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__________________________________________________________________________________________
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 September 30, 2014
 
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
 
 
 
 
 
__________________________________________________________________________________________

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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 R 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 R 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
ü
 
 
 
 
 
 
Entergy Arkansas, Inc.
 
 
 
 
ü
 
 
Entergy Gulf States Louisiana, L.L.C.
 
 
 
 
ü
 
 
Entergy Louisiana, LLC
 
 
 
 
ü
 
 
Entergy Mississippi, Inc.
 
 
 
 
ü
 
 
Entergy New Orleans, Inc.
 
 
 
 
ü
 
 
Entergy Texas, Inc.
 
 
 
 
ü
 
 
System Energy Resources, Inc.
 
 
 
 
ü
 
 

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No R
Common Stock Outstanding
 
Outstanding at October 31, 2014
Entergy Corporation
($0.01 par value)
180,481,135

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, 2013 and the Quarterly Report on Form 10-Q for the quarters ended March 31, 2014 and June 30, 2014, filed by the individual registrants with the SEC, and should be read in conjunction therewith.


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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2014

 
Page Number
 
 
Entergy Corporation and Subsidiaries
 
Entergy Arkansas, Inc. and Subsidiaries
 
Entergy Gulf States Louisiana, L.L.C.
 
Entergy Louisiana, LLC and Subsidiaries
 
Entergy Mississippi, Inc.
 

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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2014

 
Page Number
 
 
Entergy New Orleans, Inc.
 
Entergy Texas, Inc. and Subsidiaries
 
System Energy Resources, Inc.
 
 


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FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, 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 participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement in November 2015, the termination of Entergy Texas’s, Entergy Gulf States Louisiana’s, and Entergy Louisiana’s participation in the System Agreement after expiration of the proposed 60-month notice period or such other period as approved by the FERC;
•
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ move to the MISO RTO, which occurred in December 2013, including the effect of current or projected RTO market rules and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
•
changes in utility regulation, including 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 the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or potential shutdown of nuclear generating facilities 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 or other authorizations required 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;
•
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, and the effect of those changes on Entergy and its customers;

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FORWARD-LOOKING INFORMATION (Concluded)

•
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, 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 and the level of spent fuel disposal fees charged by the U.S. government related to such sites;
•
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
•
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 and circumstances that could influence economic conditions in those areas, and the risk that anticipated load growth may not materialize;
•
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;
•
changes in technology, including with respect to new, developing, or alternative sources of generation;
•
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 implementation of the shutdown of Vermont Yankee by the end of 2014 and the related decommissioning of Vermont Yankee;
•
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.


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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, 2013 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
FTR
Financial transmission right
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), 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

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DEFINITIONS (Concluded)

Abbreviation or Acronym
Term
IRS
Internal Revenue Service
ISO
Independent System Operator
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. Entergy Arkansas terminated its participation in the System Agreement effective December 18, 2013.
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


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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 operation of a small natural gas distribution business.  
•
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.  In August 2013, Entergy announced plans to close and decommission Vermont Yankee.  The plant is expected to cease power production in the fourth quarter 2014 after its current fuel cycle.  Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Results of Operations

Third Quarter 2014 Compared to Third Quarter 2013

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the third quarter 2014 to the third quarter 2013 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)
3rd Quarter 2013 Consolidated Net Income (Loss)
 

$352,303

 

($92,828
)
 

($15,293
)
 

$244,182

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
17,946

 
(9,906
)
 
(5,024
)
 
3,016

Other operation and maintenance expenses
 
16,512

 
(9,651
)
 
(4,270
)
 
2,591

Asset write-off, impairments, and related charges
 
60,857

 
(188,527
)
 
—

 
(127,670
)
Taxes other than income taxes
 
4,089

 
(1,047
)
 
(257
)
 
2,785

Depreciation and amortization
 
(9,416
)
 
16,498

 
(152
)
 
6,930

Other income
 
26,150

 
7,993

 
(5,395
)
 
28,748

Interest expense
 
4,812

 
(481
)
 
436

 
4,767

Other expenses
 
2,910

 
11,505

 
—

 
14,415

Income taxes
 
1,372

 
109,640

 
26,200

 
137,212

 
 
 
 
 
 
 
 
 
3rd Quarter 2014 Consolidated Net Income (Loss)
 

$315,263



($32,678
)


($47,669
)


$234,916


(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.

Third quarter 2014 results of operations includes $102.9 million ($66.9 million after-tax) of charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014 along with reassessment of the assumptions regarding the timing of decommissioning cash flows. See Note 11 to the financial statements herein for further discussion of the charges. Third quarter 2014 results of

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Management's Financial Discussion and Analysis

operations also includes the $60.9 million ($40.5 million after-tax) write-off in September 2014 of Entergy Mississippi’s regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the new nuclear generation development costs and the joint stipulation.

Third quarter 2013 results of operations includes $291.5 million ($183.7 million after-tax) of impairment and other related charges to write down the carrying value 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 the impairment charges.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the third quarter 2014 to the third quarter 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$1,628

Retail electric price
37

Volume/weather
(23
)
Other
4

2014 net revenue

$1,646


The retail electric price variance is primarily due to:

•
an increase in the energy efficiency rider at Entergy Arkansas, as approved by the APSC, effective July 2014.  Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income;
•
a formula rate plan increase at Entergy Mississippi, as approved by the MPSC, effective September 2013;
•
an annual base rate increase at Entergy Texas, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case;
•
an annual base rate increase at Entergy Arkansas, as approved by the APSC, effective January 2014; and
•
an increase in Entergy Mississippi’s storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has 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 volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales in the third quarter 2014 as compared to the third quarter 2013, substantially offset by an increase in sales to industrial customers, primarily due to expansions in the chemicals and refining industries and growth in the small industrial segments.


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Management's Financial Discussion and Analysis

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the third quarter 2014 to the third quarter 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$494

Nuclear volume
(14
)
Mark-to-market value changes
(12
)
Nuclear realized price changes
8

Nuclear fuel expenses
8

2014 net revenue

$484


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $10 million in the third quarter 2014 compared to the third quarter 2013 primarily due to:

•
lower volume in its nuclear fleet resulting from more refueling outage days in the third quarter 2014 as compared to the third quarter 2013;
•
mark-to-market activity, which was negative for the quarter. See Note 8 to the financial statements herein for discussion of derivative instruments;
•
higher capacity prices, partially offset by lower realized wholesale energy prices; and
•
a decrease in nuclear fuel expenses primarily due to lower DOE spent fuel disposal fees.

Following are key performance measures for Entergy Wholesale Commodities for the third quarter 2014 and 2013 :
 
2014
 
2013
Owned capacity (MW) (a)
6,068
 
6,612
GWh billed
11,328
 
11,630
Average realized revenue per MWh
$53.11
 
$53.22
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
90%
 
94%
GWh billed
9,950
 
10,274
Average realized revenue per MWh
$53.24
 
$53.16
Refueling Outage Days:
 
 
 
FitzPatrick
37
 
—

(a)     The reduction in owned capacity is due to the retirement of the 544 MW Ritchie Unit 2 in November 2013.

Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants " in the Form 10-K for a discussion of the effects of sustained low natural gas prices and power market structure challenges on market prices for electricity in the New York and New England power regions over the past few years.


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Management's Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $570 million for the third quarter 2013 to $586 million for the third quarter 2014 primarily due to:

•
an increase of $21 million in nuclear generation expenses primarily due to higher contract labor costs, higher materials costs, and higher NRC fees;
•
an increase of $11 million in energy efficiency costs at Entergy Arkansas and Entergy Texas.  These costs are recovered through energy efficiency riders and have a minimal effect on net income;
•
an increase of $10 million due to administration fees in 2014 related to participation in the MISO RTO. The net income effect is partially offset due to deferrals of these fees in certain jurisdictions. See Note 2 to the financial statements in the Form 10-K for further information on deferrals;
•
an increase of $7 million in storm damage accruals primarily at Entergy Mississippi effective October 2013, as approved by the MPSC, and Entergy Arkansas effective January 2014, as approved by the APSC;
•
an increase of $3 million resulting from costs incurred in the third quarter 2014 related to Baxter Wilson (Unit 1) repairs, including an offset for expected insurance proceeds. See “ Baxter Wilson Plant Event ” in Note 1 to the financial statements herein for further discussion;
•
an increase of $3 million as a result of higher write-offs of uncollectible customer accounts; and
•
several individually insignificant items.

The increase was partially offset by:

•
a decrease of $40 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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;
•
a decrease of $11 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
•
a decrease of $6 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative, including an offset for partial amortization in the third quarter 2014 of costs deferred in 2013. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Human Capital Management Strategic Imperative ” in the Form 10-K for further discussion.

The asset write-off, impairment, and related charges variance is due to the $60.9 million ($40.5 million after-tax) write-off in September 2014 of Entergy Mississippi’s regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agrees not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the new nuclear generation development costs and the joint stipulation.

Other income increased primarily due to:

•
an increase in earnings on decommissioning trust fund investments;
•
an increase due to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy's net income because the investment is in another Entergy subsidiary; and

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

•
carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC.

See Note 2 to the financial statements in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $264 million for the third quarter 2013 to $254 million for the third quarter 2014 primarily due to:

•
a decrease of $29 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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
•
a decrease of $5 million due to the absence of expenses from Entergy Solutions District Energy, which was sold in November 2013.

The decrease was partially offset by

•
an increase of $10 million primarily due to higher contract labor costs and higher NRC fees;
•
$10 million incurred in the third quarter 2014 related to the shutdown of Vermont Yankee including severance and retention costs. See “ Impairment of Long-Lived Assets ” in Note 11 to the financial statements herein for discussion regarding the planned shutdown of the Vermont Yankee plant by the end of 2014; and
•
$5 million in transmission imbalance sales in the third quarter 2013.

The asset impairment variance is primarily due to $291.5 million ($183.7 million after-tax) in the third quarter 2013 of impairment and other related charges primarily to write down the carrying value of Vermont Yankee and related assets to their fair values and $102.9 million ($66.9 million after-tax) in the third quarter 2014 of impairment charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014. See Note 1 to the financial statements in the Form 10-K and Note 11 to the financial statements herein for further discussion of these impairment charges.

Depreciation and amortization expenses increased primarily due to a change effective in 2014 in the estimated average useful lives of plant in service as a result of a new depreciation study and increases to depreciable plant balances. The depreciation rate on average depreciable property for Entergy Wholesale Commodities property is approximately 5.6% in 2014.

Other expenses increased primarily due to an increase in nuclear refueling outage costs that are being amortized over the estimated period to the next outage and an increase in decommissioning costs primarily due to revisions to the estimated decommissioning cost liability for Vermont Yankee recorded in the third and fourth quarters of 2013.

Income Taxes

The effective income tax rate was 40.8% for the third quarter 2014. The difference in the effective income tax rate for the third quarter 2014 versus the statutory rate of 35% was primarily due to state income taxes, the provision for uncertain tax positions, and 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.


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The effective income tax rate was 9.1% for the third quarter 2013. The difference in the effective income tax rate for the third quarter 2013 versus the statutory rate of 35% was primarily due to lower state income taxes resulting from a state deferred tax adjustment and the reversal of a state valuation allowance. Also contributing to the lower rate was the reversal of a portion of the provision for uncertain tax positions.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 2014 to the nine months ended September 30, 2013 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)
2013 Consolidated Net Income (Loss)
 

$680,694

 

$818

 

($102,292
)
 

$579,220

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
178,802

 
333,487

 
(12,633
)
 
499,656

Asset write-off, impairments, and related charges
 
60,857

 
(184,590
)
 
—

 
(123,733
)
Other operation and maintenance expenses
 
(36,655
)
 
(1,013
)
 
(7,543
)
 
(45,211
)
Taxes other than income taxes
 
12,107

 
1,941

 
(43
)
 
14,005

Depreciation and amortization
 
11,166

 
58,033

 
(196
)
 
69,003

Other income
 
14,087

 
3,692

 
(7,071
)
 
10,708

Interest expense
 
16,893

 
857

 
1,420

 
19,170

Other expenses
 
7,059

 
20,769

 
—

 
27,828

Income taxes
 
69,318

 
205,745

 
18,209

 
293,272

 
 
 
 
 
 
 
 
 
2014 Consolidated Net Income (Loss)
 

$732,838

 

$236,255

 

($133,843
)
 

$835,250


(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.

Results of operations for the nine months ended September 30, 2014 includes $106.9 million ($69.4 million after-tax) of charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014 along with reassessment of the assumptions regarding the timing of decommissioning cash flows. See Note 11 to the financial statements herein for further discussion of the charges. Results of operations for the nine months ended September 30, 2014 also includes the $60.9 million ($40.5 million after-tax) write-off in September 2014 of Entergy Mississippi’s regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the new nuclear generation development costs and the joint stipulation.

Results of operations for the nine months ended September 30, 2013 includes $291.5 million ($183.7 million after-tax) of impairment and other related charges to write down the carrying value 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 the impairment charges.


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Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2014 to the nine months ended September 30, 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$4,222

Retail electric price
95

Volume/weather
43

Asset retirement obligation
31

Other
10

2014 net revenue

$4,401


The retail electric price variance is primarily due to:

•
an increase in the energy efficiency rider at Entergy Arkansas, as approved by the APSC, effective July 2013 and July 2014.  Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income;
•
a formula rate plan increase at Entergy Mississippi, as approved by the MPSC, effective September 2013;
•
an increase in Entergy Mississippi’s storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has no effect on net income;
•
an annual base rate increase at Entergy Texas, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case;
•
an increase in purchased power capacity costs at Entergy Louisiana and Entergy Gulf States Louisiana that are recovered through base rates set in the annual formula rate plan mechanisms; and
•
an annual base rate increase at Entergy Arkansas, as approved by the APSC, effective January 2014.

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

The volume/weather variance is primarily due to an increase of 2,814 GWh, or 3%, in billed electricity usage primarily due to an increase in sales to industrial customers and the effect of more favorable weather on residential sales in the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013. The increase in industrial sales was primarily due to expansions, recovery of a major refining customer from an unplanned outage in 2013, and continued moderate growth in the manufacturing sector.

                The asset retirement obligation affects net revenue because Entergy records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue.  The variance for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 is primarily caused by an increase in the regulatory credits because of increases in depreciation and accretion expenses and an increase in the regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.


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Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2014 to the nine months ended September 30, 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$1,370

Nuclear realized price changes
277

Nuclear volume
40

Mark-to-market value changes
34

Other
(18
)
2014 net revenue

$1,703


As shown in the table above, net revenue for Entergy Wholesale Commodities increased by $333 million in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
higher realized wholesale energy prices primarily due to increases in Northeast market power prices and higher capacity prices. Entergy Wholesale Commodities’ hedging strategies routinely include financial instruments that manage operational and liquidity risk. These positions, in addition to a larger-than-normal unhedged position in 2014 due to Vermont Yankee being in its final year of operation, allowed Entergy Wholesale Commodities to benefit from increases in Northeast market power prices;
•
higher volume in its nuclear fleet resulting from fewer unplanned outage days in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013, partially offset by a larger exercise of resupply options in the nine months ended September 30, 2013 compared to the nine months ended September 30, 2014 provided for in purchase power agreements where Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running. Amounts related to the exercise of resupply options are included in the GWh billed in the table below; and
•
mark-to-market activity, which was positive for the nine months ended September 30, 2014. See Note 8 to the financial statements herein for discussion of derivative instruments.

Following are key performance measures for Entergy Wholesale Commodities for the nine months ended September 30, 2014 and 2013 :
 
2014
 
2013
Owned capacity (MW) (a)
6,068
 
6,612
GWh billed
32,874
 
33,189
Average realized revenue per MWh
$63.37
 
$52.95
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
89%
 
86%
GWh billed
29,618
 
29,309
Average realized revenue per MWh
$62.93
 
$52.37
Refueling Outage Days:
 
 
 
FitzPatrick
37
 
—
Indian Point 2
24
 
—
Indian Point 3
—
 
28
Palisades
56
 
—
Pilgrim
—
 
45
Vermont Yankee
—
 
27

(a)     The reduction in owned capacity is due to the retirement of the 544 MW Ritchie Unit 2 in November 2013.

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Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $1,677 million for the nine months ended September 30, 2013 to $1,640 million for the nine months ended September 30, 2014 primarily due to:

•
a decrease of $93 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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;
•
a decrease of $30 million in fossil-fueled generation expenses primarily resulting from an overall lower scope of work done in 2014 as compared to the same period in 2013;
•
a decrease of $30 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
•
a decrease of $11 million resulting from costs incurred in 2013 related to the generator stator incident at ANO, including an offset for insurance proceeds. See “ ANO Damage and Outage ” below for further discussion of the incident.

The decrease was partially offset by:

•
an increase of $30 million in nuclear generation expenses primarily due to higher contract labor costs, higher materials costs, and higher NRC fees;
•
an increase of $28 million due to administration fees in 2014 related to participation in the MISO RTO. The net income effect is partially offset due to deferrals of these fees in certain jurisdictions. See Note 2 to the financial statements in the Form 10-K for further information on deferrals;
•
an increase of $25 million in energy efficiency costs at Entergy Arkansas and Entergy Texas.  These costs are recovered through energy efficiency riders and have a minimal effect on net income;
•
an increase of $21 million in storm damage accruals primarily at Entergy Arkansas effective January 2014, as approved by the APSC, and at Entergy Mississippi effective October 2013, as approved by the MPSC;
•
an increase of $10 million resulting from costs incurred in 2014 related to Baxter Wilson (Unit 1) repairs, including an offset for expected insurance proceeds. See “ Baxter Wilson Plant Event ” in Note 1 to the financial statements herein for further discussion; and
•
an increase of $5 million as a result of higher write-offs of uncollectible customer accounts.

The asset write-off, impairment, and related charges variance is due to the $60.9 million ($40.5 million after-tax) write-off in September 2014 of Entergy Mississippi’s regulatory assets associated with new nuclear generation development costs. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of new nuclear generation development costs.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher residential and commercial revenues. Also contributing to the increase was an increase in ad valorem taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in Entergy Arkansas depreciation rates.

Other income increased primarily due to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing and carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy's net

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income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing.

Interest expense increased primarily due to the lease renewal in December 2013 of the Grand Gulf sale leaseback and net debt issuances of first mortgage bonds in the first quarter 2014 and the second quarter 2013 by certain Utility operating companies. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details of long-term debt.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $748 million for the nine months ended September 30, 2013 to $747 million for the nine months ended September 30, 2014 primarily due to:

•
a decrease of $52 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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
•
a decrease of $12 million due to the absence of expenses from Entergy Solutions District Energy, which was sold in November 2013.

The decrease was partially offset by:

•
an increase of $28 million primarily due to higher contract labor costs and higher NRC fees;
•
$25 million incurred in the nine months ended September 30, 2014 related to the shutdown of Vermont Yankee including severance and retention costs. See “ Impairment of Long-Lived Assets ” in Note 11 to the financial statements herein for discussion regarding the planned shutdown of the Vermont Yankee plant by the end of 2014; and
•
$13 million in transmission imbalance sales in 2013.

The asset impairment variance is primarily due to $291.5 million ($183.7 million after-tax) in 2013 of impairment and other related charges primarily to write down the carrying value of Vermont Yankee and related assets to their fair values and $106.9 million ($69.4 million after-tax) in 2014 of impairment charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014. See Note 1 to the financial statements in the Form 10-K and Note 11 to the financial statements herein for further discussion of these impairment charges.

Depreciation and amortization expenses increased primarily due to a change effective in 2014 in the estimated average useful lives of plant in service as a result of a new depreciation study, an increase to depreciable plant balances, and additions to plant in service.

Other expenses increased primarily due to an increase in decommissioning costs primarily due to revisions to the estimated decommissioning cost liability for Vermont Yankee recorded in the third and fourth quarters of 2013 and an increase in nuclear refueling outage costs that are being amortized over the estimated period to the next outage.

Income Taxes

The effective income tax rate was 37.8% for the nine months ended September 30, 2014. The difference in the effective income tax rate for the nine months ended September 30, 2014 versus the statutory rate of 35% was primarily due to state income taxes, the provision for uncertain tax positions, and certain book and tax differences

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related to utility plant items, partially offset by a deferred state income tax reduction related to a New York tax law change and book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 27% for the nine months ended September 30, 2013. The difference in the effective income tax rate for the nine months ended September 30, 2013 versus the statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions, lower state income taxes resulting from a state deferred tax adjustment and the reversal of a state valuation allowance, 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. See Note 10 to the financial statements herein for further discussion of income taxes.

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 is an update to the discussion regarding the NRC proceedings. In April 2014 the ASLB granted Entergy’s motion to dismiss as moot a contention by Riverkeeper alleging that the Final Supplemental Environmental Impact Statement failed to adequately address endangered species issues. At the same time, the ASLB denied a motion filed by Riverkeeper in August 2013 to amend its endangered species contention. These ASLB decisions were not appealed and are now final, leaving three Track 2 contentions. The NRC staff expects to issue a further supplemental Safety Evaluation Report in November 2014. Testimony on the remaining Track 2 contentions has not been completed, and Track 2 hearings have not been scheduled.

By letter dated November 3, 2014, the NRC staff advised of its proposed schedule for issuance of a further supplemental Final Environmental Impact Statement (FSEIS) to address new information received by NRC staff since preparation and publication of the previous FSEIS supplement in June 2013. The proposed schedule identifies several milestones leading to the issuance of a new final FSEIS supplement in March 2016. The matters to be addressed in the new supplement include Entergy’s May 2013 submittal of updated cost information for severe accident mitigation alternatives (SAMAs); Entergy’s February 2014 submittal of new aquatic impact information; the June 2013 revision by NRC of its Generic Environmental Impact Statement relied upon in license renewal proceedings; and the NRC’s Continued Storage Of Spent Nuclear Fuel rule, which was published in the Federal Register in September 2014.

In 2014, hearings were held on NYSDEC’s proposed best technology available, closed cycle cooling. The NYSDEC also has proposed annual fish protection outages of 42, 62, or 92 days at both units or at one unit with closed cycle cooling at the other. Hearings on this alternative technology are expected to occur in 2015, to be followed by post-hearing briefing. The ALJs have issued no partial decisions on the several issues that have been litigated during the past two years and have not announced a schedule for doing so. After the full hearing on the merits, the ALJs will issue a recommended decision to the NYSDEC Commissioner who will then issue the final agency decision.  A party to the proceeding can appeal the decision of the NYSDEC Commissioner to state court.

With respect to Entergy’s first Coastal Zone Management Act (CZMA) initiative (previous review), in May 2014 the New York State Department of State (NYSDOS) responded to questions the NRC staff submitted in December 2013. In July 2014, Entergy submitted comments on NYSDOS’s responses and NYSDOS filed a reply to those comments. The NRC staff advised the ASLB in November 2014 that it is considering the information it has received regarding previous review. With respect to Entergy’s second CZMA initiative (grandfathering), oral argument was held before the New York State Supreme Court (Appellate Division) in October 2014. With respect to Entergy’s third CZMA initiative (consistency certification filed with the NRC and NYSDOS for NYSDOS review), Entergy filed with both agencies on November 5, 2014 a notice withdrawing the consistency certification. Entergy cited the NRC staff’s announcement two days earlier of its intent to issue in March 2016 a new FSEIS supplement addressing, among other things, new information concerning aquatic impacts. Entergy stated that unless the previous review or grandfathering issues were first and finally resolved in Entergy’s favor, Entergy intended to file a new consistency certification after the NRC issues the FSEIS supplement. That new consistency certification will initiate NYSDOS’s review process, and will allow the FSEIS supplement to be part of the record before NYSDOS and, should NYSDOS object to the new certification, the Secretary of Commerce on appeal.

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See “ Critical Accounting Estimates - Nuclear Decommissioning Costs ” below and “ Impairment of Long-Lived Assets ” in Note 11 to the financial statements herein for discussions regarding the planned shutdown of the Vermont Yankee plant by the end of 2014.

ANO Damage, Outage, and NRC Reviews
 
See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage and Outage " in the Form 10-K for a discussion of the ANO stator incident. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.

Entergy Arkansas is pursuing 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 contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop. During 2014, Entergy Arkansas collected $40 million from NEIL and is pursuing additional recoveries due under the policy.

Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant's response.  In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.

In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy's response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.

In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issue that led to the finding have been addressed at ANO, the NRC will still assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with substantial safety

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significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings.  The NRC indicated that these preliminary findings may warrant additional regulatory oversight.  Entergy requested a public regulatory conference regarding the inspection, and the conference was held on October 28, 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” The NRC can consider this information as it works to finalize its assessment of the safety significance of the flood barrier issue.

If the NRC’s final assessment of the flood barrier issue remains yellow, ANO would likely be placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier issue, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure.

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. The decrease in the debt to capital ratio is primarily due to an increase in retained earnings.
 
September 30,
2014
 
December 31,
2013
Debt to capital
56.7
%
 
57.9
%
Effect of excluding the securitization bonds
(1.5
%)
 
(1.6
%)
Debt to capital, excluding securitization bonds (a)
55.2
%
 
56.3
%
Effect of subtracting cash
(2.2
%)
 
(1.5
%)
Net debt to net capital, excluding securitization bonds (a)
53.0
%
 
54.8
%

(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.

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Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2019. 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 September 30, 2014 :
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)

$3,500

 

$245

 

$8

 

$3,247


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 herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation commercial paper program.  As of September 30, 2014 , Entergy Corporation had $776 million of commercial paper outstanding.

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 2014 through 2016. Following are updates to the discussion in the Form 10-K.

Capital Investment Plan Preliminary Estimate for 2015-2017

Entergy is developing its capital investment plan for 2015 through 2017 and currently anticipates that the Utility will make $7.8 billion in capital investments during that period and that Entergy Wholesale Commodities will make $0.9 billion in capital investments during that period. The preliminary Utility estimate includes amounts associated with specific investments for resource planning, generation projects, environmental compliance, transmission upgrades, system improvements and other investments. The preliminary Entergy Wholesale Commodities estimate includes amounts associated with specific investments such as dry cask storage, nuclear license renewal, component replacement and identified repairs, NYPA value sharing, and wedgewire screens at Indian Point. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.

Ninemile Point Unit 6 Self-Build Project

See the Form 10-K for a discussion of Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  The Ninemile 6 capacity and energy will be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Under terms approved by the LPSC, non-fuel costs may be recovered through Entergy Louisiana’s and Entergy Gulf States Louisiana’s formula rate plans beginning in the month after the unit is placed in service.  In July 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an unopposed stipulation with the LPSC that estimates a first year revenue requirement associated with Ninemile 6 and provides a mechanism to update the revenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In September 2014 an updated revenue requirement of $51.5 million for Entergy Louisiana and $27 million for Entergy Gulf States Louisiana was

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filed.  Under terms approved by the City Council, Entergy New Orleans’s non-fuel costs associated with Ninemile 6 may be recovered through a special rider for that purpose. The unit is expected to be placed in service by the end of 2014.

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 October 2014 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since the second quarter 2010.

Sources of Capital

Hurricane Isaac

As discussed in the Form 10-K, Entergy Gulf States Louisiana and Entergy Louisiana sought to recover restoration costs for the repair and replacement of electric facilities damaged by Hurricane Isaac, as well as replenishment of storm escrow accounts for prior storms, in the amount of $73.8 million for Entergy Gulf States Louisiana and $247.7 million for Entergy Louisiana. In January 2013, Entergy Gulf States Louisiana and Entergy Louisiana drew $65 million and $187 million, respectively, from their funded 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.  Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ($90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Gulf States Louisiana committed to pass on to customers a minimum of $6.9 million of customer benefits through annual customer credits of approximately $1.4 million for five years.  Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.

In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $71 million in bonds under Act 55 of the Louisiana Legislature.  From the $69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $66 million directly to Entergy Gulf States Louisiana.  Entergy Gulf States Louisiana used the $66 million received from the LURC to acquire 662,426.80 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.

In August 2014 the LCDA issued another $243.85 million in bonds under Act 55 of the Louisiana Legislature.  From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana.  Entergy Louisiana used the $227 million received from the LURC to acquire 2,272,725.89 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the

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option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.

Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA and there is no recourse against Entergy, Entergy Gulf States Louisiana, or Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee.  Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.

Total restoration costs for the repair and replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million. Entergy New Orleans withdrew $17.4 million from the storm reserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs. In July 2014 the City Council adopted a procedural schedule that provides for hearings on the merits in September 2015.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Millions)
Cash and cash equivalents at beginning of period

$739

 

$533

 
 
 
 
Cash flow provided by (used in):
 

 
 

Operating activities
2,892

 
2,199

Investing activities
(2,168
)
 
(2,058
)
Financing activities
(394
)
 
(309
)
Net increase (decrease) in cash and cash equivalents
330

 
(168
)
 
 
 
 
Cash and cash equivalents at end of period

$1,069

 

$365


Operating Activities

Net cash provided by operating activities increased by $693 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
higher Entergy Wholesale Commodities and Utility net revenues in 2014 as compared to the same period in 2013, as discussed previously;
•
proceeds of $310 million received from the LURC in August 2014 as a result of the Louisiana Act 55 storm cost financing. See Note 2 to the financial statements herein and in the Form 10-K and “ Hurricane Isaac ” above for a discussion of the Act 55 storm cost financing;
•
a decrease in income tax payments of $60 million in the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013; and
•
approximately $27 million in spending in 2013 related to the generator stator incident at ANO, as discussed previously.

The increase was partially offset by an increase of $215 million in pension contributions in 2014 and proceeds of $72 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent

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nuclear fuel. 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 by $110 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
the deposit of a total of $268 million into Entergy Louisiana’s and Entergy Gulf States Louisiana’s storm escrow accounts in 2014;
•
the withdrawal of a total of $260 million from storm reserve escrow accounts in 2013, primarily by Entergy Gulf States Louisiana and Entergy Louisiana, after Hurricane Isaac; and
•
proceeds of $21 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel.

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

The increase was partially offset by:

•
a decrease in construction expenditures, primarily in the Utility business, including a decrease in spending on the Ninemile 6 self-build project and spending in 2013 on the generator stator incident at ANO, partially offset by an increase in storm restoration spending;
•
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as Entergy received net deposits of $37 million in 2014 and returned net deposits of $49 million in 2013.  Entergy Wholesale Commodities’s forward sales contracts are discussed in the “ Market and Credit Risk Sensitive Instruments ” section below;
•
a decrease in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•
$29 million in insurance proceeds received in 2014 for property damages related to the generator stator incident at ANO, as discussed above.

Financing Activities

Net cash flow used in financing activities increased by $85 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
long-term debt activity providing approximately $132 million of cash in 2014 compared to using $180 million of cash in 2013.  Included in the long-term debt activity is $10 million in 2014 and $645 million in 2013 for the repayment of borrowings on the Entergy Corporation long-term credit facility;
•
Entergy Corporation repaid $269 million of commercial paper in 2014 and issued $351 million in 2013;
•
a net increase of $153 million in 2014 in short-term borrowings by the nuclear fuel company variable interest entities; and
•
an increase of $67 million in treasury stock issuances in 2014 primarily due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2014 to satisfy stock option exercises.

For details of long-term debt activity and Entergy’s commercial paper program in 2014, see Note 4 to the financial statements herein and Notes 4 and 5 to the financial statements in the Form 10-K.


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Rate, Cost-recovery, and Other Regulation

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Rate, Cost-recovery, and Other Regulation " in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.

State and Local Rate Regulation and Fuel-Cost Recovery

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.

