes other than income taxes
    20,227       18,454       40,114       37,238  
Depreciation and amortization
    26,900       24,287       53,551       48,074  
Other regulatory credits - net
    (1,856 )     (3,832 )     (10,299 )     (11,304 )
TOTAL
    279,230       234,979       533,748       468,401  
                                 
OPERATING INCOME
    46,809       42,225       83,932       70,563  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    713       1,025       1,446       2,190  
Interest and investment income
    187       14       326       24  
Miscellaneous - net
    (976 )     (1,055 )     (1,834 )     (2,110 )
TOTAL
    (76 )     (16 )     (62 )     104  
                                 
INTEREST EXPENSE
                               
Interest expense
    14,875       14,103       30,168       28,648  
Allowance for borrowed funds used during construction
    (471 )     (547 )     (926 )     (1,163 )
TOTAL
    14,404       13,556       29,242       27,485  
                                 
INCOME BEFORE INCOME TAXES
    32,329       28,653       54,628       43,182  
                                 
Income taxes
    13,375       12,739       21,740       18,586  
                                 
NET INCOME
    18,954       15,914       32,888       24,596  
                                 
Preferred dividend requirements and other
    707       707       1,414       1,414  
                                 
EARNINGS APPLICABLE TO
                               
COMMON STOCK
  $ 18,247     $ 15,207     $ 31,474     $ 23,182  
                                 
See Notes to Financial Statements.
                               



 
STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 32,888     $ 24,596  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation and amortization
    53,551       48,074  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    17,319       5,627  
  Changes in assets and liabilities:
               
    Receivables
    (34,538 )     40,205  
    Fuel inventory
    (1,930 )     (3,452 )
    Accounts payable
    26,511       (292 )
    Taxes accrued
    (24,786 )     (12,716 )
    Interest accrued
    2,283       (4,681 )
    Deferred fuel costs
    (5,751 )     13,957  
    Other working capital accounts
    (1,030 )     (7,587 )
    Provisions for estimated losses
    9       (2,148 )
    Other regulatory assets
    (1,889 )     4,773  
    Pension and other postretirement liabilities
    (2,179 )     (6,010 )
    Other assets and liabilities
    496       (3,342 )
Net cash flow provided by operating activities
    60,954       97,004  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (85,436 )     (79,851 )
Allowance for equity funds used during construction
    1,446       2,190  
Change in money pool receivable - net
    12,023       (10,374 )
Other
    (6 )     (23 )
Net cash flow used in investing activities
    (71,973 )     (88,058 )
                 
FINANCING ACTIVITIES
               
Retirement of long-term debt
    (100,000 )     -  
Changes in credit borrowings - net
    70,000       -  
Change in money pool payable - net
    -       (1,999 )
Dividends paid:
               
  Common stock
    (7,400 )     -  
  Preferred stock
    (1,414 )     (1,414 )
Other
    (70 )     (94 )
Net cash flow used in financing activities
    (38,884 )     (3,507 )
                 
Net increase (decrease) in cash and cash equivalents
    (49,903 )     5,439  
                 
Cash and cash equivalents at beginning of period
    52,970       16  
                 
Cash and cash equivalents at end of period
  $ 3,067     $ 5,455  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
         
Cash paid (received) during the period for:
               
  Interest - net of amount capitalized
  $ 26,492     $ 32,013  
  Income taxes
  $ (1,008 )   $ 2,118  
                 
See Notes to Financial Statements.
               
                 



 
BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 1,067     $ 585  
  Temporary cash investments
    2,000       52,385  
    Total cash and cash equivalents
    3,067       52,970  
Accounts receivable:
               
  Customer
    66,429       49,836  
  Allowance for doubtful accounts
    (892 )     (910 )
  Associated companies
    24,379       25,504  
  Other
    10,244       11,072  
  Accrued unbilled revenues
    50,902       43,045  
    Total accounts receivable
    151,062       128,547  
Deferred fuel costs
    32,241       26,490  
Accumulated deferred income taxes
    30,808       44,027  
Fuel inventory - at average cost
    50,708       48,778  
Materials and supplies - at average cost
    39,594       40,331  
Prepayments and other
    7,124       5,329  
TOTAL
    314,604       346,472  
                 
OTHER PROPERTY AND INVESTMENTS
               
Non-utility property - at cost (less accumulated depreciation)
    4,684       4,698  
Escrow accounts
    61,841       61,836  
TOTAL
    66,525       66,534  
                 
UTILITY PLANT
               
Electric
    3,782,575       3,708,743  
Property under capital lease
    6,743       8,112  
Construction work in progress
    59,250       62,876  
TOTAL UTILITY PLANT
    3,848,568       3,779,731  
Less - accumulated depreciation and amortization
    1,369,030       1,324,627  
UTILITY PLANT - NET
    2,479,538       2,455,104  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    62,246       63,614  
  Other regulatory assets
    404,728       401,471  
Other
    22,147       20,832  
TOTAL
    489,121       485,917  
                 
TOTAL ASSETS
  $ 3,349,788     $ 3,354,027  
                 
See Notes to Financial Statements.
               



ENTERGY MISSISSIPPI, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
 
 
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ -     $ 100,000  
Short-term borrowings
    70,021       21  
Accounts payable:
               
  Associated companies
    41,626       42,377  
  Other
    67,894       44,856  
Customer deposits
    72,808       71,182  
Taxes accrued
    27,541       52,327  
Accumulated deferred income taxes
    1,028       218  
Interest accrued
    20,509       18,226  
Other
    29,081       21,490  
TOTAL
    330,508       350,697  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    764,692       761,812  
Accumulated deferred investment tax credits
    7,872       7,257  
Obligations under capital lease
    4,769       5,329  
Other regulatory liabilities
    1,510       1,235  
Asset retirement cost liabilities
    6,218       6,039  
Accumulated provisions
    35,829       35,820  
Pension and other postretirement liabilities
    158,689       160,866  
Long-term debt
    1,069,591       1,069,519  
Other
    16,009       25,426  
TOTAL
    2,065,179       2,073,303  
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    50,381       50,381  
                 
COMMON EQUITY
               
Common stock, no par value, authorized 12,000,000
               
 shares; issued and outstanding 8,666,357 shares in 2013 and 2012
    199,326       199,326  
Capital stock expense and other
    (690 )     (690 )
Retained earnings
    705,084       681,010  
TOTAL
    903,720       879,646  
                 
TOTAL LIABILITIES AND EQUITY
  $ 3,349,788     $ 3,354,027  
                 
See Notes to Financial Statements.
               



 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
   
   
Common Equity
       
   
Common Stock
   
Capital Stock Expense and Other
   
Retained Earnings
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 199,326     $ (690 )   $ 637,070     $ 835,706  
                                 
Net income
    -       -       24,596       24,596  
Preferred stock dividends
    -       -       (1,414 )     (1,414 )
                                 
Balance at June 30, 2012
  $ 199,326     $ (690 )   $ 660,252     $ 858,888  
                                 
                                 
Balance at December 31, 2012
  $ 199,326     $ (690 )   $ 681,010     $ 879,646  
                                 
Net income
    -       -       32,888       32,888  
Common stock dividends
    -       -       (7,400 )     (7,400 )
Preferred stock dividends
    -       -       (1,414 )     (1,414 )
                                 
Balance at June 30, 2013
  $ 199,326     $ (690 )   $ 705,084     $ 903,720  
                                 
See Notes to Financial Statements.
                               
                                 



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
   
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                       
  Residential
  $ 110     $ 102     $ 8       8  
  Commercial
    99       92       7       8  
  Industrial
    36       36       -       -  
  Governmental
    10       9       1       11  
    Total retail
    255       239       16       7  
  Sales for resale:
                               
     Associated companies
    33       6       27       450  
     Non-associated companies
    6       6       -       -  
  Other
    32       26       6       23  
    Total
  $ 326     $ 277     $ 49       18  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,149       1,225       (76 )     (6 )
  Commercial
    1,108       1,203       (95 )     (8 )
  Industrial
    531       604       (73 )     (12 )
  Governmental
    96       101       (5 )     (5 )
    Total retail
    2,884       3,133       (249 )     (8 )
  Sales for resale:
                               
     Associated companies
    538       74       464       627  
     Non-associated companies
    75       63       12       19  
    Total
    3,497       3,270       227       7  
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
   
%
 
   
(Dollars In Millions)
         
Electric Operating Revenues:
                               
  Residential
  $ 234     $ 211     $ 23       11  
  Commercial
    195       184       11       6  
  Industrial
    72       71       1       1  
  Governmental
    20       18       2       11  
    Total retail
    521       484       37       8  
  Sales for resale:
                               
     Associated companies
    49       10       39       390  
     Non-associated companies
    11       11       -       -  
  Other
    37       34       3       9  
    Total
  $ 618     $ 539     $ 79       15  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    2,509       2,470       39       2  
  Commercial
    2,199       2,317       (118 )     (5 )
  Industrial
    1,063       1,150       (87 )     (8 )
  Governmental
    190       194       (4 )     (2 )
    Total retail
    5,961       6,131       (170 )     (3 )
  Sales for resale:
                               
     Associated companies
    775       99       676       683  
     Non-associated companies
    119       92       27       29  
    Total
    6,855       6,322       533       8  
                                 



ENTERGY NEW ORLEANS, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt and preferred securities.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $6.6 million primarily due to higher other operation and maintenance expenses.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $5.3 million primarily due to higher other operation and maintenance expenses and higher taxes other than income taxes, partially offset by higher net revenue.

Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the changes in net revenue comparing the second quarter 2013 to the second quarter 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$62.7 
Provision for regulatory proceedings
 
(1.1)
Miscellaneous items
 
0.2 
2013 net revenue
 
$61.8 

The provision for regulatory proceedings variance is primarily due to an additional $1.1 million provision recorded in the second quarter 2013 as a result of a settlement relating to the formula rate plan proceeding.  See Note 2 to the financial statements for additional discussion of the settlement.



 
146
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis



Gross operating revenues and purchased power expenses

Gross operating revenues increased primarily due to an increase of $8.6 million in electric fuel cost recovery revenues due to higher fuel rates and an increase of $5.9 million in gross gas revenues primarily due to higher fuel cost recovery revenues as a result of higher fuel rates.  Entergy New Orleans’s fuel and purchased power recovery mechanism is discussed in Note 2 to the financial statements in the Form 10-K.

Purchased power expenses increased primarily due to an increase in Grand Gulf capacity and energy purchases as a result of the Grand Gulf uprate.
 
Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the changes in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$116.5 
Net gas revenue
 
1.6 
Provision for regulatory proceedings
 
(1.1)
Other
 
2.0 
2013 net revenue
 
$119.0 

The net gas revenue variance is primarily due to the effect of more favorable weather, primarily in the residential and commercial sectors, in 2013 as compared to the same period in prior year.

The provision for regulatory proceedings variance is primarily due to an additional $1.1 million provision recorded in the second quarter 2013 as a result of a settlement relating to the formula rate plan proceeding.  See Note 2 to the financial statements for additional discussion of the settlement.

Gross operating revenues and purchased power expenses

Gross operating revenues increased primarily due to an increase of $22.6 million in electric fuel cost recovery revenues due to higher fuel rates and an increase of $9.8 million in gross gas revenues primarily due to higher fuel cost recovery revenues as a result of higher fuel rates.  Entergy New Orleans’s fuel and purchased power recovery mechanism is discussed in Note 2 to the financial statements in the Form 10-K.

Purchased power expenses increased primarily due to an increase in Grand Gulf capacity and energy purchases as a result of the Grand Gulf uprate.

Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to an increase of $5.9 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages compared to prior year.
 
 
147
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis



Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to an increase of $6.9 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages compared to prior year, partially offset by a decrease of $1.5 million due to expenses recorded in 2012 related to the Energy Smart Program.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher electric and gas retail revenues as compared to prior year and an increase in ad valorem taxes resulting from higher assessments.

Income Taxes

The effective income tax rate was (119.9%) for the second quarter 2013 and (46.3%) for the six months ended June 30, 2013.  The differences in the effective income tax rates for the second quarter 2013 and the six months ended June 30, 2013 versus the federal statutory rate of 35% were primarily due to flow-through tax accounting and book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items and state income taxes.

The effective income tax rate was (1.4%) for the second quarter 2012 and 1.5% for the six months ended June 30, 2012.  The differences in the effective income tax rates for the second quarter 2012 and the six months ended June 30, 2012 versus the federal statutory rate of 35% were primarily due to the provision for uncertain tax positions and flow-through tax accounting, offset by certain book and tax differences related to utility plant items and state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$9,391 
 
$9,834 
         
Cash flow provided by (used in):
       
 
Operating activities
 
23,944 
 
(107)
 
Investing activities
 
(103,326)
 
(24,399)
 
Financing activities
 
98,487 
 
16,372 
Net increase (decrease) in cash and cash equivalents
 
19,105 
 
(8,134)
         
Cash and cash equivalents at end of period
 
$28,496 
 
$1,700 

Operating Activities

Entergy New Orleans’s operating activities provided $23.9 million in cash for the six months ended June 30, 2013 compared to using $0.1 million in cash for the six months ended June 30, 2012 primarily due to the increased recovery of fuel costs, the timing of collections of customer receivables and payments to vendors, and a $2.7 million decrease 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.
 
 
 
148
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis



Investing Activities

Net cash flow used in investing activities increased $78.9 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to money pool activity.

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 $63.7 million for the six months ended June 30, 2013 compared to decreasing $9.1 million for the six months ended June 30, 2012.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash provided by financing activities increased $82.1 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to the issuance of $100 million of 3.9% Series first mortgage bonds in June 2013, partially offset by money pool activity.

Increases in Entergy New Orleans’s payable to the money pool are a source of cash flow, and Entergy New Orleans’s payable to the money pool increased by $18.8 million for the six months ended June 30, 2012.

Capital Structure

Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table.  The increase in debt to capital ratio is due to the issuance of $100 million of 3.9% Series first mortgage bonds in June 2013.

   
June 30,
 2013
 
December 31,
2012
         
Debt to capital
 
57.7% 
 
47.7% 
Effect of subtracting cash
 
(2.5%)
 
(1.2%)
Net debt to net capital
 
55.2% 
 
46.5% 

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, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy New Orleans 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 New Orleans’s financial condition.  Entergy New Orleans 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 New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources "   in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital.  Following are additional updates to the information provided in the Form 10-K.