Federal Regulation

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

Entergy’s Integration Into the MISO Regional Transmission Organization

As discussed in the Form 10-K, on December 19, 2013, the Utility operating companies successfully completed their planned integration into the MISO RTO.

I n January 2013, Occidental Chemical Corporation filed with the FERC a petition for declaratory judgment and complaint against MISO alleging that MISO’s proposed treatment of Qualifying Facilities (QFs) in the Entergy region is unduly discriminatory in violation of sections 205 and 206 of the Federal Power Act and violates the Public Utility Regulatory Policies Act (PURPA) and the FERC’s implementing regulations. Occidental’s filing asks that the FERC declare that MISO’s QF integration plan is unlawful, find that the plan cannot be implemented because MISO did not file it pursuant to section 205 of the Federal Power Act, and direct that MISO modify certain aspects of the plan. Entergy sought to intervene and filed a protest to the pleadings.

In February 2014, Occidental filed a petition for enforcement against the LPSC. Occidental’s petition for enforcement alleges that the LPSC’s January 2014 order, which approved Entergy Gulf States Louisiana’s and Entergy Louisiana’s application for modification of Entergy’s methodology for calculating avoided cost rates paid to QFs, is inconsistent with the requirements of PURPA and the FERC’s regulations implementing PURPA. In April 2014 the FERC issued a “Notice Of Intent Not To Act At This Time” with respect to Occidental’s petition for enforcement against the LPSC. The FERC concluded that Occidental’s petition for enforcement largely raises the same issues as those raised in the January 2013 complaint and petition for declaratory order that Occidental had filed against MISO, and that the two proceedings should be addressed at the same time. The FERC reserved its ability to issue a further order or to take further action at a future date should it find that doing so is appropriate.

In April 2014, Occidental filed a complaint in federal district court for the Middle District of Louisiana against the LPSC and Entergy Louisiana that challenges the January 2014 order issued by the LPSC on grounds similar to those raised in the 2013 complaint and 2014 petition for enforcement that Occidental previously filed at the FERC.  The district court complaint seeks a declaration that the January 2014 order conflicts with and is preempted by PURPA and the Supremacy Clause of the United States Constitution, and also seeks an injunction prohibiting the LPSC and Entergy Louisiana from enforcing or utilizing the practices approved in the order.  The district court complaint seeks damages from Entergy Louisiana and a declaration from the district court that in pursuing the January 2014 order Entergy Louisiana breached an existing agreement with Occidental and an implied covenant of good faith and fair dealing. Entergy Louisiana has moved to stay the district court proceeding, asserting that the FERC has primary jurisdiction to address Occidental’s claims and should be allowed to do so in the context of Occidental’s 2013 complaint. The motion to stay is currently pending before the district court.

In February 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

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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. In June 2013 the FERC issued an order accepting the use of four transmission pricing zones 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. In February 2014 the FERC issued an order addressing the rehearing requests. Among other things, the FERC denied rehearing and affirmed its prior decision allowing the four transmission pricing zones for the Utility operating companies in MISO. The FERC granted rehearing and set for hearing and settlement judge proceedings certain challenges of MISO’s regional through and out rates. In March 2014 certain parties filed a request for rehearing of the FERC’s February 2014 order on issues related to MISO’s regional through and out rates. In February 2014 and April 2014 various parties appealed the FERC’s June 2013 and February 2014 orders to the U.S. Court of Appeals for the D.C. Circuit where the appeals have been consolidated for further proceedings.

System Agreement
 
Utility Operating Company Notices of Termination of System Agreement Participation

As discussed in the Form 10-K, in February 2014, Entergy Louisiana and Entergy Gulf States Louisiana provided notice of their respective decisions to terminate their participation in the System Agreement and made a filing with the FERC seeking acceptance of the notice. In the FERC filing, Entergy Louisiana and Entergy Gulf States Louisiana requested an effective date of February 14, 2019 or such other effective date approved by the FERC for the termination. In March 2014 the City Council submitted comments to the FERC regarding the notices of termination. The City Council requested the FERC either to condition its acceptance of the notices on compliance with the prior 96-month notice termination period, or in the alternative, to consolidate the notice filings with the proceeding related to the Utility operating companies’ proposal to shorten the System Agreement’s termination notice period from 96 months to 60 months, and to set all of the proceedings for hearing. Also in March 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a response to the City Council’s comments requesting that the FERC accept the notices without hearing and with an effective date subject to and consistent with the notice period established by the FERC in the proceeding related to the Utility operating companies’ proposal to shorten the System Agreement’s termination notice period. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy New Orleans, and Entergy Texas continue to explore with the LPSC staff, City Council advisors, and the PUCT staff the early termination of the System Agreement on a consensual basis.

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also 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’ 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, and 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 sensitivities are provided in the table below to show potential variations.  The sensitivities may not reflect the total maximum upside potential from higher market prices.  The information contained in the following table represents

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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’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of September 30, 2014 (2014 represents the remainder of the year):

Entergy Wholesale Commodities Nuclear Portfolio
 
 
2014
 
2015
 
2016
 
2017
 
2018
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
29%
 
38%
 
23%
 
14%
 
14%
Unit-contingent with availability guarantees (c)
 
13%
 
15%
 
14%
 
15%
 
3%
Firm LD (d)
 
55%
 
40%
 
34%
 
—%
 
—%
Offsetting positions (e)
 
(22%)
 
(9%)
 
—%
 
—%
 
—%
Total
 
75%
 
84%
 
71%
 
29%
 
17%
Planned generation (TWh) (f) (g)
 
10
 
35
 
36
 
35
 
35
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
 
 
Minimum
 
$43
 
$47
 
$47
 
$51
 
$56
Expected based on market prices as of September 30, 2014
 
$50
 
$51
 
$52
 
$53
 
$56
Sensitivity: -/+ $10 per MWh market price change
 
$48-$53
 
$49-$53
 
$48-$55
 
$53-$54
 
$56
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (i)
 
15%
 
18%
 
18%
 
18%
 
18%
Capacity contracts (j)
 
42%
 
15%
 
15%
 
16%
 
7%
Total
 
57%
 
33%
 
33%
 
34%
 
25%
Planned net MW in operation (g)
 
5,011
 
4,406
 
4,406
 
4,406
 
4,406
Average revenue under contract per kW per month
(applies to capacity contracts only)
 
$5.5
 
$3.2
 
$3.4
 
$5.6
 
$7.0
 
 
 
 
 
 
 
 
 
 
 
Total Nuclear Energy and Capacity Revenues
 
 
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$57
 
$57
 
$54
 
$54
 
$56
Sensitivity: -/+ $10 per MWh market price change
 
$52-$63
 
$52-$62
 
$47-$60
 
$47-$61
 
$48-$64


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Entergy Wholesale Commodities Non-Nuclear Portfolio
 
 
2014
 
2015
 
2016
 
2017
 
2018
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
35%
 
38%
 
36%
 
34%
 
35%
Firm LD (d)
 
6%
 
7%
 
7%
 
7%
 
7%
Total
 
41%
 
45%
 
43%
 
41%
 
42%
Planned generation (TWh) (f) (l)
 
1
 
5
 
6
 
6
 
6
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
24%
 
24%
 
24%
 
26%
 
26%
Bundled capacity and energy contracts (i)
 
8%
 
8%
 
8%
 
8%
 
8%
Capacity contracts (j)
 
54%
 
53%
 
53%
 
57%
 
24%
Total
 
86%
 
85%
 
85%
 
91%
 
58%
Planned net MW in operation (l)
 
1,052
 
1,052
 
1,052
 
977
 
977

(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. Positions that are no longer classified as hedges are netted in the planned generation under contract.
(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 affect dispatch.
(g)
Assumes NRC license renewals for plants whose current licenses expire within five years.  Assumes shutdown of Vermont Yankee in the fourth quarter 2014 and uninterrupted normal operation at remaining 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 now operating under its period of extended operations) and Indian Point 3 (December 2015).  For a discussion regarding the shutdown of the Vermont Yankee plant, see “ Impairment of Long-Lived Assets ” in Note 11 to the financial statements herein.  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 and in the Form10-K.
(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)
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 and were executed

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prior to receiving market-based rate authority under MISO.  The percentage sold assumes completion of the necessary transmission upgrades required for the approved transmission rights.
(l)
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’ wind investment. The decrease in planned net MW in operation beginning in 2017 is due to the expiration of a non-affiliated 75 MW contact.

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 September 30, 2014 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $61 million for the remainder of 2014. A negative $10 per MWh change in the annual average energy price in the markets based on September 30, 2014 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($55) million for the remainder of 2014.

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 September 30, 2014, based on power prices at that time, Entergy had liquidity exposure of $239 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $15 million of posted cash collateral.  As of September 30, 2014, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $211 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 September 30, 2014, Entergy would have been required to provide approximately $136 million of additional cash or letters of credit under some of the agreements.

As of September 30, 2014, substantially all of the counterparties or their guarantors for 100% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2018 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. The following is an update to that discussion.

In June 2012 the U.S. Court of Appeals for the D.C. Circuit vacated the NRC’s 2010 update to its Waste Confidence Decision, which had found generically that a permanent geologic repository to store spent nuclear fuel would be available when necessary and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Grand Gulf and Indian Point 2 and 3. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit’s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a final new Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its

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suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. The final rule remains in effect while that challenge is pending unless the court orders otherwise.

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 are updates to that discussion.

Nuclear Decommissioning Costs

In the first quarter 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study.  The revised estimates resulted in a $43.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.

See “ Impairment of Long-Lived Assets ” in Note 1 to the financial statements in the Form 10-K and Note 11 to the financial statements herein for a discussion of the planned shutdown of Vermont Yankee and the December 2013 settlement agreement involving Entergy and Vermont parties.  In the settlement agreement, Entergy Vermont Yankee agreed to complete and shall provide to the Vermont parties by December 31, 2014, a site assessment study of the costs and tasks of radiological decommissioning, spent nuclear fuel management, and site restoration of Vermont Yankee.  Entergy Vermont Yankee also agreed that it shall file its Post-Shutdown Decommissioning Activities Report (PSDAR) for Vermont Yankee with the NRC no sooner than sixty days after completing the site assessment study.  As part of the development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014.  The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge. 

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.

In April 2014 the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” which changes the requirements for reporting discontinued operations. The ASU states that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results when the component of an entity or group of components of an entity meets the criteria to be classified as held for sale, is disposed of by sale, or is disposed of other than by sale. The amendments in this ASU also require additional disclosures about discontinued operations. ASU 2014-08 is effective for Entergy for the first quarter 2015. Entergy does not currently expect ASU 2014-08 to affect materially its results of operations, financial position, or cash flows.

23
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

In May 2014 the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The ASU’s core principle is that “an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to achieve the core principle. ASU 2014-09 is effective for Entergy for the first quarter 2017. Entergy does not expect ASU 2014-09 to affect materially its results of operations, financial position, or cash flows.















24
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
2014
 
2013
 
2014
 
2013
 
(In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
 
 
 
 
Electric

$2,824,055

 

$2,704,800

 

$7,424,360

 
$6,831,290
Natural gas
28,039

 
26,113

 
141,727

 
113,315

Competitive businesses
606,016

 
621,046

 
2,097,516

 
1,754,436

TOTAL
3,458,110

 
3,351,959

 
9,663,603

 
8,699,041

 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
858,901

 
818,254

 
2,006,811

 
1,818,194

Purchased power
465,106

 
392,545

 
1,557,631

 
1,251,418

Nuclear refueling outage expenses
71,651

 
64,758

 
197,692

 
191,940

Other operation and maintenance
841,939

 
839,348

 
2,392,590

 
2,437,801

Asset write-off, impairments, and related charges
163,835

 
291,505

 
167,772

 
291,505

Decommissioning
68,370

 
60,848

 
201,418

 
179,342

Taxes other than income taxes
159,735

 
156,950

 
466,939

 
452,934

Depreciation and amortization
332,079

 
325,149

 
992,544

 
923,541

Other regulatory charges (credits)
3,635

 
13,708

 
(7,010
)
 
22,914

TOTAL
2,965,251

 
2,963,065

 
7,976,387

 
7,569,589

 
 
 
 
 
 
 
 
OPERATING INCOME
492,859

 
388,894

 
1,687,216

 
1,129,452

 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
Allowance for equity funds used during construction
16,737

 
17,676

 
46,654

 
46,675

Interest and investment income
49,547

 
23,430

 
109,040

 
102,277

Miscellaneous - net
(6,644
)
 
(10,214
)
 
(33,026
)
 
(36,992
)
TOTAL
59,640

 
30,892

 
122,668

 
111,960

 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
Interest expense
164,482

 
157,504

 
491,359

 
466,422

Allowance for borrowed funds used during construction
(8,664
)
 
(6,453
)
 
(24,199
)
 
(18,432
)
TOTAL
155,818

 
151,051

 
467,160

 
447,990

 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
396,681

 
268,735

 
1,342,724

 
793,422

 
 
 
 
 
 
 
 
Income taxes
161,765

 
24,553

 
507,474

 
214,202

 
 
 
 
 
 
 
 
CONSOLIDATED NET INCOME
234,916

 
244,182

 
835,250

 
579,220

 
 
 
 
 
 
 
 
Preferred dividend requirements of subsidiaries
4,879

 
4,332

 
14,656

 
14,247

 
 
 
 
 
 
 
 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION

$230,037

 

$239,850

 

$820,594

 

$564,973

 
 
 
 
 
 
 
 
Earnings per average common share:
 
 
 
 
 
 
 
Basic

$1.28

 

$1.35

 

$4.58

 

$3.17

Diluted

$1.27

 

$1.34

 

$4.56

 

$3.16

Dividends declared per common share

$0.83

 

$0.83

 

$2.49

 

$2.49

 
 
 
 
 
 
 
 
Basic average number of common shares outstanding
179,610,067

 
178,283,721

 
179,256,975

 
178,170,339

Diluted average number of common shares outstanding
180,527,116

 
178,652,210

 
179,867,018

 
178,520,063

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 

25
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26
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
2014
 
2013
 
2014
 
2013
 
(In Thousands)
 
 
 
 
 
 
 
 
Net Income

$234,916

 

$244,182

 

$835,250

 

$579,220


 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
 
 
 
 
(net of tax expense (benefit) of ($1,540), ($17,199), $1,913, and ($43,803))
(2,488
)
 
(31,663
)
 
4,522

 
(80,048
)
Pension and other postretirement liabilities
 
 
 
 
 
 
 
(net of tax expense of $1,345, $10,301, $20,928, and $22,055)
2,956

 
15,430

 
(6,281
)
 
35,004

Net unrealized investment gains (losses)
 
 
 
 
 
 
 
(net of tax expense (benefit) of ($3,501), $20,819, $31,827, and $65,805)
(10,490
)
 
46,300

 
51,734

 
94,644

Foreign currency translation
 
 
 
 
 
 
 
(net of tax expense (benefit) of ($356), $380, ($144), and ($25))
(662
)
 
706

 
(267
)
 
(47
)
Other comprehensive income (loss)
(10,684
)
 
30,773

 
49,708

 
49,553


 
 
 
 
 
 
 
Comprehensive Income
224,232

 
274,955

 
884,958

 
628,773

Preferred dividend requirements of subsidiaries
4,879

 
4,332

 
14,656

 
14,247

Comprehensive Income Attributable to Entergy Corporation

$219,353

 

$270,623

 

$870,302

 

$614,526

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 



27
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 

$835,250

 

$579,220

Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
1,585,547

 
1,472,985

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
480,382

 
174,052

Asset impairments and related charges
 
106,915

 
291,505

Changes in working capital:
 
 
 
 
Receivables
 
(119,108
)
 
(273,876
)
Fuel inventory
 
29,863

 
16,421

Accounts payable
 
(40,167
)
 
(80,626
)
Prepaid taxes and taxes accrued
 
19,745

 
(6,150
)
Interest accrued
 
(3,931
)
 
(25,586
)
Deferred fuel costs
 
(124,475
)
 
(43,419
)
Other working capital accounts
 
(4,095
)
 
(81,315
)
Changes in provisions for estimated losses
 
287,513

 
(247,560
)
Changes in other regulatory assets
 
147,055

 
173,164

Changes in other regulatory liabilities
 
41,594

 
290,965

Changes in pensions and other postretirement liabilities
 
(291,454
)
 
(48,814
)
Other
 
(59,145
)
 
8,493

Net cash flow provided by operating activities
 
2,891,489

 
2,199,459

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction/capital expenditures
 
(1,506,611
)
 
(1,781,208
)
Allowance for equity funds used during construction
 
49,137

 
49,411

Nuclear fuel purchases
 
(353,472
)
 
(398,456
)
Proceeds from sale of assets
 
10,100

 
—

Insurance proceeds received for property damages
 
33,350

 
—

Changes in securitization account
 
(4,908
)
 
(3,702
)
NYPA value sharing payment
 
(72,000
)
 
(71,736
)
Payments to storm reserve escrow account
 
(274,170
)
 
(5,882
)
Receipts from storm reserve escrow account
 
—

 
260,279

Decrease (increase) in other investments
 
37,090

 
(43,656
)
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
—

 
21,034

Proceeds from nuclear decommissioning trust fund sales
 
1,446,817

 
1,063,711

Investment in nuclear decommissioning trust funds
 
(1,533,774
)
 
(1,147,571
)
Net cash flow used in investing activities
 
(2,168,441
)
 
(2,057,776
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

28
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
Long-term debt
 
1,667,616

 
2,925,997

Treasury stock
 
88,068

 
20,720

Retirement of long-term debt
 
(1,535,695
)
 
(3,106,226
)
Repurchase of common stock
 
(18,259
)
 
—

Changes in credit borrowings and commercial paper - net
 
(155,437
)
 
310,042

Other
 
20,982

 
—

Dividends paid:
 
 
 
 
Common stock
 
(446,308
)
 
(445,031
)
Preferred stock
 
(14,632
)
 
(14,469
)
Net cash flow used in financing activities
 
(393,665
)
 
(308,967
)

 
 
 
 
Effect of exchange rates on cash and cash equivalents
 
—

 
47


 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
329,383

 
(167,237
)

 
 
 
 
Cash and cash equivalents at beginning of period
 
739,126

 
532,569


 
 
 
 
Cash and cash equivalents at end of period
 

$1,068,509

 

$365,332

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$476,100

 

$476,063

Income taxes
 

$47,860

 

$107,560

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


29
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$90,910

 

$129,979

Temporary cash investments
 
977,599

 
609,147

Total cash and cash equivalents
 
1,068,509

 
739,126

Accounts receivable:
 
 
 
 
Customer
 
765,306

 
670,641

Allowance for doubtful accounts
 
(34,687
)
 
(34,311
)
Other
 
219,300

 
195,028

Accrued unbilled revenues
 
363,464

 
340,828

Total accounts receivable
 
1,313,383

 
1,172,186

Deferred fuel costs
 
205,553

 
116,379

Accumulated deferred income taxes
 
14,159

 
175,073

Fuel inventory - at average cost
 
179,095

 
208,958

Materials and supplies - at average cost
 
929,934

 
915,006

Deferred nuclear refueling outage costs
 
272,110

 
192,474

Prepayments and other
 
281,796

 
410,489

TOTAL
 
4,264,539

 
3,929,691

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliates - at equity
 
39,756

 
40,350

Decommissioning trust funds
 
5,179,952

 
4,903,144

Non-utility property - at cost (less accumulated depreciation)
 
201,943

 
199,375

Other
 
408,539

 
210,616

TOTAL
 
5,830,190

 
5,353,485

 
 
 
 
 
PROPERTY, PLANT, AND EQUIPMENT
 
 
 
 
Electric
 
43,781,183

 
42,935,712

Property under capital lease
 
940,372

 
941,299

Natural gas
 
374,094

 
366,365

Construction work in progress
 
1,913,757

 
1,514,857

Nuclear fuel
 
1,550,732

 
1,566,904

TOTAL PROPERTY, PLANT, AND EQUIPMENT
 
48,560,138

 
47,325,137

Less - accumulated depreciation and amortization
 
20,271,000

 
19,443,493

PROPERTY, PLANT, AND EQUIPMENT - NET
 
28,289,138

 
27,881,644

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
838,899

 
849,718

Other regulatory assets (includes securitization property of $746,022 as of September 30, 2014 and $822,218 as of December 31, 2013)
 
3,757,127

 
3,893,363

Deferred fuel costs
 
238,102

 
172,202

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
43,276

 
62,011

Other
 
903,206

 
887,160

TOTAL
 
6,157,782

 
6,241,626

 
 
 
 
 
TOTAL ASSETS
 

$44,541,649

 

$43,406,446

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

30
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$1,114,046

 

$457,095

Notes payable and commercial paper
 
891,445

 
1,046,887

Accounts payable
 
1,104,105

 
1,173,313

Customer deposits
 
406,114

 
370,997

Taxes accrued
 
210,838

 
191,093

Accumulated deferred income taxes
 
55,126

 
28,307

Interest accrued
 
177,066

 
180,997

Deferred fuel costs
 
88,230

 
57,631

Obligations under capital leases
 
2,460

 
2,323

Pension and other postretirement liabilities
 
52,497

 
67,419

Other
 
351,640

 
484,510

TOTAL
 
4,453,567

 
4,060,572

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
9,063,086

 
8,724,635

Accumulated deferred investment tax credits
 
257,036

 
263,765

Obligations under capital leases
 
30,354

 
32,218

Other regulatory liabilities
 
1,337,549

 
1,295,955

Decommissioning and asset retirement cost liabilities
 
4,272,151

 
3,933,416

Accumulated provisions
 
403,492

 
115,139

Pension and other postretirement liabilities
 
2,044,173

 
2,320,704

Long-term debt (includes securitization bonds of $814,224 as of September 30, 2014 and $883,013 as of December 31, 2013)
 
11,634,662

 
12,139,149

Other
 
591,784

 
583,667

TOTAL
 
29,634,287

 
29,408,648

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Subsidiaries' preferred stock without sinking fund
 
210,760

 
210,760

 
 
 
 
 
EQUITY
 
 
 
 
Common Shareholders' Equity:
 
 
 
 
Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2014 and in 2013
 
2,548

 
2,548

Paid-in capital
 
5,367,768

 
5,368,131

Retained earnings
 
10,199,338

 
9,825,053

Accumulated other comprehensive income (loss)
 
20,384

 
(29,324
)
Less - treasury stock, at cost (75,103,116 shares in 2014 and 76,381,936 shares in 2013)
 
5,441,003

 
5,533,942

Total common shareholders' equity
 
10,149,035

 
9,632,466

Subsidiaries' preferred stock without sinking fund
 
94,000

 
94,000

TOTAL
 
10,243,035

 
9,726,466

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$44,541,649

 

$43,406,446

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


31
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(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, 2012

$94,000

 

$2,548

 

($5,574,819
)
 

$5,357,852

 

$9,704,591

 

($293,083
)
 

$9,291,089

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
14,247

 
—

 
—

 
—

 
564,973

 
—

 
579,220

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
49,553

 
49,553

Common stock issuances related to stock plans
—

 
—

 
36,175

 
4,572

 
—

 
—

 
40,747

Common stock dividends declared
—

 
—

 
—

 
—

 
(443,911
)
 
—

 
(443,911
)
Preferred dividend requirements of subsidiaries (a)
(14,247
)
 
—

 
—

 
—

 
—

 
—

 
(14,247
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2013

$94,000

 

$2,548

 

($5,538,644
)
 

$5,362,424

 

$9,825,653

 

($243,530
)
 

$9,502,451

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$94,000

 

$2,548

 

($5,533,942
)
 

$5,368,131

 

$9,825,053

 

($29,324
)
 

$9,726,466

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
14,656

 
—

 
—

 
—

 
820,594

 
—

 
835,250

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
49,708

 
49,708

Common stock repurchases
—

 
—

 
(18,259
)
 
—

 
—

 
—

 
(18,259
)
Common stock issuances related to stock plans
—

 
—

 
111,198

 
(363
)
 
—

 
—

 
110,835

Common stock dividends declared
—

 
—

 
—

 
—

 
(446,309
)
 
—

 
(446,309
)
Preferred dividend requirements of subsidiaries (a)
(14,656
)
 
—

 
—

 
—

 
—

 
—

 
(14,656
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$94,000

 

$2,548

 

($5,441,003
)
 

$5,367,768

 

$10,199,338

 

$20,384

 

$10,243,035

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2014 and 2013 include $9.7 million and $9.3 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


32
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$1,132

 

$1,140

 

($8
)
 
(1
)
Commercial
 
745

 
720

 
25

 
3

Industrial
 
740

 
673

 
67

 
10

Governmental
 
62

 
60

 
2

 
3

Total retail
 
2,679

 
2,593

 
86

 
3

Sales for resale
 
66

 
46

 
20

 
43

Other
 
79

 
66

 
13

 
20

Total
 

$2,824

 

$2,705

 

$119

 
4


 
 
 
 
 
 
 
 
Utility Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
10,869

 
11,359

 
(490
)
 
(4
)
Commercial
 
8,281

 
8,393

 
(112
)
 
(1
)
Industrial
 
11,620

 
11,038

 
582

 
5

Governmental
 
659

 
648

 
11

 
2

Total retail
 
31,429

 
31,438

 
(9
)
 
—

Sales for resale
 
2,075

 
667

 
1,408

 
211

Total
 
33,504

 
32,105

 
1,399

 
4


 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating Revenues
 

$606

 

$623

 

($17
)
 
(3
)
Billed Electric Energy Sales (GWh)
 
11,328

 
11,630

 
(302
)
 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$2,801

 

$2,620

 

$181

 
7

Commercial
 
1,949

 
1,817

 
132

 
7

Industrial
 
2,003

 
1,815

 
188

 
10

Governmental
 
172

 
165

 
7

 
4

Total retail
 
6,925

 
6,417

 
508

 
8

Sales for resale
 
238

 
145

 
93

 
64

Other
 
261

 
269

 
(8
)
 
(3
)
Total
 

$7,424

 

$6,831

 

$593

 
9


 
 
 
 
 
 
 
 
Utility Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
28,162

 
27,080

 
1,082

 
4

Commercial
 
21,844

 
21,498

 
346

 
2

Industrial
 
32,635

 
31,264

 
1,371

 
4

Governmental
 
1,829

 
1,814

 
15

 
1

Total retail
 
84,470

 
81,656

 
2,814

 
3

Sales for resale
 
6,357

 
1,887

 
4,470

 
237

Total
 
90,827

 
83,543

 
7,284

 
9


 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating Revenues
 

$2,096

 

$1,771

 

$325

 
18

Billed Electric Energy Sales (GWh)
 
32,874

 
33,189

 
(315
)
 
(1
)


33
Table of Contents

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 and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.

ANO Damage, Outage, and NRC Reviews

See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million .  In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.

Entergy Arkansas is pursuing 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 contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop. During 2014, Entergy Arkansas collected $ 40 million from NEIL and is pursuing additional recoveries due under the policy.

Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant's response.  In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.

In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy's response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment

34
Entergy Corporation and Subsidiaries
Notes to Financial Statements

follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.    

In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issue that led to the finding have been addressed at ANO, the NRC will still assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with substantial safety significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings.  The NRC indicated that these preliminary findings may warrant additional regulatory oversight.  Entergy requested a public regulatory conference regarding the inspection, and the conference was held on October 28, 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” The NRC can consider this information as it works to finalize its assessment of the safety significance of the flood barrier issue.

If the NRC’s final assessment of the flood barrier issue remains yellow, ANO would likely be placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier issue, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure.

Baxter Wilson Plant Event

On September 11, 2013, Entergy Mississippi’s Baxter Wilson (Unit 1) power plant experienced a significant unplanned outage event.  Entergy Mississippi completed the process of assessing the nature and extent of the damage to the unit and repairs are in progress. The current estimate of costs to return the unit to service is in the range of $ 45 million to $ 60 million .  This estimate may change as restorative activities occur.  The costs necessary to return the plant to service are expected to be incurred into late 2014.  Entergy Mississippi believes that the damage is covered by its property insurance policy, subject to a $ 20 million deductible. In the third quarter 2014, Entergy Mississippi recorded an insurance receivable of $18 million based on the minimum amount it currently expects to receive from its insurance policy based on total spending of $38 million as of September 30, 2014. This $18 million receivable offset approximately $8 million of capital spending and $10 million of operation and maintenance expenses through September 30, 2014. In June 2014, Entergy Mississippi filed a rate case with the MPSC, which includes recovery of the costs associated with Baxter Wilson (Unit 1) repair activities, net of applicable insurance proceeds. On October 14, 2014 and October 31, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that provide for a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset to occur over two years. The final accounting of costs to return the unit to service and insurance proceeds will be addressed in Entergy Mississippi’s next formula rate plan filing. The joint stipulations also provide that the capital costs associated with the return to service of Baxter Wilson (Unit 1) will be reflected in rate base and will be reduced to reflect the application of insurance proceeds. The joint stipulations are subject to review and approval by the MPSC.

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.


35
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.

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

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Gulf States Louisiana, Entergy Louisiana, 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 is an update to that discussion.

Fuel and purchased power cost recovery

Entergy Arkansas

In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $68 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and will enter an order based on the evidence and legal briefs in the record.

Entergy Gulf States Louisiana

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.

Entergy Louisiana

In July 2014 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 by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.


36
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Mississippi

Entergy Mississippi had a deferred fuel balance of $60.4 million as of March 31, 2014. In May 2014, Entergy Mississippi filed for an interim adjustment under its energy cost recovery rider. The interim adjustment proposed a net energy cost factor designed to collect over a six-month period the under-recovered deferred fuel balance as of March 31, 2014 and also reflected a natural gas price of $4.50 per MMBtu. In May 2014, Entergy Mississippi and the Public Utilities Staff entered into a joint stipulation in which Entergy Mississippi agreed to a revised net energy cost factor that reflected the proposed interim adjustment with a reduction in costs recovered through the energy cost recovery rider associated with the suspension of the DOE nuclear waste storage fee. In June 2014 the MPSC approved the joint stipulation and allowed Entergy Mississippi’s interim adjustment. The revised net energy cost factor will remain in effect through the end of 2014.

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

See Note 2 to the financial statements in the Form 10-K for a discussion of Entergy Arkansas’s 2013 base rate filing. In January 2014, Entergy Arkansas filed a petition for rehearing or clarification of several aspects of the APSC’s order, including the 9.3% authorized return on common equity. In February 2014 the APSC granted Entergy Arkansas's petition for the purpose of considering the additional evidence identified by Entergy Arkansas. In August 2014 the APSC issued an order amending certain aspects of the original order, including providing for a 9.5% authorized return on common equity. The revised rates are effective for all bills rendered after December 31, 2013 and were implemented in the first billing cycle of October 2014.

Filings with the LPSC

Retail Rates - Electric

(Entergy Gulf States Louisiana)

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 in February 2013. Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Gulf States Louisiana submitted a compliance filing in May 2014 reflecting the effects of the estimated MISO cost recovery mechanism revenue requirement and adjustment of the additional capacity mechanism requiring a net increase of approximately $3.8 million in formula rate plan revenue to be implemented over nine months commencing with the first billing cycle of December 2014. Before rates are implemented in December 2014, an updated compliance filing will be made in November 2014 to further refine the estimated MISO cost recovery mechanism revenue requirement component of the May 2014 compliance filing to then-available actual data. The compliance filings will be subject to the review of the parties to the proceeding generally in accordance with the review process set forth in Entergy Gulf States Louisiana’s formula rate plan.