Entergy New Orleans has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up to the aggregate amount, at any one time outstanding, of $100 million.  See Note 4 to the financial statements for further discussion of Entergy New Orleans’s short-term borrowing limits.  The long-term securities issuances of Entergy New Orleans are limited to amounts authorized by the City Council, and the current authorization extends through July 2014.
 
 
149
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis



Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
$66,606
 
$2,923
 
($18,809)
 
$9,074

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 November 2013.  No borrowings were outstanding under the facility as of June 30, 2013.  See Note 4 to the financial statements herein for additional discussion of the credit facility.

In June 2013, Entergy New Orleans issued $100 million of 3.90% Series first mortgage bonds due July 2023.  Entergy New Orleans used the proceeds to pay, at maturity, its $70 million 5.25% Series first mortgage bonds due August 2013 and for general corporate purposes.

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.

As discussed in the Form 10-K, in May 2012, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports for the 2011 test year.   The City Council had approved a procedural schedule to resolve disputed items that included a hearing in April 2013, but that hearing was postponed.  On August 1, 2013, the Utility Committee of the City Council unanimously approved a settlement of all issues in the formula rate plan proceeding.  Under the terms of the settlement, Entergy New Orleans will implement an approximately $1.625 million net decrease to the electric rates that were in effect prior to the electric rate increase implemented in October 2012, with no change in gas rates.  Entergy New Orleans will refund to customers approximately $6.0 million over the four-month period from September 2013 through December 2013 to make the electric rate decrease effective as of the first billing cycle of October 2012.  Entergy New Orleans had previously recorded provisions for the majority of the refund to customers, but recorded an additional $1.1 million provision in second quarter 2013 as a result of the settlement.  The Utility Committee’s approval will be presented to the City Council for consideration later in August 2013.

Federal Regulation

See “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

Nuclear Matters

See “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for unbilled revenue and qualified pension and other postretirement benefits.
 
 
 
 
 
INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 121,426     $ 113,729     $ 235,389     $ 214,313  
Natural gas
    21,415       15,515       53,918       44,087  
TOTAL
    142,841       129,244       289,307       258,400  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    12,586       11,605       41,449       39,287  
   Purchased power
    68,164       54,401       128,323       101,632  
   Other operation and maintenance
    37,134       32,908       68,367       63,804  
Taxes other than income taxes
    11,522       10,621       23,768       21,169  
Depreciation and amortization
    9,559       9,199       19,002       18,268  
Other regulatory charges - net
    249       501       499       981  
TOTAL
    139,214       119,235       281,408       245,141  
                                 
OPERATING INCOME
    3,627       10,009       7,899       13,259  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    263       153       433       302  
Interest and investment income
    23       6       44       21  
Miscellaneous - net
    (328 )     (357 )     (644 )     (762 )
TOTAL
    (42 )     (198 )     (167 )     (439 )
                                 
INTEREST EXPENSE
                               
Interest expense
    3,448       2,795       6,651       5,628  
Allowance for borrowed funds used during construction
    (135 )     (71 )     (221 )     (142 )
TOTAL
    3,313       2,724       6,430       5,486  
                                 
INCOME BEFORE INCOME TAXES
    272       7,087       1,302       7,334  
                                 
Income taxes
    (326 )      (99 )     (603 )     108  
                                 
NET INCOME
    598       7,186       1,905       7,226  
                                 
Preferred dividend requirements and other
    241       241       482       482  
                                 
EARNINGS APPLICABLE TO
                               
COMMON STOCK
  $ 357     $ 6,945     $ 1,423     $ 6,744  
                                 
See Notes to Financial Statements.
                               
 
 

 
 
 
 
 
 
 
 
 
(Page left blank intentionally)
 



 
STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
   
2013
   
2012
 
   
(In Thousands)
 
OPERATING ACTIVITIES
           
Net income
  $ 1,905     $ 7,226  
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
         
  Depreciation and amortization
    19,002       18,268  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    (12,061 )     (9,083 )
  Changes in other assets and liabilities:
               
    Receivables
    (1,942 )     (7,765 )
    Fuel inventory
    420       974  
    Accounts payable
    2,790       (5,551 )
    Prepaid taxes and taxes accrued
    (1,047 )     5,454  
    Interest accrued
    (219 )     (331 )
    Deferred fuel costs
    959       (8,413 )
    Other working capital accounts
    (4,557 )     (9,554 )
    Provisions for estimated losses
    (4,250 )     2,065  
    Other regulatory assets
    12,461       9,286  
    Pension and other postretirement liabilities
    (1,086 )     (4,383 )
    Other assets and liabilities
    11,569       1,700  
Net cash flow provided by (used in) operating activities
    23,944       (107 )
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (44,018 )     (30,969 )
Allowance for equity funds used during construction
    433       302  
Changes in money pool receivable - net
    (63,683 )     9,074  
Receipts from storm reserve escrow account
    7,749       -  
Payments to storm reserve escrow account
    (3,807 )     (2,806 )
Net cash flow used in investing activities
    (103,326 )     (24,399 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    99,024       -  
Change in money pool payable - net
    -       18,809  
Dividends paid:
               
  Common stock
    -       (1,700 )
  Preferred stock
    (482 )     (482 )
Other
    (55 )     (255 )
Net cash flow provided by financing activities
    98,487       16,372  
                 
Net increase (decrease) in cash and cash equivalents
    19,105       (8,134 )
                 
Cash and cash equivalents at beginning of period
    9,391       9,834  
                 
Cash and cash equivalents at end of period
  $ 28,496     $ 1,700  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid during the period for:
               
  Interest - net of amount capitalized
  $ 6,254     $ 5,476  
  Income taxes
  $ 425     $ -  
                 
See Notes to Financial Statements.
               



 
BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents
           
  Cash
  $ 1,186     $ 319  
  Temporary cash investments
    27,310       9,072  
        Total cash and cash equivalents
    28,496       9,391  
Accounts receivable:
               
  Customer
    44,105       33,142  
  Allowance for doubtful accounts
    (481 )     (446 )
  Associated companies
    83,883       29,326  
  Other
    2,999       3,115  
  Accrued unbilled revenues
    18,380       18,124  
    Total accounts receivable
    148,886       83,261  
Accumulated deferred income taxes
    7,308       9,517  
Fuel inventory - at average cost
    1,357       1,777  
Materials and supplies - at average cost
    10,753       10,889  
Prepaid taxes
    2,424       1,377  
Prepayments and other
    9,988       3,201  
TOTAL
    209,212       119,413  
                 
OTHER PROPERTY AND INVESTMENTS
               
Non-utility property at cost (less accumulated depreciation)
    1,016       1,016  
Storm reserve escrow account
    6,663       10,605  
TOTAL
    7,679       11,621  
                 
UTILITY PLANT
               
Electric
    873,379       860,358  
Natural gas
    220,392       217,769  
Construction work in progress
    25,660       11,135  
TOTAL UTILITY PLANT
    1,119,431       1,089,262  
Less - accumulated depreciation and amortization
    564,257       549,587  
UTILITY PLANT - NET
    555,174       539,675  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Deferred fuel costs
    4,080       4,080  
  Other regulatory assets
    189,542       202,003  
Other
    6,434       4,997  
TOTAL
    200,056       211,080  
                 
TOTAL ASSETS
  $ 972,121     $ 881,789  
                 
See Notes to Financial Statements.
               



ENTERGY NEW ORLEANS, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 70,000     $ 70,000  
Accounts payable:
               
  Associated companies
    36,729       28,778  
  Other
    25,114       31,209  
Customer deposits
    22,313       21,974  
Interest accrued
    2,801       3,020  
Deferred fuel costs
    3,116       2,157  
System agreement cost equalization
    14,600       16,880  
Other
    7,514       3,479  
TOTAL CURRENT LIABILITIES
    182,187       177,497  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    173,244       172,790  
Accumulated deferred investment tax credits
    1,191       1,300  
Regulatory liability for income taxes - net
    9,993       24,291  
Other regulatory liabilities
    23,311       11,060  
Asset retirement cost liabilities
    2,269       2,193  
Accumulated provisions
    10,781       15,031  
Pension and other postretirement liabilities
    82,704       83,790  
Long-term debt
    225,938       126,300  
Gas system rebuild insurance proceeds
    37,329       44,207  
Other
    6,406       7,985  
TOTAL NON-CURRENT LIABILITIES
    573,166       488,947  
                 
                 
Commitments and Contingencies
               
                 
Preferred stock without sinking fund
    19,780       19,780  
                 
COMMON EQUITY
               
Common stock, $4 par value, authorized 10,000,000
               
  shares; issued and outstanding 8,435,900 shares in 2013
               
  and 2012
    33,744       33,744  
Paid-in capital
    36,294       36,294  
Retained earnings
    126,950       125,527  
TOTAL
    196,988       195,565  
                 
TOTAL LIABILITIES AND EQUITY
  $ 972,121     $ 881,789  
                 
See Notes to Financial Statements.
               



 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
   
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 33,744     $ 36,294     $ 111,127     $ 181,165  
                                 
Net income
    -       -       7,226       7,226  
Common stock dividends
    -       -       (1,700 )     (1,700 )
Preferred stock dividends
    -       -       (482 )     (482 )
                                 
Balance at June 30, 2012
  $ 33,744     $ 36,294     $ 116,171     $ 186,209  
                                 
                                 
Balance at December 31, 2012
  $ 33,744     $ 36,294     $ 125,527     $ 195,565  
                                 
Net income
    -       -       1,905       1,905  
Preferred stock dividends
    -       -       (482 )     (482 )
                                 
Balance at June 30, 2013
  $ 33,744     $ 36,294     $ 126,950     $ 196,988  
                                 
See Notes to Financial Statements.
                               
                                 
                                 
                                 



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Increase/
       
Description
 
2013
   
2012
   
(Decrease)
 
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                   
  Residential
  $ 43     $ 42     $ 1       2  
  Commercial
    43       40       3       8  
  Industrial
    8       7       1       14  
  Governmental
    16       15       1       7  
    Total retail
    110       104       6       6  
  Sales for resale:
                               
     Associated companies
    4       4       -       -  
  Other
    7       6       1       17  
    Total
  $ 121     $ 114     $ 7       6  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    393       436       (43 )     (10 )
  Commercial
    475       507       (32 )     (6 )
  Industrial
    116       124       (8 )     (6 )
  Governmental
    182       198       (16 )     (8 )
    Total retail
    1,166       1,265       (99 )     (8 )
  Sales for resale:
                               
     Associated companies
    70       51       19       37  
     Non-associated companies
    1       2       (1 )     (50 )
    Total
    1,237       1,318       (81 )     (6 )
                                 
                                 
   
Six Months Ended
   
Increase/
         
Description
    2013       2012    
(Decrease)
 
%
 
   
(Dollars In Millions)
         
Electric Operating Revenues:
                         
  Residential
  $ 88     $ 77     $ 11       14  
  Commercial
    85       76       9       12  
  Industrial
    16       14       2       14  
  Governmental
    32       29       3       10  
    Total retail
    221       196       25       13  
  Sales for resale:
                               
     Associated companies
    8       11       (3 )     (27 )
  Other
    6       7       (1 )      (14 ) 
    Total
  $ 235     $ 214     $ 21       10  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    825       819       6       1  
  Commercial
    926       954       (28 )     (3 )
  Industrial
    219       235       (16 )     (7 )
  Governmental
    364       379       (15 )     (4 )
    Total retail
    2,334       2,387       (53 )     (2 )
  Sales for resale:
                               
     Associated companies
    156       190       (34 )     (18 )
     Non-associated companies
    2       3       (1 )     (33 )
    Total
    2,492       2,580       (88 )     (3 )
                                 



ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Plan to Spin Off the Utility’s Transmission Business

See the “ Plan to Spin Off the Utility’s Transmission Business ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and herein for a discussion of Entergy’s plan to spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp., including the planned retirement of debt.

Results of Operations

Net Income

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $5.3 million primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher net revenue.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $6.1 million primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher net revenue.

Net Revenue

Second Quarter 2013 Compared to Second Quarter 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the second quarter 2013 to the second quarter 2012:

   
Amount
   
(In Millions)
     
2012 net revenue
 
$142.5 
Net wholesale revenue
 
3.4 
Retail electric price
 
3.4 
Reserve equalization
 
2.7 
Volume/weather
 
(3.8)
Purchased power capacity
 
(4.0)
Other
 
0.1 
2013 net revenue
 
$144.3 

The net wholesale revenue variance is primarily due to higher capacity revenue resulting from the purchased power agreements between Entergy Gulf States Louisiana and Entergy Texas.

The retail electric price variance is primarily due to an annual base rate increase of $28 million, effective July 2012, as a result of the PUCT’s order in the December 2011 rate case. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case.

The reserve equalization variance is primarily due to reserve equalization revenue as a result of changes in the Entergy System generation mix compared to the same period in 2012.
 
 
158
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


 

 
The volume/weather variance is primarily due to a decrease of 138 GWh, or 3%, in billed electricity usage, including the effect of milder weather compared to last year on residential and commercial sales.

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

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to an increase of $48.9 million in gross wholesale revenues as a result of an increase in sales to affiliated customers and higher prices, and an increase of $44.7 million in fuel cost recovery revenues primarily attributable to higher fuel rates.

Fuel and purchased power expenses increased primarily due to increases in the average market prices of natural gas and purchased power and increased demand.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2013 to the six months ended June 30, 2012:


   
Amount
   
(In Millions)
     
2012 net revenue
 
$259.9 
Retail electric price
 
10.1 
Reserve equalization
 
6.5 
Purchased power capacity
 
 (8.4)
Other
 
(3.0)
2013 net revenue
 
$265.1 

The retail electric price variance is primarily due to an annual base rate increase of $28 million, effective July 2012, as a result of the PUCT’s order in the December 2011 rate case. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case.

The reserve equalization variance is primarily due to decreased reserve equalization expense as a result of changes in the Entergy System generation mix compared to the same period in 2012.

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

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to an increase of $80.9 million in gross wholesale revenues as a result of an increase in sales to affiliated customers and higher prices and the annual base rate increase effective July 2012, as discussed above, partially offset by a decrease of $14 million in fuel cost recovery revenues primarily attributable to lower fuel rates.

Fuel and purchased power expenses increased primarily due to increases in the average market prices of natural gas and purchased power and increased demand, offset by a decrease in deferred fuel expense as a result of higher interim fuel refunds in 2013 compared to 2012.


 
159
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


Other Income Statement Variances

Second Quarter 2013 Compared to Second Quarter 2012

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $5.6 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2013 compared to the same period in prior year;
·  
an increase of $1.3 million in compensation and benefit costs primarily due to a decrease in discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
·  
an increase of $1.1 million primarily due to storm damage accruals in accordance with a rate order from PUCT issued in September 2012. See Note 2 to the financial statements in the Form 10-K for further discussion of the PUCT rate order.

Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in depreciation rates as a result of the rate order approved by the PUCT in September 2012.  See Note 2 to the financial statements in the Form 10-K for further discussion of the PUCT rate order.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Other operation and maintenance expenses increased primarily due to:

·  
an increase of $2.6 million primarily due to storm damage accruals in accordance with a rate order from PUCT issued in September 2012. See Note 2 to the financial statements in the Form 10-K for further discussion of the PUCT rate order;
·  
an increase of $2.4 million  in distribution contract work relating primarily to vegetation maintenance;
·  
an increase of $2.2 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2013 compared to the same period in prior year;
·  
an increase of $1.5 million in insurance expenses primarily due to increases in premiums; and
·  
an increase of $1.4 million in compensation and benefit costs primarily due to a decrease in discount rates used to determine net periodic pension and other postretirement benefit costs.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates " in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in depreciation rates as a result of the rate order approved by the PUCT in September 2012.  See Note 2 to the financial statements in the Form 10-K for further discussion of the PUCT rate order.

Income Taxes

The effective income tax rate was 40.1% for the second quarter 2013 and 46.5% for the six months ended June 30, 2013.  The differences in the effective income tax rates for the second quarter 2013 and the six months ended June 30, 2013 versus the federal statutory rate of 35% were due to certain book and tax differences related to utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 41.7% for the second quarter 2012 and 43% for the six months ended June 30, 2012.  The differences in the effective tax rates for the second quarter 2012 and the six months ended June 30, 2012 versus the federal statutory rate of 35% were primarily due to certain book and tax differences related to utility plant items and state income taxes, partially offset by the amortization of investment tax credits and book and tax differences related to the allowance for equity funds used during construction.


 
160
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$60,236 
 
$65,289 
         
Cash flow provided by (used in):
       
 
Operating activities
 
93,516 
 
95,361 
 
Investing activities
 
(101,881)
 
(59,971)
 
Financing activities
 
(33,319)
 
(77,994)
Net decrease in cash and cash equivalents
 
(41,684)
 
(42,604)
         
Cash and cash equivalents at end of period
 
$18,552 
 
$22,685 

Operating Activities

Net cash flow provided by operating activities decreased $1.8 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to income tax refunds of $94.2 million for the six months ended June 30, 2013 compared to income tax payments of $6 million for the six months ended June 30, 2012.  Entergy Texas had income tax refunds in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement.   The refunds resulted from the utilization of Entergy Texas’s taxable losses against taxable income of other members of the Entergy consolidated group.
 
This was substantially offset by:

·  
$86.1 million of fuel cost refunds for the six months ended June 30, 2013 compared to $67.2 million of fuel cost refunds for the six months ended June 30, 2012.  See Note 2 to the financial statements herein and in the Form 10-K for discussion of the fuel cost refunds; and
·  
the receipt, in January 2012, of $43 million in System Agreement bandwidth remedy payments required to implement the FERC’s remedy in an October 2011 order for the period June-December 2005.  As of March 31, 2013, all of the $43 million, plus interest, had been credited to Entergy Texas customers, with the final $9.5 million being credited in the first quarter 2013.  See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings.

Investing Activities

Net cash flow used in investing activities increased $41.9 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to money pool activity and an increase in transmission construction expenditures due to reliability work performed in 2013 offset by lower fossil-fueled generation construction expenditures due to a greater scope of projects in 2012.

Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from the money pool increased by $21.1 million for the six months ended June 30, 2013 compared to decreasing by $10.8 million for the six months ended June 30, 2012.  The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities decreased $44.7 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to $45 million in common equity dividends paid in 2012.
 
 
161
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


Capital Structure

Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.

   
June 30,
 2013
 
December 31,
2012
         
Debt to capital
 
64.7% 
 
65.4% 
Effect of excluding the securitization bonds
 
(13.0%)
 
(13.3%)
Debt to capital, excluding securitization bonds (a)
 
51.7% 
 
52.1% 
Effect of subtracting cash
 
(0.5%) 
 
(1.7%)
Net debt to net capital, excluding securitization bonds (a)
 
51.2% 
 
50.4% 

(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 long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

           See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources " in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital.  Following are updates to the information provided in the Form 10-K.

Entergy Texas has obtained short-term borrowing authorization through October 2013 from the FERC under which it may borrow at any one time outstanding, $200 million in the aggregate.  See Note 4 to the financial statements for further discussion of Entergy Texas’s short-term borrowing limits.  Entergy Texas has also obtained an order from the FERC authorizing long-term securities issuances through October 2013.

Entergy Texas’s receivables from the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
$40,293
 
$19,175
 
$52,397
 
$63,191

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in March 2018.  No borrowings were outstanding under the facility as of June 30, 2013.  See Note 4 to the financial statements herein for additional discussion of the 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.  Following is an update to that discussion.


 
162
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


In November 2012, Entergy Texas filed a pleading seeking a PUCT finding that special circumstances exist for limited cost recovery of capacity costs associated with two power purchase agreements until such time that these costs are included in base rates or a purchased capacity recovery rider or other recovery mechanism.  In March 2013 the PUCT Staff and intervenors filed a joint motion to dismiss Entergy Texas’s application seeking special circumstances recovery of these capacity costs.  Entergy Texas filed to withdraw this case without prejudice and the judge granted the request in June 2013.

At the April 11, 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity rider was good public policy.   The PUCT issued an order on May 28, 2013 adopting the rule allowing for a purchased power capacity rider, subject to an offsetting adjustment for load growth.  The rule, as adopted, also includes a process for obtaining pre-approval by the PUCT of purchased power agreements.  Entergy Texas has the option to recover its capacity costs under the new rider mechanism or could proceed with a full base rate proceeding.

Federal Regulation

See “ System Agreement ” and “ Entergy’s Proposal to Join MISO ” in the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the Federal Regulation discussion in the Form 10-K.

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.

Nuclear Matters

See “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the unbilled revenue and qualified pension and other postretirement benefits.


 
CONSOLIDATED INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 455,100     $ 358,067     $ 761,273     $ 684,991  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    60,044       30,893       33,944       74,931  
   Purchased power
    234,228       170,602       426,947       322,725  
   Other operation and maintenance
    67,177       56,625       123,667       112,448  
Taxes other than income taxes
    15,051       15,814       29,701       31,609  
Depreciation and amortization
    23,712       21,117       47,072       41,844  
Other regulatory charges - net
    16,533       14,033       35,310       27,389  
TOTAL
    416,745       309,084       696,641       610,946  
                                 
OPERATING INCOME
    38,355       48,983       64,632       74,045  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    1,910       985       2,669       2,074  
Interest and investment income
    339       1,458       686       2,918  
Miscellaneous - net
    (485 )     (849 )     (1,343 )     (1,644 )
TOTAL
    1,764       1,594       2,012       3,348  
                                 
INTEREST EXPENSE
                               
Interest expense
    23,151       23,454       46,332       47,264  
Allowance for borrowed funds used during construction
    (1,331 )     (658 )     (1,886 )     (1,384 )
TOTAL
    21,820       22,796       44,446       45,880  
                                 
INCOME BEFORE INCOME TAXES
    18,299       27,781       22,198       31,513  
                                 
Income taxes
    7,346       11,577       10,323       13,565  
                                 
NET INCOME
  $ 10,953     $ 16,204     $ 11,875     $ 17,948  
                                 
                                 
See Notes to Financial Statements.
                               



 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
OPERATING ACTIVITIES
           
Net income
  $ 11,875     $ 17,948  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation and amortization
    47,072       41,844  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    (28,187 )     12,373  
  Changes in assets and liabilities:
               
    Receivables
    (43,776 )     19,538  
    Fuel inventory
    (4,337 )     (7,506 )
    Accounts payable
    36,679       19,978  
    Taxes accrued
    120,352       (14,095 )
    Interest accrued
    (394 )     (326 )
    Deferred fuel costs
    (93,518 )     (13,064 )
    Other working capital accounts
    4,387       (4,642 )
    Provisions for estimated losses
    2,124       2,525  
    Other regulatory assets
    46,800       34,619  
    Pension and other postretirement liabilities
    (4,303 )     (7,141 )
    Other assets and liabilities
    (1,258 )     (6,690 )
Net cash flow provided by operating activities
    93,516       95,361  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (92,149 )     (83,474 )
Allowance for equity funds used during construction
    2,669       2,074  
Change in money pool receivable - net
    (21,118 )     10,794  
Remittances to transition charge account
    (39,933 )     (38,104 )
Payments from transition charge account
    48,650       48,739  
Net cash flow used in investing activities
    (101,881 )     (59,971 )
                 
FINANCING ACTIVITIES
               
Retirement of long-term debt
    (33,157 )     (32,293 )
Dividends paid:
               
    Common stock
    -       (45,000 )
Other
    (162 )     (701 )
Net cash flow used in financing activities
    (33,319 )     (77,994 )
                 
Net decrease in cash and cash equivalents
    (41,684 )     (42,604 )
                 
Cash and cash equivalents at beginning of period
    60,236       65,289  
                 
Cash and cash equivalents at end of period
  $ 18,552     $ 22,685  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid (received) during the period for:
               
  Interest - net of amount capitalized
  $ 44,663     $ 45,402  
  Income taxes
  $ (94,189 )   $ 6,000  
                 
See Notes to Financial Statements.
               



 
CONSOLIDATED BALANCE SHEETS
 
ASSETS
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 2,002     $ 528  
   Temporary cash investments
    16,550       59,708  
    Total cash and cash equivalents
    18,552       60,236  
Securitization recovery trust account
    28,538       37,255  
Accounts receivable:
               
  Customer
    67,337       53,836  
  Allowance for doubtful accounts
    (730 )     (680 )
  Associated companies
    107,485       68,750  
  Other
    9,981       10,450  
  Accrued unbilled revenues
    51,429       38,252  
    Total accounts receivable
    235,502       170,608  
Deferred fuel costs
    184       -  
Accumulated deferred income taxes
    15,433       34,988  
Fuel inventory - at average cost
    59,725       55,388  
Materials and supplies - at average cost
    30,311       32,853  
System agreement cost equalization
    14,600       16,880  
Prepaid taxes
    -       53,668  
Prepayments and other
    11,019       18,206  
TOTAL
    413,864       480,082  
                 
OTHER PROPERTY AND INVESTMENTS
               
Investments in affiliates - at equity
    657       678  
Non-utility property - at cost (less accumulated depreciation)
    492       638  
Other
    17,889       17,263  
TOTAL
    19,038       18,579  
                 
UTILITY PLANT
               
Electric
    3,542,587       3,475,776  
Construction work in progress
    85,264       90,469  
TOTAL UTILITY PLANT
    3,627,851       3,566,245  
Less - accumulated depreciation and amortization
    1,357,506       1,332,349  
UTILITY PLANT - NET
    2,270,345       2,233,896  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    130,371       131,287  
  Other regulatory assets (includes securitization property
       of $621,305 as of June 30, 2013 and
       $648,863 as of December 31, 2012)
    1,068,652       1,114,536  
Long-term receivables - associated companies
    28,571       29,510  
Other
    18,537       17,891  
TOTAL
    1,246,131       1,293,224  
                 
TOTAL ASSETS
  $ 3,949,378     $ 4,025,781  
                 
See Notes to Financial Statements.
               



ENTERGY TEXAS, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Accounts payable:
           
  Associated companies
  $ 117,927     $ 88,743  
  Other
    65,243       65,261  
Customer deposits
    38,729       38,859  
Taxes accrued
    66,684       -  
Interest accrued
    31,772       32,166  
Deferred fuel costs
    -       93,334  
Pension and other postretirement liabilities
    821       853  
System agreement cost equalization
    -       8,968  
Other
    4,315       2,839  
TOTAL
    325,491       331,023  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    962,613       1,009,081  
Accumulated deferred investment tax credits
    16,945       17,743  
Other regulatory liabilities
    5,422       6,150  
Asset retirement cost liabilities
    4,224       4,103  
Accumulated provisions
    8,733       6,609  
Pension and other postretirement liabilities
    150,970       155,241  
Long-term debt (includes securitization bonds of
       $657,235 as of June 30, 2013 and
       $690,380 as of December 31, 2012)
    1,584,877       1,617,813  
Other
    24,082       23,872  
TOTAL
    2,757,866       2,840,612  
                 
Commitments and Contingencies
               
                 
COMMON EQUITY
               
Common stock, no par value, authorized 200,000,000 shares;
               
  issued and outstanding 46,525,000 shares in 2013 and 2012
    49,452       49,452  
Paid-in capital
    481,994       481,994  
Retained earnings
    334,575       322,700  
TOTAL
    866,021       854,146  
                 
TOTAL LIABILITIES AND EQUITY
  $ 3,949,378     $ 4,025,781  
                 
See Notes to Financial Statements.
               
                 



 
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Common Equity
       
   
Common Stock
   
Paid-in Capital
   
Retained Earnings
   
Total
 
   
(In Thousands)
 
                         
Balance at December 31, 2011
  $ 49,452     $ 481,994     $ 367,909     $ 899,355  
                                 
Net income
    -       -       17,948       17,948  
Common stock dividends
    -       -       (45,000 )     (45,000 )
                                 
Balance at June 30, 2012
  $ 49,452     $ 481,994     $ 340,857     $ 872,303  
                                 
                                 
Balance at December 31, 2012
  $ 49,452     $ 481,994     $ 322,700     $ 854,146  
                                 
Net income
    -       -       11,875       11,875  
                                 
Balance at June 30, 2013
  $ 49,452     $ 481,994     $ 334,575     $ 866,021  
                                 
See Notes to Financial Statements.
                               