(Entergy Louisiana)

See Note 2 to the financial statements in the Form 10-K for a discussion of the base rate case filed by Entergy Louisiana in February 2013. Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Louisiana submitted a compliance filing in May 2014 reflecting the effects of the $10 million agreed-upon increase in formula rate plan revenue, the estimated MISO cost recovery mechanism revenue requirement, and the adjustment of the additional capacity mechanism requiring a net increase of approximately $39 million in formula rate plan revenue to be implemented over nine months commencing with the first billing cycle of December 2014. Before rates are

37
Entergy Corporation and Subsidiaries
Notes to Financial Statements

implemented in December 2014, an updated compliance filing will be made in November 2014 to further refine the estimated MISO cost recovery mechanism revenue requirement component of the May 2014 compliance filing to then-available actual data. The compliance filings will be subject to the review of the parties to the proceeding generally in accordance with the review process set forth in Entergy Louisiana’s formula rate plan.

As discussed in the Form 10-K, the LPSC is conducting a prudence review of the Waterford 3 replacement steam generator project with regard to Entergy Louisiana’s actions concerning the following aspects of the 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.  In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up $71 million , citing a need for further explanation or documentation from Entergy Louisiana.  An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent.  Entergy Louisiana believes that the replacement steam generator costs were prudently incurred and applicable legal principles support their recovery in rates.  Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing is scheduled for December 2014.

Retail Rates - Gas (Entergy Gulf States Louisiana)

In January 2014, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2013.  The filing showed an earned return on common equity of 5.47% , which results in a $1.5 million rate increase. In April 2014 the LPSC Staff issued a report indicating "that Entergy Gulf States Louisiana has properly determined its earnings for the test year ended September 30, 2013." The $1.5 million rate increase was implemented effective with the first billing cycle of April 2014.

Filings with the MPSC (Entergy Mississippi)
    
In June 2014, Entergy Mississippi filed its first general rate case before the MPSC in almost 12 years.  The rate filing lays out Entergy Mississippi’s plans for improving reliability, modernizing the grid, maintaining its workforce, stabilizing rates, utilizing new technologies, and attracting new industry to its service territory.  Entergy Mississippi requested a net increase in revenue of $49 million for bills rendered during calendar year 2015, including $30 million resulting from new depreciation rates to update the estimated service life of assets.  In addition, the filing proposed, among other things: 1) realigning cost recovery of the Attala and Hinds power plant acquisitions from the power management rider to base rates; 2) including certain MISO-related revenues and expenses in the power management rider; 3) power management rider changes that reflect the changes in costs and revenues that will accompany Entergy Mississippi’s withdrawal from participation in the System Agreement; and 4) a formula rate plan forward test year to allow for known changes in expenses and revenues for the rate effective period.  Entergy Mississippi proposed maintaining the current authorized return on common equity of 10.59% . 

On October 14, 2014 and October 31, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that addressed the majority of issues in the proceeding. The stipulations provide for an approximate $16 million net increase in revenues, which reflects an agreed upon 10.07% return on common equity. The stipulations also revise Entergy Mississippi’s formula rate plan (FRP) by providing Entergy Mississippi with the ability to reflect known and measurable changes to historical rate base and certain expense amounts, resolve uncertainty around and obviate the need for an additional rate filing in connection with Entergy Mississippi’s withdrawal from participation in the System Agreement, update depreciation rates, and move costs associated with the Attala and Hinds generating plants from the power management rider to base rates. The stipulations also provide for recovery of non-fuel MISO-related costs through a separate rider for that purpose. The joint stipulations are subject to MPSC approval. The schedule in the proceeding calls for the rates ultimately approved by the MPSC to be effective January 30, 2015.


38
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 requested 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 made in February 2013. In January 2014 the City Council advisors filed direct testimony recommending a rate increase of $5.56 million over three years , including an 8.13% return on common equity. In June 2014 the City Council unanimously approved a settlement that includes the following:

•
a $9.3 million base rate revenue increase to be phased in on a levelized basis over four years;
•
recovery of an additional $853 thousand annually through a MISO recovery rider; and
•
the adoption of a four-year formula rate plan requiring the filing of annual evaluation reports in May of each year, commencing May 2015, with resulting rates being implemented in October of each year. The formula rate plan includes a midpoint target authorized return on common equity of 9.95% with a +/- 40 basis point bandwidth.

The rate increase was effective with bills rendered on and after the first billing cycle of July 2014.

Filings with the PUCT (Entergy Texas)

In September 2013, Entergy Texas filed a rate case requesting a $38.6 million base rate increase reflecting a 10.4% return on common equity based on an adjusted test year ending March 31, 2013.  The rate case also proposed (1) a rough production cost equalization adjustment rider recovering Entergy Texas’s payment to Entergy New Orleans to achieve rough production cost equalization based on calendar year 2012 production costs and (2) a rate case expense rider recovering the cost of the 2013 rate case and certain costs associated with previous rate cases. The rate case filing also included a request to reconcile $0.9 billion of fuel and purchased power costs and fuel revenues covering the period July 2011 through March 2013.  The fuel reconciliation also reflects special circumstances fuel cost recovery of approximately $22 million of purchased power capacity costs. In January 2014 the PUCT staff filed direct testimony recommending a retail rate reduction of $0.3 million and a 9.2% return on common equity. In March 2014, Entergy Texas filed an Agreed Motion for Interim Rates. The motion explained that the parties to this proceeding have agreed that Entergy Texas should be allowed to implement new rates reflecting an $18.5 million base rate increase, effective for usage on and after April 1, 2014, as well as recovery of charges for rough production cost equalization and rate case expenses. In March 2014 the State Office of Administrative Hearings, the body assigned to hear the case, approved the motion. In April 2014, Entergy Texas filed a unanimous stipulation in this case. Among other things, the stipulation provides for an $18.5 million base rate increase, recovery over three years of the calendar year 2012 rough production cost equalization charges and rate case expenses, and states a 9.8% return on common equity. In addition, the stipulation finalizes the fuel and purchased power reconciliation covering the period July 2011 through March 2013, with the parties stipulating an immaterial fuel disallowance. No special circumstances recovery of purchased power capacity costs was allowed. In April 2014 the State Office of Administrative Hearings remanded the case back to the PUCT for final processing. In May 2014 the PUCT approved the stipulation. No motions for rehearing were filed during the statutory rehearing period.

In September 2014, Entergy Texas filed for a distribution cost recovery factor rider based on a law that was passed in 2011 allowing for the recovery of increases in capital costs associated with distribution plant. Entergy Texas is requesting collection of approximately $7 million annually from retail customers. The PUCT has not yet acted on this filing.


39
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

In June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the LPSC. The report contained a preliminary analysis of the potential combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. Though not a formal application, the report provided an overview of the combination and identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it anticipates it will seek authorization to transfer to Entergy New Orleans the assets that currently support Entergy Louisiana’s customers in Algiers. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.

On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.

The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.

It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:

•
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
•
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
•
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all of the liabilities of Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
•
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the liabilities of Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and hold the membership interests in New Entergy Gulf States Louisiana.
•
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.
•
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.


40
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.

Algiers Asset Transfer (Entergy Louisiana and Entergy New Orleans)

In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently support Entergy Louisiana’s customers in Algiers. The transaction is expected to result in the transfer of net assets of approximately $60 million . The Algiers asset transfer is also subject to regulatory review and approval of the FERC. As discussed previously, Entergy Louisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Entergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and the FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015.

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, including the FERC’s October 2011 order and Entergy’s December 2011 compliance filing in response to that order.  In February 2014 the FERC issued a rehearing order addressing its October 2011 order. The FERC denied the LPSC’s request for rehearing on the issues of whether the bandwidth remedy should be made effective earlier than June 1, 2005, and whether refunds should be ordered for the 20 -month refund effective period. The FERC granted the LPSC’s rehearing request on the issue of interest on the bandwidth payments/receipts for the June - December 2005 period, requiring that interest be accrued from June 1, 2006 until the date those bandwidth payments/receipts are made. Also in February 2014 the FERC issued an order rejecting the December 2011 compliance filing that calculated the bandwidth payments/receipts for the June - December 2005 period. The FERC order required a new compliance filing that calculates the bandwidth payments/receipts for the June - December 2005 period based on monthly data for the seven individual months and that includes interest pursuant to the February 2014 rehearing order. Entergy has sought rehearing of the February 2014 orders with respect to the FERC’s determinations regarding interest. In April 2014 the LPSC filed a petition for review of the FERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit.

In April and May 2014, Entergy filed with the FERC an updated compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s February 2014 orders.  The filing shows the following net payments and receipts, including interest, among the Utility operating companies:

 
Payments
(Receipts)
 
(In Millions)
Entergy Arkansas
$68
 
Entergy Gulf States Louisiana
($10)
 
Entergy Louisiana
$—
 
Entergy Mississippi
($11)
 
Entergy New Orleans
$2
 
Entergy Texas
($49)
 

These payments were made in May 2014. The LPSC, City Council, and APSC have filed protests.


41
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2007 Rate Filing Based on Calendar Year 2006 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In July 2014 the FERC issued an order accepting Entergy Services’ November 2013 compliance filing. The FERC directed Entergy Services to make a comprehensive bandwidth recalculation report by September 15, 2014 showing all the updated payment/receipt amounts based on the 2006 calendar year data in compliance with all bandwidth formula and bandwidth calculation adjustments that the FERC has accepted or ordered for those years. The FERC also directed the Entergy Operating Companies to make any true-up bandwidth payments associated with the 2006 bandwidth recalculation report with interest following the filing of the comprehensive recalculation report. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.

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 July 2014 the FERC issued an order denying Entergy’s rehearing request and decided that it is appropriate to allow interest to be paid on the bandwidth recalculation amounts. The FERC also directed Entergy to file a comprehensive bandwidth recalculation report by September 15, 2014 showing all the updated payment/receipt amounts based on the 2007 calendar year data in compliance with all bandwidth formula and bandwidth calculation adjustments that the FERC has accepted or ordered for that year. The FERC also directed the Entergy Operating Companies to make any true-up bandwidth payments associated with the 2007 bandwidth recalculation report with interest following the filing of the comprehensive recalculation report. In August 2014 the Fifth Circuit issued its opinion dismissing the LPSC petition for review of the FERC’s order. In October 2014, Entergy filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking appellate review of the FERC’s interest determination. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.

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 August 2014, the FERC issued an order accepting the November 2013 compliance filing that was made in response to the FERC’s October 2013 order. The LPSC has appealed to the U.S. Court of Appeals for the Fifth Circuit the FERC’s May 2012 and October 2013 orders. Briefs have been filed and oral argument was held in October 2014. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.

Comprehensive Bandwidth Recalculation for 2007, 2008, and 2009 Rate Filing Proceedings

See Note 2 to the financial statements in the Form 10-K for a discussion of this comprehensive bandwidth recalculation. In July 2014 the FERC issued four orders in connection with various Service Schedule MSS-3 rough production cost equalization formula compliance filings and rehearing requests. Specifically, the FERC accepted Entergy Services’ revised methodologies for calculating certain cost components of the formula and affirmed its prior ruling requiring interest on the true-up amounts. The FERC directed that a comprehensive recalculation of the formula be performed for the filing years 2007 and 2008 based on calendar years 2006 and 2007 production costs. In September 2014, Entergy filed with the FERC its compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s orders for the 2007, 2008, and 2009 rate filing proceedings.  The filing shows the following payments/receipts among the Utility operating companies:

42
Entergy Corporation and Subsidiaries
Notes to Financial Statements

 
Payments
(Receipts)
 
(In Millions)
Entergy Arkansas
$38
 
Entergy Gulf States Louisiana
($22)
 
Entergy Louisiana
($16)
 
Entergy Mississippi
$16
 
Entergy New Orleans
($1)
 
Entergy Texas
($15)
 

Entergy Arkansas and Entergy Mississippi made the payments in September and October 2014. The updated compliance filings in the 2008 and 2009 rate filing proceedings have not been protested, and one protest was filed at the FERC related to the 2007 rate filing proceeding. The filings are pending at the FERC.

2010 Rate Filing Based on Calendar Year 2009 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. The hearing was held in March 2014 and the presiding ALJ issued an initial decision in September 2014. Briefs on exception were filed in October 2014, and the case is pending before the FERC.

2011 Rate Filing Based on Calendar Year 2010 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In March 2014 the Fifth Circuit rejected the LPSC’s petition for a writ of mandamus.

2014 Rate Filing Based on Calendar Year 2013 Production Costs

In May 2014, Entergy filed with the FERC the 2014 rates in accordance with the FERC’s orders in the System Agreement proceeding. The filing shows the following payments and receipts among the Utility operating companies for 2014, based on calendar year 2013 production costs, commencing for service in June 2014, are necessary to achieve rough production cost equalization under the FERC’s orders:
 
Payments
(Receipts)
 
(In Millions)
Entergy Gulf States Louisiana
$—
 
Entergy Louisiana
$—
 
Entergy Mississippi
$—
 
Entergy New Orleans
($15)
 
Entergy Texas
$15
 

The LPSC protested the filing and the PUCT and City Council filed comments regarding the filing.


43
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Storm Cost Recovery Filings with Retail Regulators

Entergy Gulf States Louisiana and Entergy Louisiana

As discussed in the Form 10-K, Entergy Gulf States Louisiana and Entergy Louisiana sought to recover restoration costs for the repair and replacement of electric facilities damaged by Hurricane Isaac, as well as replenishment of storm escrow accounts for prior storms, in the amount of $73.8 million for Entergy Gulf States Louisiana and $247.7 million for Entergy Louisiana. In January 2013, Entergy Gulf States Louisiana and Entergy Louisiana drew $65 million and $187 million , respectively, from their funded 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.  Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ( $66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ( $90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Gulf States Louisiana committed to pass on to customers a minimum of $6.9 million of customer benefits through annual customer credits of approximately $1.4 million for five years.  Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.

In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $71 million in bonds under Act 55 of the Louisiana Legislature.  From the $69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $66 million directly to Entergy Gulf States Louisiana.  Entergy Gulf States Louisiana used the $66 million received from the LURC to acquire 662,426.80  Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion .

In August 2014 the LCDA issued another $243.85 million in bonds under Act 55 of the Louisiana Legislature.  From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana.  Entergy Louisiana used the $227 million received from the LURC to acquire 2,272,725.89  Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion .

Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA and there is no recourse against Entergy, Entergy Gulf States Louisiana, or Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee.  Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.


44
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy New Orleans

As discussed in the Form 10-K, total restoration costs for the repair and replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million . Entergy New Orleans withdrew $17.4 million from the storm reserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs. In July 2014 the City Council adopted a procedural schedule that provides for hearings on the merits in September 2015.

New Nuclear Generation Development Costs

Entergy Mississippi

See the Form 10-K for discussion of Entergy Mississippi’s developing and preserving a project option for new nuclear generation at Grand Gulf Nuclear Station. On October 14, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed a joint stipulation in Entergy Mississippi’s general rate case proceeding, which is discussed above. In consideration of the comprehensive terms for settlement in that rate case proceeding, the Mississippi Public Utilities Staff and Entergy Mississippi agreed that Entergy Mississippi will request consolidation of the new nuclear generation development costs proceeding with the rate case proceeding for hearing purposes and will not further pursue, except as noted below, recovery of the costs deferred by MPSC order in the new nuclear generation development docket. The stipulation states, however, that, if Entergy Mississippi decides to move forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs are verifiable and prudent and the ESP is still valid and relevant to any such option pursued. After considering the progress of the new nuclear generation costs proceeding in light of the joint stipulation, Entergy Mississippi recorded in the third quarter 2014 a $60.9 million pre-tax charge to recognize that the regulatory assets associated with new nuclear generation development are no longer probable of recovery. If the MPSC does not ultimately approve all of the provisions agreed to in the October 2014 joint stipulation, however, Entergy Mississippi would continue to pursue recovery of the new nuclear development costs.

Texas Power Price Lawsuit

See the Form 10-K for discussion of this proceeding. In November 2014 the Texas Court of Appeals - First District reversed the state district court's class certification order and dismissed the case holding that the state district court lacked subject matter jurisdiction to address the issues.  Plaintiffs can file a motion for rehearing and/or a petition for review at the Supreme Court of Texas.




45
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 September 30,
 
2014
 
2013
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$230.0

 
179.6

 

$1.28

 

$239.9

 
178.3

 

$1.35

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.3

 
—

 
 
 
0.1

 
—

Other equity plans
 
 
0.6

 
(0.01
)
 
 
 
0.3

 
(0.01
)
Diluted earnings per share

$230.0

 
180.5

 

$1.27

 

$239.9

 
178.7

 

$1.34


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 5.2 million for the three months ended September 30, 2014 and approximately 8.8 million for the three months ended September 30, 2013 .

 
For the Nine Months Ended September 30,
 
2014
 
2013
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$820.6

 
179.3

 

$4.58

 

$565.0

 
178.2

 

$3.17

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.2

 
(0.01
)
 
 
 
0.1

 
—

Other equity plans
 
 
0.4

 
(0.01
)
 
 
 
0.2

 
(0.01
)
Diluted earnings per share

$820.6

 
179.9

 

$4.56

 

$565.0

 
178.5

 

$3.16


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 6.6 million for the nine months ended September 30, 2014 and approximately 8.9 million for the nine months ended September 30, 2013 .

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

Treasury Stock

During the nine months ended September 30, 2014 , Entergy Corporation issued 1,527,010 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards.  During the nine months ended September 30, 2014 , Entergy Corporation repurchased 248,190 shares of its common stock for a total purchase price of $18.3 million .


46
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Retained Earnings

On October 31, 2014, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.83 per share, payable on December 1, 2014 to holders of record as of November 13, 2014.

Comprehensive Income

Accumulated other comprehensive income (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 income (loss) for Entergy for the three months ended September 30, 2014 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Beginning balance, June 30, 2014

($74,767
)
 

($297,460
)
 

$399,480

 

$3,815

 

$31,068

Other comprehensive income (loss) before reclassifications
5,783

 
—

 
(9,475
)
 
(662
)
 
(4,354
)
Amounts reclassified from accumulated other comprehensive income (loss)
(8,271
)
 
2,956

 
(1,015
)
 
—

 
(6,330
)
Net other comprehensive income (loss) for the period
(2,488
)
 
2,956

 
(10,490
)
 
(662
)
 
(10,684
)
Ending balance, September 30, 2014

($77,255
)
 

($294,504
)
 

$388,990

 

$3,153

 

$20,384


The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 2013 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Beginning balance, June 30, 2013

$31,520

 

($571,138
)
 

$262,891

 

$2,424

 

($274,303
)
Other comprehensive income (loss) before reclassifications
(9,838
)
 
—

 
45,647

 
706

 
36,515

Amounts reclassified from accumulated other comprehensive income (loss)
(21,825
)
 
15,430

 
653

 
—

 
(5,742
)
Net other comprehensive income (loss) for the period
(31,663
)
 
15,430

 
46,300

 
706

 
30,773

Ending balance, September 30, 2013

($143
)
 

($555,708
)
 

$309,191

 

$3,130

 

($243,530
)
    

47
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2014 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Beginning balance, December 31, 2013

($81,777
)
 

($288,223
)
 

$337,256

 

$3,420

 

($29,324
)
Other comprehensive income (loss) before reclassifications
(114,587
)
 
—

 
56,056

 
(267
)
 
(58,798
)
Amounts reclassified from accumulated other comprehensive income (loss)
119,109

 
(6,281
)
 
(4,322
)
 
—

 
108,506

Net other comprehensive income (loss) for the period
4,522

 
(6,281
)
 
51,734

 
(267
)
 
49,708

Ending balance, September 30, 2014

($77,255
)
 

($294,504
)
 

$388,990

 

$3,153

 

$20,384


The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2013 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Beginning balance, December 31, 2012

$79,905

 

($590,712
)
 

$214,547

 

$3,177

 

($293,083
)
Other comprehensive income (loss) before reclassifications
(57,376
)
 
—

 
95,843

 
(47
)
 
38,420

Amounts reclassified from accumulated other comprehensive income (loss)
(22,672
)
 
35,004

 
(1,199
)
 
—

 
11,133

Net other comprehensive income (loss) for the period
(80,048
)
 
35,004

 
94,644

 
(47
)
 
49,553

Ending balance, September 30, 2013

($143
)
 

($555,708
)
 

$309,191

 

$3,130

 

($243,530
)


48
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended September 30, 2014:
 
Pension and Other
Postretirement Liabilities
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
(In Thousands)
Beginning balance June 30, 2014

($27,943
)
 

($10,224
)
Amounts reclassified from accumulated other
comprehensive income (loss)
137

 
(287
)
Net other comprehensive income (loss) for the period
137

 
(287
)
Ending balance, September 30, 2014

($27,806
)
 

($10,511
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended September 30, 2013:
 
Pension and Other
Postretirement Liabilities
 
Entergy
Gulf States
Louisiana

Entergy
Louisiana
 
(In Thousands)
Beginning balance June 30, 2013

($63,312
)


($44,771
)
Amounts reclassified from accumulated other
comprehensive income (loss)
963


684

Net other comprehensive income (loss) for the period
963


684

Ending balance, September 30, 2013

($62,349
)


($44,087
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the nine months ended September 30, 2014:
 
Pension and Other
Postretirement Liabilities
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
(In Thousands)
Beginning balance, December 31, 2013

($28,202
)
 

($9,635
)
Amounts reclassified from accumulated other
comprehensive income (loss)
396

 
(876
)
Net other comprehensive income (loss) for the period
396

 
(876
)
Ending balance, September 30, 2014

($27,806
)
 

($10,511
)


49
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the nine months ended September 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 (loss)
2,880

 
2,045

Net other comprehensive income (loss) for the period
2,880

 
2,045

Ending balance, September 30, 2013

($62,349
)
 

($44,087
)

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended September 30, 2014 are as follows:
 
Amounts
reclassified
from
AOCI
 
Income Statement Location
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
   Power contracts

$13,000

 
Competitive business operating revenues
   Interest rate swaps
(275
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
12,725

 
 
 
(4,454
)
 
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

$8,271

 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
   Amortization of prior-service costs

$5,074

 
(a)
   Amortization of loss
(8,952
)
 
(a)
   Settlement loss
(423
)
 
(a)
Total amortization
(4,301
)
 
 
 
1,345

 
Income taxes
Total amortization (net of tax)

($2,956
)
 
 
 
 
 
 
Net unrealized investment gain (loss)
 
 
 
Realized gain (loss)

$1,990

 
Interest and investment income
 
(975
)
 
Income taxes
Total realized investment gain (loss) (net of tax)

$1,015

 
 
 
 
 
 
Total reclassifications for the period (net of tax)

$6,330

 
 

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

50
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

Amounts
reclassified
from
AOCI

Income Statement Location

(In Thousands)


Cash flow hedges net unrealized gain (loss)



   Power contracts

$35,325


Competitive business operating revenues
   Interest rate swaps
(389
)

Miscellaneous - net
Total realized gain (loss) on cash flow hedges
34,936




(13,111
)

Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

$21,825








Pension and other postretirement liabilities




   Amortization of prior-service costs

$2,414


(a)
   Amortization of loss
(17,179
)

(a)
   Curtailment loss
(1,304
)

(a)
   Settlement loss
(9,662
)

(a)
Total amortization
(25,731
)



10,301


Income taxes
Total amortization (net of tax)

($15,430
)






Net unrealized investment gain (loss)



Realized gain (loss)

($1,280
)

Interest and investment income

627


Income taxes
Total realized investment gain (loss) (net of tax)

($653
)







Total reclassifications for the period (net of tax)

$5,742




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

51
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the nine months ended September 30, 2014 are as follows:

Amounts
reclassified
from
AOCI

Income Statement Location

(In Thousands)


Cash flow hedges net unrealized gain (loss)



   Power contracts

($182,275
)

Competitive business operating revenues
   Interest rate swaps
(970
)

Miscellaneous - net
Total realized gain (loss) on cash flow hedges
(183,245
)



64,136


Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

($119,109
)







Pension and other postretirement liabilities




   Amortization of prior-service costs

$15,227


(a)
   Amortization of loss
(26,903
)

(a)
Settlement loss
(2,971
)

(a)
Total amortization
(14,647
)



20,928


Income taxes
Total amortization (net of tax)

$6,281







Net unrealized investment gain (loss)



Realized gain (loss)

$8,474


Interest and investment income

(4,152
)

Income taxes
Total realized investment gain (loss) (net of tax)

$4,322








Total reclassifications for the period (net of tax)

($108,506
)



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


52
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the nine months ended September 30, 2013 are as follows:
 
Amounts
reclassified
from
AOCI
 
Income Statement Location
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
   Power contracts

$37,518

 
Competitive business operating revenues
   Interest rate swaps
(1,193
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
36,325

 
 
 
(13,653
)
 
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

$22,672

 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
   Amortization of prior-service costs

$7,175

 
(a)
   Amortization of loss
(53,268
)
 
(a)
   Curtailment loss
(1,304
)
 
(a)
   Settlement loss
(9,662
)
 
(a)
Total amortization
(57,059
)
 
 
 
22,055

 
Income taxes
Total amortization (net of tax)

($35,004
)
 
 
 
 
 
 
Net unrealized investment gain (loss)
 
 
 
Realized gain (loss)

$2,351

 
Interest and investment income
 
(1,152
)
 
Income taxes
Total realized investment gain (loss) (net of tax)

$1,199

 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($11,133
)
 
 

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


53
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended September 30, 2014 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

$559

 

$844

 
(a)
   Amortization of loss
(782
)
 
(378
)
 
(a)
Total amortization
(223
)
 
466

 
 
 
86

 
(179
)
 
Income tax expense (benefit)
Total amortization (net of tax)
(137
)
 
287

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($137
)
 

$287

 
 

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

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended September 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

$206



$62


(a)
   Amortization of loss
(1,947
)

(1,288
)

(a)
Total amortization
(1,741
)

(1,226
)



778


542


Income tax expense
Total amortization (net of tax)
(963
)

(684
)










Total reclassifications for the period (net of tax)

($963
)


($684
)



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


54
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the nine months ended September 30, 2014 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

$1,677

 

$2,533

 
(a)
   Amortization of loss
(2,345
)
 
(1,134
)
 
(a)
Total amortization
(668
)
 
1,399

 
 
 
272

 
(523
)
 
Income tax expense (benefit)
Total amortization (net of tax)
(396
)
 
876

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($396
)
 

$876

 
 

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

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the nine months ended September 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

$617

 

$186

 
(a)
   Amortization of loss
(5,839
)
 
(3,862
)
 
(a)
Total amortization
(5,222
)
 
(3,676
)
 
 
 
2,342

 
1,631

 
Income taxes
Total amortization (net of tax)
(2,880
)
 
(2,045
)
 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($2,880
)
 

($2,045
)
 
 

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




55
Entergy Corporation and Subsidiaries
Notes to Financial Statements

NOTE 4.  REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT   (Entergy Corporation, Entergy Arkansas, Entergy 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 2019.  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 nine months ended September 30, 2014 was 1.91% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2014 .
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)

$3,500

 

$245

 

$8

 

$3,247


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 Board-approved program limit of up to $1.5 billion .  At September 30, 2014 , Entergy Corporation had $776 million of commercial paper outstanding.  The weighted-average interest rate for the nine months ended September 30, 2014 was 0.89% .

Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of September 30, 2014 as follows:
Company
 
Expiration
Date
 
Amount of
Facility
 
Interest Rate (a)
 
Amount Drawn
as of
September 30, 2014
Entergy Arkansas
 
April 2015
 
$20 million (b)
 
1.65%
 
$—
Entergy Arkansas
 
March 2019
 
$150 million (c)
 
1.65%
 
$—
Entergy Gulf States Louisiana
 
March 2019
 
$150 million (d)
 
1.40%
 
$—
Entergy Louisiana
 
March 2019
 
$200 million (e)
 
1.40%
 
$—
Entergy Mississippi
 
May 2015
 
$37.5 million (f)
 
1.65%
 
$—
Entergy Mississippi
 
May 2015
 
$35 million (f)
 
1.65%
 
$—
Entergy Mississippi
 
May 2015
 
$20 million (f)
 
1.65%
 
$—
Entergy Mississippi
 
May 2015
 
$10 million (f)
 
1.65%
 
$—
Entergy New Orleans
 
November 2014
 
$25 million
 
1.90%
 
$—
Entergy Texas
 
March 2019
 
$150 million (g)
 
1.65%
 
$—

(a)
The interest rate is the rate as of September 30, 2014 that would most likely apply to outstanding borrowings under the facility.
(b)
Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)
The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of September 30, 2014 , $4 million in letters of credit were outstanding.  
(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 September 30, 2014 , $17.9 million in letters of credit were outstanding.  

56
Entergy Corporation and Subsidiaries
Notes to Financial Statements

(e)
The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  As of September 30, 2014 , $16.4 million in letters of credit were outstanding.  
(f)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
(g)
The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of September 30, 2014 , $31.4 million in letters of credit were outstanding.  

The commitment fees on the credit facilities range from 0.125% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio of 65% or less of its total capitalization.  Each Registrant Subsidiary is in compliance with this covenant.

In addition, Entergy Mississippi and Entergy New Orleans each entered into an uncommitted letter of credit facility in 2013 as a means to post collateral to support its obligations related to MISO. As of September 30, 2014 , a $21.8 million letter of credit was outstanding under Entergy Mississippi’s letter of credit facility and an $11.8 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility. As of September 30, 2014 , the letter of credit fee on outstanding letters of credit under the Entergy Mississippi and Entergy New Orleans letter of credit facilities was 1.50% .

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, 2015.  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 September 30, 2014 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:
 
Authorized
 
Borrowings
 
(In Millions)
Entergy Arkansas
$250
 
$64
Entergy Gulf States Louisiana
$200
 
$—
Entergy Louisiana
$250
 
$8
Entergy Mississippi
$175
 
$—
Entergy New Orleans
$100
 
$—
Entergy Texas
$200
 
$—
System Energy
$200
 
$—

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 2015. 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 2016.

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 September 30, 2014 :

57
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Company
 
Expiration
Date
 
Amount
of
Facility
 
Weighted
Average
Interest
Rate on Borrowings (a)
 
Amount
Outstanding
as of
September 30,
2014
 
 

 
(Dollars in Millions)
Entergy Arkansas VIE
 
June 2016
 
$85
 
1.58%
 
$8.0
Entergy Gulf States Louisiana VIE
 
June 2016
 
$100
 
n/a
 
$—
Entergy Louisiana VIE
 
June 2016
 
$90
 
1.46%
 
$66.4
System Energy VIE
 
June 2016
 
$125
 
1.60%
 
$40.9

(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 0.10% of the undrawn commitment amount for the Entergy Louisiana and Entergy Gulf States Louisiana VIEs and 0.125% of the undrawn commitment amount for the Entergy Arkansas and System Energy VIEs.  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.

The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of September 30, 2014 as follows:
Company
 
Description
 
Amount
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 Arkansas VIE
 
3.65% Series L due July 2021
 
$90 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
 
3.30% Series F due March 2016
 
$20 million
Entergy Louisiana VIE
 
3.25% Series G due July 2017
 
$25 million
Entergy Louisiana VIE
 
3.92% Series H due February 2021
 
$40 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
System Energy VIE
 
3.78% Series I due October 2018
 
$85 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.


58
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Debt Issuances and Redemptions

(Entergy Arkansas)

In March 2014, Entergy Arkansas issued $375 million of 3.70% Series first mortgage bonds due June 2024. Entergy Arkansas used the proceeds to pay, prior to maturity, its $250 million term loan, to pay, prior to maturity, its $115 million of 5.0% Series first mortgage bonds due July 2018, and for general corporate purposes.