                                 



 
SELECTED OPERATING RESULTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
                         
   
Three Months Ended
 
Increase/
     
Description
 
2013
   
2012
   
(Decrease)
 
%
 
   
(Dollars In Millions)
     
Electric Operating Revenues:
                       
  Residential
  $ 136     $ 116     $ 20       17  
  Commercial
    85       73       12       16  
  Industrial
    85       76       9       12  
  Governmental
    6       5       1       20  
    Total retail
    312       270       42       16  
  Sales for resale:
                               
     Associated companies
    109       57       52       91  
     Non-associated companies
    9       12       (3 )     (25 )
  Other
    25       19       6       32  
    Total
  $ 455     $ 358     $ 97       27  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    1,203       1,312       (109 )     (8 )
  Commercial
    1,034       1,101       (67 )     (6 )
  Industrial
    1,517       1,479       38       3  
  Governmental
    68       68       -       -  
    Total retail
    3,822       3,960       (138 )     (3 )
  Sales for resale:
                               
     Associated companies
    1,740       1,433       307       21  
     Non-associated companies
    160       248       (88 )     (35 )
    Total
    5,722       5,641       81       1  
                                 
                                 
   
Six Months Ended
   
Increase/
       
Description
    2013       2012    
(Decrease)
 
%
 
   
(Dollars In Millions)
       
Electric Operating Revenues:
                               
  Residential
  $ 237     $ 233     $ 4       2  
  Commercial
    138       150       (12 )     (8 )
  Industrial
    135       139       (4 )     (3 )
  Governmental
    10       11       (1 )     (9 )
    Total retail
    520       533       (13 )     (2 )
  Sales for resale:
                               
     Associated companies
    193       109       84       77  
     Non-associated companies
    18       20       (2 )     (10 )
  Other
    30       23       7       30  
    Total
  $ 761     $ 685     $ 76       11  
                                 
Billed Electric Energy
                               
 Sales (GWh):
                               
  Residential
    2,466       2,507       (41 )     (2 )
  Commercial
    2,015       2,075       (60 )     (3 )
  Industrial
    2,936       2,878       58       2  
  Governmental
    136       135       1       1  
    Total retail
    7,553       7,595       (42 )     (1 )
  Sales for resale:
                               
     Associated companies
    3,065       2,163       902       42  
     Non-associated companies
    322       504       (182 )     (36 )
    Total
    10,940       10,262       678       7  
                                 
                                 



SYSTEM ENERGY RESOURCES, INC .

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations

System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf.  The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.  System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement.  Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.

Second Quarter 2013 Compared to Second Quarter 2012

Net income decreased $7.6 million primarily due to lower other income, partially offset by increased operating income.  Other income was lower due to AFUDC accrued on the Grand Gulf uprate project in the second quarter 2012.  Operating income was higher because of higher rate base compared to 2012 resulting from capital spending at Grand Gulf, including the uprate project.  Grand Gulf’s spring 2012 refueling outage was completed in June 2012, and the majority of uprate-related capital improvements were completed during this outage.

Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

Net income decreased $6.2 million primarily due to lower other income, partially offset by increased operating income.  Other income was lower due to AFUDC accrued on the Grand Gulf uprate project in 2012.  Operating income was higher because of higher rate base compared to 2012 resulting from capital spending at Grand Gulf, including the uprate project.    Grand Gulf’s spring 2012 refueling outage was completed in June 2012, and the majority of uprate-related capital improvements were completed during this outage.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2013 and 2012 were as follows:

   
2013
 
2012
   
(In Thousands)
         
Cash and cash equivalents at beginning of period
 
$83,622 
 
$185,157 
         
Cash flow provided by (used in):
       
 
Operating activities
 
16,406 
 
109,849 
 
Investing activities
 
(19,437)
 
(371,585)
 
Financing activities
 
(79,971)
 
77,017 
Net decrease in cash and cash equivalents
 
(83,002)
 
(184,719)
         
Cash and cash equivalents at end of period
 
$620  
 
$438  

 
170
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis


Operating Activities

Net cash provided by operating activities decreased $93.4 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to income tax payments of $204.2 million in 2013 compared to income tax refunds of $3.9 million in 2012, partially offset by spending on the Grand Gulf refueling outage in 2012.  System Energy had income tax payments in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement.  The income tax payments resulted primarily from the reversal of temporary differences for which System Energy had previously claimed a tax deduction.

Investing Activities

Net cash used in investing activities decreased $352.1 million for the six months ended June 30, 2013 compared to the six months ended June 30, 2012 primarily due to a decrease in construction expenditures resulting from spending on the uprate project at Grand Gulf completed during the refueling outage in 2012 and a decrease in nuclear fuel activity primarily due to the Grand Gulf refueling outage in 2012.  The decrease was partially offset by money pool activity.

Decreases in System Energy’s receivable from the money pool are a source of cash flow, and System Energy’s receivable from the money pool decreased $26.9 million for the six months ended June 30, 2013 compared to decreasing by $120.4 million for the six months ended June 30, 2012.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

System Energy’s financing activities used $80 million of cash for the six months ended June 30, 2013 compared to providing $77 million of cash for the six months ended June 30, 2012 primarily due to the following cash flow activity:

·  
the repayment of borrowings of $38.9 million on the nuclear fuel company variable interest entity’s credit facility in 2013 compared to an increase in borrowings of $61.1 million on the nuclear fuel company variable interest entity’s credit facility in 2012;
·  
the issuance of $50 million of 4.02% Series H notes by the nuclear fuel company variable interest entity in February 2012; and
·  
an increase of $17.3 million in common stock dividends paid in 2013.

Capital Structure

System Energy’s capitalization is balanced between equity and debt, as shown in the following table.

   
June 30,
 2013
 
December 31,
2012
         
Debt to capital
 
47.0% 
 
49.7% 
Effect of subtracting cash
 
-% 
 
(2.6%)
Net debt to net capital
 
47.0% 
 
47.1% 

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.  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.
 
 
 
 
171
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis



Uses and Sources of Capital

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources "   in the Form 10-K for a discussion of System Energy’s uses and sources of capital.  Following are updates to the information provided in the Form 10-K.

As discussed in the Form 10-K, the planned construction and capital investment amounts in the table do not include significant costs for the capital projects that might result from the NRC post-Fukushima requirements.  The current preliminary cost estimate for post-Fukushima requirements for System Energy is approximately $70 million, including approximately $65 million in capital and $5 million in one-time operation and maintenance expenses.  These costs are expected to be incurred over the 2012 through 2018 time period, and do not include amounts for any future NRC requirements (e.g., Tier 2 and 3 activities).

System Energy has obtained a short-term borrowing authorization from the FERC under which it may borrow, through October 2013, up to the aggregate amount, at any one time outstanding, of $200 million.  See Note 4 to the financial statements for further discussion of System Energy’s short-term borrowing limits.  System Energy has also obtained an order from the FERC authorizing long-term securities issuances through October 2013.  System Energy has obtained long-term financing authorization from the FERC that extends through November 2013 for issuances by its nuclear fuel company variable interest entity.

System Energy’s receivables from or (payables to) the money pool were as follows:

June 30,
2013
 
December 31,
2012
 
June 30,
2012
 
December 31,
2011
(In Thousands)
             
($51,092)
 
$26,915
 
($41,138)
 
$120,424

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 $125 million scheduled to expire in June 2016.  As of June 30, 2013, $1.1 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the System Energy nuclear fuel company variable interest entity.  See Note 4 to the financial statements for additional discussion of the variable interest entity credit facility.

Nuclear Matters

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters " in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks " in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates " in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs and qualified pension and other postretirement benefits.


 
INCOME STATEMENTS
 
For the Three and Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                         
   
Three Months Ended
   
Six Months Ended
 
   
2013
   
2012
   
2013
   
2012
 
   
(In Thousands)
   
(In Thousands)
 
                         
OPERATING REVENUES
                       
Electric
  $ 172,177     $ 113,699     $ 340,755     $ 239,733  
                                 
OPERATING EXPENSES
                               
Operation and Maintenance:
                               
   Fuel, fuel-related expenses, and
                               
     gas purchased for resale
    28,586       3,077       50,103       13,438  
   Nuclear refueling outage expenses
    7,358       2,884       14,715       7,048  
   Other operation and maintenance
    40,437       33,441       80,378       67,725  
Decommissioning
    8,787       8,180       17,418       16,214  
Taxes other than income taxes
    6,484       5,519       12,973       11,032  
Depreciation and amortization
    32,030       25,324       67,446       54,998  
Other regulatory credits - net
    (3,137 )     (2,971 )     (5,962 )     (4,423 )
TOTAL
    120,545       75,454       237,071       166,032  
                                 
OPERATING INCOME
    51,632       38,245       103,684       73,701  
                                 
OTHER INCOME
                               
Allowance for equity funds used during construction
    1,732       12,518       3,203       21,987  
Interest and investment income
    2,514       2,076       5,191       5,602  
Miscellaneous - net
    (191 )     (143 )     (359 )     (300 )
TOTAL
    4,055       14,451       8,035       27,289  
                                 
INTEREST EXPENSE
                               
Interest expense
    9,451       10,596       18,655       21,445  
Allowance for borrowed funds used during construction
    (203 )     (3,714 )     (381 )     (6,491 )
TOTAL
    9,248       6,882       18,274       14,954  
                                 
INCOME BEFORE INCOME TAXES
    46,439       45,814       93,445       86,036  
                                 
Income taxes
    18,705       10,446       37,705       24,132  
                                 
NET INCOME
  $ 27,734     $ 35,368     $ 55,740     $ 61,904  
                                 
See Notes to Financial Statements.
                               
                                 
                                 

 
 
 
 
 
 
 
 
 
 
 
 
 
(Page left blank intentionally)

 

 
STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
OPERATING ACTIVITIES
           
Net income
  $ 55,740     $ 61,904  
Adjustments to reconcile net income to net cash flow provided by operating activities:
         
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
    124,192       80,946  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
    34,693       73,886  
  Changes in assets and liabilities:
               
    Receivables
    11,076       (5,502 )
    Accounts payable
    43       12,026  
    Taxes accrued and prepaid taxes
    (211,986 )     (56,901 )
    Interest accrued
    (3,254 )     (5,400 )
    Other working capital accounts
    8,537       (37,718 )
    Other regulatory assets
    11,145       (2,334 )
    Pension and other postretirement liabilities
    (1,777 )     (5,711 )
    Other assets and liabilities
    (12,003 )     (5,347 )
Net cash flow provided by operating activities
    16,406       109,849  
                 
INVESTING ACTIVITIES
               
Construction expenditures
    (30,515 )     (341,458 )
Allowance for equity funds used during construction
    3,203       21,987  
Nuclear fuel purchases
    (29,802 )     (157,719 )
Proceeds from the sale of nuclear fuel
    26,522       -  
Proceeds from nuclear decommissioning trust fund sales
    91,230       223,243  
Investment in nuclear decommissioning trust funds
    (106,990 )     (238,062 )
Changes in money pool receivable - net
    26,915       120,424  
Net cash flow used in investing activities
    (19,437 )     (371,585 )
                 
FINANCING ACTIVITIES
               
Proceeds from the issuance of long-term debt
    -       50,000  
Retirement of long-term debt
    (40,902 )     (39,892 )
Changes in money pool payable - net
    51,092       41,138  
Changes in credit borrowings - net
    (38,934 )     61,102  
Dividends paid:
               
  Common stock
    (50,000 )     (32,750 )
Other
    (1,227 )     (2,581 )
Net cash flow provided by (used in) financing activities
    (79,971 )     77,017  
                 
Net decrease in cash and cash equivalents
    (83,002 )     (184,719 )
                 
Cash and cash equivalents at beginning of period
    83,622       185,157  
                 
Cash and cash equivalents at end of period
  $ 620     $ 438  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
               
Cash paid (received) during the period for:
               
  Interest - net of amount capitalized
  $ 17,578     $ 21,357  
  Income taxes
  $ 204,219     $ (3,873 )
                 
See Notes to Financial Statements.
               
                 

 
 
BALANCE SHEETS
ASSETS
June 30, 2013 and December 31, 2012
(Unaudited)
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT ASSETS
           
Cash and cash equivalents:
           
  Cash
  $ 620     $ 100  
  Temporary cash investments
    -       83,522  
    Total cash and cash equivalents
    620       83,622  
Accounts receivable:
               
  Associated companies
    56,425       93,381  
  Other
    4,869       5,904  
    Total accounts receivable
    61,294       99,285  
Accumulated deferred income taxes
    29,250       74,331  
Materials and supplies - at average cost
    84,798       82,443  
Deferred nuclear refueling outage costs
    20,156       35,155  
Prepaid taxes
    30,509       -  
Prepayments and other
    6,196       2,080  
TOTAL
    232,823       376,916  
                 
OTHER PROPERTY AND INVESTMENTS
               
Decommissioning trust funds
    537,585       490,572  
TOTAL
    537,585       490,572  
                 
UTILITY PLANT
               
Electric
    3,995,656       3,987,672  
Property under capital lease
    569,355       569,355  
Construction work in progress
    45,244       40,392  
Nuclear fuel
    212,637       252,682  
TOTAL UTILITY PLANT
    4,822,892       4,850,101  
Less - accumulated depreciation and amortization
    2,632,353       2,568,862  
UTILITY PLANT - NET
    2,190,539       2,281,239  
                 
DEFERRED DEBITS AND OTHER ASSETS
               
Regulatory assets:
               
  Regulatory asset for income taxes - net
    122,866       126,503  
  Other regulatory assets
    322,566       330,074  
Other
    16,912       18,212  
TOTAL
    462,344       474,789  
                 
TOTAL ASSETS
  $ 3,423,291     $ 3,623,516  
                 
See Notes to Financial Statements.
               


 

SYSTEM ENERGY RESOURCES, INC.
 
BALANCE SHEETS
 
LIABILITIES AND EQUITY
 
June 30, 2013 and December 31, 2012
 
(Unaudited)
 
             
   
2013
   
2012
 
   
(In Thousands)
 
             
CURRENT LIABILITIES
           
Currently maturing long-term debt
  $ 119,229     $ 111,854  
Short-term borrowings
    1,053       39,986  
Accounts payable:
               
  Associated companies
    56,514       5,564  
  Other
    29,086       44,433  
Taxes accrued
    -       181,477  
Accumulated deferred income taxes
    1,029       1,789  
Interest accrued
    12,365       15,619  
Other
    2,438       2,429  
TOTAL
    221,714       403,151  
                 
NON-CURRENT LIABILITIES
               
Accumulated deferred income taxes and taxes accrued
    783,134       782,469  
Accumulated deferred investment tax credits
    54,906       56,188  
Other regulatory liabilities
    264,669       256,024  
Decommissioning
    495,789       478,371  
Pension and other postretirement liabilities
    140,840       142,617  
Long-term debt
    623,725       671,945  
Other
    45       22  
TOTAL
    2,363,108       2,387,636  
                 
Commitments and Contingencies
               
                 
COMMON EQUITY
               
Common stock, no par value, authorized 1,000,000 shares;
               
  issued and outstanding 789,350 shares in 2013 and 2012
    789,350       789,350  
Retained earnings
    49,119       43,379  
TOTAL
    838,469       832,729  
                 
TOTAL LIABILITIES AND EQUITY
  $ 3,423,291     $ 3,623,516  
                 
See Notes to Financial Statements.
               