In July 2014 the Entergy Arkansas nuclear fuel trust variable interest entity issued $90 million of 3.65% Series L notes due July 2021. The Entergy Arkansas nuclear fuel trust variable interest entity used the proceeds to pay, at maturity, its $70 million of 5.69% Series I notes due July 2014 and to purchase additional nuclear fuel.

(Entergy Gulf States Louisiana)

In July 2014, Entergy Gulf States Louisiana issued $110 million of 3.78% Series first mortgage bonds due April 2025. Entergy Gulf States Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.

(Entergy Louisiana)

In February 2014 the Entergy Louisiana nuclear fuel company variable interest entity issued $40 million of 3.92% Series H Notes due February 2021. The Entergy Louisiana nuclear fuel company variable interest entity used the proceeds to purchase additional nuclear fuel.

In June 2014, Entergy Louisiana issued $170 million of 5% Series first mortgage bonds due July 2044. Entergy Louisiana used the proceeds to pay, prior to maturity, its $70 million of 6.4% Series first mortgage bonds due October 2034 and to pay, prior to maturity, its $100 million of 6.3% Series first mortgage bonds due September 2035.

In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025. Entergy Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.

In July 2014 the Entergy Louisiana nuclear fuel company variable interest entity redeemed, at maturity, its $50 million of 5.69% Series E Notes.

(Entergy Mississippi)

In March 2014, Entergy Mississippi issued $100 million of 3.75% Series first mortgage bonds due July 2024. Entergy Mississippi used the proceeds to pay, prior to maturity, its $95 million of 4.95% Series first mortgage bonds due June 2018 and for general corporate purposes.

(Entergy Texas)

In May 2014, Entergy Texas issued $135 million of 5.625% Series first mortgage bonds due June 2064. Entergy Texas used the proceeds to pay, prior to maturity, a portion of its $150 million of 7.875% Series first mortgage bonds due June 2039.


59
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of September 30, 2014 are as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$12,748,708

 

$12,872,518

Entergy Arkansas

$2,429,578

 

$2,244,612

Entergy Gulf States Louisiana

$1,622,755

 

$1,746,041

Entergy Louisiana

$3,368,934

 

$3,414,414

Entergy Mississippi

$1,058,806

 

$1,098,397

Entergy New Orleans

$225,886

 

$226,115

Entergy Texas

$1,490,216

 

$1,641,839

System Energy

$710,777

 

$672,972


(a)
The values exclude lease obligations of $128 million at Entergy Louisiana and $51 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $97 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.

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2013 were as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$12,596,244

 

$12,439,785

Entergy Arkansas

$2,405,802

 

$2,142,527

Entergy Gulf States Louisiana

$1,527,465

 

$1,631,308

Entergy Louisiana

$3,219,516

 

$3,148,877

Entergy Mississippi

$1,053,670

 

$1,067,006

Entergy New Orleans

$225,944

 

$217,692

Entergy Texas

$1,556,939

 

$1,726,623

System Energy

$757,436

 

$664,890


(a)
The values exclude lease obligations of $149 million at Entergy Louisiana and $97 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $95 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.



60
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 611,700 stock options during the first quarter 2014 with a weighted-average fair value of $8.71 per option.  At September 30, 2014 , there are 8,785,130 stock options outstanding with a weighted-average exercise price of $81.23 .  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 September 30, 2014 .  Because Entergy’s stock price at September 30, 2014 is less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of September 30, 2014 is zero. The intrinsic value of “in the money” stock options is $4.8 million as of September 30, 2014 .

The following table includes financial information for stock options for the third quarters of 2014 and 2013:
 
2014
 
2013
 
(In Millions)
Compensation expense included in Entergy’s net income

$1.0

 

$1.0

Tax benefit recognized in Entergy’s net income

$0.4

 

$0.4

Compensation cost capitalized as part of fixed assets and inventory

$0.2

 

$0.2


The following table includes financial information for stock options for the nine months ended September 30, 2014 and 2013 :
 
2014
 
2013
 
(In Millions)
Compensation expense included in Entergy’s net income

$3.1

 

$3.2

Tax benefit recognized in Entergy’s net income

$1.2

 

$1.3

Compensation cost capitalized as part of fixed assets and inventory

$0.5

 

$0.6


Other Equity Plans

In January 2014 the Board approved and Entergy granted 352,600 restricted stock awards and 226,792 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 30, 2014 and were valued at $63.17 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 30, 2014 and were valued at $67.16 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 3 -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 3 -year vesting period.


61
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table includes financial information for other equity plans for the third quarters of 2014 and 2013 :
 
2014
 
2013
 
(In Millions)
Compensation expense included in Entergy’s net income

$7.6

 

$5.7

Tax benefit recognized in Entergy’s net income

$2.9

 

$2.2

Compensation cost capitalized as part of fixed assets and inventory

$1.2

 

$0.9


The following table includes financial information for other equity plans for the nine months ended September 30, 2014 and 2013 :
 
2014
 
2013
 
(In Millions)
Compensation expense included in Entergy’s net income

$22.7

 

$17.5

Tax benefit recognized in Entergy’s net income

$8.8

 

$6.8

Compensation cost capitalized as part of fixed assets and inventory

$3.5

 

$2.7



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 third quarters of 2014 and 2013, included the following components:
 
2014
 
2013
 
(In Thousands)
Service cost - benefits earned during the period

$35,109

 

$43,542

Interest cost on projected benefit obligation
72,519

 
65,464

Expected return on assets
(90,366
)
 
(81,898
)
Amortization of prior service cost
400

 
531

Amortization of loss
36,274

 
54,156

Curtailment loss
—

 
1,304

Net pension costs

$53,936

 

$83,099

    

62
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy’s qualified pension cost, including amounts capitalized, for the nine months ended September 30, 2014 and 2013, included the following components:
 
2014
 
2013
 
(In Thousands)
Service cost - benefits earned during the period

$105,327

 

$131,644

Interest cost on projected benefit obligation
217,557

 
195,996

Expected return on assets
(271,098
)
 
(245,394
)
Amortization of prior service cost
1,200

 
1,665

Amortization of loss
108,822

 
164,058

Curtailment loss
—

 
1,304

Special termination benefit
732

 
—

Net pension costs

$162,540

 

$249,273


The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the third quarters of 2014 and 2013, included the following components:
2014
 
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
 

$5,023

 

$2,881

 

$3,546

 

$1,523

 

$666

 

$1,285

 

$1,446

Interest cost on projected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit obligation
 
14,884

 
7,278

 
9,467

 
4,318

 
2,041

 
4,437

 
3,390

Expected return on assets
 
(18,305
)
 
(9,488
)
 
(11,449
)
 
(5,698
)
 
(2,505
)
 
(5,931
)
 
(4,155
)
Amortization of loss
 
8,989

 
3,981

 
6,131

 
2,354

 
1,449

 
2,339

 
2,375

Net pension cost
 

$10,591

 

$4,652

 

$7,695

 

$2,497

 

$1,651

 

$2,130

 

$3,056

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
 
12,544

 
5,933

 
8,727

 
3,344

 
2,011

 
3,373

 
2,429

Net pension cost
 

$15,754

 

$7,457

 

$11,272

 

$3,839

 

$2,422

 

$3,501

 

$2,985



63
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the nine months ended September 30, 2014 and 2013, included the following components:
2014
 
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
 

$15,069

 

$8,643

 

$10,638

 

$4,569

 

$1,998

 

$3,855

 

$4,338

Interest cost on projected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit obligation
 
44,652

 
21,834

 
28,401

 
12,954

 
6,123

 
13,311

 
10,170

Expected return on assets
 
(54,915
)
 
(28,464
)
 
(34,347
)
 
(17,094
)
 
(7,515
)
 
(17,793
)
 
(12,465
)
Amortization of loss
 
26,967

 
11,943

 
18,393

 
7,062

 
4,347

 
7,017

 
7,125

Net pension cost
 

$31,773

 

$13,956

 

$23,085

 

$7,491

 

$4,953

 

$6,390

 

$9,168


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
 

$19,113

 

$10,797

 

$13,002

 

$5,526

 

$2,496

 

$4,911

 

$5,508

Interest cost on projected
 
 

 
 

 
 

 
 

 
 

 
 

 
 

benefit obligation
 
40,650

 
19,971

 
25,932

 
11,790

 
5,547

 
12,165

 
9,048

Expected return on assets
 
(50,151
)
 
(26,202
)
 
(31,362
)
 
(15,837
)
 
(6,810
)
 
(16,698
)
 
(12,897
)
Amortization of prior service
 
 
 
 
 
 
 
 
 
 
 
 
 
 
cost
 
18

 
6

 
63

 
6

 
—

 
6

 
9

Amortization of loss
 
37,631

 
17,800

 
26,181

 
10,032

 
6,033

 
10,118

 
7,286

Net pension cost
 

$47,261

 

$22,372

 

$33,816

 

$11,517

 

$7,266

 

$10,502

 

$8,954


Non-Qualified Net Pension Cost

Entergy recognized $6.5 million and $33.1 million in pension cost for its non-qualified pension plans in the third quarters of 2014 and 2013 , respectively. Reflected in the pension cost for non-qualified pension plans in the third quarters of 2014 and 2013, respectively, is a $2.3 million and a $28.1 million settlement charge related to the payment of lump sum benefits out of the plan. Entergy recognized $25.6 million and $44.1 million in pension cost for its non-qualified pension plans for the nine months ended September 30, 2014 and 2013, respectively. Reflected in the pension costs for non-qualified pension plans for the nine months ended September 30, 2014 and 2013, respectively, is a $12.5 million and a $28.1 million settlement charge related to the payment of lump sum benefits out of the plan.

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the third quarters of 2014 and 2013:
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
Non-qualified pension cost
 third quarter 2014

$377

 

$32

 

$1

 

$47

 

$24

 

$129

Non-qualified pension cost
 third quarter 2013

$121

 

$38

 

$3

 

$46

 

$22

 

$560



64
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the nine months ended September 30, 2014 and 2013:
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
Non-qualified pension cost
 nine months ended
 September 30, 2014

$657

 

$98

 

$4

 

$143

 

$70

 

$373

Non-qualified pension cost
 nine months ended
 September 30, 2013

$326

 

$113

 

$9

 

$139

 

$68

 

$857


Reflected in Entergy Arkansas’s non-qualified pension costs in the third quarters of 2014 and 2013, respectively, are $274 thousand and $19 thousand in settlement charges related to the payment of lump sum benefits out of the plan. Reflected in Entergy Arkansas’s non-qualified pension costs for the nine months ended September 30, 2014 and 2013, respectively, are $337 thousand and $19 thousand in settlement charges related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs in the third quarters of 2014 and 2013, respectively, are $10 thousand and $415 thousand in settlement charges related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs for the nine months ended September 30, 2014 and 2013, respectively, are $16 thousand and $415 thousand in settlement charges related to the payment of lump sum benefits out of the plan.

Components of Net Other Postretirement Benefit Cost

Entergy’s other postretirement benefit cost, including amounts capitalized, for the third quarters of 2014 and 2013, included the following components:
 
2014
 
2013
 
(In Thousands)
Service cost - benefits earned during the period

$10,873

 

$18,917

Interest cost on accumulated postretirement benefit obligation (APBO)
17,960

 
19,766

Expected return on assets
(11,197
)
 
(9,950
)
Amortization of prior service credit
(7,898
)
 
(3,334
)
Amortization of loss
2,786

 
11,304

Net other postretirement benefit cost

$12,524

 

$36,703


Entergy’s other postretirement benefit cost, including amounts capitalized, for the nine months ended September 30, 2014 and 2013, included the following components:
 
2014
 
2013
 
(In Thousands)
Service cost - benefits earned during the period

$32,619

 

$56,751

Interest cost on accumulated postretirement benefit obligation (APBO)
53,880

 
59,298

Expected return on assets
(33,591
)
 
(29,850
)
Amortization of prior service credit
(23,694
)
 
(10,002
)
Amortization of loss
8,358

 
33,912

Net other postretirement benefit cost

$37,572

 

$110,109


65
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the third quarters of 2014 and 2013, included the following components:
2014
 
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
 

$1,489

 

$1,224

 

$1,130

 

$475

 

$217

 

$595

 

$515

Interest cost on APBO
 
3,065

 
2,095

 
2,066

 
914

 
701

 
1,413

 
653

Expected return on assets
 
(4,784
)
 
—

 
—

 
(1,443
)
 
(1,119
)
 
(2,590
)
 
(932
)
Amortization of prior service
 
 
 
 
 
 
 
 
 
 
 
 
 
 
credit
 
(610
)
 
(559
)
 
(844
)
 
(229
)
 
(177
)
 
(325
)
 
(206
)
Amortization of loss
 
317

 
303

 
378

 
37

 
14

 
200

 
111

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

($523
)
 

$3,063

 

$2,730

 

($246
)
 

($364
)
 

($707
)
 

$141

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/(credit)
 
(133
)
 
(206
)
 
(62
)
 
(35
)
 
10

 
(107
)
 
(16
)
Amortization of loss
 
2,041

 
1,173

 
1,288

 
662

 
396

 
976

 
479

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

$3,533

 

$5,194

 

$5,747

 

$1,203

 

$624

 

$1,013

 

$1,274

    
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the nine months ended September 30, 2014 and 2013, included the following components:
2014
 
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
 

$4,467

 

$3,672

 

$3,390

 

$1,425

 

$651

 

$1,785

 

$1,545

Interest cost on APBO
 
9,195

 
6,285

 
6,198

 
2,742

 
2,103

 
4,239

 
1,959

Expected return on assets
 
(14,352
)
 
—

 
—

 
(4,329
)
 
(3,357
)
 
(7,770
)
 
(2,796
)
Amortization of prior service
 
 
 
 
 
 
 
 
 
 
 
 
 
 
credit
 
(1,830
)
 
(1,677
)
 
(2,532
)
 
(687
)
 
(531
)
 
(975
)
 
(618
)
Amortization of loss
 
951

 
909

 
1,134

 
111

 
42

 
600

 
333

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

($1,569
)
 

$9,189

 

$8,190

 

($738
)
 

($1,092
)
 

($2,121
)
 

$423



66
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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
 

$7,242

 

$6,003

 

$6,516

 

$2,457

 

$1,341

 

$2,850

 

$2,721

Interest cost on APBO
 
10,080

 
6,678

 
7,047

 
3,222

 
2,355

 
4,545

 
2,187

Expected return on assets
 
(12,447
)
 
—

 
—

 
(3,951
)
 
(3,042
)
 
(6,963
)
 
(2,475
)
Amortization of prior service
 
 
 
 
 
 
 
 
 
 
 
 
 
 
cost/(credit)
 
(399
)
 
(618
)
 
(186
)
 
(105
)
 
30

 
(321
)
 
(48
)
Amortization of loss
 
6,124

 
3,520

 
3,862

 
1,987

 
1,189

 
2,927

 
1,437

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

$10,600

 

$15,583

 

$17,239

 

$3,610

 

$1,873

 

$3,038

 

$3,822


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 third quarters of 2014 and 2013:
2014
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

($389
)
 

$5,570

 

($107
)
 

$5,074

Amortization of loss
 
(6,734
)
 
(1,673
)
 
(545
)
 
(8,952
)
Settlement loss
 
—

 
—

 
(423
)
 
(423
)
 
 

($7,123
)
 

$3,897

 

($1,075
)
 

($4,301
)
Entergy Gulf States Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

$—

 

$559

 

$—

 

$559

Amortization of loss
 
(478
)
 
(303
)
 
(1
)
 
(782
)
 
 

($478
)
 

$256

 

($1
)
 

($223
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

$—

 

$844

 

$—

 

$844

Amortization of loss
 
—

 
(378
)
 
—

 
(378
)
 
 

$—

 

$466

 

$—

 

$466



67
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2013

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service cost


($466
)


$3,007



($127
)


$2,414

Amortization of loss

(11,050
)

(5,485
)

(644
)

(17,179
)
Curtailment loss

(1,304
)

—


—


(1,304
)
Settlement loss

—


—


(9,662
)

(9,662
)



($12,820
)


($2,478
)


($10,433
)


($25,731
)
Entergy Gulf States Louisiana








Amortization of prior service cost


$—



$206



$—



$206

Amortization of loss

(772
)

(1,173
)

(2
)

(1,947
)



($772
)


($967
)


($2
)


($1,741
)
Entergy Louisiana








Amortization of prior service cost


$—



$62



$—



$62

Amortization of loss

—


(1,288
)

—


(1,288
)



$—



($1,226
)


$—



($1,226
)

Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) for the nine months ended September 30, 2014 and 2013:
2014

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service cost


($1,167
)


$16,711



($317
)


$15,227

Amortization of loss

(20,202
)

(5,019
)

(1,682
)

(26,903
)
Settlement loss

—


—


(2,971
)

(2,971
)



($21,369
)


$11,692



($4,970
)


($14,647
)
Entergy Gulf States Louisiana








Amortization of prior service cost


$—



$1,677



$—



$1,677

Amortization of loss

(1,433
)

(909
)

(3
)

(2,345
)



($1,433
)


$768



($3
)


($668
)
Entergy Louisiana








Amortization of prior service cost


$—



$2,533



$—



$2,533

Amortization of loss

—


(1,134
)

—


(1,134
)



$—



$1,399



$—



$1,399



68
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2013
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

($1,472
)
 

$9,022

 

($375
)
 

$7,175

Amortization of loss
 
(34,740
)
 
(16,455
)
 
(2,073
)
 
(53,268
)
Curtailment loss
 
(1,304
)
 
—

 
—

 
(1,304
)
Settlement loss
 
—

 
—

 
(9,662
)
 
(9,662
)
 
 

($37,516
)
 

($7,433
)
 

($12,110
)
 

($57,059
)
Entergy Gulf States Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

($1
)
 

$618

 

$—

 

$617

Amortization of loss
 
(2,314
)
 
(3,520
)
 
(5
)
 
(5,839
)
 
 

($2,315
)
 

($2,902
)
 

($5
)
 

($5,222
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service cost
 

$—

 

$186

 

$—

 

$186

Amortization of loss
 
—

 
(3,862
)
 
—

 
(3,862
)
 
 

$—

 

($3,676
)
 

$—

 

($3,676
)

Employer Contributions

Based on current assumptions, Entergy expects to contribute $399 million to its qualified pension plans in 2014.  As of September 30, 2014 , Entergy had contributed $320 million to its pension plans.  Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their employees in 2014 :
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
(In Thousands)
Expected 2014 pension contributions

$95,464

 

$30,176

 

$54,549

 

$21,839

 

$10,509

 

$17,072

 

$21,158

Pension contributions made through September 2014

$76,371

 

$24,217

 

$43,475

 

$17,455

 

$8,408

 

$13,793

 

$16,989

Remaining estimated pension contributions to be made in 2014

$19,093

 

$5,959

 

$11,074

 

$4,384

 

$2,101

 

$3,279

 

$4,169



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 September 30, 2014 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

69
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.

Entergy’s segment financial information for the third quarters of 2014 and 2013 is as follows:
 
 
Utility
 
Entergy
Wholesale
Commodities*
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2014
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,852,088

 

$605,740

 

$275

 

$7

 

$3,458,110

Income taxes (benefit)
 

$172,188

 

$2,303

 

($12,726
)
 

$—

 

$161,765

Consolidated net income (loss)
 

$315,263

 

($32,678
)
 

($14,793
)
 

($32,876
)
 

$234,916

2013
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,732,482

 

$623,321

 

$787

 

($4,631
)
 

$3,351,959

Income taxes (benefit)
 

$170,816

 

($107,337
)
 

($38,926
)
 

$—

 

$24,553

Consolidated net income (loss)
 

$352,303

 

($92,828
)
 

$11,102

 

($26,395
)
 

$244,182


Entergy’s segment financial information for the nine months ended September 30, 2014 and 2013 is as follows:
 
 
Utility
 
Entergy
Wholesale
Commodities*
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2014
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$7,566,187

 

$2,095,752

 

$1,765

 

($101
)
 

$9,663,603

Income taxes (benefit)
 

$410,135

 

$140,777

 

($43,438
)
 

$—

 

$507,474

Consolidated net income (loss)
 

$732,838

 

$236,255

 

($47,869
)
 

($85,974
)
 

$835,250

2013
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$6,948,258

 

$1,770,577

 

$2,775

 

($22,569
)
 

$8,699,041

Income taxes (benefit)
 

$340,817

 

($64,968
)
 

($61,647
)
 

$—

 

$214,202

Consolidated net income (loss)
 

$680,694

 

$818

 

($23,107
)
 

($79,185
)
 

$579,220

    
Businesses marked with * are sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.

Registrant Subsidiaries

Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business.  Each of the Registrant Subsidiaries’ operations 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.



70
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 commodity or instrument.  All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk.  Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.

The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation.  To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also 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, and options, to mitigate commodity price risk.  When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.

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 may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.

Entergy enters into derivatives 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 September 30, 2014 is approximately 2.25 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 75% for the remainder of 2014, of which approximately 60% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2014 is 10 TWh.

71
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures.  These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities.  All benefits or costs of the program are recorded in fuel costs.  The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.  The total volume of natural gas swaps outstanding as of September 30, 2014 is 19,999,000 MMBtu for Entergy, 9,400,000 MMBtu for Entergy Gulf States Louisiana, 6,690,000 MMBtu for Entergy Louisiana, 2,670,000 MMBtu for Entergy Mississippi, and 1,239,000 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.

During the second quarter 2014, Entergy participated in the annual FTR auction process for the MISO planning year of June 1, 2014 through May 31, 2015. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records FTRs at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on FTRs held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on FTRs. The total volume of FTRs outstanding as of September 30, 2014 is 73,378 GWh for Entergy, including 15,935 GWh for Entergy Arkansas, 16,199 GWh for Entergy Gulf States Louisiana, 16,991 GWh for Entergy Louisiana, 9,032 GWh for Entergy Mississippi, 5,846 GWh for Entergy New Orleans, and 9,264 GWh for Entergy Texas. Credit support for FTRs held by the Utility operating companies is covered by cash or letters of credit issued by each Utility operating company as required by MISO. Credit support for FTRs held by Entergy Wholesale Commodities is covered by cash. As of September 30, 2014 , no cash collateral was required to be posted.

    

72
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of September 30, 2014 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)
 
$118
 
($117)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$21
 
($16)
 
$5
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$206
 
($145)
 
$61
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$33
 
($14)
 
$19
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$93
 
($82)
 
$11
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$8
 
($8)
 
$—
 
Entergy Wholesale Commodities
FTRs
 
Prepayments and other
 
$92
 
($9)
 
$83
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities(current portion)
 
$78
 
($54)
 
$24
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$14
 
($10)
 
$4
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$1
 
$—
 
$1
 
Utility

73
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, 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)
 
$118
 
($99)
 
$19
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$17
 
($17)
 
$—
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$197
 
($131)
 
$66
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$46
 
($17)
 
$29
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$177
 
($122)
 
$55
 
Entergy Wholesale Commodities
Natural gas swaps
 
Prepayments and other
 
$6
 
$—
 
$6
 
Utility
FTRs
 
Prepayments and other
 
$36
 
($2)
 
$34
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$201
 
($89)
 
$112
 
Entergy Wholesale Commodities

(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 $4 million posted as of September 30, 2014 and $47 million posted and $4 million held as of December 31, 2013 , respectively

74
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 September 30, 2014 and 2013 are as follows:
Instrument
 
Amount of gain (loss)
recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain
reclassified from
AOCI into income
 
 
(In Millions)
 
 
 
(In Millions)
2014
 
 
 
 
 
 
Electricity swaps and options
 
$8
 
Competitive businesses operating revenues
 
$13
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Electricity swaps and options
 
($4)
 
Competitive businesses operating revenues
 
$35

The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the nine months ended September 30, 2014 and 2013 are as follows:
Instrument
 
Amount of loss recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain (loss)
 reclassified from
AOCI into income

 
(In Millions)
 
 
 
(In Millions)
2014
 
 
 
 
 
 
Electricity swaps and options
 
($177)
 
Competitive businesses operating revenues
 
($182)
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Electricity swaps and options
 
($78)
 
Competitive businesses operating revenues
 
$38

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 $13 million and $35 million were realized on the maturity of cash flow hedges, before taxes of $5 million and $13 million , for the three months ended September 30, 2014 and 2013 , respectively. Gains (losses) totaling approximately ($182) million and $38 million were realized on the maturity of cash flow hedges, before taxes (benefit) of ($64) million and $14 million , for the nine months ended September 30, 2014 and 2013 , respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended September 30, 2014 and 2013 was ($1.0) million and ($1.8) million , respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the nine months ended September 30, 2014 and 2013 was $0.8 million and ($2.3) million , respectively. The ineffective portion of cash flow hedges is recorded in competitive businesses operating revenues.

Based on market prices as of September 30, 2014 , unrealized losses recorded in AOCI on cash flow hedges relating to power sales totaled ($113) million of net unrealized losses.  Approximately ($96) 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.


75
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 September 30, 2014 , derivative contracts with nine counterparties were in a liability position (approximately $96 million total). In addition to the corporate guarantee, $4 million in cash collateral was required to be posted. As of September 30, 2013 , derivative contracts with five counterparties were in a liability position (approximately $32 million total), but were significantly below the amount of the guarantee provided under the contract and no cash collateral was required. 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 occurs. 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 September 30, 2014 and 2013 is as follows:
Instrument
 
Amount of gain (loss)
recognized in AOCI
 
Income Statement
location
 
Amount of gain (loss)
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2014
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($8)
FTRs
 
$—
 
Purchased power expense
(b)
$47
Electricity swaps and options de-designated as hedged items
 
($9)
 
Competitive business operating revenues
 
($5)
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($1)
Electricity swaps and options de-designated as hedged items
 
$4
 
Competitive business operating revenues
 
$12

76
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the nine months ended September 30, 2014 and 2013 is as follows:
Instrument

Amount of gain (loss)
recognized in AOCI

Income Statement
location

Amount of gain
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2014
 

 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
$13
FTRs

$—

Purchased power expense
(b)
$182
Electricity swaps and options de-designated as hedged items
 
($2)
 
Competitive business operating revenues
 
$20
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
$8
Electricity swaps and options de-designated as hedged items
 
$4
 
Competitive business operating revenues
 
$2

(a)
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.
(b)
Due to regulatory treatment, the changes in the estimated fair value of FTRs for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the FTRs for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.


77
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of September 30, 2014 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
FTRs
 
Prepayments and other
 
$0.5
 
Entergy Arkansas
FTRs
 
Prepayments and other
 
$26.8
 
Entergy Gulf States Louisiana
FTRs
 
Prepayments and other
 
$14.7
 
Entergy Louisiana
FTRs
 
Prepayments and other
 
$6.1
 
Entergy Mississippi
FTRs
 
Prepayments and other
 
$6.0
 
Entergy New Orleans
FTRs
 
Prepayments and other
 
$27.5
 
Entergy Texas
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Natural gas swaps
 
Other current liabilities
 
$0.5
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.3
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.1
 
Entergy Mississippi
Natural gas swaps
 
Other current liabilities
 
$0.1
 
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, 2013 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
Natural gas swaps
 
Gas hedge contracts
 

$2.2

 
Entergy Gulf States Louisiana
Natural gas swaps
 
Gas hedge contracts
 

$2.9

 
Entergy Louisiana
Natural gas swaps
 
Prepayments and other
 

$0.7

 
Entergy Mississippi
Natural gas swaps
 
Prepayments and other
 

$0.1

 
Entergy New Orleans
 
 
 
 
 
 
 
FTRs
 
Prepayments and other
 

$6.7

 
Entergy Gulf States Louisiana
FTRs
 
Prepayments and other
 

$5.7

 
Entergy Louisiana
FTRs
 
Prepayments and other
 

$1.0

 
Entergy Mississippi
FTRs
 
Prepayments and other
 

$2.0

 
Entergy New Orleans
FTRs
 
Prepayments and other
 

$18.4

 
Entergy Texas

(a)
No cash collateral was required to be posted as of September 30, 2014 and December 31, 2013, respectively.

78
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended September 30, 2014 and 2013 are as follows:
Instrument
 
Income Statement Location
 
Amount of gain
(loss) recorded
in the income statement
 
Registrant
 
 
 
 
(In Millions)
 
 
2014
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($3.4)
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($3.7)
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.6)
 
Entergy Mississippi
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$4.9
 
Entergy Arkansas
FTRs
 
Purchased power expense
 
$10.6
 
Entergy Gulf States Louisiana
FTRs
 
Purchased power expense
 
$13.4
 
Entergy Louisiana
FTRs
 
Purchased power expense
 
$3.3
 
Entergy Mississippi
FTRs
 
Purchased power expense
 
$5.1
 
Entergy New Orleans
FTRs
 
Purchased power expense
 
$9.8
 
Entergy Texas
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.4)
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.7)
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.3)
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.1)
 
Entergy New Orleans




79
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the nine months ended September 30, 2014 and 2013 are as follows:
Instrument

Income Statement Location

Amount of gain
(loss) recorded
in the income statement

Registrant
 
 
 
 
(In Millions)
 
 
2014
 
 
 

 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$4.8
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$6.5
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.6
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.7
 
Entergy New Orleans
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$16.7
 
Entergy Arkansas
FTRs
 
Purchased power expense
 
$45.7
 
Entergy Gulf States Louisiana
FTRs
 
Purchased power expense
 
$33.8
 
Entergy Louisiana
FTRs
 
Purchased power expense
 
$15.6
 
Entergy Mississippi
FTRs
 
Purchased power expense
 
$11.4
 
Entergy New Orleans
FTRs
 
Purchased power expense
 
$56.0
 
Entergy Texas
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$2.4
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$3.2
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$2.2
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.2)
 
Entergy New Orleans

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

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


80
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.  Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.

•
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date.  Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.  Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value.  Level 2 inputs include the following:

-    quoted prices for similar assets or liabilities in active markets;
-    quoted prices for identical assets or liabilities in inactive markets;
-    inputs other than quoted prices that are observable for the asset or liability; or
-
inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 2 consists primarily of individually-owned debt instruments 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 FTRs and 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 the Entergy Wholesale Commodities Accounting Policy and External Reporting group.  The primary functions of the Entergy Wholesale Commodities Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system.  The Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Entergy Wholesale Commodities Accounting Policy and External Reporting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Entergy Wholesale Commodities Risk Control group reports to the Vice President, Treasury while the Entergy Wholesale Commodities Accounting Policy and External Reporting group reports to the Vice President, Accounting Policy and External Reporting.

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 to or payable by Entergy if the contracts were settled

81
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.

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.  

On a daily basis, Entergy Wholesale Commodities Risk Control group calculates the mark-to-market for electricity swaps and options.  Entergy Wholesale Commodities Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions.  Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions.  Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available, and uses 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 values of FTRs are based on unobservable inputs, including estimates of future congestion costs in MISO between applicable generation and load pricing nodes based on prices published by MISO.  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 for the unregulated business and by the System Planning and Operations Risk Control group for the Utility operating companies.  Entergy’s Accounting Policy group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The System Planning and Operations Risk Control group reports to the Vice President, Treasury.  The Accounting Policy group reports to the Vice President, Accounting Policy and External Reporting.