 

 
STATEMENTS OF CHANGES IN COMMON EQUITY
 
For the Six Months Ended June 30, 2013 and 2012
 
(Unaudited)
 
                   
   
Common Equity
       
   
Common Stock
   
Retained Earnings
   
Total
 
   
(In Thousands)
 
                   
Balance at December 31, 2011
  $ 789,350     $ 11,213     $ 800,563  
                         
Net income
    -       61,904       61,904  
Common stock dividends
    -       (32,750 )     (32,750 )
                         
Balance at June 30, 2012
  $ 789,350     $ 40,367     $ 829,717  
                         
                         
Balance at December 31, 2012
  $ 789,350     $ 43,379     $ 832,729  
                         
Net income
    -       55,740       55,740  
Common stock dividends
    -       (50,000 )     (50,000 )
                         
Balance at June 30, 2013
  $ 789,350     $ 49,119     $ 838,469  
                         
See Notes to Financial Statements.
                       
                         
 
 

ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See " PART I, Item 1, Litigation " in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.  Following is an update to that discussion.  Also see "Item 5, Other Information, Environmental Regulation " , below, for updates regarding environmental proceedings and regulation.

Texas Power Price Lawsuit

See the Form 10-K for a discussion of the lawsuit filed in August 2003 in the district court of Chambers County, Texas by Texas residents on behalf of a purported class of the Texas retail customers of Entergy Gulf States, Inc. who were billed and paid for electric power from January 1, 1994 to the present.  The case is pending in state district court, and in March 2012 the court found that the case met the requirements to be maintained as a class action under Texas law.  On April 30, 2012, the court entered an order certifying the class.  The defendants have appealed the order to the Texas Court of Appeals – First District.  The appeal is pending, and proceedings in district court are stayed until the appeal is resolved.  Oral arguments before the court of appeals were conducted on April 23, 2013, and the matter awaits that court’s decision.

Item 1A.  Risk Factors

There have been no material changes to the risk factors discussed in " PART I, Item 1A, Risk Factors " in the Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)

 
 
 
 
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 (b)
                 
4/01/2013-4/30/2013
 
-
 
$-
 
-
 
$350,052,918
5/01/2013-5/31/2013
 
-
 
$-
 
-
 
$350,052,918
6/01/2013-6/30/2013
 
-
 
$-
 
-
 
$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.  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 2013, Entergy withheld 62,841 shares of its common stock at $64.45 per share to pay income taxes due upon vesting of restricted stock granted as part of its long-term incentive program.

(a)
See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.
(b)
Maximum amount of shares that may yet be repurchased does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.
 
 


Item 5.  Other Information

Regulation of the Nuclear Power Industry

Nuclear Waste Policy Act of 1982

Spent Nuclear Fuel

See the discussion in Part I, Item 1 in the Form 10-K for information regarding litigation against the DOE related to the DOE’s breach of its obligation to remove spent fuel from nuclear sites.  Following is an update to that discussion.  On April 2, 2013, the U.S. Court of Appeals for the Federal Circuit issued a ruling in favor of Entergy Nuclear FitzPatrick and Entergy Nuclear Indian Point 3 and against the DOE that the DOE may not raise as a defense to damages claims in the spent fuel litigation a claim that it was unavoidably delayed in commencing performance.  On April 5, 2013, the U.S. Treasury paid Entergy Nuclear Generation Company $4.2 million representing the judgment in favor of Entergy Nuclear Generation Company against the DOE for the Pilgrim plant.  On April 11, 2013, the U.S. Treasury paid Entergy Nuclear Vermont Yankee $40.8 million representing the judgment in favor of Entergy Nuclear Vermont Yankee against the DOE for the Vermont Yankee plant.  On April 23, 2013, the U.S. Court of Federal Claims issued a judgment in favor of Entergy Arkansas and against the DOE in the remanded spent fuel case for damages in the amount of $47.8 million.  No party appealed this decision and payment of the judgment is pending.  Management cannot predict the timing of receipt of funds pursuant to this judgment.

Nuclear Plant Decommissioning

See the discussion in Part I, Item 1 in the Form 10-K for information regarding decommissioning funding for the nuclear plants.  Following is an update to that discussion.  On March 29, 2013, Entergy Operations and Entergy Nuclear Operations made filings with the NRC reporting on decommissioning funding for Entergy's nuclear plants.  Those reports all showed that decommissioning funding for the nuclear plants met the NRC’s financial assurance requirements.

Environmental Regulation

Following are updates to the Environmental Regulation section of Part I, Item 1 of the Form 10-K.

Clean Air Act and Subsequent Amendments

Potential SO 2   Nonattainment

The EPA issued a final rule in June 2010 adopting an SO2 1-hour national ambient air quality standard of 75 parts per billion.  The EPA designations for counties in attainment and nonattainment were originally due in June 2012, but the EPA has indicated that it will delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violations of the new standard. In those few areas, final designations are expected in the summer of 2013.  In all other areas, analysis is required once EPA issues additional final regulations and guidance.  Additional capital projects or operational changes may be required for Entergy facilities in these areas.

Hazardous Air Pollutants

The EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011 and the rule became effective in April 2012.  Entergy currently is developing compliance plans to meet requirements of the rule, which could result in significant capital expenditures for Entergy’s coal-fired units.  Compliance with MATS is required by the Clean Air Act within three years, or by 2015, although certain extensions of this deadline are available from state permit authorities and the EPA.  Entergy has applied for and received a one-year extension, as allowed by the Clean Air Act, for its affected facilities in Arkansas and Louisiana.



Cross-State Air Pollution

See the Form 10-K for a discussion of the Clean Air Interstate Rule (CAIR) and the Cross-State Air Pollution Rule (CSAPR, which previously was referred to as the Transport Rule).  In December 2011 the Court of Appeals for the D.C. Circuit stayed CSAPR and instructed the EPA to continue administering CAIR, pending further judicial review.  In August 2012 the court issued a decision vacating CSAPR and leaving CAIR in place pending the promulgation of a lawful replacement for both rules.  In January 2013 the court denied petitions for reconsideration filed by the EPA and certain states and intervenors.  In March 2013 the EPA and other parties filed petitions for certiorari with the U.S. Supreme Court.  The U.S. Supreme Court issued an order in June 2013 granting the EPA’s and environmental groups’ petitions for review of the D.C. Circuit’s decision vacating CSAPR.  Entergy is complying with CAIR as it continues to be implemented until further instruction from the court or the EPA.

New Source Performance Standards for Greenhouse Gas Emissions

As a part of a Climate Plan announced June 25, 2013, President Obama directed the EPA to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016.

Clean Water Act

Effluent Limitation Guidelines

On April 19, 2013, the EPA issued proposed effluent limitation guidelines that, if adopted as final, would apply to discharges from Entergy’s generating facilities that hold national pollutant discharge elimination system permits under the Clean Water Act.  The proposal includes several options for public consideration.  Entergy is in the process of reviewing the proposal and will engage in the public comment process as appropriate. 

Indian Point Units 1 and 2 Hazardous Waste Remediation

Prior to Entergy’s purchase of Indian Point Unit 1, the previous owner completed the cleanup and desludging of the Unit 1 water storage pool, generating mixed waste.  The existing mixed waste storage permit and an associated order on consent were transferred to Entergy upon purchasing the unit.  The waste is stored in the Unit 1 containment building in accordance with NRC regulations controlling low level radioactive waste.  An order on consent with NYSDEC requires a quarterly survey of the availability of any commercial facility capable of treating, processing, and disposing of this waste in a commercially reasonable manner.  However, in 2005, NYSDEC revised its regulations to conditionally exempt the storage and disposal of mixed waste that is regulated by the NRC.   Thus, in October 2005 and again in January 2013, Entergy requested that NYSDEC terminate the mixed waste permit and order on consent because the waste falls within the mixed waste exemption.  On April 26, 2013, NYSDEC agreed with Entergy’s request to terminate the permit finding that as long as the facility continues to meet the exemption, the mixed waste permit is not required.  However, NYSDEC denied the request to terminate the consent order reasoning that it contains provisions for storage and reporting that are still applicable.    Therefore, pursuant to the terms of the order on consent, Entergy continues to review this matter and to conduct its quarterly searches for a commercially reasonable vendor that is acceptable both to the NRC and the NYSDEC.



Earnings Ratios (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:

 
Ratios of Earnings to Fixed Charges
 
Twelve Months Ended
 
December 31,
 
June 30,
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
                       
Entergy Arkansas
2.33
 
2.39
 
3.91
 
4.31
 
3.79
 
3.69
Entergy Gulf States Louisiana
2.44
 
2.99
 
3.58
 
4.36
 
3.48
 
3.52
Entergy Louisiana
3.14
 
3.52
 
3.41
 
1.86
 
2.08
 
3.01
Entergy Mississippi
2.92
 
3.31
 
3.35
 
3.55
 
2.79
 
2.94
Entergy New Orleans
3.71
 
3.61
 
4.43
 
5.37
 
3.02
 
2.41
Entergy Texas
2.04
 
1.92
 
2.10
 
2.34
 
1.76
 
1.68
System Energy
3.29
 
3.73
 
3.64
 
3.85
 
5.12
 
5.54

 
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions
 
Twelve Months Ended
 
December 31,
 
June 30,
 
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
 
                         
Entergy Arkansas
1.95
 
2.09
 
3.60
 
3.83
 
3.36
 
3.29
 
Entergy Gulf States Louisiana
2.42
 
2.95
 
3.54
 
4.30
 
3.43
 
3.46
 
Entergy Louisiana
2.87
 
3.27
 
3.19
 
1.70
 
1.93
 
2.80
 
Entergy Mississippi
2.67
 
3.06
 
3.16
 
3.27
 
2.59
 
2.73
 
Entergy New Orleans
3.45
 
3.33
 
4.08
 
4.74
 
2.67
 
2.15
 

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.

Item 6.  Exhibits *

*
4(a) -
Seventy-seventh Supplemental Indenture, dated as of May 1, 2013, to Entergy Louisiana, LLC Mortgage and Deed of Trust, dated as of April 1, 1944 (4.08 to Form 8-K dated May 21, 2013 in 1-32718).
     
*
4(b) -
Seventy-third Supplemental Indenture, dated as of May 1, 2013, to Entergy Arkansas, Inc. Mortgage and Deed of Trust, dated as of October 1, 1944 (4.06 to Form 8-K dated May 30, 2013 in 1-10764).
     
*
4(c) -
Seventy-fourth Supplemental Indenture, dated as of June 1, 2013, to Entergy Arkansas, Inc. Mortgage and Deed of Trust, dated as of October 1, 1944 (4.06 to Form 8-K dated June 4, 2013 in 1-10764).
     
*
4(d) -
Seventeenth Supplemental Indenture, dated as of June 1, 2013, to Entergy New Orleans, Inc. Mortgage and Deed of Trust, dated as of May 1, 1987 (4.02 to Form 8-K dated June 21, 2013 in 0-05807).
 
 
 
     
*
4(e) -
Seventy-fifth Supplemental Indenture, dated as of July 15, 2013, to Entergy Arkansas, Inc. Mortgage and Deed of Trust, dated as of October 1, 1944 (4.02 to Form 8-K dated July 26, 2013 in 1-10764).
     
*
4(f) -
Credit Agreement ($250,000,000), dated as of July 26, 2013, among Entergy Arkansas, Inc., as borrower, the Banks named therein (Canadian Imperial Bank of Commerce, New York Agency, SunTrust Bank, and Union Bank, N.A.), and Wells Fargo Bank, National Association, as Administrative Agent (4.01 to Form 8-K dated July 26, 2013 in 1-10764).
     
 
10(a) -
Restricted Units Agreement, effective May 1, 2013, between Roderick K. West and Entergy Corporation.
     
 
10(b) -
Third Amendment, dated as of June 19, 2013, to the Pension Equalization Plan of Entergy Corporation and Subsidiaries (as Amended and Restated January 1, 2009).
     
 
10(c) -
Fourth Amendment, dated as of July 25, 2013, to the Pension Equalization Plan of Entergy Corporation and Subsidiaries (as Amended and Restated January 1, 2009).
     
 
10(d) -
Fourth Amendment, dated as of July 25, 2013, to the System Executive Retirement Plan of Entergy Corporation and Subsidiaries (as Amended and Restated January 1, 2009).
     
 
12(a) -
Entergy Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
     
 
12(b) -
Entergy Gulf States Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
     
 
12(c) -
Entergy Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
     
 
12(d) -
Entergy Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
     
 
12(e) -
Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Pre­ferred Dividends, as defined.
     
 
12(f) -
Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined.
     
 
12(g) -
System Energy’s Computation of Ratios of Earnings to Fixed Charges, as defined.
     
 
31(a) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
     
 
31(b) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
     
 
31(c) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
     
 
31(d) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
     
 
31(e) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
     
 
31(f) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
     
 
31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
     
 
31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
     
 
 
 
 
 
31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
     
 
31(j) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
     
 
31(k) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
     
 
31(l) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
     
 
31(m) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
     
 
31(n) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
     
 
31(o) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
     
 
31(p) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
     
 
32(a) -
Section 1350 Certification for Entergy Corporation.
     
 
32(b) -
Section 1350 Certification for Entergy Corporation.
     
 
32(c) -
Section 1350 Certification for Entergy Arkansas.
     
 
32(d) -
Section 1350 Certification for Entergy Arkansas.
     
 
32(e) -
Section 1350 Certification for Entergy Gulf States Louisiana.
     
 
32(f) -
Section 1350 Certification for Entergy Gulf States Louisiana.
     
 
32(g) -
Section 1350 Certification for Entergy Louisiana.
     
 
32(h) -
Section 1350 Certification for Entergy Louisiana.
     
 
32(i) -
Section 1350 Certification for Entergy Mississippi.
     
 
32(j) -
Section 1350 Certification for Entergy Mississippi.
     
 
32(k) -
Section 1350 Certification for Entergy New Orleans.
     
 
32(l) -
Section 1350 Certification for Entergy New Orleans.
     
 
32(m) -
Section 1350 Certification for Entergy Texas.
     
 
32(n) -
Section 1350 Certification for Entergy Texas.
     
 
32(o) -
Section 1350 Certification for System Energy.
     
 
32(p) -
Section 1350 Certification for System Energy.
     