82
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 .  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.
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$978

 

$—

 

$—

 

$978

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
435

 
2,739

(b)
—

 
3,174

Debt securities
 
856

 
1,150

 
—

 
2,006

Power contracts
 
—

 
—

 
17

 
17

Securitization recovery trust account
 
51

 
—

 
—

 
51

Escrow accounts
 
360

 
—

 
—

 
360

FTRs
 
—

 
—

 
83

 
83

 
 

$2,680

 

$3,889

 

$100

 

$6,669

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$108

 

$108

Gas hedge contracts
 
1

 
—


—

 
1

 
 

$1

 

$—



$108

 

$109


2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$609

 

$—

 

$—

 

$609

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
472

 
2,601

(b)
—

 
3,073

Debt securities
 
783

 
1,047

 
—

 
1,830

Power contracts
 
—

 
—

 
74

 
74

Securitization recovery trust account
 
46

 
—

 
—

 
46

Escrow accounts
 
115

 
—

 
—

 
115

Gas hedge contracts
 
6

 
—

 
—

 
6

FTRs
 
—

 
—

 
34

 
34

 
 

$2,031

 

$3,648

 

$108

 

$5,787

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$207

 

$207


(a)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)
Commingled equity funds may be redeemed bi-monthly.


83
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2014 and 2013 :
 
2014
 
2013
 
Power Contracts
 
FTRs
 
Power Contracts
 
(In Millions)
Balance as of July 1,

($88
)
 

$144

 

$83

Realized losses included in earnings
(10
)
 
—

 
(5
)
Unrealized gains included in earnings
4

 
1

 
11

Unrealized gains (losses) included in OCI
37

 
—

 
(4
)
Unrealized losses included as a regulatory liability/asset
—

 
(14
)
 
—

Purchases
7

 
—

 
—

Settlements
(41
)
 
(48
)
 
(36
)
Balance as of September 30,

($91
)
 

$83

 

$49


The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2014 and 2013 :
 
2014
 
2013
 
Power Contracts
 
FTRs
 
Power Contracts

(In Millions)
Balance as of January 1,

($133
)
 

$34

 

$178

Realized losses included in earnings
(69
)
 
—

 
(27
)
Unrealized gains included in earnings
90

 
3

 
14

Unrealized losses included in OCI
(182
)
 
—

 
(78
)
Unrealized gains included as a regulatory liability/asset
—

 
108

 
—

Issuances of FTRs
—

 
121

 
—

Purchases
15

 
—

 
—

Settlements
188

 
(183
)
 
(38
)
Balance as of September 30,

($91
)
 

$83

 

$49


The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of September 30, 2014 :
Transaction Type
 
Fair Value
as of
September 30,
2014
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
 
 
(In Millions)
 
 
 
 
 
 
(In Millions)
Electricity swaps
 
($120)
 
Unit contingent discount
 
+/-
3%
 
($4)
Electricity options
 
$29
 
Implied volatility
 
+/-
69%
 
$30


84
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 September 30, 2014 and December 31, 2013 .  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
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$4.9

 

$457.9

(b)

$—

 

$462.8

Debt securities
 
67.0

 
215.3

 
—

 
282.3

Securitization recovery trust account
 
8.3

 
—

 
—

 
8.3

Escrow accounts
 
12.2

 
—

 
—

 
12.2

FTRs
 
—

 
—

 
0.5

 
0.5

 
 

$92.4

 

$673.2

 

$0.5

 

$766.1


2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$122.8

 

$—

 

$—

 

$122.8

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
13.6

 
449.7

(b)
—

 
463.3

Debt securities
 
58.6

 
189.0

 
—

 
247.6

Securitization recovery trust account
 
3.8

 
—

 
—

 
3.8

Escrow accounts
 
26.0

 
—

 
—

 
26.0

 
 

$224.8

 

$638.7

 

$—

 

$863.5



85
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Gulf States Louisiana
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$121.4

 

$—

 

$—

 

$121.4

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
12.1

 
367.4

(b)
—

 
379.5

Debt securities
 
78.6

 
155.6

 
—

 
234.2

Escrow accounts
 
90.0

 
—

 
—

 
90.0

FTRs
 
—

 
—

 
26.8

 
26.8

 
 

$302.1

 

$523.0

 

$26.8

 

$851.9

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
      Gas hedge contracts
 

$0.5

 

$—

 

$—

 

$0.5

 
 
 
 
 
 
 
 
 

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$13.8

 

$—

 

$—

 

$13.8

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
27.6

 
343.2

(b)
—

 
370.8

Debt securities
 
71.7

 
131.2

 
—

 
202.9

Escrow accounts
 
21.5

 
—

 
—

 
21.5

Gas hedge contracts
 
2.2

 
—

 
—

 
2.2

FTRs
 
—

 
—

 
6.7

 
6.7

 
 

$136.8

 

$474.4

 

$6.7

 

$617.9


Entergy Louisiana
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$2.6

 

$—

 

$—

 

$2.6

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
7.5

 
223.4

(b)
—

 
230.9

Debt securities
 
64.4

 
73.0

 
—

 
137.4

Escrow accounts
 
200.0

 
—

 
—

 
200.0

Securitization recovery trust account
 
10.4

 
—

 
—

 
10.4

FTRs
 
—

 
—

 
14.7

 
14.7

 
 

$284.9

 

$296.4

 

$14.7

 

$596.0

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
      Gas hedge contracts
 

$0.3

 

$—

 

$—

 

$0.3



86
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$123.6

 

$—

 

$—

 

$123.6

Decommissioning trust funds (a):
 
 

 
 

 
 

 
 

Equity securities
 
13.5

 
210.7

(b)
—

 
224.2

Debt securities
 
61.7

 
61.4

 
—

 
123.1

Securitization recovery trust account
 
4.5

 
—

 
—

 
4.5

Gas hedge contacts
 
2.9

 
—

 
—

 
2.9

FTRs
 
—

 
—

 
5.7

 
5.7

 
 

$206.2

 

$272.1

 

$5.7

 

$484.0


Entergy Mississippi
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$30.3

 

$—

 

$—

 

$30.3

Escrow accounts
 
41.8

 
—

 
—

 
41.8

FTRs
 
—

 
—

 
6.1

 
6.1

 
 

$72.1

 

$—

 

$6.1

 

$78.2

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.1

 

$—

 

$—

 

$0.1


2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Escrow accounts
 

$51.8

 

$—

 

$—

 

$51.8

Gas hedge contracts
 
0.7

 
—

 
—

 
0.7

FTRs
 
—

 
—

 
1.0

 
1.0

 
 

$52.5

 

$—

 

$1.0

 

$53.5


Entergy New Orleans
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$37.7

 

$—

 

$—

 

$37.7

Escrow accounts
 
16.2

 
—

 
—

 
16.2

FTRs
 
—

 
—

 
6.0

 
6.0

 
 

$53.9

 

$—

 

$6.0

 

$59.9

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.1

 

$—

 

$—

 

$0.1



87
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$33.2

 

$—

 

$—

 

$33.2

Escrow accounts
 
10.5

 
—

 
—

 
10.5

Gas hedge contracts
 
0.1

 
—

 
—

 
0.1

FTRs
 
—

 
—

 
2.0

 
2.0

 
 

$43.8

 

$—

 

$2.0

 

$45.8


Entergy Texas
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$38.0

 

$—

 

$—

 

$38.0

Securitization recovery trust account
 
32.1

 
—

 
—

 
32.1

FTRs
 
—

 
—

 
27.5

 
27.5

 
 

$70.1

 

$—

 

$27.5

 

$97.6


2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$44.1

 

$—

 

$—

 

$44.1

Securitization recovery trust account
 
37.5

 
—

 
—

 
37.5

FTRs
 
—

 
—

 
18.4

 
18.4

 
 

$81.6

 

$—

 

$18.4

 

$100.0


System Energy
2014
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$134.3

 

$—

 

$—

 

$134.3

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
2.5

 
401.9

(b)
—

 
404.4

Debt securities
 
188.2

 
58.1

 
—

 
246.3

 
 

$325.0

 

$460.0

 

$—

 

$785.0


2013
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$64.6

 

$—

 

$—

 

$64.6

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
2.2

 
377.8

(b)
—

 
380.0

Debt securities
 
152.9

 
71.0

 
—

 
223.9

 
 

$219.7

 

$448.8

 

$—

 

$668.5


(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

88
Entergy Corporation and Subsidiaries
Notes to Financial Statements

and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)
Commingled equity funds may be redeemed bi-monthly.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2014 .

Entergy
Arkansas

Entergy
Gulf States
Louisiana

Entergy
Louisiana

Entergy
Mississippi

Entergy
New
Orleans

Entergy
Texas
 
(In Millions)
Balance as of July 1,

$3.0



$47.2



$23.6



$12.7



$8.5



$47.8

Unrealized gains (losses) included as a regulatory liability/asset
2.4


(9.8
)

4.5


(3.3
)

2.6


(10.5
)
Settlements
(4.9
)

(10.6
)

(13.4
)

(3.3
)

(5.1
)

(9.8
)
Balance as of September 30,

$0.5



$26.8



$14.7



$6.1



$6.0



$27.5


The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2014 .
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$—

 

$6.7

 

$5.7

 

$1.0

 

$2.0

 

$18.4

Issuances of FTRs
4.2

 
37.3

 
21.5

 
15.2

 
8.3

 
33.2

Unrealized gains included as a regulatory liability/asset
13.0

 
28.5

 
21.3

 
5.5

 
7.1

 
31.9

Settlements
(16.7
)
 
(45.7
)
 
(33.8
)
 
(15.6
)
 
(11.4
)
 
(56.0
)
Balance as of September 30,

$0.5

 

$26.8

 

$14.7

 

$6.1

 

$6.0

 

$27.5



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 debt securities, and cash and cash equivalents.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 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

89
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 September 30, 2014 and December 31, 2013 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$3,174

 

$1,385

 

$1

Debt Securities
 
2,006

 
61

 
10

Total
 

$5,180

 

$1,446

 

$11

 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2013
 
 
 
 
 
 
Equity Securities
 

$3,073

 

$1,260

 

$—

Debt Securities
 
1,830

 
47

 
29

Total
 

$4,903

 

$1,307

 

$29


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 $361 million and $329 million as of September 30, 2014 and December 31, 2013 , respectively.  The amortized cost of debt securities was $1,957 million as of September 30, 2014 and $1,843 million as of December 31, 2013 .  As of September 30, 2014 , the debt securities have an average coupon rate of approximately 3.27% , an average duration of approximately 5.40 years, and an average maturity of approximately 8.11 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 equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 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 September 30, 2014 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$23

 

$1

 

$427

 

$3

More than 12 months
—

 
—

 
211

 
7

Total

$23

 

$1

 

$638

 

$10



90
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, 2013 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$892

 

$24

More than 12 months
—

 
—

 
60

 
5

Total

$—

 

$—

 

$952

 

$29


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 September 30, 2014 and December 31, 2013 are as follows:
 
2014
 
2013
 
(In Millions)
less than 1 year

$45

 

$83

1 year - 5 years
818

 
752

5 years - 10 years
666

 
620

10 years - 15 years
166

 
169

15 years - 20 years
70

 
52

20 years+
241

 
154

Total

$2,006

 

$1,830


During the three months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $ 465 million and $284 million , respectively.  During the three months ended September 30, 2014 and 2013 , gross gains of $11 million and $3 million , respectively, and gross losses of $2 million and $4 million , respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $1,447 million and $1,064 million , respectively.  During the nine months ended September 30, 2014 and 2013 , gross gains of $23 million and $25 million , respectively, and gross losses of $5 million and $7 million , respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

91
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of September 30, 2014 and December 31, 2013 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$462.8

 

$227.4

 

$—

Debt Securities
 
282.3

 
5.3

 
2.1

Total
 

$745.1

 

$232.7

 

$2.1

 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Equity Securities
 

$463.3

 

$214.0

 

$—

Debt Securities
 
247.6

 
5.3

 
5.2

Total
 

$710.9

 

$219.3

 

$5.2


The amortized cost of debt securities was $279.1 million as of September 30, 2014 and $248.9 million as of December 31, 2013 .  As of September 30, 2014 , the debt securities have an average coupon rate of approximately 2.62% , an average duration of approximately 4.82 years, and an average maturity of approximately 5.43 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 equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale 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 September 30, 2014 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$4.5

 

$—

 

$94.5

 

$0.6

More than 12 months
—

 
—

 
52.0

 
1.5

Total

$4.5

 

$—

 

$146.5

 

$2.1



92
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, 2013 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$153.2

 

$4.8

More than 12 months
—

 
—

 
6.9

 
0.4

Total

$—

 

$—

 

$160.1

 

$5.2


The fair value of debt securities, summarized by contractual maturities, as of September 30, 2014 and December 31, 2013 are as follows:
 
2014
 
2013
 
(In Millions)
less than 1 year

$11.5

 

$8.1

1 year - 5 years
122.6

 
110.9

5 years - 10 years
136.4

 
118.0

10 years - 15 years
3.3

 
3.9

15 years - 20 years
1.0

 
0.9

20 years+
7.5

 
5.8

Total

$282.3

 

$247.6


During the three months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $85.1 million and $30.3 million , respectively.  During the three months ended September 30, 2014 and 2013 , gross gains of $8.1 million and $0.6 million , respectively, and gross losses of $13 thousand and $0.1 million , respectively were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $155.4 million and $173.4 million , respectively.  During the nine months ended September 30, 2014 and 2013 , gross gains of $8.5 million and $9.3 million , respectively, and gross losses of $0.3 million and $0.2 million , respectively were reclassified out of other regulatory liabilities/assets into earnings.


93
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 September 30, 2014 and December 31, 2013 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$379.5

 

$161.0

 

$—

Debt Securities
 
234.2

 
10.8

 
0.7

Total
 

$613.7

 

$171.8

 

$0.7

 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Equity Securities
 

$370.8

 

$141.8

 

$—

Debt Securities
 
202.9

 
7.4

 
3.5

Total
 

$573.7

 

$149.2

 

$3.5


The amortized cost of debt securities was $225 million as of September 30, 2014 and $199.1 million as of December 31, 2013 .  As of September 30, 2014 , the debt securities have an average coupon rate of approximately 4.40% , an average duration of approximately 5.81 years, and an average maturity of approximately 10.22 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 equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale 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 September 30, 2014 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.6

 

$—

 

$16.7

 

$0.1

More than 12 months
—

 
—

 
21.8

 
0.6

Total

$0.6

 

$—

 

$38.5

 

$0.7



94
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, 2013 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$91.9

 

$3.1

More than 12 months
—

 
—

 
4.6

 
0.4

Total

$—

 

$—

 

$96.5

 

$3.5


The fair value of debt securities, summarized by contractual maturities, as of September 30, 2014 and December 31, 2013 are as follows:
 
2014
 
2013
 
(In Millions)
less than 1 year

$6.1

 

$7.9

1 year - 5 years
57.0

 
51.2

5 years - 10 years
74.1

 
75.5

10 years - 15 years
45.1

 
55.8

15 years - 20 years
13.8

 
4.6

20 years+
38.1

 
7.9

Total

$234.2

 

$202.9


During the three months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $52.5 million and $19.5 million , respectively.  During the three months ended September 30, 2014 and 2013 , gross gains of $0.5 million and $0.3 million , respectively, and gross losses of $0.1 million and $ 0.02 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $127.9 million and $66.2 million , respectively.  During the nine months ended September 30, 2014 and 2013 , gross gains of $1.2 million and $6.6 million , respectively, and gross losses of $0.3 million and $ 0.03 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.


95
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Louisiana

Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of September 30, 2014 and December 31, 2013 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$230.9

 

$106.3

 

$—

Debt Securities
 
137.4

 
5.5

 
0.7

Total
 

$368.3

 

$111.8

 

$0.7

 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Equity Securities
 

$224.2

 

$96.1

 

$—

Debt Securities
 
123.1

 
4.7

 
1.9

Total
 

$347.3

 

$100.8

 

$1.9


The amortized cost of debt securities was $132.6 million as of September 30, 2014 and $120.6 million as of December 31, 2013 .  As of September 30, 2014 , the debt securities have an average coupon rate of approximately 3.04% , an average duration of approximately 5.06 years, and an average maturity of approximately 8.05 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 equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale 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 September 30, 2014 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.4

 

$—

 

$25.0

 

$0.1

More than 12 months
—

 
—

 
17.4

 
0.6

Total

$0.4

 

$—

 

$42.4

 

$0.7



96
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, 2013 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$38.3

 

$1.7

More than 12 months
—

 
—

 
1.7

 
0.2

Total

$—

 

$—

 

$40.0

 

$1.9


The fair value of debt securities, summarized by contractual maturities, as of September 30, 2014 and December 31, 2013 are as follows:
 
2014
 
2013
 
(In Millions)
less than 1 year

$5.0

 

$14.8

1 year - 5 years
57.9

 
41.9

5 years - 10 years
41.9

 
37.0

10 years - 15 years
6.2

 
6.6

15 years - 20 years
8.3

 
6.2

20 years+
18.1

 
16.6

Total

$137.4

 

$123.1


During the three months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $6.2 million and $2.7 million , respectively.  During the three months ended September 30, 2014 and 2013 , gross gains of $0.03 million and $0.01 million , respectively, and gross losses of $3.7 thousand and $0.01 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $35.9 million and $12.2 million , respectively.  During the nine months ended September 30, 2014 and 2013 , gross gains of $0.2 million and $0.06 million , respectively, and gross losses of $7.8 thousand and $0.03 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.


97
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 September 30, 2014 and December 31, 2013 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$404.4

 

$169.2

 

$—

Debt Securities
 
246.3

 
4.2

 
0.6

Total
 

$650.7

 

$173.4

 

$0.6

 
 
 
 
 
 
 
2013
 
 
 
 
 
 
Equity Securities
 

$380.0

 

$150.8

 

$—

Debt Securities
 
223.9

 
3.5

 
1.8

Total
 

$603.9

 

$154.3

 

$1.8


The amortized cost of debt securities was $242.7 million as of September 30, 2014 and $223.4 million as of December 31, 2013 .  As of September 30, 2014 , the debt securities have an average coupon rate of approximately 2.03% , an average duration of approximately 4.31 years, and an average maturity of approximately 5.76 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 equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale 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 September 30, 2014 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.9

 

$—

 

$92.2

 

$0.4

More than 12 months
—

 
—

 
7.8

 
0.2

Total

$0.9

 

$—

 

$100.0

 

$0.6



98
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, 2013 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$121.7

 

$1.7

More than 12 months
—

 
—

 
0.9

 
0.1

Total

$—

 

$—

 

$122.6

 

$1.8


The fair value of debt securities, summarized by contractual maturities, as of September 30, 2014 and December 31, 2013 are as follows:
 
2014
 
2013
 
(In Millions)
less than 1 year

$6.3

 

$5.5

1 year - 5 years
164.0

 
144.9

5 years - 10 years
50.7

 
44.3

10 years - 15 years
1.3

 
9.3

15 years - 20 years
2.8

 
1.6

20 years+
21.2

 
18.3

Total

$246.3

 

$223.9


During the three months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $101.4 million and $53.4 million , respectively.  During the three months ended September 30, 2014 and 2013 , gross gains of $0.2 million and $0.1 million , respectively, and gross losses of $0.2 million and $0.8 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2014 and 2013 , proceeds from the dispositions of securities amounted to $333.0 million and $144.6 million , respectively.  During the nine months ended September 30, 2014 and 2013 , gross gains of $1.6 million and $0.9 million , respectively, and gross losses of $0.5 million and $1.2 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 nine months ended September 30, 2014 and 2013 .  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 will recover its value within a reasonable period of time.  Entergy’s trusts are managed

99
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 nine months ended September 30, 2014 and 2013 , 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.  Following is an update to that disclosure.

On March 31, 2014, New York enacted budget legislation that substantially modifies various aspects of New York tax law. The most significant effect of the legislation on Entergy is the adoption of full water’s-edge unitary combined reporting, meaning that all of Entergy’s domestic entities will be included in New York’s combined filing group. The effect of the tax law change resulted in a deferred state income tax reduction of approximately $21.5 million .


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 September 30, 2014 are $136.3 million for Entergy, $24.0 million for Entergy Arkansas, $18.7 million for Entergy Gulf States Louisiana, $11.7 million for Entergy Louisiana, $3.7 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, $6.9 million for Entergy Texas, and $9.7 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2013 are $166 million for Entergy, $61.9 million for Entergy Arkansas, $13.1 million for Entergy Gulf States Louisiana, $31.1 million for Entergy Louisiana, $2.8 million for Entergy Mississippi, $1.7 million for Entergy New Orleans, $10.9 million for Entergy Texas, and $6.7 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.

As discussed in the Form 10-K, in December 2013, Entergy and Vermont entered into a settlement agreement, with an accompanying memorandum of understanding that was filed with the Vermont Public Service Board (VPSB), under which Vermont agreed to support Entergy’s request to operate Vermont Yankee until the end of 2014. The settlement agreement provided for Entergy to make $10 million in economic transition payments, $5 million in clean energy development support, and a transitional $5 million payment to Vermont. Entergy will also set aside a new $25 million fund to ensure the Vermont Yankee site is restored after decommissioning. These terms were contingent upon the VPSB issuing by March 31, 2014 a Certificate of Public Good authorizing Vermont Yankee’s operation through 2014, and otherwise conforming to the terms of the settlement agreement. The settlement agreement also provided for the dismissal or discontinuation of other litigation between Entergy and Vermont; in the case of Entergy’s appeal of the VPSB’s March and November 2012 orders, such dismissal was contingent upon the VPSB’s issuance of such a Certificate of Public Good. On March 28, 2014, the VPSB approved the memorandum of understanding and issued

100
Entergy Corporation and Subsidiaries
Notes to Financial Statements

a Certificate of Public Good authorizing Vermont Yankee to operate until December 31, 2014.  In May 2014 the VPSB denied a motion that had been filed by one of the intervenors to amend its approval order. In the settlement agreement, Entergy Vermont Yankee agreed to complete and shall provide to the Vermont parties by December 31, 2014, a site assessment study of the costs and tasks of radiological decommissioning, spent nuclear fuel management, and site restoration of Vermont Yankee.  Entergy Vermont Yankee also agreed that it shall file its Post-Shutdown Decommissioning Activities Report (PSDAR) for Vermont Yankee with the NRC no sooner than sixty days after completing the site assessment study.  As part of the development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014.  The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge, recorded in September 2014.  Impairment charges are recorded as a separate line item in Entergy’s consolidated statements of income for 2014 and 2013 and this impairment charge is included within the results of the Entergy Wholesale Commodities segment.


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 facilities 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 $8.3 million and $7.8 million in the three months ended September 30, 2014 and 2013, respectively. Entergy Louisiana made payments on its lease, including interest, of $31 million and $26.3 million in the nine months ended September 30, 2014 and 2013 , respectively. System Energy made payments on its lease, including interest, of $3.7 million in the three months ended September 30, 2013. System Energy made payments on its lease, including interest, of $51.6 million and $50.5 million in the nine months ended September 30, 2014 and 2013 , 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 are updates to that discussion.

In the first quarter 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study.  The revised estimates resulted in a $43.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.

In the third quarter 2014, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Vermont Yankee.   As part of the development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014.  The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge, recorded in September 2014. See Note 1 to the financial statements in the Form 10-K and Note 11 to the financial statements herein for further discussion of the Vermont Yankee plant.

101
Entergy Corporation and Subsidiaries
Notes to Financial Statements

__________________________________

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.  Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters.  The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.

102

Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of September 30, 2014, 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 September 30, 2014 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


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Table of Contents


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013
 
Net income decreased by $19.6 million primarily due to higher other operation and maintenance expenses and lower net revenue, partially offset by higher other income.
 
Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income decreased by $17.4 million primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher net revenue.

Net Revenue
 
Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$407.8

Volume/weather
(17.9
)
Asset retirement obligation
(9.6
)
Reserve equalization
3.7

Transmission revenue
5.7

Retail electric price
11.8

Other
(4.9
)
2014 net revenue

$396.6


The volume/weather variance is primarily due to a decrease of 159 GWh, or 3%, in billed electricity usage primarily due to the effect of less favorable weather on residential and commercial sales as compared to the same period in prior year.
 
The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge for the difference between the trust earnings plus asset retirement obligation-related costs collected in revenue and asset retirement obligation-related expenses.  The variance for the third quarter 2014 compared to the third quarter 2013 is primarily caused by an increase in the regulatory charge because of an increase in decommissioning trust earnings.

The reserve equalization variance is primarily due to the absence of reserve equalization expenses as compared to the same period in 2013 resulting from Entergy Arkansas’s exit from the System Agreement.


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

The transmission revenue variance is primarily due to changes as a result of participation in the MISO RTO in 2014.

The retail electric price variance is primarily due to an increase in the energy efficiency rider, as approved by the APSC, effective July 2014, and the effect of the APSC’s order in the 2013 rate case, including a MISO rider to provide customers credits in rates for transmission revenue received through MISO offset by an annual base rate increase effective January 2014. Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case.

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

Gross operating revenues decreased primarily due to:

•
a decrease of $37.3 million in rider revenues due to the absence of System Agreement production cost equalization revenue as compared to the same period in 2013. 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;
•
the decrease in volume/weather, as discussed above; and
•
a decrease of $11.9 million in gross wholesale revenues due to decreased sales to municipal customers and
affiliated customers as a result of contract changes and Entergy Arkansas’s exit from the System Agreement, partially offset by higher wholesale revenue due to higher average price and sales in the MISO market in 2014.

The decrease was partially offset by an increase of $13.6 million in fuel cost recovery revenues as a result of higher fuel rates and the increase in retail electric price, as discussed above.

Fuel and purchased power expenses decreased primarily due to:

•
a decrease in the recovery from customers of deferred fuel costs due to System Agreement production cost equalization revenues in 2013; and
•
a higher volume of lower-priced nuclear generation in 2014 as a result of the ANO extended outage in 2013.

The decrease was substantially offset by an increase in deferred fuel expense due to an increase in the recovery of fuel costs and increases in the average market prices of natural gas and purchased power.

Other regulatory charges increased primarily due to higher deferred gains in 2014 on decommissioning trust fund investments.


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

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013:
 
Amount
 
(In Millions)
2013 net revenue

$1,022.2

Retail electric price
24.6

Reserve equalization
17.9

Transmission revenue
10.9

MISO deferral
(11.1
)
Volume/weather
(14.2
)
Net wholesale revenue
(15.5
)
Other
(4.3
)
2014 net revenue

$1,030.5


The retail electric price variance is primarily due to an increase in the energy efficiency rider, as approved by the APSC, effective July 2013 and July 2014, and the effect of the APSC’s order in the 2013 rate case, including a MISO rider to provide customers credits in rates for transmission revenue received through MISO offset by an annual base rate increase effective January 2014. Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income. 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 the absence of reserve equalization expenses as compared to the same period in 2013 resulting from Entergy Arkansas’s exit from the System Agreement.

The transmission revenue variance is primarily due to changes as a result of participation in the MISO RTO in 2014.

The MISO deferral variance is due to the deferral in April 2013, as approved by the APSC, of costs incurred from March 2010 through December 2012 related to the transition and implementation of joining the MISO RTO.

The volume/weather variance is primarily due to a decrease in sales volume in the unbilled sales period, partially offset by an increase of 213 GWh, or 1%, in billed electricity usage primarily in the residential sector.

The net wholesale variance is primarily due to lower margins on co-owner contracts due to contract changes.

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

Gross operating revenues decreased primarily due to:

•
a decrease of $94 million in rider revenues due to the absence of System Agreement production cost equalization revenue as compared to the same period in 2013. 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;
•
a decrease of $29.6 million in gross wholesale revenues due to decreased sales to municipal customers and affiliated customers as a result of contract changes and Entergy Arkansas’s exit from the System Agreement, partially offset by higher wholesale revenue due to higher average price and sales in the MISO market in 2014; and
•
the decrease in volume/weather, as discussed above.

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

The decrease was partially offset by:

•
the increase in retail electric price, as discussed above;
•
an increase of $5.7 million in fuel cost recovery revenues as a result of higher fuel rates; and
•
an increase of $5 million in rider revenues primarily due to an increase in the Grand Gulf rate effective January 2014.

Fuel and purchased power expenses decreased primarily due to:

•
a decrease in the recovery from customers of deferred fuel costs due to System Agreement production cost equalization revenues in 2013; and
•
a higher volume of lower-priced nuclear generation in 2014 as a result of the ANO extended outage in 2013.

The decrease was partially offset by increases in the average market prices of purchased power and natural gas.

Other regulatory credits decreased primarily due to the deferral of prior period MISO costs in April 2013, as discussed above.

Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses increased primarily due to:

•
an increase of $10.7 million in energy efficiency costs.  These costs are recovered through the energy efficiency rider and have a minimal effect on net income;
•
an increase of $7.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, higher NRC fees, and higher materials costs;
•
an increase of $3.4 million due to an increase in storm damage accruals effective January 2014, as approved by the APSC;
•
an increase of $2 million due to administration fees in 2014 related to participation in the MISO RTO;
•
an increase of $1.8 million due to the amortization in 2014 of costs deferred in 2013 related to the transition and implementation of joining the MISO RTO, as discussed above; and
•
an increase of $1.8 million due to the amortization in 2014 of human capital management costs that were deferred in 2013, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the deferral of these costs.

The increase was partially offset by:

•
a decrease of $3.8 million in compensation and benefits costs primarily due to an increase in the discount rates
used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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
•
a decrease of $2.8 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.
    
Other income increased due to higher earnings in 2014 on decommissioning trust fund investments. There is no effect on net income as the trust fund earnings are offset by a corresponding amount of regulatory charges.
    

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Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Other operation and maintenance expenses increased primarily due to:

•
an increase of $23.5 million in energy efficiency costs. These costs are recovered through the energy efficiency rider and have a minimal effect on net income;
•
an increase of $19 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, and higher NRC fees;
•
an increase of $10.5 million due to an increase in storm damage accruals effective January 2014, as approved by the APSC;
•
an increase of $5.6 million due to administration fees in 2014 related to participation in the MISO RTO;
•
an increase of $5.3 million due to the amortization in 2014 of human capital management costs that were deferred in 2013, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the deferral of these costs;
•
an increase of $4.2 million due to the amortization in 2014 of costs deferred in 2013 related to the transition and implementation of joining the MISO RTO, as discussed above; and
•
the effects in 2013 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 increase was partially offset by:

•
a decrease of $14.4 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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;
•
a decrease of $11 million resulting from costs incurred in 2013 related to the generator stator incident at ANO, including an offset for insurance proceeds. See “ ANO Damage and Outage ” below for further discussion of the incident;
•
a decrease of $7.5 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
•
a decrease of $4.3 million related to a true-up to the 2013 energy efficiency filing for fixed costs collected from customers.

Depreciation and amortization expenses increased primarily due to additions to plant in service and higher depreciation rates in 2014.

Income Taxes
    
The effective income tax rate was 41.4% for the third quarter 2014 and 42.3% for the nine months ended September 30, 2014. The differences in the effective income tax rates for the third quarter 2014 and the nine months ended September 30, 2014 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.

The effective income tax rate was 40.6% for the third quarter 2013 and 42.3% for the nine months ended September 30, 2013. The differences in the effective income tax rates for the third quarter 2013 and the nine months ended September 30, 2013 versus the federal statutory rate of 35% were due to state income taxes, certain book and

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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.

ANO Damage, Outage, and NRC Reviews

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage and Outage " in the Form 10-K for a discussion of the ANO stator incident. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.

Entergy Arkansas is pursuing 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 contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop. During 2014, Entergy Arkansas collected $40 million from NEIL and is pursuing additional recoveries due under the policy.
    
Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant's response.  In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.

In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy's response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.

In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issue that led to the finding have been addressed at ANO, the NRC will still assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with substantial safety significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings.  The NRC indicated that

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these preliminary findings may warrant additional regulatory oversight.  Entergy requested a public regulatory conference regarding the inspection, and the conference was held on October 28, 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” The NRC can consider this information as it works to finalize its assessment of the safety significance of the flood barrier issue.

If the NRC’s final assessment of the flood barrier issue remains yellow, ANO would likely be placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier issue, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$127,022

 

$34,533

Cash flow provided by (used in):


 
 

Operating activities
199,435

 
201,757

Investing activities
(401,834
)
 
(435,244
)
Financing activities
87,204

 
244,017

Net increase (decrease) in cash and cash equivalents
(115,195
)
 
10,530

Cash and cash equivalents at end of period

$11,827

 

$45,063


Operating Activities

Net cash flow provided by operating activities decreased $2.3 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
a decrease in the recovery of fuel and purchased power costs including a $68 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period and a $33.7 million System Agreement bandwidth remedy payment made in September 2014 as a result of the compliance filing pursuant to the FERC’s orders related to the bandwidth payments/receipts for the comprehensive recalculation for 2007, 2008, and 2009. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement bandwidth remedy payment;
•
an increase of $54.6 million in pension contributions in 2014. 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 $38 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel; and
•
the timing of payments to vendors.


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The decrease was partially offset by:

•
a decrease of $209.7 million in income tax payments. Entergy Arkansas made income tax payments of $211.4 million 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;
•
approximately $27 million in spending in 2013 related to the generator stator incident at ANO, as discussed above;
•
$10.7 million in insurance proceeds received in 2014 for property damages related to the generator stator incident at ANO, as discussed above;
•
a decrease of $8.2 million in interest paid in 2014;
•
the timing of collections from customers; and
•
$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.

Investing Activities

Net cash flow used in investing activities decreased $33.4 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
approximately $68 million in spending in 2013 related to the generator stator incident at ANO, as discussed above;
•
money pool activity; and
•
$29.3 million in insurance proceeds received in 2014 for property damages related to the generator stator incident at ANO, as discussed above.

The decrease was partially 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;
•
an increase in construction expenditures, including an increase in storm spending in 2014 of approximately $15 million; and
•
proceeds of $10.3 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel.

Decreases in Entergy Arkansas’s receivable from the money pool are a source of cash flow, and Entergy Arkansas’s receivable from the money pool decreased by $17.5 million for the nine months ended September 30, 2014 compared to increasing by $45.3 million for the nine months ended September 30, 2013 .  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 decreased by $156.8 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to the net issuance of $20.2 million of long-term debt in 2014 compared to the net issuance of $280.8 million of long-term debt in 2013.

The decrease was partially offset by:

•
money pool activity;
•
the net borrowings of $8 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2014 compared to net repayments of $16.6 million in 2013; and

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•
common stock dividends of $15 million paid in 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 $63.7 million for the nine months ended September 30, 2014.

See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for more details on long-term debt.

Capital Structure

Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.  
 
September 30,
 2014
 
December 31,
2013
Debt to capital
55.5
%
 
56.7
%
Effect of excluding the securitization bonds
(0.8
%)
 
(0.9
%)
Debt to capital, excluding securitization bonds (a)
54.7
%
 
55.8
%
Effect of subtracting cash
(0.1
%)
 
(1.4
%)
Net debt to net capital, excluding securitization bonds (a)
54.6
%
 
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. Entergy Arkansas is developing its capital investment plan for 2015 through 2017 and currently anticipates making $1.8 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
($63,677)
 
$17,531
 
$53,375
 
$8,035

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

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Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in March 2019. The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2014 , there were no cash borrowings and $4 million of letters of credit outstanding under the credit facility.  Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2015. No borrowings were outstanding under the credit facility as of September 30, 2014. 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 September 30, 2014 , $8.0 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 herein for additional discussion of the nuclear fuel company variable interest entity credit facility.

In March 2014, Entergy Arkansas issued $375 million of 3.70% Series first mortgage bonds due June 2024. Entergy Arkansas used the proceeds to pay, prior to maturity, its $250 million term loan, to pay, prior to maturity, its $115 million of 5.0% Series first mortgage bonds due July 2018, and for general corporate purposes.

In July 2014 the Entergy Arkansas nuclear fuel trust variable interest entity issued $90 million of 3.65% Series L notes due July 2021. The Entergy Arkansas nuclear fuel trust variable interest entity used the proceeds to pay, at maturity, its $70 million of 5.69% Series I notes due July 2014 and 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.  The following are updates to that discussion.

Retail Rates

As discussed in the Form 10-K, the APSC issued an order in Entergy Arkansas’s 2013 base rate filing in December 2013. In January 2014, Entergy Arkansas filed a petition for rehearing or clarification of several aspects of the APSC’s order, including the 9.3% authorized return on common equity. In February 2014 the APSC granted Entergy Arkansas's petition for the purpose of considering the additional evidence identified by Entergy Arkansas. In August 2014 the APSC issued an order amending certain aspects of the original order, including providing for a 9.5% authorized return on common equity. The revised rates are effective for all bills rendered after December 31, 2013 and were implemented in the first billing cycle of October 2014.

Production Cost Allocation Rider

In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $68 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and will enter an order based on the evidence and legal briefs in the record.


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Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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. Following is an update to that discussion.

Nuclear Decommissioning Costs

In the first quarter 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study.  The revised estimates resulted in a $43.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$627,153

 

$647,671

 

$1,653,656

 

$1,698,716

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
86,932

 
113,523

 
196,007

 
321,373

Purchased power
 
141,042

 
131,736

 
433,513

 
369,643

Nuclear refueling outage expenses
 
12,541

 
9,403

 
30,717

 
29,031

Other operation and maintenance
 
170,868

 
147,513

 
468,124

 
438,021

Decommissioning
 
11,938

 
10,847

 
34,853

 
32,044

Taxes other than income taxes
 
26,081

 
24,303

 
69,515

 
69,073

Depreciation and amortization
 
59,805

 
58,083

 
176,634

 
172,059

Other regulatory charges (credits) - net
 
2,589

 
(5,418
)
 
(6,394
)
 
(14,465
)
TOTAL
 
511,796

 
489,990

 
1,402,969

 
1,416,779

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
115,357

 
157,681

 
250,687

 
281,937

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
1,816

 
2,902

 
5,229

 
7,852

Interest and investment income
 
12,812

 
1,525

 
20,425

 
18,411

Miscellaneous - net
 
(30
)
 
(629
)
 
(761
)
 
(2,573
)
TOTAL
 
14,598

 
3,798

 
24,893

 
23,690

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
23,342

 
23,253

 
69,863

 
69,290

Allowance for borrowed funds used during construction
 
(942
)
 
(744
)
 
(2,728
)
 
(2,473
)
TOTAL
 
22,400

 
22,509

 
67,135

 
66,817

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
107,555

 
138,970

 
208,445

 
238,810

 
 
 
 
 
 
 
 
 
Income taxes
 
44,575

 
56,393

 
88,090

 
101,031

 
 
 
 
 
 
 
 
 
NET INCOME
 
62,980

 
82,577

 
120,355

 
137,779

 
 
 
 
 
 
 
 
 
Preferred dividend requirements
 
1,718

 
1,718

 
5,155

 
5,155

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$61,262

 

$80,859

 

$115,200

 

$132,624

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$120,355

 

$137,779

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
285,824

 
263,176

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
119,305

 
99,442

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(19,754
)
 
(70,219
)
Fuel inventory
 
13,014

 
16,740

Accounts payable
 
(102,234
)
 
(12,996
)
Prepaid taxes and taxes accrued
 
(40,576
)
 
(222,118
)
Interest accrued
 
(1,029
)
 
(9,760
)
Deferred fuel costs
 
(155,571
)
 
26,672

Other working capital accounts
 
61,711

 
(12,324
)
Provisions for estimated losses
 
(911
)
 
200

Other regulatory assets
 
(8,307
)
 
2,515

Pension and other postretirement liabilities
 
(84,298
)
 
(25,332
)
Other assets and liabilities
 
11,906

 
7,982

Net cash flow provided by operating activities
 
199,435

 
201,757

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(397,055
)
 
(365,511
)
Allowance for equity funds used during construction
 
7,701

 
10,587

Nuclear fuel purchases
 
(123,358
)
 
(73,151
)
Proceeds from sale of nuclear fuel
 
75,860

 
36,478

Proceeds from nuclear decommissioning trust fund sales
 
155,403

 
173,431

Investment in nuclear decommissioning trust funds
 
(162,916
)
 
(178,516
)
Changes in money pool receivable - net
 
17,531

 
(45,340
)
Changes in securitization account
 
(4,480
)
 
(3,493
)
Insurance proceeds
 
29,280

 
—

Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
—

 
10,271

Other
 
200

 
—

Net cash flow used in investing activities
 
(401,834
)
 
(435,244
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
461,553

 
716,670

Retirement of long-term debt
 
(441,318
)
 
(435,896
)
Changes in short-term borrowings - net
 
8,036

 
(16,602
)
Change in money pool payable - net
 
63,677

 
—

Dividends paid:
 
 
 
 
Common stock
 
—

 
(15,000
)
Preferred stock
 
(5,155
)
 
(5,155
)
Other
 
411

 
—

Net cash flow provided by financing activities
 
87,204

 
244,017

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(115,195
)
 
10,530

Cash and cash equivalents at beginning of period
 
127,022

 
34,533

Cash and cash equivalents at end of period
 

$11,827

 

$45,063

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$66,838

 

$75,022

Income taxes
 

$1,714

 

$211,415

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$11,749

 

$4,181

Temporary cash investments
 
78

 
122,841

Total cash and cash equivalents
 
11,827

 
127,022

Securitization recovery trust account
 
8,315

 
3,835

Accounts receivable:
 
 
 
 
Customer
 
133,118

 
102,328

Allowance for doubtful accounts
 
(30,463
)
 
(30,113
)
Associated companies
 
32,870

 
68,875

Other
 
103,306

 
94,256

Accrued unbilled revenues
 
91,794

 
82,298

Total accounts receivable
 
330,625

 
317,644

Accumulated deferred income taxes
 
—

 
33,556

Deferred fuel costs
 
158,367

 
68,696

Fuel inventory - at average cost
 
28,490

 
41,504

Materials and supplies - at average cost
 
161,561

 
152,429

Deferred nuclear refueling outage costs
 
38,489

 
31,135

System agreement costs equalization
 
—

 
30,000

Prepaid taxes
 
30,597

 
—

Prepayments and other
 
22,378

 
58,911

TOTAL
 
790,649

 
864,732

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
745,144

 
710,913

Non-utility property - at cost (less accumulated depreciation)
 
1,756

 
1,664

Other
 
15,381

 
29,181

TOTAL
 
762,281

 
741,758

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
9,080,352

 
8,798,458

Property under capital lease
 
988

 
1,064

Construction work in progress
 
215,255

 
209,036

Nuclear fuel
 
297,658

 
321,901

TOTAL UTILITY PLANT
 
9,594,253

 
9,330,459

Less - accumulated depreciation and amortization
 
4,147,088

 
4,034,880

UTILITY PLANT - NET
 
5,447,165

 
5,295,579

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
68,714

 
73,864

Other regulatory assets (includes securitization property of $70,604 as of September 30, 2014 and $80,963 as of December 31, 2013)
 
1,027,849

 
1,014,392

Deferred fuel costs
 
65,900

 
—

Other
 
45,804

 
44,565

TOTAL
 
1,208,267

 
1,132,821

 
 
 
 
 
TOTAL ASSETS
 

$8,208,362

 

$8,034,890

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$—

 

$70,000

Short-term borrowings
 
8,036

 
—

Accounts payable:
 
 
 
 
Associated companies
 
162,164

 
149,802

Other
 
142,733

 
228,160

Customer deposits
 
113,750

 
86,512

Taxes accrued
 
—

 
9,979

Accumulated deferred income taxes
 
20,586

 
9,231

Interest accrued
 
21,007

 
22,036

Other
 
39,704

 
55,656

TOTAL
 
507,980

 
631,376

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,976,404

 
1,906,562

Accumulated deferred investment tax credits
 
38,020

 
38,958

Other regulatory liabilities
 
235,804

 
219,370

Decommissioning
 
806,232

 
723,771

Accumulated provisions
 
4,835

 
5,746

Pension and other postretirement liabilities
 
234,929

 
319,211

Long-term debt (includes securitization bonds of $82,657 as of September 30, 2014 and $88,961 as of December 31, 2013)
 
2,429,578

 
2,335,802

Other
 
23,312

 
18,026

TOTAL
 
5,749,114

 
5,567,446

 
 
 
 
 
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 2014 and 2013
 
470

 
470

Paid-in capital
 
588,471

 
588,471

Retained earnings
 
1,245,977

 
1,130,777

TOTAL
 
1,834,918

 
1,719,718

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$8,208,362

 

$8,034,890

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Common Equity
 
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012
 

$470

 

$588,444

 

$990,702

 

$1,579,616

 
 
 
 
 
 
 
 
 
Net income
 
—

 
—

 
137,779

 
137,779

Common stock dividends
 
—

 
—

 
(15,000
)
 
(15,000
)
Preferred stock dividends
 
—

 
—

 
(5,155
)
 
(5,155
)
 
 
 
 
 
 
 
 
 
Balance at September 30, 2013
 

$470

 

$588,444

 

$1,108,326

 

$1,697,240

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
 

$470

 

$588,471

 

$1,130,777

 

$1,719,718

 
 
 
 
 
 
 
 
 
Net income
 
—

 
—

 
120,355

 
120,355

Preferred stock dividends
 
—

 
—

 
(5,155
)
 
(5,155
)
 
 
 
 
 
 
 
 
 
Balance at September 30, 2014
 

$470

 

$588,471

 

$1,245,977

 

$1,834,918

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%

 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$234

 

$248

 

($14
)
 
(6
)
Commercial
 
140

 
141

 
(1
)
 
(1
)
Industrial
 
133

 
131

 
2

 
2

Governmental
 
5

 
5

 
—

 
—

Total retail
 
512

 
525

 
(13
)
 
(2
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
36

 
89

 
(53
)
 
(60
)
Non-associated companies
 
59

 
19

 
40

 
211

Other
 
20

 
15

 
5

 
33

Total
 

$627

 

$648

 

($21
)
 
(3
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,233

 
2,367

 
(134
)
 
(6
)
Commercial
 
1,730

 
1,767

 
(37
)
 
(2
)
Industrial
 
1,920

 
1,906

 
14

 
1

Governmental
 
65

 
67

 
(2
)
 
(3
)
Total retail
 
5,948

 
6,107

 
(159
)
 
(3
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
387

 
2,094

 
(1,707
)
 
(82
)
Non-associated companies
 
1,788

 
181

 
1,607

 
888

Total
 
8,123

 
8,382

 
(259
)
 
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$592

 

$608

 

($16
)
 
(3
)
Commercial
 
350

 
358

 
(8
)
 
(2
)
Industrial
 
317

 
328

 
(11
)
 
(3
)
Governmental
 
13

 
15

 
(2
)
 
(13
)
Total retail
 
1,272

 
1,309

 
(37
)
 
(3
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
97

 
267

 
(170
)
 
(64
)
Non-associated companies
 
195

 
56

 
139

 
248

Other
 
90

 
67

 
23

 
34

Total
 

$1,654

 

$1,699

 

($45
)
 
(3
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
6,361

 
6,164

 
197

 
3

Commercial
 
4,519

 
4,503

 
16

 
—

Industrial
 
5,071

 
5,068

 
3

 
—

Governmental
 
179

 
182

 
(3
)
 
(2
)
Total retail
 
16,130

 
15,917

 
213

 
1

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,232

 
6,202

 
(4,970
)
 
(80
)
Non-associated companies
 
5,211

 
539

 
4,672

 
867

Total
 
22,573

 
22,658

 
(85
)
 
—


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ENTERGY GULF STATES LOUISIANA, L.L.C.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

In June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the LPSC. The report contained a preliminary analysis of the potential combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. Though not a formal application, the report provided an overview of the combination and identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it anticipates it will seek authorization to transfer to Entergy New Orleans the assets that currently support Entergy Louisiana’s customers in Algiers. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.

On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.

The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.

It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:

•
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
•
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
•
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all of the liabilities of Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
•
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the liabilities of Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and hold the membership interests in New Entergy Gulf States Louisiana.
•
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.

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Management's Financial Discussion and Analysis

•
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.

Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013

Net income decreased $7.1 million primarily due to a higher effective income tax rate and higher interest expense, partially offset by higher net revenue and lower other operation and maintenance expenses.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income increased $18.7 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by higher interest expense, lower other income and a higher effective income tax rate.

Net Revenue

Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$258.9

MISO deferral
3.8

Asset retirement obligation
3.3

Retail electric price
2.5

Volume/weather
(2.1
)
Other
2.3

2014 net revenue

$268.7


The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

The asset retirement obligation affects net revenue because Entergy Gulf States Louisiana records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the third quarter 2014 compared to the third quarter 2013 is primarily caused by an increase in the regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.


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Management's Financial Discussion and Analysis


The retail electric price variance is primarily due to an increase in purchased power capacity costs that are 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 in the Form 10-K.

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by higher industrial usage primarily in the chemicals industry.

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

Gross operating revenues increased primarily due to an increase of $33.4 million in electric fuel cost recovery revenues primarily due to higher fuel rates and an increase of $24.3 million in gross wholesale revenues primarily due to System Agreement receipts as a result of the comprehensive bandwidth recalculation filing made in connection with the 2007, 2008, and 2009 rate filing proceedings, and sales in the MISO market. See Note 2 to the financial statements in the Form 10-K for additional discussion of Entergy Gulf States Louisiana’s fuel and purchased power recovery mechanism. See Note 2 to the financial statements in the Form 10-K and herein for a discussion of this comprehensive bandwidth recalculation.
    
Fuel and purchased power expenses increased primarily due to:

•
an increase in demand for gas-fired generation;
•
an increase in the average market price of purchased power; and
•
an increase in deferred fuel expense due to higher fuel cost recovery revenues as compared to prior year and the timing of System Agreement receipts and credits to customers.

Other regulatory charges decreased primarily due to:

•
the deferral in 2014 of non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges; and
•
regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment, as previously discussed.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$691.8

Volume/weather
17.9

Retail electric price
10.6

Asset retirement obligation
10.0

MISO deferral
5.7

Other
6.0

2014 net revenue

$742.0


The volume/weather variance is primarily due to an increase of 834 GWh, or 6%, in billed electricity usage, including the effect of more favorable weather on residential sales, and higher industrial usage primarily in the chemicals industry.


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

The retail electric price variance is primarily due to an increase in purchased power capacity costs that are 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 in the Form 10-K.

The asset retirement obligation affects net revenue because Entergy Gulf States Louisiana records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 is primarily caused by an increase in the regulatory credits because of a decrease in decommissioning trust earnings and an increase in the regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.

The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

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

Gross operating revenues increased primarily due to:

•
an increase of $124.9 million in electric fuel cost recovery revenues primarily due to higher fuel rates. See Note 2 to the financial statements in the Form 10-K for additional discussion of Entergy Gulf States Louisiana’s fuel and purchased power recovery mechanism;
•
an increase of $55.4 million in gross wholesale revenues primarily due to System Agreement receipts as a result of the comprehensive bandwidth recalculation filing made in connection with the 2007, 2008, and 2009 rate filing proceedings and sales in the MISO market. See Note 2 to the financial statements in the Form 10-K and herein for a discussion of this comprehensive bandwidth recalculation;
•
the increase related to volume/weather, as discussed above; and
•
an increase of $10.5 million in natural gas fuel cost recovery revenues primarily due to higher fuel rates.

Fuel and purchased power expenses increased primarily due to:

•
an increase in the average market price of natural gas and purchased power; and
•
an increase in deferred fuel expense due to higher fuel cost recovery revenues as compared to prior year and the timing of System Agreement receipts and credits to customers.

Other regulatory charges decreased 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;
•
regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment, as previously discussed; and
•
the deferral in 2014 of non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.


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Management's Financial Discussion and Analysis


Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses decreased primarily due to:
•
a decrease of $4.8 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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
•
a decrease of $2.1 million due to costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

The decrease was partially offset by an increase of $1.9 million due to administration fees in 2014 related to participation in the MISO RTO. The LPSC approved deferral of these expenses resulting in no net income effect.

Interest expense increased primarily due to $3.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013
 
Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $12.2 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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;
•
a decrease of $6.1 million due to costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
•
a decrease of $5.3 million in nuclear generation expenses primarily due to lower nuclear labor costs.

The decrease was partially offset by an increase of $5.1 million due to administration fees in 2014 related to participation in the MISO RTO. The LPSC approved deferral of these expenses resulting in no net income effect.
    
Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher residential and commercial revenues compared to prior year and an increase in ad valorem taxes resulting from higher assessments.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Interest expense increased primarily due to $3.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC.

Other income decreased 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.


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

Income Taxes

The effective income tax rate was 34.1% for the third quarter 2014 and 35.4% for the nine months ended September 30, 2014 . The difference in the effective income tax rate for the third quarter 2014 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests partially offset by state income taxes and certain book and tax differences related to utility plant items. The difference in the effective income tax rate for the nine months ended September 30, 2014 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 book and tax differences related to the non-taxable income distributions earned on preferred membership interests.

The effective income tax rate was 15.6% for the third quarter 2013 and 27.3% for the nine months ended September 30, 2013 . The differences in the effective income tax rates for the third quarter 2013 and the nine months ended September 30, 2013 versus the federal statutory rate of 35% were due to the reversal of a portion of the provision for uncertain tax positions and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$15,581

 

$35,686

Cash flow provided by (used in):
 
 
 
Operating activities
478,414

 
270,298

Investing activities
(333,712
)
 
(261,281
)
Financing activities
(8,195
)
 
(43,933
)
Net increase (decrease) in cash and cash equivalents
136,507

 
(34,916
)
Cash and cash equivalents at end of period

$152,088

 

$770


Operating Activities

Net cash flow provided by operating activities increased $208.1 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
proceeds of $69 million received from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financing. See Note 2 to the financial statements herein and in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing;
•
a decrease of $41.7 million in income tax payments for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013. Entergy Gulf States Louisiana had income tax payments of $62.4 million in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The 2013 payments resulted primarily from the reversal of temporary differences for which Entergy Gulf States Louisiana had previously claimed a tax deduction;
•
lower nuclear refueling outage spending at River Bend. River Bend had a refueling outage in 2013 and did not have one in 2014; and
•
an increase in the recovery of fuel and purchased power costs including System Agreement bandwidth remedy payments of $10.1 million received in the second quarter 2014 and $19 million received in the third quarter 2014. As of September 30 2014, Entergy Gulf States Louisiana customers were credited $10.3 million. See

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


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

The increase was partially offset by an increase of $17.1 million in pension contributions in 2014. 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 $72.4 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
the investment in 2014 of $66.2 million in affiliate securities as a result of the Act 55 storm cost financing. See Note 2 to the financial statements herein and in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing;
•
the deposit in 2014 of $68.5 million into the storm escrow account;
•
the withdrawal of $65.5 million from the storm reserve escrow account in 2013;
•
an increase in fossil-fueled generation expenditures as a result of an increased scope of work in 2014; and
•
money pool activity.

The increase was partially 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;
•
a decrease in nuclear construction expenditures as a result of spending on nuclear projects during the River Bend refueling outage in 2013. River Bend had a refueling outage in 2013 and did not have one in 2014; and
•
a decrease in transmission construction expenditures due to a decreased scope of work performed in 2014.

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 $19.5 million for the nine months ended September 30, 2014 . 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 used in financing activities decreased $35.7 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to the issuance of $110 million of 3.78% Series first mortgage bonds in July 2014 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.

The decrease was partially offset by:

•
the issuance of $70 million of 3.38% Series R notes by the nuclear fuel company variable interest entity in February 2013;
•
payments of $14.8 million on credit borrowings for the nine months ended September 30, 2014 compared to an increase of $31 million in credit borrowings for the nine months ended September 30, 2013 against the nuclear fuel company variable interest entity credit facility; and
•
money pool activity.


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

    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 $50.8 million for the nine months ended September 30, 2013.

See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for more details on long-term debt.

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 is primarily due to an increase in long-term debt as a result of the issuance of $110 million of 3.78% Series first mortgage bonds in July 2014.

 
September 30, 2014
 
December 31,
2013
Debt to capital
52.4
%
 
51.1
%
Effect of subtracting cash
(2.5
%)
 
(0.2
%)
Net debt to net capital
49.9
%
 
50.9
%

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 additional updates to the information provided in the Form 10-K. Entergy Gulf States Louisiana is developing its capital investment plan for 2015 through 2017 and currently anticipates making $1.9 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Gulf States Louisiana’s receivables from or (payables to) the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
$21,446
 
$1,925
 
($57,835)
 
($7,074)

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

    

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Management's Financial Discussion and Analysis


Entergy Gulf States Louisiana has a credit facility in the amount of $150 million scheduled to expire in March 2019.  The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2014 , there were no cash borrowings and $17.9 million of letters of credit outstanding under 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.  No borrowings were outstanding on the variable interest entity credit facility as of September 30, 2014 . See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

In July 2014, Entergy Gulf States Louisiana issued $110 million of 3.78% Series first mortgage bonds due April 2025. Entergy Gulf States Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.

Hurricane Isaac

As discussed in the Form 10-K, Entergy Gulf States Louisiana sought to recover restoration costs for the repair and replacement of electric facilities damaged by Hurricane Isaac, as well as replenishment of storm escrow accounts for prior storms, in the amount of $73.8 million. In January 2013, Entergy Gulf States Louisiana drew $65 million from its funded 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.  Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ( $66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ( $90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Gulf States Louisiana committed to pass on to customers a minimum of $6.9 million of customer benefits through annual customer credits of approximately $1.4 million for five years.  Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.

In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $71 million in bonds under Act 55 of the Louisiana Legislature.  From the $69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $66 million directly to Entergy Gulf States Louisiana.  Entergy Gulf States Louisiana used the $66 million received from the LURC to acquire 662,426.80  Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion .

Entergy Gulf States Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy Gulf States Louisiana in the event of a bond default.  To service the bonds, Entergy Gulf States Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee.  Entergy Gulf States Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.


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

Entergy Louisiana’s Ninemile Point Unit 6 Self-Build Project

See the Form 10-K for a discussion of Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  The Ninemile 6 capacity and energy will be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Under terms approved by the LPSC, non-fuel costs may be recovered through Entergy Louisiana’s and Entergy Gulf States Louisiana’s formula rate plans beginning in the month after the unit is placed in service.  In July 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an unopposed stipulation with the LPSC that estimates a first year revenue requirement associated with Ninemile 6 and provides a mechanism to update the revenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In September 2014 an updated revenue requirement of $51.5 million for Entergy Louisiana and $27 million for Entergy Gulf States Louisiana was filed. The unit is expected to be placed in service by the end of 2014.

State and Local Rate Regulation and Fuel-Cost Recovery

See   " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery "   in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery .   The following are updates to that discussion.

Retail Rates - Electric

As discussed in the Form 10-K, Entergy Gulf States Louisiana filed a base rate case in February 2013. Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Gulf States Louisiana submitted a compliance filing in May 2014 reflecting the effects of the estimated MISO cost recovery mechanism revenue requirement and adjustment of the additional capacity mechanism requiring a net increase of approximately $3.8 million in formula rate plan revenue to be implemented over nine months commencing with the first billing cycle of December 2014. Before rates are implemented in December 2014, an updated compliance filing will be made in November 2014 to further refine the estimated MISO cost recovery mechanism revenue requirement component of the May 2014 compliance filing to then-available actual data. The compliance filings will be subject to the review of the parties to the proceeding generally in accordance with the review process set forth in Entergy Gulf States Louisiana’s formula rate plan.

Retail Rates - Gas

In January 2014, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2013.  The filing showed an earned return on common equity of 5.47% which results in a $1.5 million rate increase. In April 2014 the LPSC Staff issued a report indicating "that Entergy Gulf States Louisiana has properly determined its earnings for the test year ended September 30, 2013." The $1.5 million rate increase was implemented effective with the first billing cycle of April 2014.

Fuel and purchased power recovery

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.

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.