 
101 INS -
XBRL Instance Document.
     
 
101 SCH -
XBRL Taxonomy Extension Schema Document.
     
 
101 PRE -
XBRL Taxonomy Presentation Linkbase Document.
     
 
101 LAB -
XBRL Taxonomy Label Linkbase Document.
     
 
101 CAL -
XBRL Taxonomy Calculation Linkbase Document.
     
 
101 DEF -
XBRL Definition Linkbase Document.
 
 
___________________________

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.

*
Incorporated herein by reference as indicated.


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, INC.
ENTERGY GULF STATES LOUISIANA, L.L.C.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)


Date:           August 7, 2013

 
186
 

Exhibit 10(a)
 
 
 
 

  2011 EQUITY OWNERSHIP AND LONG TERM CASH INCENTIVE PLAN OF ENTERGY CORPORATION AND SUBSIDIARIES


RESTRICTED UNITS AGREEMENT

THIS RESTRICTED UNITS AGREEMENT , by and between Entergy Corporation (" Company ") and Roderick K. West (" Grantee "), is effective on May 1, 2013 (the “ Effective   Date ”), as approved by the Personnel Committee of the Entergy Corporation Board of Directors .   For purposes of this Restricted Units Agreement (the “ Agreement ”), Company  shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law or otherwise.

1.               Grant of Restricted Units .   Company hereby grants to Grantee, pursuant to the 2011 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (the “ Equity Plan ”) , Twenty-One Thousand (21,000) Restricted Share Units (the “ Restricted Units ”), subject to the terms and conditions of the Equity Plan and this Agreement.

2.               Vesting of Restricted Units .  The Restricted Units shall vest on May 1, 2018 (the “ Vesting Date ”), provided that Grantee remains  continuously employed through the Vesting Date as a regular full-time employee of Employer (as defined in Section 17 below) or another System Company and performs Grantee’s job duties in a satisfactory manner through such Vesting Date , as determined solely in the discretion of the Company’s Chairman & CEO (“ Vesting Criteria ”).  For purposes of this Section 2, Grantee shall no longer be considered a regular full-time employee of a System Company on the date of Grantee’s death, separation from employment because of Total Disability, R etirement ,   or any other separation from employment with Employer.  If Grantee fails to meet the Vesting Criteria set forth in this Section 2, then Grantee shall not vest in the Restricted Units, except as otherwise provided in Section 4 of this Agreement.

3.            Scheduled Payment of Restricted Units .  If Grantee meets the Vesting Criteria, then as soon as reasonably practicable after the Vesting Date, but in no event later than the date that is 2 ½ months following the end of the Employer’s taxable year in which such Restricted Units are no longer subject to a substantial risk of forfeiture, Grantee’s Employer shall pay to Grantee, or Grantee’s beneficiary or estate ( i.e ., if Grantee should die after the Vesting Date, but prior to the payment date), as the case may be, a cash amount equal to the Fair Market Value of a share of Common Stock on the Vesting Date, multiplied by the number of Restricted Units, less all federal and state deductions, tax withholdings, and other withholdings and offsets that may apply or be required to be withheld in connection with such payment. Such payment shall be made in accordance with the short-term deferral exception under   Code Section 409A and final regulations issued thereunder, as may be amended after the Effective Date.

 
4.            Accelerated Vesting .  Notwithstanding the Vesting Criteria set forth in Section 2 to the contrary, th e vesting of all or a portion of Grantee’s Restricted Units  shall accelerate  in the following circumstances:

 
4.1  Employer terminates Grantee’s System Company employment for a reason other than Cause (as defined in Section 17 of this Agreement), Total Disability or death, and Grantee has otherwise satisfied the Vesting Criteria set forth in Section 2 through the date of such termination, then Grantee shall fully vest in all Restricted Units on such termination date, unless Grantee becomes employed by an employer that assumes this Agreement or the obligations to Grantee hereunder.

 
4.2    In accordance with the terms and conditions of the Equity Plan, if within twenty-four (24) months following the effective date of a Change in Control, Grantee’s System Company employment is terminated by a System Company without Cause (as defined in the Equity Plan) or by Grantee with Good Reason (such that Grantee is no longer employed by any System Company), then Grantee shall fully vest in all Restricted Units as of the date  Grantee’s System Company employment is terminated , unless Grantee becomes employed by an employer that assumes this Agreement or the obligations to Grantee hereunder.

In the event of accelerated vesting as described in this Section 4, but subject to the conditions and limitations described in the last paragraph of this Section 4, Employer shall pay Grantee a lump sum cash payment  equal to the Fair Market Value of such vested Restricted Units as of the earlier of the Vesting Date or separation from service, less all applicable income , employment  and other tax amounts required to be withheld in connection with such payment, as soon as reasonably practicable following such  accelerated vesting date, but in no event later than March 15 th following the end of the calendar year in which such Restricted Units are no longer subject to a “substantial risk of forfeiture” (within the meaning of Code Section 409A).  It is intended that the timing of such payments shall be in accordance with the short-term deferral exception of Code Section 409A and accompanying final regulations. In no event shall Grantee be entitled to accelerated vesting and payment of Restricted Units under more than one of the events described in Section 4 above.

Notwithstanding the foregoing, if vesting and payment of the Restricted Units is accelerated in accordance with the event described in 4.1 above, then the value of any such Restricted Units payable under this Section 4 shall reduce dollar-by-dollar the amount of any cash severance payment that is exempt from the requirements of Code Section 409A and otherwise payable to Grantee under the terms and conditions of any Company-sponsored severance plan or severance arrangement.  To the extent that any such cash severance payment is subject to, and not exempt from, the requirements of Code Section 409A, then the value of any Restricted Units payable under this Section 4 pursuant to the event described in 4.1 above instead shall be reduced dollar-by-dollar by the amount of such cash severance payment restricted under Code Section 409A and such severance shall be payable to Grantee under the terms and conditions of such Company-sponsored severance plan or severance arrangement.

5.            Termination and Forfeiture of Restricted Units .  Except as otherwise provided herein, the Restricted Units shall terminate on the date on which Grantee's full-time System Company employment terminates.  Further, except as otherwise provided in Section 4 of this Agreement, if Grantee fails to meet a condition of the Restricted Units Vesting Criteria set forth in Section 2 at any time prior to the Vesting Date, then Grantee shall not vest in the Restricted Units and shall forfeit any portion of the Restricted Units not yet paid.

6.      Compliance with Code Section 409A Limitations .  Notwithstanding any provision to the contrary, all provisions of this Agreement shall be construed and interpreted to comply with Code Section 409A and if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Code Section 409A or final regulations thereunder.  Specifically, the terms “termination” and “termination of employment” shall be applied in a manner consistent with the definition of “separation from service” within the meaning of Code Section 409A.  A right of the Company, if any, to offset or otherwise reduce any sums that may be due or become payable by the Company to Grantee by any overpayment or indebtedness of the Grantee shall be subject to limitations imposed by Code Section 409A.  For purposes of the limitations on nonqualified deferred compensation under Code Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Section 409A deferral election rules and the exclusion from Section 409A for certain short-term deferral amounts. Amounts payable under this Agreement shall be excludible from the requirements of Code Section 409A, to the maximum possible extent, either as (i) short-term deferral amounts ( e.g ., amounts payable prior to March 15 of the calendar year following the calendar year of substantial vesting), or (ii) under the exclusion for involuntary separation pay provided in Treasury Regulations Section 1.409A-1(b)(9)(iii).  To the extent that deferred compensation subject to the requirements of Code Section 409A becomes payable under this Agreement to Grantee at a time when Grantee is a “specified employee” (within the meaning of Code Section 409A), any such payments shall be delayed by six months to the extent necessary to comply with the requirements of Code Section 409A(a)(2)(B).
 
 
7.            Restricted Units Nontransferable .  Restricted Units awarded pursuant to this Agreement may not be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by Grantee (or any beneficiary) other than by will or laws of descent and distribution  or otherwise as the Equity Plan may allow .

8.            Governing Law .  This Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.
 
9.            Incorporation of Equity Plan .  The Equity Plan is hereby incorporated by reference and made a part hereof, and the Restricted Units and this Agreement shall be subject to all terms and conditions of the Equity Plan, a copy of which has been provided or otherwise made accessible to the Grantee.  Any capitalized term that is not defined in this Agreement shall have the meaning set forth in the Equity Plan.

      10.            Amendments .   The Equity Plan may be amended, modified or terminated only in accordance with its terms. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Grantee and such officer as may be specifically designated by the Committee.  No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
 
      11.            Rights as a Shareholder .  Neither the Grantee nor any of Grantee's successors in interest shall have any rights as a stockholder of the Company with respect to any Restricted Units , including without limitation the right to any dividends or dividend equivalents .
 
     12.            Agreement Not a Contract of Employment .  Neither the Equity Plan, the granting of the Restricted Units, this Agreement nor any other action taken pursuant to the Equity Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Grantee has a right to continue as an employee of any System Company for any period of time or at any specific rate of compensation.
 
      13.            Notices .   For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when hand-delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to the Grantee, to his last known address as shown in the personnel records of Employer, and if to Employer, to the following address shown below or thereafter to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

 
 
If to Employer :
 
 
 
 
Entergy Services, Inc.
 
 
Attention:  General Counsel
 
 
639 Loyola Avenue, 26 th Floor
New Orleans, LA 70113-3125
           
14.            Confidentiality .   Grantee shall not disclose, publicize or discuss the terms or conditions of this Agreement or the Restricted Units Grantee may receive under this Agreement with any third party, except with Grantee’s Supervisor, spouse, lawyer or accountant, or as may be required by law.  If Grantee breaches this obligation of confidentiality, then Grantee shall no longer be eligible to vest in the Restricted Units.  If the Restricted Units have already been paid to Grantee at the time of such breach, then Grantee shall be required to repay the Restricted Units within ten (10) days of written demand from Employer and further shall be required to reimburse Employer for all expenses, costs and attorneys’ fees incurred by Employer in seeking repayment of the Restricted Units.


15.            Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

16.            Counterparts .  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
 
17.              Definitions .  For purposes of this Agreement, the following terms shall have the meanings indicated unless otherwise specified:
 
17.1   "Cause" shall mean:

(a)  
 the willful and continuing failure by Grantee to substantially perform Grantee’s duties; or
 
 
(b)  
the engaging by Grantee in conduct which is demonstrably and materially injurious to any System Company, monetarily or otherwise; or

(c)  
conviction of, or entrance of a plea of guilty or nolo contendere to, a felony or other crime which has or may have a material adverse effect on Grantee’s ability to carry out Grantee’s duties or upon the reputation of any System Company; or
 
 
(d)  
a material violation by Grantee of any agreement Grantee has with a System Company; or
 
 
(e)  
unauthorized disclosure by Grantee of the confidences of any System Company.

 
17.2 “ Employer” shall mean Entergy Services, Inc. or any successor System Company employer of Grantee or any successor to any such System Company employer’s business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

 
17.3 “Retirement” shall  have the meaning set forth in the Equity Plan; however, solely in the event Grantee is not eligible to participate  in a Company-sponsored qualified defined benefit pension plan at the time Grantee separates from service with the System Companies, Retirement shall mean Grantee separates from service with the System Companies  after attaining age 55 and with ten (10) or more years of employment with System Companies as interpreted in the sole discretion of the Committee.


 

IN WITNESS WHEREOF , the parties have executed and delivered this Agreement, which is effective on the day and year first above written.


 

ENTERGY CORPORATION

By:  /s/ E. Renae Conley                                                                                                                                                                                    
             E. Renae Conley
             Executive Vice-President,
             Human Resources and Administration    
 
 
                   
The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Agreement and to all the terms and provisions of the Equity Plan herein incorporated by reference. The undersigned further acknowledges that the Equity Plan and Equity Plan Prospectus are available to him on the Company’s internal Web page.
 
           


/s/ Roderick K. West                                                                                                          
      Roderick K. West, Grantee

This document constitutes part of a prospectus covering Securities that have been registered under the Securities Act of 1933. The remaining
documents constituting the prospectus are available on Entergy Corporation’s intranet under the Compensation icon on the HR Home Page (http://www.prod.entergy.com/admin/hr/compen.htm)

 

 

Exhibit 10(b)
 
 

PENSION EQUALIZATION PLAN
OF ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective January 1, 2009)

Certificate of Amendment

Amendment No. 3

THIS INSTRUMENT , executed this 19th day of June, 2013, constitutes the Third Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries (As Amended and Restated Effective January 1, 2009) (the “Plan”).

All capitalized terms used in this document shall have the meanings assigned to them in the Plan, unless otherwise defined in this Third Amendment.

Pursuant to Section 8.01 of the Plan, and in accordance with the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of May 2, 2013, the Plan is hereby amended as follows:

1.  
New subsections (3) and (4) are added to Section 302(e) of the Plan, to read as follows:

 
(3)
Participant engages in any employment (without the prior written consent of his last System Company employer) either individually or with any person, corporation, governmental agency or body, or other entity in competition with, or similar in nature to, any business conducted by any System Company at any time within the two-year period commencing at Retirement, Separation from Service, or other termination of employment, as applicable, where such competing employer is located in, or servicing in any way customers located in, those parishes and counties in which any System Company services customers during the two-year period; or

 
(4)
Participant, other than as authorized by a System Company, or as required by law, or as necessary for the Participant to perform his duties for a System Company employer, divulges, communicates or uses to the detriment of the Employer or the System, or uses for the benefit of any other person or entity, or misuses in any way, any confidential or proprietary information or trade secrets of the Employer or the System, including without limitation non-public financial information, know-how, formulas, or other technical data.  Disclosure of information pursuant to subpoena, judicial process, or request of a governmental authority shall not be deemed a violation of this provision, provided that the Participant gives the System Company immediate notice of any such subpoena or request and filly cooperates with any action by System Company to object to, quash, or limit such request.

Except as amended hereby, the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, the Personnel Committee of the Board of Directors has caused this Third Amendment to the Pension Equalization Plan of Entergy Corporation and Subsidiaries (As Amended and Restated Effective January 1, 2009) to be executed by its duly authorized representative on the day, month and year set forth above.
 

 
ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned duly authorized representative
 

 

/s/ E. Renae Conley                                                                                         
     E. Renae Conley
     Executive Vice-President
     Human Resources and Administration


Exhibit 10(c)
 
 
 

PENSION EQUALIZATION PLAN
OF ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective January 1, 2009)

Certificate of Amendment

Amendment No. 4


THIS INSTRUMENT, executed this 25th day of July, 2013, and effective July 25, 2013, constitutes the Fourth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries (As Amended and Restated effective January 1, 2009) (the “Plan”).
 
All capitalized terms used in this document shall have the meanings assigned to them in the Plan unless otherwise defined in this document.
 