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Management's Financial Discussion and Analysis


Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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 Gulf States Louisiana’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

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ENTERGY GULF STATES LOUISIANA, L.L.C.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$600,208

 

$549,123

 

$1,622,236

 

$1,428,155

Natural gas
 
10,285

 
9,208

 
55,586

 
42,492

TOTAL
 
610,493

 
558,331

 
1,677,822

 
1,470,647

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
141,354

 
104,932

 
289,030

 
213,270

Purchased power
 
206,360

 
194,455

 
659,275

 
560,531

Nuclear refueling outage expenses
 
5,419

 
5,419

 
16,024

 
14,955

Other operation and maintenance
 
100,908

 
105,107

 
283,584

 
300,012

Decommissioning
 
4,240

 
4,005

 
12,542

 
11,845

Taxes other than income taxes
 
22,393

 
21,346

 
64,139

 
60,729

Depreciation and amortization
 
39,068

 
37,703

 
116,042

 
113,002

Other regulatory charges (credits) - net
 
(5,947
)
 
80

 
(12,438
)
 
5,080

TOTAL
 
513,795

 
473,047

 
1,428,198

 
1,279,424

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
96,698

 
85,284

 
249,624

 
191,223

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
2,099

 
2,171

 
5,440

 
5,630

Interest and investment income
 
11,565

 
9,428

 
29,058

 
34,239

Miscellaneous - net
 
(2,477
)
 
(2,822
)
 
(7,844
)
 
(7,861
)
TOTAL
 
11,187

 
8,777

 
26,654

 
32,008

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
24,783

 
20,498

 
65,353

 
60,971

Allowance for borrowed funds used during construction
 
(1,207
)
 
(690
)
 
(3,128
)
 
(2,041
)
TOTAL
 
23,576

 
19,808

 
62,225

 
58,930

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
84,309

 
74,253

 
214,053

 
164,301

 
 
 
 
 
 
 
 
 
Income taxes
 
28,774

 
11,611

 
75,875

 
44,773

 
 
 
 
 
 
 
 
 
NET INCOME
 
55,535

 
62,642

 
138,178

 
119,528

 
 
 
 
 
 
 
 
 
Preferred distribution requirements and other
 
206

 
206

 
621

 
619

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$55,329

 

$62,436

 

$137,557

 

$118,909

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
2014
 
2013
 
2014
 
2013
 
(In Thousands)
 
(In Thousands)
 
 
 
 
 
 
 
 
Net Income

$55,535

 

$62,642

 

$138,178

 

$119,528

Other comprehensive income
 
 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
 
(net of tax expense of $86, $778, $272, and $2,342)
137

 
963

 
396

 
2,880

Other comprehensive income
137

 
963

 
396

 
2,880

Comprehensive Income

$55,672

 

$63,605

 

$138,574

 

$122,408

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 






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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$138,178

 

$119,528

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
174,240

 
165,684

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
75,344

 
78,265

Changes in working capital:
 
 
 
 
Receivables
 
(46,839
)
 
(59,583
)
Fuel inventory
 
7,128

 
(1,868
)
Accounts payable
 
36,104

 
13,921

Prepaid taxes and taxes accrued
 
18,147

 
(61,290
)
Interest accrued
 
5,943

 
5,302

Deferred fuel costs
 
30,317

 
(8,867
)
Other working capital accounts
 
2,589

 
(24,029
)
Changes in provisions for estimated losses
 
67,521

 
(60,205
)
Changes in other regulatory assets
 
7,110

 
31,754

Changes in pension and other postretirement liabilities
 
(18,212
)
 
4,877

Other
 
(19,156
)
 
66,809

Net cash flow provided by operating activities
 
478,414

 
270,298

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(198,569
)
 
(205,162
)
Allowance for equity funds used during construction
 
5,440

 
5,630

Nuclear fuel purchases
 
(28,357
)
 
(132,083
)
Proceeds from the sale of nuclear fuel
 
54,642

 
19,401

Payment to storm reserve escrow account
 
(68,508
)
 
(25
)
Receipts from storm reserve escrow account
 
—

 
65,475

Investment in affiliates
 
(66,243
)
 
—

Proceeds from nuclear decommissioning trust fund sales
 
127,903

 
66,152

Investment in nuclear decommissioning trust funds
 
(140,499
)
 
(80,669
)
Change in money pool receivable - net
 
(19,521
)
 
—

Net cash flow used in investing activities
 
(333,712
)
 
(261,281
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
108,491

 
69,782

Retirement of long-term debt
 
—

 
(75,000
)
Change in money pool payable - net
 
—

 
50,761

Changes in credit borrowings - net
 
(14,800
)
 
31,000

Distributions paid:
 
 
 
 
Common equity
 
(122,373
)
 
(119,900
)
Preferred membership interests
 
(619
)
 
(619
)
Other
 
21,106

 
43

Net cash flow used in financing activities
 
(8,195
)
 
(43,933
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
136,507

 
(34,916
)
Cash and cash equivalents at beginning of period
 
15,581

 
35,686

Cash and cash equivalents at end of period
 

$152,088

 

$770

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$53,676

 

$53,512

Income taxes
 

$20,700

 

$62,435

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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Table of Contents

ENTERGY GULF STATES LOUISIANA, L.L.C.
BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$30,666

 

$1,739

Temporary cash investments
 
121,422

 
13,842

Total cash and cash equivalents
 
152,088

 
15,581

Accounts receivable:
 
 
 
 
Customer
 
97,243

 
69,648

Allowance for doubtful accounts
 
(879
)
 
(909
)
Associated companies
 
129,805

 
107,723

Other
 
36,882

 
22,945

Accrued unbilled revenues
 
61,583

 
58,867

Total accounts receivable
 
324,634

 
258,274

Deferred fuel costs
 
—

 
9,625

Fuel inventory - at average cost
 
19,427

 
26,555

Materials and supplies - at average cost
 
127,501

 
122,909

Deferred nuclear refueling outage costs
 
10,528

 
25,975

Prepaid taxes
 
3,861

 
22,008

Gas hedge contracts
 
—

 
2,238

Prepayments and other
 
34,203

 
12,452

TOTAL
 
672,242

 
495,617

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliate preferred membership interests
 
355,906

 
289,664

Decommissioning trust funds
 
613,661

 
573,744

Non-utility property - at cost (less accumulated depreciation)
 
178,801

 
174,134

Storm reserve escrow account
 
90,046

 
21,538

Other
 
14,782

 
14,145

TOTAL
 
1,253,196

 
1,073,225

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
7,509,701

 
7,400,689

Natural gas
 
148,256

 
143,902

Construction work in progress
 
145,121

 
105,314

Nuclear fuel
 
128,186

 
196,508

TOTAL UTILITY PLANT
 
7,931,264

 
7,846,413

Less - accumulated depreciation and amortization
 
4,152,003

 
4,071,762

UTILITY PLANT - NET
 
3,779,261

 
3,774,651

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
162,584

 
165,456

Other regulatory assets
 
317,228

 
321,466

Deferred fuel costs
 
100,124

 
100,124

Other
 
14,767

 
12,049

TOTAL
 
594,703

 
599,095

 
 
 
 
 
TOTAL ASSETS
 

$6,299,402

 

$5,942,588

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY GULF STATES LOUISIANA, L.L.C.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$128,944

 

$95,853

Other
 
104,576

 
103,314

Customer deposits
 
55,892

 
51,839

Accumulated deferred income taxes
 
11,757

 
36,330

Interest accrued
 
31,751

 
25,808

Deferred fuel costs
 
20,692

 
—

Pension and other postretirement liabilities
 
9,097

 
9,065

System agreement cost equalization
 
—

 
15,000

Other
 
39,030

 
19,032

TOTAL
 
401,739

 
356,241

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,611,906

 
1,512,547

Accumulated deferred investment tax credits
 
73,031

 
75,295

Other regulatory liabilities
 
169,446

 
159,429

Decommissioning and asset retirement cost liabilities
 
420,633

 
403,084

Accumulated provisions
 
104,667

 
37,146

Pension and other postretirement liabilities
 
256,071

 
274,315

Long-term debt
 
1,622,755

 
1,527,465

Long-term payables - associated companies
 
26,558

 
27,900

Other
 
136,064

 
108,189

TOTAL
 
4,421,131

 
4,125,370

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Preferred membership interests without sinking fund
 
10,000

 
10,000

Member's equity
 
1,494,338

 
1,479,179

Accumulated other comprehensive loss
 
(27,806
)
 
(28,202
)
TOTAL
 
1,476,532

 
1,460,977

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$6,299,402

 

$5,942,588

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
Preferred Membership Interests
 
Member's
Equity
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2012

$10,000

 

$1,438,233

 

($65,229
)
 

$1,383,004

 
 
 
 
 
 
 
 
Net income
—

 
119,528

 
—

 
119,528

Other comprehensive income
—

 
—

 
2,880

 
2,880

Distributions declared on common equity
—

 
(119,900
)
 
—

 
(119,900
)
Distributions declared on preferred membership interests
—

 
(619
)
 
—

 
(619
)
Other
—

 
16

 
—

 
16

 
 
 
 
 
 
 
 
Balance at September 30, 2013

$10,000

 

$1,437,258

 

($62,349
)
 

$1,384,909

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$10,000

 

$1,479,179

 

($28,202
)
 

$1,460,977

 
 
 
 
 
 
 
 
Net income
—

 
138,178

 
—

 
138,178

Other comprehensive income
—

 
—

 
396

 
396

Distributions declared on common equity
—

 
(122,373
)
 
—

 
(122,373
)
Distributions declared on preferred membership interests
—

 
(621
)
 
—

 
(621
)
Other
—

 
(25
)
 
—

 
(25
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$10,000

 

$1,494,338

 

($27,806
)
 

$1,476,532

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%

 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$157

 

$158

 

($1
)
 
(1
)
Commercial
 
126

 
123

 
3

 
2

Industrial
 
162

 
137

 
25

 
18

Governmental
 
6

 
6

 
—

 
—

Total retail
 
451

 
424

 
27

 
6

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
122

 
102

 
20

 
20

Non-associated companies
 
15

 
11

 
4

 
36

Other
 
12

 
12

 
—

 
—

Total
 

$600

 

$549

 

$51

 
9

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,651

 
1,740

 
(89
)
 
(5
)
Commercial
 
1,473

 
1,514

 
(41
)
 
(3
)
Industrial
 
2,633

 
2,337

 
296

 
13

Governmental
 
61

 
59

 
2

 
3

Total retail
 
5,818

 
5,650

 
168

 
3

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,972

 
1,940

 
32

 
2

Non-associated companies
 
183

 
245

 
(62
)
 
(25
)
Total
 
7,973

 
7,835

 
138

 
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$397

 

$356

 

$41

 
12

Commercial
 
345

 
314

 
31

 
10

Industrial
 
448

 
379

 
69

 
18

Governmental
 
18

 
16

 
2

 
13

Total retail
 
1,208

 
1,065

 
143

 
13

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
318

 
283

 
35

 
12

Non-associated companies
 
53

 
33

 
20

 
61

Other
 
43

 
47

 
(4
)
 
(9
)
Total
 

$1,622

 

$1,428

 

$194

 
14

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
4,178

 
3,982

 
196

 
5

Commercial
 
4,001

 
3,923

 
78

 
2

Industrial
 
7,327

 
6,772

 
555

 
8

Governmental
 
177

 
172

 
5

 
3

Total retail
 
15,683

 
14,849

 
834

 
6

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
5,341

 
4,858

 
483

 
10

Non-associated companies
 
704

 
642

 
62

 
10

Total
 
21,728

 
20,349

 
1,379

 
7


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

In June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the LPSC. The report contained a preliminary analysis of the potential combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. Though not a formal application, the report provided an overview of the combination and identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it anticipates it will seek authorization to transfer to Entergy New Orleans the assets that currently support Entergy Louisiana’s customers in Algiers. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.

On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.

The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.

It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:

•
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
•
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
•
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all of the liabilities of Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
•
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the liabilities of Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and hold the membership interests in New Entergy Gulf States Louisiana.
•
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.

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•
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.

Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013

Net income increased $23.2 million primarily due to higher net revenue and higher other income.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income increased $44.5 million primarily due to higher net revenue and higher other income, partially offset by higher depreciation and amortization expenses and higher interest expense.

Net Revenue

Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$363.9

MISO deferral
7.1

Asset retirement obligation
3.9

Other
4.7

2014 net revenue

$379.6


The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

The asset retirement obligation affects net revenue because Entergy Louisiana records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the third quarter 2014 compared to the third quarter 2013 is primarily caused by an increase in the regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.


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Gross operating revenues, fuel expenses, and other regulatory credits

Gross operating revenues increased primarily due to:

•
an increase of $51.1 million in gross wholesale revenues as a result of increased sales to affiliate customers and System Agreement receipts as a result of the comprehensive bandwidth recalculation filing made in connection with the 2007, 2008, and 2009 rate filing proceedings. See Note 2 to the financial statements in the Form 10-K and herein for a discussion of this comprehensive bandwidth recalculation; and
•
an increase of $31.8 million in fuel cost recovery revenues primarily due to higher fuel rates.

Fuel expenses increased primarily due to an increase in demand for gas-fired generation and an increase in the recovery from customers of deferred fuel costs resulting from higher fuel revenues and the timing of System Agreement receipts and credits to customers.

Other regulatory credits increased primarily due to:

•
the deferral in 2014 of non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges; and
•
regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment, as discussed above.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013:
 
Amount
 
(In Millions)
2013 net revenue

$934.8

Volume/weather
17.8

MISO deferral
12.0

Asset retirement obligation
7.4

Retail electric price
4.5

Other
10.9

2014 net revenue

$987.4


The volume/weather variance is primarily due to an increase of 517 GWh, or 2%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales as compared to the same period in the prior year and an increase in industrial usage primarily due to the addition of new mid-small customers.

The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

The asset retirement obligation affects net revenue because Entergy Louisiana records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 is primarily caused by an increase in the regulatory credits because of increases in

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depreciation and accretion expenses and an increase in the regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.

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

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

Gross operating revenues increased primarily due to:

•
an increase of $138.2 million in gross wholesale revenues as a result of increased sales to affiliate customers, System Agreement receipts as a result of the comprehensive bandwidth recalculation filing made in connection with the 2007, 2008, and 2009 rate filing proceedings, and sales in the MISO market. See Note 2 to the financial statements in the Form 10-K and herein for a discussion of this comprehensive bandwidth recalculation;
•
an increase of $40.1 million in fuel cost recovery revenues primarily due to higher fuel rates; and
•
the increase related to volume/weather, as discussed above.

Fuel and purchased power expenses increased primarily due to an increase in demand for gas-fired generation and an increase in the average market price of purchased power.

Other regulatory credits increased primarily due to:

•
the deferral in 2014 of non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges; and
•
regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment, as discussed above.

Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $6.4 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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
•
a decrease of $2.2 million relating to the sale of surplus oil inventory in 2014.

The decrease was partially offset by:

•
an increase of $5.3 million in nuclear generation expenses primarily due to higher labor costs, including contract labor, higher materials costs, and higher NRC fees; and
•
an increase of $2.8 million due to administration fees in 2014 related to the participation in the MISO RTO. The LPSC approved deferral of these expenses resulting in no net income effect.

Other income increased primarily due to $7.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC and an increase of $5.0 million due to distributions earned

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on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing. See Note 2 to the financial statements in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing.

Interest expense increased primarily due to the issuance of $325 million of 4.05% Series first mortgage bonds in August 2013, the issuance of $170 million of 5.0% Series first mortgage bonds in June 2014, and the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014, partially offset by an increase in the allowance for borrowed funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 Self-Build Project.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $13.9 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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;
•
a decrease of $6.1 million relating to the sale of surplus oil inventory in 2014; and
•
a decrease of $4.8 million due to costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

The decrease was partially offset by:

•
an increase of $7.7 million due to administration fees in 2014 related to the participation in the MISO RTO. The LPSC approved deferral of these expenses resulting in no net income effect; and
•
an increase of $5.5 million in nuclear generation expenses primarily due to higher labor costs, including contract labor, higher materials costs, and higher NRC fees.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other income increased primarily due to $7.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC, an increase of $5.0 million due to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing, and the increase in allowance for equity funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 Self-Build Project. See Note 2 to the financial statements in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing.

Interest expense increased primarily due to:

•
the issuance of $100 million of 4.7% Series first mortgage bonds in May 2013;
•
the issuance of $325 million of 4.05% Series first mortgage bonds in August 2013;
•
the issuance of $170 million of 5.0% Series first mortgage bonds in June 2014; and
•
the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014.

The increase was partially offset by an increase in the allowance for borrowed funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 Self-Build Project.


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Income Taxes

The effective income tax rate was 26.4% for the third quarter 2014 and 26.6% for the nine months ended September 30, 2014.  The difference in the effective income tax rate for the third quarter 2014 versus the federal statutory rate of 35% was primarily due to 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 state income taxes. The difference in the effective income tax rate for the nine months ended September 30, 2014 versus the federal statutory rate of 35% was primarily 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, partially offset by state income taxes.

The effective income tax rate was 28% for the third quarter 2013 and 25.8% for the nine months ended September 30, 2013. The differences in the effective income tax rates for the third quarter 2013 and the nine months ended September 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, book and tax differences related to the allowance for equity funds used during construction, and the reversal of a portion of the provision for uncertain tax positions, partially offset by state income taxes.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$124,007

 

$30,086

Cash flow provided by (used in):
 
 
 
Operating activities
718,817

 
450,443

Investing activities
(823,042
)
 
(449,858
)
Financing activities
(16,880
)
 
10,221

Net increase (decrease) in cash and cash equivalents
(121,105
)
 
10,806

Cash and cash equivalents at end of period

$2,902

 

$40,892


Operating Activities

Net cash flow provided by operating activities increased $268.4 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to proceeds of $240 million received from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financing and the timing of collections from customers and payments to vendors.  The increase was partially offset by an increase of $30.1 million in pension contributions in 2014 and an increase of $15.8 million in interest paid resulting from an increase in interest expense, as discussed above.  See Note 2 to the financial statements herein and in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing. 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.


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Investing Activities

Net cash flow used in investing activities increased $373.2 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:
 
•
the investment in 2014 of $227 million in affiliate securities as a result of the Act 55 storm cost financing. See Note 2 to the financial statements herein and in the Form 10-K and “ Hurricane Isaac ” below for a discussion of the Act 55 storm cost financing;
•
the deposit of $200 million into the storm reserve escrow account in 2014;
•
receipts of $187 million from the storm reserve escrow account in 2013; and
•
an increase 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.

The increase was partially offset by a decrease in fossil-fueled generation construction expenditures due to lower spending on the Ninemile Unit 6 self-rebuild project 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 $17.6 million for the nine months ended September 30, 2014 compared to increasing by $42.4 million for the nine months ended September 30, 2013 .  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 $16.9 million of cash for the nine months ended September 30, 2014 compared to providing $10.2 million of cash for the nine months ended September 30, 2013 primarily due to the net issuance of $145.3 million of long-term debt in 2014 compared to the net issuance of $397 million of long-term debt in 2013, partially offset by a decrease of $123 million in common equity distributions in 2014 and borrowings of $63.5 million on the nuclear fuel company variable interest entity’s credit facility in 2014 compared to the repayment of borrowings of $30.4 million in 2013. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for details of long-term debt activity.

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 is primarily due to an increase in long-term debt as a result of the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014.
 
 
September 30,
2014
 
December 31,
2013
Debt to capital
53.4
%
 
52.0
%
Effect of excluding securitization bonds
(1.1
%)
 
(1.3
%)
Debt to capital, excluding securitization bonds (a)
52.3
%
 
50.7
%
Effect of subtracting cash
—
%
 
(1.1
%)
Net debt to net capital, excluding securitization bonds (a)
52.3
%
 
49.6
%

(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, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating

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Entergy Louisiana’s financial condition. Entergy 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 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.

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. Entergy Louisiana is developing its capital investment plan for 2015 through 2017 and currently anticipates making $1.6 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
($7,746)
 
$17,648
 
$51,867
 
$9,433

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
    
Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in March 2019.  The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2014 , there were no cash borrowings and $16.4 million of letters of credit outstanding under the credit 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 September 30, 2014 , $66.4 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 herein for additional discussion of the nuclear fuel company variable interest entity credit facility.

In February 2014 the Entergy Louisiana nuclear fuel company variable interest entity issued $40 million of 3.92% Series H Notes due February 2021. The Entergy Louisiana nuclear fuel company variable interest entity used the proceeds to purchase additional nuclear fuel.

In June 2014, Entergy Louisiana issued $170 million of 5% Series first mortgage bonds due July 2044. Entergy Louisiana used the proceeds to pay, prior to maturity, its $70 million 6.4% Series first mortgage bonds due October 2034 and to pay, prior to maturity, its $100 million 6.3% Series first mortgage bonds due September 2035.

In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025. Entergy Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.

In July 2014 the Entergy Louisiana nuclear fuel company variable interest entity redeemed, at maturity, its $50 million of 5.69% Series E Notes.


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Hurricane Isaac

As discussed in the Form 10-K, Entergy Louisiana sought to recover restoration costs for the repair and replacement of electric facilities damaged by Hurricane Isaac, as well as replenishment of storm escrow accounts for prior storms, in the amount of $247.7 million. In January 2013, Entergy Louisiana drew $187 million from its funded storm reserve escrow account.  In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs.  Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ($90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.

In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $243.85 million in bonds under Act 55 of the Louisiana Legislature.  From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana.  Entergy Louisiana used the $227 million received from the LURC to acquire 2,272,725.89 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.

Entergy Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee.  Entergy Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.

Ninemile Point Unit 6 Self-Build Project

See the Form 10-K for a discussion of Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  The Ninemile 6 capacity and energy will be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Under terms approved by the LPSC, non-fuel costs may be recovered through Entergy Louisiana’s and Entergy Gulf States Louisiana’s formula rate plans beginning in the month after the unit is placed in service.  In July 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an unopposed stipulation with the LPSC that estimates a first year revenue requirement associated with Ninemile 6 and provides a mechanism to update the revenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In September 2014 an updated revenue requirement of $51.5 million for Entergy Louisiana and $27 million for Entergy Gulf States Louisiana was filed.  The unit is expected to be placed in service by the end of 2014.



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State and Local Rate Regulation and Fuel-Cost Recovery

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery "   in the Form 10-K for a discussion of state and local rate regulation and fuel cost recovery.  The following are updates to that discussion.
 
As discussed in the Form 10-K, Entergy Louisiana filed a base rate case in February 2013. Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Louisiana submitted a compliance filing in May 2014 reflecting the effects of the $10 million agreed-upon increase in formula rate plan revenue, the estimated MISO cost recovery mechanism revenue requirement, and the adjustment of the additional capacity mechanism requiring a net increase of approximately $39 million in formula rate plan revenue to be implemented over nine months commencing with the first billing cycle of December 2014. Before rates are implemented in December 2014, an updated compliance filing will be made in November 2014 to further refine the estimated MISO cost recovery mechanism revenue requirement component of the May 2014 compliance filing to then-available actual data. The compliance filings will be subject to the review of the parties to the proceeding generally in accordance with the review process set forth in Entergy Louisiana’s formula rate plan.

Also as discussed in the Form 10-K, the LPSC is conducting a prudence review of the Waterford 3 replacement steam generator project with regard to Entergy Louisiana’s actions concerning the following aspects of the 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.  In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up $71 million, citing a need for further explanation or documentation from Entergy Louisiana.  An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent.  Entergy Louisiana believes that the replacement steam generator costs were prudently incurred and applicable legal principles support their recovery in rates.  Entergy Louisiana provided further documentation and explanation requested by the LPSC staff.  An evidentiary hearing is scheduled for December 2014.

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 requested 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 made in February 2013. In January 2014 the City Council Advisors filed direct testimony recommending a rate increase of $5.56 million over three years, including an 8.13% return on common equity. In June 2014 the City Council unanimously approved a settlement that includes the following:

•
a $9.3 million base rate revenue increase to be phased in on a levelized basis over four years;
•
recovery of an additional $853 thousand annually through a MISO recovery rider; and
•
adoption of a four-year formula rate plan requiring the filing of annual evaluation reports in May of each year, commencing May 2015, with resulting rates being implemented in October of each year. The formula rate plan includes a midpoint target authorized return on common equity of 9.95% with a +/- 40 basis point bandwidth.

The rate increase was effective with bills rendered on and after the first billing cycle of July 2014.

Fuel and purchased power recovery

In July 2014 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 by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.


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Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis

Algiers Asset Transfer

In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently support Entergy Louisiana’s customers in Algiers. The transaction is expected to result in the transfer of net assets of approximately $60 million. The Algiers asset transfer is also subject to regulatory review and approval of the FERC. As discussed previously, Entergy Louisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Entergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and the FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015.

Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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.



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$870,181

 

$782,789

 

$2,230,083

 

$2,024,679

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
289,480

 
206,329

 
549,087

 
418,188

Purchased power
 
211,954

 
213,832

 
719,697

 
679,254

Nuclear refueling outage expenses
 
6,995

 
9,317

 
23,636

 
25,248

Other operation and maintenance
 
123,809

 
123,344

 
352,579

 
355,696

Decommissioning
 
6,201

 
5,437

 
18,370

 
16,106

Taxes other than income taxes
 
18,524

 
19,337

 
58,014

 
57,124

Depreciation and amortization
 
63,479

 
60,664

 
189,000

 
181,409

Other regulatory credits - net
 
(10,856
)
 
(1,318
)
 
(26,128
)
 
(7,612
)
TOTAL
 
709,586

 
636,942

 
1,884,255

 
1,725,413

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
160,595

 
145,847

 
345,828

 
299,266

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
10,066

 
8,854

 
28,159

 
21,693

Interest and investment income
 
34,212

 
21,149

 
76,476

 
64,064

Miscellaneous - net
 
320

 
(618
)
 
1,462

 
(2,271
)
TOTAL
 
44,598

 
29,385

 
106,097

 
83,486

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
42,334

 
39,206

 
123,709

 
112,539

Allowance for borrowed funds used during construction
 
(5,293
)
 
(3,714
)
 
(14,809
)
 
(9,198
)
TOTAL
 
37,041

 
35,492

 
108,900

 
103,341

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
168,152

 
139,740

 
343,025

 
279,411

 
 
 
 
 
 
 
 
 
Income taxes
 
44,331

 
39,143

 
91,159

 
72,061

 
 
 
 
 
 
 
 
 
NET INCOME
 
123,821

 
100,597

 
251,866

 
207,350

 
 
 
 
 
 
 
 
 
Preferred dividend requirements and other
 
1,738

 
1,738

 
5,232

 
5,213

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$122,083

 

$98,859

 

$246,634

 

$202,137

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
2014
 
2013
 
2014
 
2013
 
(In Thousands)
 
(In Thousands)
 
 
 
 
 
 
 
 
Net Income

$123,821

 

$100,597

 

$251,866

 

$207,350

Other comprehensive income (loss)
 
 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
 
(net of tax expense (benefit) of ($179), $542, ($523), and $1,631)
(287
)
 
684

 
(876
)
 
2,045

Other comprehensive income (loss)
(287
)
 
684

 
(876
)
 
2,045

Comprehensive Income

$123,534

 

$101,281

 

$250,990

 

$209,395

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 







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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$251,866

 

$207,350

Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
260,344

 
250,232

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
138,892

 
168,988

Changes in working capital:
 
 
 
 
Receivables
 
(40,314
)
 
(131,198
)
Fuel inventory
 
1,692

 
992

Accounts payable
 
(19,141
)
 
(39,947
)
Prepaid taxes and taxes accrued
 
(7,710
)
 
(37,490
)
Interest accrued
 
(3,234
)
 
1,527

Deferred fuel costs
 
18,544

 
22,450

Other working capital accounts
 
(23,103
)
 
21,742

Changes in provisions for estimated losses
 
205,017

 
(187,642
)
Changes in other regulatory assets
 
(14,086
)
 
(19,483
)
Changes in other regulatory liabilities
 
3,743

 
146,329

Changes in pension and other postretirement liabilities
 
(36,832
)
 
1,851

Other
 
(16,861
)
 
44,742

Net cash flow provided by operating activities
 
718,817

 
450,443

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(356,407
)
 
(583,451
)
Allowance for equity funds used during construction
 
28,159

 
21,693

Nuclear fuel purchases
 
(117,694
)
 
(41,209
)
Proceeds from the sale of nuclear fuel
 
46,045

 
23,438

Receipts from storm reserve escrow account
 
—

 
187,007

Payments to storm reserve escrow account
 
(200,021
)
 
—

Investment in affiliates
 
(227,273
)
 
—

Changes to securitization account
 
(5,812
)
 
(6,085
)
Proceeds from nuclear decommissioning trust fund sales
 
35,893

 
12,211

Investment in nuclear decommissioning trust funds
 
(43,580
)
 
(21,006
)
Changes in money pool receivable - net
 
17,648

 
(42,434
)
Other
 
—

 
(22
)
Net cash flow used in investing activities
 
(823,042
)
 
(449,858
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
395,977

 
418,009

Retirement of long-term debt
 
(250,694
)
 
(20,960
)
Changes in credit borrowings - net
 
63,466

 
(30,361
)
Change in money pool payable - net
 
7,746

 
—

Distributions paid:
 
 
 
 
Common equity
 
(228,212
)
 
(351,254
)
Preferred membership interests
 
(5,213
)
 
(5,213
)
Other
 
50

 
—

Net cash flow provided by (used in) financing activities
 
(16,880
)
 
10,221

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(121,105
)
 
10,806

Cash and cash equivalents at beginning of period
 
124,007

 
30,086

Cash and cash equivalents at end of period
 

$2,902

 

$40,892

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid (received) during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$122,728

 

$106,975

Income taxes
 

($495
)
 

($3,874
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$343

 

$427

Temporary cash investments
 
2,559

 
123,580

Total cash and cash equivalents
 
2,902

 
124,007

Securitization recovery trust account
 
10,351

 
4,539

Accounts receivable:
 
 
 
 
Customer
 
176,650

 
144,836

Allowance for doubtful accounts
 
(1,116
)
 
(965
)
Associated companies
 
78,027

 
87,820

Other
 
15,245

 
21,420

Accrued unbilled revenues
 
100,044

 
93,073

Total accounts receivable
 
368,850

 
346,184

Accumulated deferred income taxes
 
18,282

 
100,022

Fuel inventory
 
21,619

 
23,311

Materials and supplies - at average cost
 
156,198

 
156,487

Deferred nuclear refueling outage costs
 
29,877

 
13,670

Prepaid taxes
 
192,213

 
184,503

Gas hedge contracts
 
—

 
2,889

Prepayments and other
 
27,165

 
15,223

TOTAL
 
827,457

 
970,835

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliate preferred membership interests
 
1,034,696

 
807,423

Decommissioning trust funds
 
368,331

 
347,274

Storm reserve escrow account
 
200,021

 
—

Non-utility property - at cost (less accumulated depreciation)
 
260

 
396

TOTAL
 
1,603,308

 
1,155,093

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
8,927,733

 
8,799,393

Property under capital lease
 
331,895

 
331,895

Construction work in progress
 
820,832

 
672,883

Nuclear fuel
 
172,191

 
147,385

TOTAL UTILITY PLANT
 
10,252,651

 
9,951,556

Less - accumulated depreciation and amortization
 
3,906,055

 
3,763,234

UTILITY PLANT - NET
 
6,346,596

 
6,188,322

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
320,274

 
309,617

Other regulatory assets (includes securitization property of $140,251 as of September 30, 2014 and $156,103 as of December 31, 2013)
 
718,932

 
715,503

Deferred fuel costs
 
67,998

 
67,998

Other
 
46,540

 
43,025

TOTAL
 
1,153,744

 
1,136,143

 
 
 
 
 
TOTAL ASSETS
 

$9,931,105

 

$9,450,393

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$269,525

 

$320,231

Short-term borrowings
 
66,389

 
2,923

Accounts payable:
 
 
 
 
Associated companies
 
75,198

 
83,655

Other
 
142,652

 
162,507

Customer deposits
 
92,294

 
90,393

Accumulated deferred income taxes
 
—

 
338

Interest accrued
 
38,838

 
42,072

Deferred fuel costs
 
48,936

 
30,392

Pension and other postretirement liabilities
 
10,075

 
10,255

System agreement cost equalization
 
—

 
17,000

Other
 
34,542

 
19,443

TOTAL
 
778,449

 
779,209

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,345,415

 
1,275,584

Accumulated deferred investment tax credits
 
65,415

 
67,347

Other regulatory liabilities
 
536,990

 
533,247

Decommissioning
 
497,455

 
479,086

Accumulated provisions
 
212,750

 
7,733

Pension and other postretirement liabilities
 
321,365

 
358,017

Long-term debt (includes securitization bonds of $154,518 as of September 30, 2014 and $164,965 as of December 31, 2013)
 
3,099,409

 
2,899,285

Other
 
79,607

 
75,233

TOTAL
 
6,158,406

 
5,695,532

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Preferred membership interests without sinking fund
 
100,000

 
100,000

Member's equity
 
2,904,761

 
2,885,287

Accumulated other comprehensive loss
 
(10,511
)
 
(9,635
)
TOTAL
 
2,994,250

 
2,975,652

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$9,931,105

 

$9,450,393

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
Preferred
Membership
Interests
 
Member’s
Equity
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2012

$100,000

 

$3,016,628

 

($46,132
)
 

$3,070,496

 
 
 
 
 
 
 
 
Net income
—

 
207,350

 
—

 
207,350

Other comprehensive income
—

 
—

 
2,045

 
2,045

Distributions to parent
—

 
(371,855
)
 
—

 
(371,855
)
Distributions declared on preferred membership interests
—

 
(5,213
)
 
—

 
(5,213
)
 
 
 
 
 
 
 
 
Balance at September 30, 2013

$100,000

 

$2,846,910

 

($44,087
)
 

$2,902,823

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$100,000

 

$2,885,287

 

($9,635
)
 

$2,975,652

 
 
 
 
 
 
 
 
Net income
—

 
251,866

 
—

 
251,866

Other comprehensive loss
—

 
—

 
(876
)
 
(876
)
Contributions from parent
—

 
1,052

 
—

 
1,052

Distributions declared on common equity
—

 
(228,212
)
 
—

 
(228,212
)
Distributions declared on preferred membership interests
—

 
(5,232
)
 
—

 
(5,232
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$100,000

 

$2,904,761

 

($10,511
)
 

$2,994,250

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$287

 

$286

 

$1

 
—

Commercial
 
179

 
174

 
5

 
3

Industrial
 
281

 
255

 
26

 
10

Governmental
 
13

 
12

 
1

 
8

Total retail
 
760

 
727

 
33

 
5

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
86

 
34

 
52

 
153

Non-associated companies
 
1

 
1

 
—

 
—

Other
 
23

 
21

 
2

 
10

Total
 

$870

 

$783

 

$87

 
11

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,800

 
2,884

 
(84
)
 
(3
)
Commercial
 
1,813

 
1,820

 
(7
)
 
—

Industrial
 
4,492

 
4,275

 
217

 
5

Governmental
 
126

 
126

 
—

 
—

Total retail
 
9,231

 
9,105

 
126

 
1

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,393

 
705

 
688

 
98

Non-associated companies
 
10

 
9

 
1

 
11

Total
 
10,634

 
9,819

 
815

 
8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$683

 

$651

 

$32

 
5

Commercial
 
461

 
444

 
17

 
4

Industrial
 
761

 
734

 
27

 
4

Governmental
 
36

 
35

 
1

 
3

Total retail
 
1,941

 
1,864

 
77

 
4

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
207

 
84

 
123

 
146

Non-associated companies
 
17

 
1

 
16

 
—

Other
 
65

 
76

 
(11
)
 
(14
)
Total
 

$2,230

 

$2,025

 

$205

 
10

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
7,091

 
6,767

 
324

 
5

Commercial
 
4,745

 
4,641

 
104

 
2

Industrial
 
12,771

 
12,687

 
84

 
1

Governmental
 
378

 
373

 
5

 
1

Total retail
 
24,985

 
24,468

 
517

 
2

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
3,459

 
1,322

 
2,137

 
162

Non-associated companies
 
107

 
26

 
81

 
312

Total
 
28,551

 
25,816

 
2,735

 
11


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ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013

Net income decreased $40.3 million primarily due to the write-off in September 2014 of the regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the new nuclear generation development costs and the joint stipulation. Also contributing to the decrease was higher other operation and maintenance expenses, partially offset by higher net revenue.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income decreased $20.8 million primarily due to the write-off in September 2014 of the regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the new nuclear generation development costs and the joint stipulation. Also contributing to the decrease were higher taxes other than income taxes, higher other operation and maintenance expenses, and higher depreciation and amortization expenses, partially offset by higher net revenue.