Pursuant to Section 8.01 of the Plan and in accordance with the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of July 25, 2013, the Plan is hereby amended as follows:
 
Appendix B is added at the end of this Plan to read as follows:
 
APPENDIX B - 2013 EWC AND HCM INITIATIVES
PURSUANT TO THE ENTERGY SYSTEM SEVERANCE PAY PLANS

ARTICLE B-I – INTRODUCTION

B-1.1
Plan Terms .  Except as otherwise expressly provided or as the context may clearly require, the definitions of all terms used herein shall be the same as provided in Article I of the Plan.  Where the context requires, the definition of any term set forth in the Plan shall apply with equal force and effect for purposes of interpreting and administering this Appendix.
 
B-1.2
Severance Program .  The term “Severance Program” shall mean an Involuntary Severance Program certified in connection with the 2013 EWC and HCM Initiatives pursuant to the Entergy System Severance Pay Plan No. 537 or Entergy System Severance Pay Plan for Officers and Directors (ML 1-5) (Plan No. 538).
 
B-1.3
Nature of Appendix .  This Appendix B is intended to supplement and be a part of the Plan.  The Plan as amended by this Appendix B is intended to continue to meet the requirements of Code Sections 409A and regulations thereunder.
 
B-1.4
Coverage of Appendix B .  This Appendix B shall apply only to those Participants who satisfy the eligibility requirements set forth in Article B-II of this Appendix B.
 
 
ARTICLE B-II - ELIGIBLITY REQUIREMENTS
 
B-2.1
Eligibility Requirements .  A Participant, who is eligible to participate in this Appendix B (“Eligible Appendix B Participant”), must satisfy all of the following requirements:
 
(a)  
On the Participant’s Universal Separation Date (as defined in the Severance Program) the Participant is within two (2) years of meeting the age and years of service requirement under the Qualified Plan for becoming eligible for retirement under the Qualified Plan;
 
(b)  
The date of the Participant’s Separation from Service Date is not more than six (6) months from the Participant’s Universal Separation Date (as defined in the Severance Program);
 
(c)  
On the date of the Participant’s Separation from Service Date the Participant is not eligible for retirement under the Qualified Plan; and
 
(d)  
The Participant’s Separation from Service must result from termination from System Company employment pursuant to the Severance Program.
 
ARTICLE B-III - ADDITIONAL SERVICE AND
EARLY RETIREMENT REDUCTION FACTORS

B-3.1            Additional Service .
 
(a)  
An Eligible Appendix B Participant who on his Separation from Service has not attained age fifty-five (55) shall be imputed with the greater of the following:
 
(1)  
the number of years of service not to exceed two (2) years of service which would be required for the Eligible Appendix B Participant to retire under the Qualified Plan as of the date of his Separation from Service; and
 
(2)  
the number of years of service not to exceed two (2) years of service for the period between the Eligible Appendix B Participant’s age as of the date of his Separation from Service and the date the Eligible Appendix B Participant will attain age fifty-five (55).
 
(b)  
An Eligible Appendix B Participant who on the date of his Separation from Service has attained age fifty-five (55) but has not attained age sixty-three (63) shall be imputed with the number of years of service not to exceed two (2) years of service which would be required for the Eligible Appendix B Participant to retire under the Qualified Plan as of the date of his Separation from Service.
 
(c)  
An Eligible Appendix B Participant who on the date of his Separation from Service has attained age sixty-three (63) shall be imputed with the lesser of the following:
 
(1)  
the number of years of service not to exceed two (2) years of service which would be required for the Eligible Appendix B Participant to become eligible for early retirement under the Qualified Plan as of the date of his Separation from Service; and
 
(2)  
the number of years of service not to exceed two (2) years of service for the period between the Eligible Appendix B Participant’s age as of the date of his Separation from Service and the date the Eligible Appendix B Participant will attain age sixty-five (65).
 
B-3.2
Early Retirement Reduction Factors.
 
(a)  
For purposes of computing Present Value in Section 1.23 for an Eligible Appendix B Participant, Subsection 1.23(a) shall apply as if the Eligible Appendix B Participant were eligible for retirement under the Qualified Plan at Separation from Service.
 
(b)  
For purposes of computing Present Value in Subsection 1.23(a), if an Eligible Appendix B Participant has not attained age fifty-five (55) as of his Income Payment Date, then the Qualified Plan’s early retirement reduction factors on the date the Eligible Appendix B Participant would have attained age fifty-five (55) shall apply to further reduce the applicable benefit to the Eligible Appendix B Participant’s Income Payment Date.
 
ARTICLE B-IV - EFFECT ON AMOUNT OF BENEFITS
 
B-4.1
Imputed Service Included in Calculating Benefits .  Additional years of service which are imputed pursuant to Article B-III, shall be taken into account as additional benefit service for purposes of computing the benefit under (a) this Plan and (b) the Qualified Plan. Taking into account imputed service shall not in any manner impact the amount the Eligible Appendix B Participant is entitled to receive under any qualified defined benefit pension plan, trust, or other arrangement sponsored by any System Company.
 
IN WITNESS WHEREOF, the Personnel Committee has caused this Fourth Amendment to the Pension Equalization Plan of Entergy Corporation and Subsidiaries (As Amended and Restated Effective January 1, 2009) to be executed by its duly authorized representative on the day, month, and year above set forth, and effective July 25. 2013.
 
ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned duly authorized representative


/s/ E. Renae Conley                                                                            
E. RENAE CONLEY
Executive Vice-President
Human Resources and Administration


Exhibit 10(d)

SYSTEM EXECUTIVE RETIREMENT PLAN
OF ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective January 1, 2009)

Certificate of Amendment

Amendment No. 4


THIS INSTRUMENT, executed this 25th day of July, 2013, and effective July 25, 2013, constitutes the Fourth Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries (As Amended and Restated effective January 1, 2009) (the “Plan”).
 
All capitalized terms used in this document shall have the meanings assigned to them in the Plan unless otherwise herein defined.
 
Pursuant to Section 9.01 of the Plan and in accordance with the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of July 25, 2013, the Plan is hereby amended as follows:
 
Appendix C is added at the end of this Plan to read as follows:
 
APPENDIX C - 2013 EWC AND HCM INITIATIVES
PURSUANT TO THE ENTERGY SYSTEM SEVERANCE PAY PLANS

ARTICLE C-I – INTRODUCTION

C-1.1
Plan Terms .  Except as otherwise expressly provided or as the context may clearly require, the definitions of all terms used herein shall be the same as provided in Article I of the Plan.  Where the context requires, the definition of any term set forth in the Plan shall apply with equal force and effect for purposes of interpreting and administering this Appendix.
 
C-1.2
Severance Program .  The term “Severance Program” shall mean an Involuntary Severance Program certified in connection with the 2013 EWC and HCM Initiatives pursuant to the Entergy System Severance Pay Plan No. 537 or Entergy System Severance Pay Plan for Officers and Directors (ML 1-5) (Plan No. 538).
 
C-1.3
Nature of Appendix .  This Appendix C is intended to supplement and be a part of the Plan.  The Plan as amended by this Appendix C is intended to continue to meet the requirements of Code Sections 409A and regulations thereunder.
 
C-1.4
Coverage of Appendix C .  This Appendix C shall apply only to those Participants who satisfy the eligibility requirements set forth in Article C-II of this Appendix C.
 
 
ARTICLE C-II - ELIGIBLITY REQUIREMENTS
 
C-2.1
Eligibility Requirements .  A Participant, who is eligible to participate in this Appendix C (“Eligible Appendix C Participant”), must satisfy all of the following requirements:
 
(a)  
On the Participant’s Universal Separation Date (as defined in the Severance Program) the Participant must have either (i) attained age fifty-three (53) and been credited with eight (8) or more Years of Service, or (ii) attained age sixty-three (63);
 
(b)  
The Participant’s Separation from Service Date is not more than six (6) months from the Participant’s Universal Separation Date (as defined in the Severance Program);
 
(c)  
On the Participant’s Separation from Service Date the Participant has not either (i) attained age fifty-five (55) and been credited with ten (10) or more Years of Service, or (ii) attained age sixty-five (65); and
 
(d)  
The Participant’s Separation from Service must result from termination from System Company employment pursuant to the Severance Program.
 
ARTICLE C-III - ADDITIONAL SERVICE AND
EARLY RETIREMENT REDUCTION FACTORS

C-3.1            Additional Service .
 
(a)  
An Eligible Appendix C Participant who on his Separation from Service Date has not attained age fifty-five (55) shall be imputed with the greater of the following:
 
(1)  
the number of Years of Service (including fractional periods) not to exceed two (2) Years of Service which would be required for the Eligible Appendix C Participant to have credited ten (10) Years of Service as of his Separation from Service Date; and
 
(2)  
the number of Years of Service (including fractional periods) not to exceed two (2) Years of Service for the period between the Eligible Appendix C Participant’s age as of his Separation from Service Date and the date the Eligible Appendix C Participant will attain age fifty-five (55).
 
(b)  
An Eligible Appendix C Participant who on his Separation from Service Date has attained age fifty-five (55), has not been credited with ten (10) or more Years of Service and has not attained age sixty-three (63) shall be imputed with the number of Years of Service (including fractional periods) not to exceed two (2) Years of Service such that the Eligible Appendix C Participant shall have credited ten (10) Years of Service as of his Separation from Service Date.
 
(c)  
An Eligible Appendix C Participant who on his Separation from Service Date has attained age sixty-three (63) shall be imputed with the lesser of the following:
 
(1)  
the number of Years of Service (including fractional periods) not to exceed two (2) Years of Service which would be required for the Eligible Appendix C Participant to have credited ten (10) Years of Service as of his Separation from Service Date; and
 
(2)  
the number of Years of Service (including fractional periods) not to exceed two (2) Years of Service for the period between the Eligible Appendix C Participant’s age as of his Separation from Service Date and the date the Eligible Appendix C Participant will attain age sixty-five (65).
 
(d)  
Notwithstanding Subsections C-3.1(a), C-3.1(b) or C-3.1(c) to the contrary, in no event shall an Eligible Appendix C Participant who is an inactive Participant as defined in Section 2.07 as of the date immediately preceding his Universal Separation Date (as defined in the Severance Program) be imputed with any additional Years of Service pursuant to this Section C-3.1.
 
C-3.2
Early Retirement Reduction Factors.
 
(a)  
For purposes of computing Present Value in Subsection 1.29(b) for an Eligible Appendix C Participant, the phrase “(and reflecting the Separation Reduction Factor on such date)” shall be replaced with the phrase “(and reflecting the Early Retirement Reduction Factor, if applicable, on such date).”
 
(b)  
For purposes of computing the Separation from Service Benefit in Section 2.04 for an Eligible Appendix C Participant, the phrase “Separation Reduction Factor” shall be replaced with the phrase “Early Retirement Reduction Factor.”
 
(c)  
Notwithstanding any provision in this Plan to the contrary, an Eligible Appendix C Participant’s Benefit Base shall be reduced using the Early Retirement Reduction Factor for each month the Eligible Appendix C Participant’s Income Payment Date next following his Separation from Service Date precedes the Eligible Appendix C Participant’s Income Payment Date next following his Normal Retirement Date.  Such reduction shall be made using the Early Retirement Reduction Factor even if such Eligible Appendix C Participant has not attained age fifty-five (55) as of his Income Payment Date.
 
ARTICLE C-IV - EFFECT ON AMOUNT OF BENEFITS
 
C-4.1
Imputed Service Included in Offset . To the extent additional Years of Service are imputed pursuant to Article C-III, such imputed Years of Service (including fractional periods) shall also be taken into account as additional benefit service in determining the amount of any monthly benefit the Eligible Appendix C Participant is entitled to receive under any qualified defined benefit pension plan, trust, or other arrangement sponsored by any System Company pursuant to Section 201(b).  Taking into account imputed service in determining the offset shall not in any manner impact the amount the Eligible Appendix C Participant is entitled to receive under any qualified defined benefit pension plan, trust, or other arrangement sponsored by any System Company.
 
IN WITNESS WHEREOF, the Personnel Committee has caused this Fourth Amendment to the System Executive Retirement Plan of Entergy Corporation and Subsidiaries (As Amended and Restated Effective January 1, 2009) to be executed by its duly authorized representative on the day, month, and year above set forth, and effective July 25. 2013.
 

ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned duly authorized representative


/s/ E. Renae Conley                                                                            
E. RENAE CONLEY
Executive Vice-President
Human Resources and Administration



           
Exhibit 12(a)
             
Entergy Arkansas, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
           
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest Charges
$87,732
$92,340
$91,598
$83,545
$82,860
$87,722
  Interest applicable to rentals
20,687
14,440
6,612
6,492
5,768
5,445
 
           
Total fixed charges, as defined
108,419
106,780
98,210
90,037
88,628
93,167
 
           
Preferred dividends, as defined (a)
20,957
15,275
8,483
11,310
11,310
11,310
 
           
Combined fixed charges and preferred dividends, as defined
$129,376
$122,055
$106,693
$101,347
$99,938
$104,477
 
           
Earnings as defined:
           
  Net Income
$47,152
$66,875
$172,618
$164,891
$152,365
$147,938
  Add:
           
    Provision for income taxes:
           
       Total
96,623
81,756
112,944
132,765
94,806
102,495
    Fixed charges as above
108,419
106,780
98,210
90,037
88,628
93,167
 
           
Total earnings, as defined
$252,194
$255,411
$383,772
$387,693
$335,799
$343,600
             
Ratio of earnings to fixed charges, as defined
           2.33
           2.39
           3.91
           4.31
           3.79
             3.69
 
           
Ratio of earnings to combined fixed charges and
           
 preferred dividends, as defined
           1.95
           2.09
           3.60
           3.83
           3.36
             3.29
             
             
------------------------
           
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
     
      requirement by one hundred percent (100%) minus the income tax rate.
         




 
         
Exhibit 12(b)
             
Entergy Gulf States Louisiana, L.L.C.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
           
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest charges
$131,197
$118,243
$101,318
$84,356
$83,251
$81,833
  Interest applicable to rentals
9,197
3,767
2,204
2,309
2,074
1,969
 
           
Total fixed charges, as defined
140,394
122,010
103,522
86,665
85,325
83,802
 
           
Preferred dividends, as defined (a)
1,151
1,306
1,006
1,341
1,341
1,341
 
           
Combined fixed charges and preferred dividends, as defined
$141,545
$123,316
$104,528
$88,006
$86,666
$85,143
 
           
Earnings as defined:
           
  Net Income
$131,888
$153,281
$174,319
$201,604
$158,977
$137,114
  Add:
           
    Income Taxes
70,076
88,951
92,297
89,736
52,616
$73,742
    Fixed charges as above
140,394
122,010
103,522
86,665
85,325
83,802
 
           
Total earnings, as defined
$342,358
$364,242
$370,138
$378,005
$296,918
$294,658
             
Ratio of earnings to fixed charges, as defined
           2.44
           2.99
           3.58
           4.36
           3.48
             3.52
 
           
Ratio of earnings to combined fixed charges and
           
 preferred dividends, as defined
           2.42
           2.95
           3.54
           4.30
           3.43
             3.46
             
------------------------
           
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
     
      requirement by one hundred percent (100%) minus the income tax rate.
         




           
Exhibit 12(c)
             
Entergy Louisiana, LLC
Computation of Ratios of Earnings to Fixed Charges and
 Ratios of Earnings to Combined Fixed Charges and Preferred
             
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
Total Interest
$94,310
$103,671
$119,484
$116,803
$136,967
$144,597
  Interest applicable to rentals
12,099
6,810
4,103
4,269
3,928
3,725
 
           
Total fixed charges, as defined
$106,409
$110,481
$123,587
$121,072
$140,895
$148,322
 
           
Preferred distributions, as defined (a)
        10,067
8,295
8,474
11,297
11,297
11,297
             
Combined fixed charges and preferred distributions, as defined
$116,476
$118,776
$132,061
$132,369
$152,192
$159,619
             
Earnings as defined:
           
  Net Income
$157,543
$232,845
$231,435
$473,923
$281,081
$223,825
  Add:
           
    Provision for income taxes:
           
Total Taxes (Benefit)
70,648
45,050
66,546
(370,211)
(128,922)
74,601
    Fixed charges as above
106,409
110,481
123,587
121,072
140,895
148,322
 
           
Total earnings, as defined
$334,600
$388,376
$421,568
$224,784
$293,054
$446,748
             
Ratio of earnings to fixed charges, as defined
           3.14
           3.52
           3.41
           1.86
           2.08
             3.01
 
           
Ratio of earnings to combined fixed charges and
           
preferred distributions, as defined
           2.87
           3.27
           3.19
           1.70
           1.93
             2.80
             
------------------------
           
(a) "Preferred distributions," as defined by SEC regulation S-K, are computed by dividing the preferred distribution
   
      requirement by one hundred percent (100%) minus the income tax rate.
         



           
Exhibit 12(d)
             
Entergy Mississippi, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
           
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest
$46,888
$51,282
$55,774
$52,273
$57,345
$58,865
  Interest applicable to rentals
1,638
1,959
1,921
1,731
1,637
1,471
             
Total fixed charges, as defined
$48,526
$53,241
$57,695
$54,004
$58,982
$60,336
 
           
Preferred dividends, as defined (a)
4,402
4,370
3,435
4,580
4,580
4,580
 
           
Combined fixed charges and preferred dividends, as defined
$52,928
$57,611
$61,130
$58,584
$63,562
$64,916
 
           
Earnings as defined:
           
 
           
  Net Income
$59,710
$79,367
$85,377
$108,729
$46,768
$55,060
  Add:
           
    Provision for income taxes:
           
    Total income taxes
33,240
43,395
50,111
28,801
58,679
61,833
    Fixed charges as above
48,526
53,241
57,695
54,004
58,982
60,336
 
           
Total earnings, as defined
$141,476
$176,003
$193,183
$191,534
$164,429
$177,229
             
Ratio of earnings to fixed charges, as defined
           2.92
           3.31
           3.35
           3.55
           2.79
             2.94
 
           
Ratio of earnings to combined fixed charges and
           
 preferred dividends, as defined
           2.67
           3.06
           3.16
           3.27
           2.59
             2.73
             
             
------------------------
           
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
     
      requirement by one hundred percent (100%) minus the income tax rate.
         
             




           
Exhibit 12(e)
             
Entergy New Orleans, Inc.
  Computation of Ratios of Earnings to Fixed Charges and
  Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
           
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest
$20,982
$16,965
$13,170
$11,114
$11,344
$12,289
  Interest applicable to rentals
444
593
751
743
670
606
             
Total fixed charges, as defined
21,426
17,558
13,921
11,857
12,014
12,895
 
           
Preferred dividends, as defined (a)
1,602
1,454
1,177
1,569
1,569
1,569
 
           
Combined fixed charges and preferred dividends, as defined
$23,028
$19,012
$15,098
$13,426
$13,583
$14,464
 
           
Earnings as defined:
           
 
           
  Net Income
$34,947
$30,479
$31,114
$35,976
$17,065
$12,427
  Add:
           
    Provision for income taxes:
           
     Total
23,052
15,346
16,601
15,862
7,240
6,957
    Fixed charges as above
21,426
17,558
13,921
11,857
12,014
12,895
 
           
Total earnings, as defined
$79,425
$63,383
$61,636
$63,695
$36,319
$32,279
             
Ratio of earnings to fixed charges, as defined (b)
           3.71
           3.61
           4.43
           5.37
           3.02
             2.50
 
           
Ratio of earnings to combined fixed charges and
         
 preferred dividends, as defined
           3.45
           3.33
           4.08
           4.74
           2.67
             2.23
             
             
------------------------
           
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
      requirement by one hundred percent (100%) minus the income tax rate.
   




 
         
Exhibit 12(f)
             
Entergy Texas, Inc. and Subsidiaries
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
           
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest charges
$80,197
$106,163
$95,272
$93,554
$96,035
$95,103
  Interest applicable to rentals
2,760
3,069
3,178
3,497
2,750
1,927
 
           
Total fixed charges, as defined
82,957
109,232
98,450
97,051
98,785
97,030
 
           
 
           
Earnings as defined:
           
  Net Income
$57,895
$63,841
$66,200
$80,845
$41,971
$35,898
  Add:
           
    Income Taxes
28,118
36,915
42,383
49,492
33,118
29,876
    Fixed charges as above
82,957
109,232
98,450
97,051
98,785
97,030
 
           
Total earnings, as defined
$168,970
$209,988
$207,033
$227,388
$173,874
$162,804
             
Ratio of earnings to fixed charges, as defined
           2.04
           1.92
           2.10
           2.34
           1.76
             1.68
 
           




           
Exhibit 12(g)
             
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
           
             
           
30-Jun
             
 
2008
2009
2010
2011
2012
2013
             
Fixed charges, as defined:
           
  Total Interest
$56,667
$47,570
$51,912
$48,117
$45,214
$42,424
  Interest applicable to rentals
9,057
5,885
634
684
655
804
 
           
Total fixed charges, as defined
$65,724
$53,455
$52,546
$48,801
$45,869
$43,228
 
           
Earnings as defined:
           
  Net Income
$91,067
$48,908
$82,624
$64,197
$111,866
$105,702
  Add:
           
    Provision for income taxes:
           
      Total
59,494
96,901
56,049
74,953
77,115
90,688
    Fixed charges as above
65,724
53,455
52,546
48,801
45,869
43,228
 
           
Total earnings, as defined
$216,285
$199,264
$191,219
$187,951
$234,850
$239,618
             
Ratio of earnings to fixed charges, as defined
           3.29
           3.73
           3.64
           3.85
           5.12
             5.54
             
             


Exhibit 31(a)
 
 
 
CERTIFICATIONS

 
I, Leo P. Denault, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                                  /s/ Leo P. Denault                                         
Leo P. Denault
Chairman of the Board and Chief Executive Officer
of Entergy Corporation
 
 
Date:           August 7, 2013


Exhibit 31(b )
 
 
 
CERTIFICATIONS

 
I, Andrew S. Marsh, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                         /s/ Andrew S. Marsh                               
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Corporation
 
 
Date:           August 7, 2013


Exhibit 31(c)
 
 
 
CERTIFICATIONS

 
I, Hugh T. McDonald, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                             /s/ Hugh T. McDonald                
Hugh T. McDonald
Chairman of the Board, President, and
Chief Executive Officer of Entergy Arkansas, Inc.
 
 
Date:           August 7, 2013


Exhibit 31(d)
 
 
 
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                             /s/ Alyson M. Mount                
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Arkansas, Inc.
(acting principal financial officer)
 
 
Date:           August 7, 2013


Exhibit 31(e)
 
 
 
 
CERTIFICATIONS

 
I, Phillip R. May, Jr., certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States Louisiana, L.L.C.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                                    /s/ Phillip R. May, Jr.                   
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Gulf States Louisiana, L.L.C.
 
 
Date:           August 7, 2013


Exhibit 31(f)
 
 
 
 
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Gulf States Louisiana, L.L.C.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                             /s/ Alyson M. Mount                 
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Gulf States Louisiana, L.L.C.
(acting principal financial officer)
 
 
Date:           August 7, 2013


Exhibit 31(g)
 
 
 
 
CERTIFICATIONS

 
I, Phillip R. May, Jr., certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Louisiana, LLC;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                                /s/ Phillip R. May, Jr.                 
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Louisiana, LLC
 
 
Date:           August 7, 2013


Exhibit 31(h)
 
 
 
 
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Louisiana, LLC;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

            /s/ Alyson M. Mount              
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Louisiana, LLC
(acting principal financial officer)
 
 
Date:           August 7, 2013


Exhibit 31(i)
 
 
 
 
CERTIFICATIONS

 
I, Haley R. Fisackerly, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


                                   /s/ Haley R. Fisackerly                                         
Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive Officer
 of Entergy Mississippi, Inc.
 
 
Date:           August 7, 2013


Exhibit 31(j)
 
 
 
 
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                              /s/ Alyson M. Mount                
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Mississippi, Inc.
(acting principal financial officer)
Date:           August 7, 2013



Exhibit 31(k)
CERTIFICATIONS

 
I, Charles L. Rice, Jr., certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


     /s/ Charles L. Rice, Jr.    
Charles L. Rice, Jr.
Chairman of the Board, President, and Chief Executive Officer
of Entergy New Orleans, Inc.
Date:           August 7, 2013


Exhibit 31(l)
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy New Orleans, Inc.
(acting principal financial officer)
Date:           August 7, 2013

   
Exhibit 31(m)
CERTIFICATIONS

 
I, Sallie T. Rainer, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Texas, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


     /s/ Sallie T. Rainer    
Sallie T. Rainer
Chair of the Board, President, and Chief Executive Officer
of Entergy Texas, Inc.
Date:           August 7, 2013


Exhibit 31(n)
CERTIFICATIONS

 
I, Alyson M. Mount, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Texas, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Texas, Inc.
(acting principal financial officer)
Date:           August 7, 2013


Exhibit 31(o)
CERTIFICATIONS

 
I, Jeffrey S. Forbes, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


     /s/ Jeffrey S. Forbes    
Jeffrey S. Forbes
Chairman of the Board, President, and Chief Executive
Officer of System Energy Resources, Inc.
Date:           August 7, 2013


Exhibit 31(p)
CERTIFICATIONS

 
I, Wanda C. Curry, certify that:
   
1.
I have reviewed this quarterly report on Form 10-Q of System Energy Resources, Inc.;
   
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
 
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
   
 
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
   
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
   
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
   
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


     /s/ Wanda C. Curry    
Wanda C. Curry
Vice President and Chief Financial Officer
of System Energy Resources, Inc.
Date:           August 7, 2013



Exhibit 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Leo P. Denault, Chairman of the Board and Chief Executive Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Leo P. Denault    
Leo P. Denault
Chairman of the Board and Chief Executive Officer
of Entergy Corporation

Date:           August 7, 2013





Exhibit 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Corporation (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Andrew S. Marsh    
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Corporation

Date:           August 7, 2013





Exhibit 32(c)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Hugh T. McDonald, Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. (the “Company”) , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Hugh T. McDonald    
Hugh T. McDonald
Chairman of the Board, President, and Chief Executive
Officer of Entergy Arkansas, Inc.

Date:           August 7, 2013





Exhibit 32(d)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy Arkansas, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Arkansas, Inc.
(acting principal financial officer)

Date:           August 7, 2013





Exhibit 32(e)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Phillip R. May, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. (the “Company”) , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Phillip R. May, Jr.      
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Gulf States Louisiana, L.L.C.

Date:           August 7, 2013





Exhibit 32(f)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 
I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy Gulf States Louisiana, L.L.C. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Gulf States Louisiana, L.L.C.
(acting principal financial officer)
 
Date:           August 7, 2013




Exhibit 32(g)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Phillip R. May, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy Louisiana, LLC (the “Company”) , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Phillip R. May, Jr.      
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Louisiana, LLC

Date:           August 7, 2013





Exhibit 32(h)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy Louisiana, LLC (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Louisiana, LLC
(acting principal financial officer)

Date:           August 7, 2013





Exhibit 32(i)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 
I, Haley R. Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Haley R. Fisackerly      
Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive
Officer of Entergy Mississippi, Inc.

Date:           August 7, 2013





Exhibit 32(j)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy Mississippi, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



                  /s/ Alyson M. Mount           
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Mississippi, Inc.
(acting principal financial officer)

Date:           August 7, 2013




Exhibit 32(k)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Charles L. Rice, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Charles L. Rice, Jr.      
Charles L. Rice, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy New Orleans, Inc.

Date:           August 7, 2013





Exhibit 32(l)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy New Orleans, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy New Orleans, Inc.
(acting principal financial officer)

Date:           August 7, 2013





Exhibit 32(m)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Sallie T. Rainer, Chair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. (the “Company”) , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



        /s/ Sallie T. Rainer         
Sallie T. Rainer
Chair of the Board, President, and Chief Executive Officer
of Entergy Texas, Inc.

Date:           August 7, 2013





Exhibit 32(n)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I,   Alyson M. Mount, Senior Vice President and Chief Accounting Officer of Entergy Texas, Inc. (the "Company") , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Alyson M. Mount      
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
of Entergy Texas, Inc.
(acting principal financial officer)

Date:           August 7, 2013





Exhibit 32(o)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Jeffrey S. Forbes, Chairman of the Board, President, and Chief Executive Officer of System Energy Resources, Inc. (the “Company”) , certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Jeffrey S. Forbes    
Jeffrey S. Forbes
Chairman of the Board, President, and Chief Executive
Officer of System Energy Resources, Inc.

Date:           August 7, 2013





Exhibit 32(p)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Wanda C. Curry, Vice President and Chief Financial Officer of System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.



     /s/ Wanda C. Curry    
Wanda C. Curry
Vice President and Chief Financial Officer
of System Energy Resources, Inc.

Date:           August 7, 2013