Net Revenue

Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$181.4

Retail electric price
9.8

Reserve equalization
3.0

Volume/weather
(2.9
)
Other
(1.1
)
2014 net revenue

$190.2


The retail electric price variance is primarily due to a formula rate plan increase, as approved by the MPSC, effective September 2013 and an increase in the storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements in the Form 10-K for a discussion of rate proceedings.


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Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis

The reserve equalization variance is primarily due to an increase in reserve equalization revenue as compared to the same period in 2013 primarily due to the changes in the Entergy System generation mix compared to the same period in 2013 as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.

The volume/weather variance is primarily due to a decrease of 136 GWh, or 3%, in billed electricity usage, primarily due to the effect of less favorable weather 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 $29 million in fuel cost recovery revenues primarily due to higher fuel rates;
•
an increase of $6.2 million due to the formula rate plan increase, as discussed above;
•
an increase of $6 million primarily due to an increase in the storm damage rider, as discussed above; and
•
an increase of $3 million primarily due to an increase in the power management rider, as approved by the MPSC, effective February 2014.

The increase was partially offset by:

•
a decrease of $7.6 million in gross wholesale revenues primarily due to a decrease in sales to affiliated customers;
•
the decrease related to volume/weather, as discussed above; and
•
a decrease of $4.8 million in Grand Gulf revenue primarily due to less favorable weather and a decrease in the Grand Gulf rider rates effective October 2013.

Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense due to higher fuel cost recovery revenues as compared to prior year, partially offset by the timing of System Agreement payments and credits to customers, and an increase in the average market price of purchased power.

Other regulatory charges increased primarily due to increased recovery of costs associated with the power management recovery rider. There is no material effect on net income because the power management recovery rider is an exact recovery rider and any differences in revenues and expenses are deferred for future recovery.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013 :
 
Amount
 
(In Millions)
2013 net revenue

$486.5

Retail electric price
36.4

Reserve equalization
4.5

MISO deferral
1.4

Volume/weather
1.4

Other
1.4

2014 net revenue

$531.6


The retail electric price variance is primarily due to a formula rate plan increase, as approved by the MPSC, effective September 2013 and an increase in the storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements in the Form 10-K for a discussion of rate proceedings.

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The reserve equalization variance is primarily due to an increase in reserve equalization revenue as compared to the same period in 2013 primarily due to the changes in the Entergy System generation mix compared to the same period in 2013 as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.

The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the MPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

The volume/weather variance is primarily due to an increase of 157 GWh, or 2%, in billed electricity usage, including the effect of more favorable weather on residential sales as compared to the same period in the prior year and an increase in industrial usage, primarily in the primary metals and pipelines industries.

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

Gross operating revenues increased primarily due to:

•
an increase of $55 million in fuel cost recovery revenues primarily due to higher fuel rates;
•
an increase of $22.3 million in gross wholesale revenues due to an increase in sales to affiliated customers and the timing of receipt of System Agreement payments;
•
an increase of $21.6 million due to the formula rate plan increase, as discussed above;
•
an increase of $16.1 million due to an increase in the power management rider, as approved by the MPSC, effective February 2014; and
•
an increase of $12.7 million due to an increase in the storm damage rider, as discussed above.

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

Other regulatory credits decreased primarily due to increased recovery of costs associated with the power management recovery rider. There is no material effect on net income because the power management recovery rider is an exact recovery rider and any differences in revenues and expenses are deferred for future recovery. The decrease was partially offset by the deferral, as approved by the MPSC, of non-fuel MISO-related charges. The deferral of non-fuel MISO-related charges is partially offset in operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for further discussion of the recovery of non-fuel MISO-related charges.

Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses increased primarily due to:

•
an increase of $3.7 million in storm damage accruals, as approved by the MPSC, effective October 2013;
•
an increase of $2.7 million resulting from costs incurred in the third quarter 2014 related to Baxter Wilson (Unit 1) repairs, including an offset for expected insurance proceeds;
•
an increase of $1.3 million due to administration fees in the third quarter 2014 related to participation in the MISO RTO; and
•
several individually insignificant items.

The increase was partially offset by:

•
a decrease of $3.8 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan

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design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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
•
a decrease of $1.6 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

The asset write-off resulted from the $60.9 million ($40.5 million after-tax) write-off in September 2014 of the regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the new nuclear generation development costs and the joint stipulation.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Other operation and maintenance expenses increased primarily due to:

•
an increase of $10.1 million in storm damage accruals, as approved by the MPSC, effective October 2013;
•
an increase of $9.7 million resulting from costs incurred in 2014 related to Baxter Wilson (Unit 1) repairs, including an offset for expected insurance proceeds;
•
an increase of $3.8 million due to administration fees in 2014 related to participation in the MISO RTO; and
•
several individually insignificant items.

The increase was partially offset by:

•
a decrease of $12.8 million in fossil-fueled generation expenses due to a lower scope of work done during plant outages in 2014 as compared to the same period in 2013;
•
a decrease of $6.8 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. 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
•
a decrease of $4.9 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

The asset write-off resulted from the $60.9 million ($40.5 million after-tax) write-off in September 2014 of the regulatory assets associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the new nuclear generation development costs and the joint stipulation.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes in 2014 as compared to the same period in the prior year and an increase in local franchise taxes due to higher revenues in 2014 as compared to the same period in the prior year.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Income Taxes

The effective income tax rate was (51.5%) for the third quarter 2014 and 44.5% for the nine months ended September 30, 2014.  The difference in the effective income tax rate for the third quarter 2014 versus the federal

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statutory rate of 35% was primarily due to a charge associated with a regulatory asset which included a component for book and tax differences related to AFUDC equity. See Note 2 to the financial statements herein for further discussion. The difference in the effective income tax rate for the nine months ended September 30, 2014 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 including the effect of the regulatory charge previously discussed.

The effective income tax rate was 39.3% for the third quarter 2013 and 39.6% for the nine months ended September 30, 2013.  The differences in the effective income tax rates for the third quarter 2013 and the nine months ended September 30, 2013 versus the federal statutory rate of 35% were primarily due to state income taxes and certain book and tax differences related to utility plant items.

Baxter Wilson Plant Event

On September 11, 2013, Entergy Mississippi’s Baxter Wilson (Unit 1) power plant experienced a significant unplanned outage event.  Entergy Mississippi completed the process of assessing the nature and extent of the damage to the unit and repairs are in progress. The current estimate of costs to return the unit to service is in the range of $45 million to $60 million.  This estimate may change as restorative activities occur.  The costs necessary to return the plant to service are expected to be incurred into late 2014.  Entergy Mississippi believes that the damage is covered by its property insurance policy, subject to a $20 million deductible. In the third quarter 2014, Entergy Mississippi recorded an insurance receivable of $18 million based on the minimum amount it currently expects to receive from its insurance policy based on total spending of $38 million as of September 30, 2014. This $18 million receivable offset approximately $8 million of capital spending and $10 million of operation and maintenance expenses through September 30, 2014. In June 2014, Entergy Mississippi filed a rate case with the MPSC, which includes recovery of the costs associated with Baxter Wilson (Unit 1) repair activities, net of applicable insurance proceeds. On October 14, 2014 and October 31, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that provide for a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset to occur over two years. The final accounting of costs to return the unit to service and insurance proceeds will be addressed in Entergy Mississippi’s next formula rate plan filing. The joint stipulations also provide that the capital costs associated with the return to service of Baxter Wilson (Unit 1) will be reflected in rate base and will be reduced to reflect the application of insurance proceeds. The joint stipulations are subject to review and approval by the MPSC.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$31

 

$52,970

Cash flow provided by (used in):
 
 
 
Operating activities
187,323

 
147,847

Investing activities
(128,895
)
 
(109,269
)
Financing activities
(26,724
)
 
(90,457
)
Net increase (decrease) in cash and cash equivalents
31,704

 
(51,879
)
Cash and cash equivalents at end of period

$31,735

 

$1,091



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Operating Activities

Net cash flow provided by operating activities increased $39.5 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
the timing of collections from customers;
•
System Agreement bandwidth remedy payments of $11.3 million received in the second quarter 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period;
•
$6.8 million in income tax refunds in the nine months ended September 30, 2014 as compared to $2 million in income tax payments in the nine months ended September 30, 2013. The income tax refunds in 2014 were refunds of income taxes paid in accordance with intercompany state income tax sharing arrangements; and
•
increased recovery of fuel costs.

The increase was partially offset by:

•
System Agreement bandwidth remedy payments in September 2014 of $16.4 million as a result of the compliance filing pursuant to the FERC’s orders related to the bandwidth payments/receipts for the 2007 - 2009 period;
•
an increase of $12.4 million in pension contributions in 2014 compared to the same period 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 funding; and
•
the timing of payments to vendors.

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 $19.6 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to money pool activity and an increase in fossil-fueled generation construction expenditures due to spending on Baxter Wilson (Unit 1) repairs in 2014. The increase was partially offset by a decrease in transmission construction expenditures as a result of decreased scope of work performed in 2014.

Increases in Entergy Mississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi’s receivable from the money pool increased by $5.4 million for the nine months ended September 30, 2014 compared to decreasing by $16.9 million for the nine months ended September 30, 2013 .  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 used in financing activities decreased $63.7 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to the issuance of $100 million of 3.75% Series first mortgage bonds in March 2014 and the payment, at maturity, of $100 million of 5.15% Series first mortgage bonds in February 2013.

The decrease was partially offset by:

•
the payment, prior to maturity, of $95 million of 4.95% Series first mortgage bonds in April 2014;
•
money pool activity; and
•
an increase of $17.6 million in common stock dividends paid in 2014 as compared to 2013.

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Decreases in Entergy Mississippi’s payable to the money pool are a use of cash flow, and Entergy Mississippi’s payable to the money pool decreased by $3.5 million for the nine months ended September 30, 2014 compared to increasing by $19.2 million for the nine months ended September 30, 2013 .

See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for more details on long-term debt.

Capital Structure

Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
 
September 30,
2014
 
December 31, 2013
Debt to capital
51.0
%
 
51.4%
Effect of subtracting cash
(0.7
%)
 
—%
Net debt to net capital
50.3
%
 
51.4%

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 is developing its capital investment plan for 2015 through 2017 and currently anticipates making $750 million in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, and system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
$5,376
 
($3,536)
 
($19,150)
 
$16,878

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

Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire May 2015. No borrowings were outstanding under the credit facilities as of September 30, 2014 .  See Note 4 to the financial statements herein for additional discussion of the credit facilities. In addition, Entergy Mississippi entered into an uncommitted letter of credit facility in 2013 as a means to post collateral to support its obligations under

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MISO. As of September 30, 2014 , a $21.8 million letter of credit was outstanding under Entergy Mississippi’s letter of credit facility.

In March 2014, Entergy Mississippi issued $100 million of 3.75% Series first mortgage bonds due July 2024. Entergy Mississippi used the proceeds to pay, prior to maturity, its $95 million of 4.95% Series first mortgage bonds due June 2018 and for general corporate purposes.

New Nuclear Generation Development Costs

See Note 2 in the Form 10-K for discussion of Entergy Mississippi’s developing and preserving a project option for new nuclear generation at Grand Gulf Nuclear Station. On October 14, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed a joint stipulation in Entergy Mississippi’s general rate case proceeding, which is discussed below. In consideration of the comprehensive terms for settlement in that rate case proceeding, the Mississippi Public Utilities Staff and Entergy Mississippi agreed that Entergy Mississippi will request consolidation of the new nuclear generation development costs proceeding with the rate case proceeding for hearing purposes and will not further pursue, except as noted below, recovery of the costs deferred by MPSC order in the new nuclear generation development docket. The stipulation states, however, that, if Entergy Mississippi decides to move forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs are verifiable and prudent and the ESP is still valid and relevant to any such option pursued. After considering the progress of the new nuclear generation costs proceeding in light of the joint stipulation, Entergy Mississippi recorded in the third quarter 2014 a $60.9 million pre-tax charge to recognize that the regulatory assets associated with new nuclear generation development are no longer probable of recovery. If the MPSC does not ultimately approve all of the provisions agreed to in the October 2014 joint stipulation, however, Entergy Mississippi would continue to pursue recovery of the new nuclear development costs.

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.

Fuel and Purchased Power Recovery

Entergy Mississippi had a deferred fuel balance of $60.4 million as of March 31, 2014. In May 2014, Entergy Mississippi filed for an interim adjustment under its energy cost recovery rider. The interim adjustment proposed a net energy cost factor designed to collect over a six-month period the under-recovered deferred fuel balance as of March 31, 2014 and also reflected a natural gas price of $4.50 per MMBtu. In May 2014, Entergy Mississippi and the Public Utilities Staff entered into a joint stipulation in which Entergy Mississippi agreed to a revised net energy cost factor that reflected the proposed interim adjustment with a reduction in costs recovered through the energy cost recovery rider associated with the suspension of the DOE nuclear waste storage fee. In June 2014 the MPSC approved the joint stipulation and allowed Entergy Mississippi’s interim adjustment. The revised net energy cost factor will remain in effect through the end of 2014.

Retail Rates

In June 2014, Entergy Mississippi filed its first general rate case before the MPSC in almost 12 years.  The rate filing lays out Entergy Mississippi’s plans for improving reliability, modernizing the grid, maintaining its workforce, stabilizing rates, utilizing new technologies, and attracting new industry to its service territory.  Entergy Mississippi requested a net increase in revenue of $49 million for bills rendered during calendar year 2015, including $30 million resulting from new depreciation rates to update the estimated service life of assets.  In addition, the filing proposed, among other things: 1) realigning cost recovery of the Attala and Hinds power plant acquisitions from the power

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management rider to base rates; 2) including certain MISO-related revenues and expenses in the power management rider; 3) power management rider changes that reflect the changes in costs and revenues that will accompany Entergy Mississippi’s withdrawal from participation in the System Agreement; and 4) a formula rate plan forward test year to allow for known changes in expenses and revenues for the rate effective period.  Entergy Mississippi proposed maintaining the current authorized return on common equity of 10.59%. 

On October 14, 2014 and October 31, 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that addressed the majority of issues in the proceeding. The stipulations provide for an approximate $16 million net increase in revenues, which reflects an agreed upon 10.07% return on common equity. The stipulations also revise Entergy Mississippi’s formula rate plan (FRP) by providing Entergy Mississippi with the ability to reflect known and measurable changes to historical rate base and certain expense amounts, resolve uncertainty around and obviate the need for an additional rate filing in connection with Entergy Mississippi’s withdrawal from participation in the System Agreement, update depreciation rates, and move costs associated with the Attala and Hinds generating plants from the power management rider to base rates. The stipulations also provide for recovery of non-fuel MISO-related costs through a separate rider for that purpose. The joint stipulations are subject to MPSC approval. The schedule in the proceeding calls for the rates ultimately approved by the MPSC to be effective January 30, 2015.

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 was 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 Mississippi Public Utilities 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 that time. In June 2014 the MPSC expanded the scope of the August 2012 inquiry to study the merits of adopting a uniform formula rate plan that could be applied, where possible in whole or in part, to both Entergy Mississippi and Mississippi Power Company in order to achieve greater consistency in the plans. The MPSC directed the Mississippi Public Utilities Staff to investigate and review Entergy Mississippi’s Formula Rate Plan Rider Schedule FRP-5 (Revised) and Mississippi Power Company’s Performance Evaluation Plan by considering the merits and deficiencies and possibilities for improvement of each and then to propose a uniform formula rate plan that, where possible, could be applicable to both companies. No procedural schedule has been set. In October 2014 the Mississippi Public Utilities Staff conducted a public technical conference to discuss performance benchmarking and its potential application to the electric utilities’ formula rate plans.

Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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.


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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.




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ENTERGY MISSISSIPPI, INC.
INCOME (LOSS) STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$425,341

 

$397,833

 

$1,144,175

 

$1,015,513

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
85,185

 
118,688

 
219,013

 
263,437

Purchased power
 
145,266

 
97,709

 
393,054

 
275,783

Other operation and maintenance
 
69,259

 
62,263

 
193,959

 
189,822

Asset write-off
 
60,857

 
—

 
60,857

 
—

Taxes other than income taxes
 
22,060

 
21,208

 
66,060

 
61,322

Depreciation and amortization
 
28,625

 
27,717

 
85,130

 
81,268

Other regulatory charges (credits) - net
 
4,686

 
62

 
504

 
(10,237
)
TOTAL
 
415,938

 
327,647

 
1,018,577

 
861,395

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
9,403

 
70,186

 
125,598

 
154,118

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
579

 
371

 
1,428

 
1,817

Interest and investment income
 
274

 
239

 
938

 
565

Miscellaneous - net
 
(728
)
 
(767
)
 
(2,981
)
 
(2,601
)
TOTAL
 
125

 
(157
)
 
(615
)
 
(219
)
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
14,099

 
14,585

 
42,923

 
44,753

Allowance for borrowed funds used during construction
 
(303
)
 
(307
)
 
(745
)
 
(1,233
)
TOTAL
 
13,796

 
14,278

 
42,178

 
43,520

 
 
 
 
 
 
 
 
 
INCOME (LOSS) BEFORE INCOME TAXES
 
(4,268
)
 
55,751

 
82,805

 
110,379

 
 
 
 
 
 
 
 
 
Income taxes
 
2,196

 
21,938

 
36,866

 
43,678

 
 
 
 
 
 
 
 
 
NET INCOME (LOSS)
 
(6,464
)
 
33,813

 
45,939

 
66,701

 
 
 
 
 
 
 
 
 
Preferred dividend requirements and other
 
707

 
707

 
2,121

 
2,121

 
 
 
 
 
 
 
 
 
EARNINGS (LOSS) APPLICABLE TO COMMON STOCK
 

($7,171
)
 

$33,106

 

$43,818

 

$64,580

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$45,939

 

$66,701

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
85,130

 
81,268

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(13,802
)
 
36,845

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(39,365
)
 
(50,692
)
Fuel inventory
 
6,039

 
5,249

Accounts payable
 
(17,736
)
 
17,940

Taxes accrued
 
41,983

 
(11,345
)
Interest accrued
 
46

 
1,960

Deferred fuel costs
 
(2,416
)
 
(10,179
)
Other working capital accounts
 
24,752

 
2,069

Provisions for estimated losses
 
10,152

 
(232
)
Other regulatory assets
 
68,660

 
8,153

Pension and other postretirement liabilities
 
(23,551
)
 
(5,444
)
Other assets and liabilities
 
1,492

 
5,554

Net cash flow provided by operating activities
 
187,323

 
147,847

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(124,944
)
 
(128,006
)
Allowance for equity funds used during construction
 
1,428

 
1,817

Changes in money pool receivable - net
 
(5,376
)
 
16,878

Other
 
(3
)
 
42

Net cash flow used in investing activities
 
(128,895
)
 
(109,269
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
98,933

 
—

Retirement of long-term debt
 
(95,000
)
 
(100,000
)
Changes in money pool payable - net
 
(3,536
)
 
19,150

Dividends paid:
 
 
 
 
Common stock
 
(25,000
)
 
(7,400
)
Preferred stock
 
(2,121
)
 
(2,121
)
Other
 
—

 
(86
)
Net cash flow used in financing activities
 
(26,724
)
 
(90,457
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
31,704

 
(51,879
)
Cash and cash equivalents at beginning of period
 
31

 
52,970

Cash and cash equivalents at end of period
 

$31,735

 

$1,091

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid (received) during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$40,834

 

$40,718

Income taxes
 

($6,840
)
 

$1,999

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$1,357

 

$22

Temporary cash investments
 
30,378

 
9

Total cash and cash equivalents
 
31,735

 
31

Accounts receivable:
 
 

 
 

Customer
 
104,122

 
76,534

Allowance for doubtful accounts
 
(1,050
)
 
(906
)
Associated companies
 
18,883

 
13,794

Other
 
28,211

 
9,117

Accrued unbilled revenues
 
46,151

 
44,777

Total accounts receivable
 
196,317

 
143,316

Deferred fuel costs
 
40,473

 
38,057

Fuel inventory - at average cost
 
42,860

 
48,899

Materials and supplies - at average cost
 
37,778

 
40,849

System agreement cost equalization
 
—

 
15,000

Prepayments and other
 
10,843

 
4,813

TOTAL
 
360,006

 
290,965

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property - at cost (less accumulated depreciation)
 
4,649

 
4,670

Escrow accounts
 
41,799

 
51,795

TOTAL
 
46,448

 
56,465

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
3,953,270

 
3,875,737

Property under capital lease
 
4,479

 
5,329

Construction work in progress
 
70,318

 
37,316

TOTAL UTILITY PLANT
 
4,028,067

 
3,918,382

Less - accumulated depreciation and amortization
 
1,496,584

 
1,413,484

UTILITY PLANT - NET
 
2,531,483

 
2,504,898

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
49,186

 
58,716

Other regulatory assets
 
259,332

 
318,462

Other
 
19,503

 
20,819

TOTAL
 
328,021

 
397,997

 
 
 
 
 
TOTAL ASSETS
 

$3,265,958

 

$3,250,325

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 

 
 

Accounts payable:
 
 

 
 

Associated companies
 

$41,532

 

$74,144

Other
 
64,357

 
52,129

Customer deposits
 
76,774

 
74,211

Taxes accrued
 
95,230

 
53,247

Accumulated deferred income taxes
 
11,806

 
15,413

Interest accrued
 
20,429

 
20,383

Other
 
19,236

 
19,021

TOTAL
 
329,364

 
308,548

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
730,869

 
746,939

Accumulated deferred investment tax credits
 
9,929

 
8,530

Obligations under capital lease
 
3,261

 
4,185

Other regulatory liabilities
 
2,191

 
2,509

Asset retirement cost liabilities
 
6,687

 
6,401

Accumulated provisions
 
45,826

 
35,674

Pension and other postretirement liabilities
 
43,174

 
66,722

Long-term debt
 
1,058,806

 
1,053,670

Other
 
15,075

 
15,189

TOTAL
 
1,915,818

 
1,939,819

 
 
 
 
 
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 2014 and 2013
 
199,326

 
199,326

Capital stock expense and other
 
(690
)
 
(690
)
Retained earnings
 
771,759

 
752,941

TOTAL
 
970,395

 
951,577

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,265,958

 

$3,250,325

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Capital Stock
Expense and
Other
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2012

$199,326

 

($690
)
 

$681,010

 

$879,646

 
 
 
 
 
 
 
 
Net income
—

 
—

 
66,701

 
66,701

Common stock dividends
—

 
—

 
(7,400
)
 
(7,400
)
Preferred stock dividends
—

 
—

 
(2,121
)
 
(2,121
)
 
 
 
 
 
 
 
 
Balance at September 30, 2013

$199,326

 

($690
)
 

$738,190

 

$936,826

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$199,326

 

($690
)
 

$752,941

 

$951,577

 
 
 
 
 
 
 
 
Net income
—

 
—

 
45,939

 
45,939

Common stock dividends
—

 
—

 
(25,000
)
 
(25,000
)
Preferred stock dividends
—

 
—

 
(2,121
)
 
(2,121
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$199,326

 

($690
)
 

$771,759

 

$970,395

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$179

 

$167

 

$12

 
7

Commercial
 
140

 
126

 
14

 
11

Industrial
 
49

 
43

 
6

 
14

Governmental
 
13

 
11

 
2

 
18

Total retail
 
381

 
347

 
34

 
10

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
25

 
30

 
(5
)
 
(17
)
Non-associated companies
 
4

 
7

 
(3
)
 
(43
)
Other
 
15

 
14

 
1

 
7

Total
 

$425

 

$398

 

$27

 
7

 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
1,724

 
1,836

 
(112
)
 
(6
)
Commercial
 
1,384

 
1,424

 
(40
)
 
(3
)
Industrial
 
629

 
612

 
17

 
3

Governmental
 
114

 
115

 
(1
)
 
(1
)
Total retail
 
3,851

 
3,987

 
(136
)
 
(3
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
482

 
527

 
(45
)
 
(9
)
Non-associated companies
 
80

 
92

 
(12
)
 
(13
)
Total
 
4,413

 
4,606

 
(193
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 

Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 

 
 

 
 

 
 

Residential
 

$451

 

$401

 

$50

 
12

Commercial
 
359

 
321

 
38

 
12

Industrial
 
129

 
115

 
14

 
12

Governmental
 
35

 
31

 
4

 
13

Total retail
 
974

 
868

 
106

 
12

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
109

 
79

 
30

 
38

Non-associated companies
 
11

 
18

 
(7
)
 
(39
)
Other
 
50

 
51

 
(1
)
 
(2
)
Total
 

$1,144

 

$1,016

 

$128

 
13

 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
4,434

 
4,345

 
89

 
2

Commercial
 
3,640

 
3,623

 
17

 
—

Industrial
 
1,719

 
1,675

 
44

 
3

Governmental
 
312

 
305

 
7

 
2

Total retail
 
10,105

 
9,948

 
157

 
2

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
1,632

 
1,302

 
330

 
25

Non-associated companies
 
156

 
211

 
(55
)
 
(26
)
Total
 
11,893

 
11,461

 
432

 
4



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ENTERGY NEW ORLEANS, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013

Net income increased $5.8 million primarily due to lower other operation and maintenance expenses and higher net revenue.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income increased $18.6 million primarily due to higher net revenue and lower other operation and maintenance expenses.

Net Revenue

Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$72.5

Volume/weather
1.9

Other
1.0

2014 net revenue

$75.4


The volume/weather variance is primarily due to an increase in billed electricity usage primarily in the commercial and governmental sectors, a 2% increase in the average number of electric customers, and the effect of more favorable weather during the unbilled sales period compared to prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND FINANCIAL ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for further discussion of the accounting for unbilled revenues.


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

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013:
 
Amount
 
(In Millions)
2013 net revenue

$191.5

Volume/weather
5.4

Net gas revenue
4.5

Other
2.3

2014 net revenue

$203.7


The volume/weather variance is primarily due to an increase of 152 GWh, or 4%, in billed electricity usage, primarily in the residential and commercial sectors, including the effect of more favorable weather on residential sales in 2014 as compared to the same period in prior year and a 2% increase in the average number of electric customers.

The net gas revenue variance is primarily due to the effect of more favorable weather, primarily in the residential and commercial sectors, in 2014 as compared to the same period in prior year.

Gross operating revenues and fuel expenses

Gross operating revenues increased primarily due to:

•
an increase of $51.2 million in gross wholesale revenue primarily due to increased sales to affiliate customers;
•
an increase of $10.8 million in gas fuel cost recovery revenues due to higher fuel rates; and
•
the increase related to volume/weather, as discussed above.

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

Fuel expenses increased primarily due to:

•
an increase in the average market price of natural gas;
•
an increase in gas-fired generation as a result of a prior year outage; and
•
an increase in gas purchased for resale as a result of an increase in price and volume.

Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $2.9 million in outside regulatory consultant fees; and
•
a decrease of $2.4 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “MANAGEMENT’S FINANCIAL DISCUSSION AND FINANCIAL ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.


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

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $10.9 million in fossil-fueled generation expenses due to an overall lower scope of work done during plant outages as compared to prior year;
•
a decrease of $4.6 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “MANAGEMENT’S FINANCIAL DISCUSSION AND FINANCIAL ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
•
a decrease of $2.5 million in outside regulatory consultant fees.

Income Taxes

The effective income tax rate was 35.6% for the third quarter 2014 and 34.1% for the nine months ended September 30, 2014.  The difference in the effective income tax rate for the third quarter 2014 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, offset by flow-through tax accounting. The difference in the effective income tax rate for the nine months ended September 30, 2014 versus the federal statutory rate of 35% was primarily due to flow-through tax accounting, partially offset by state income taxes and certain book and tax differences related to utility plant items.

The effective income tax rate was 34.4% for the third quarter 2013 and 26.7% for the nine months ended September 30, 2013. The difference in the effective income tax rate for the third quarter 2013 versus the federal statutory rate of 35% was primarily due to flow-through tax accounting, offset by certain book and tax differences related to utility plant items and state income taxes. The difference in the effective income tax rate for the nine months ended September 30, 2013 versus the federal statutory rate of 35% was 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.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$33,489

 

$9,391

Cash flow provided by (used in):
 
 
 
Operating activities
58,546

 
59,948

Investing activities
(49,269
)
 
(81,546
)
Financing activities
(4,101
)
 
27,710

Net increase in cash and cash equivalents
5,176

 
6,112

Cash and cash equivalents at end of period

$38,665

 

$15,503


Operating Activities

Net cash flow provided by operating activities decreased slightly, by $1.4 million, for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to the payment of calendar year 2012 System Agreement bandwidth remedy payments of $15 million to the City Council of New Orleans in June

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

2014 for use in the streetlight conversion program, as directed by the City Council and an increase of $5.8 million in pension contributions compared to the same period in 2013. The decrease in cash flow was offset by the timing of collections from customers. See “MANAGEMENT’S FINANCIAL DICUSSION AND ANALYSIS - Critical Accountings 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 decreased $32.3 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
a decrease in transmission construction expenditures as a result of decreased scope of work in 2014;
•
a decrease in fossil-fueled generation construction expenditures primarily due to spending on the Michoud turbine blade replacement projects in 2013; and
•
money pool activity.

The decrease was partially offset by payments to the storm reserve escrow account of $5.6 million for the nine months ended September 30, 2014 compared to net receipts from the storm reserve escrow account of $1.9 million for the nine months ended September 30, 2013.

Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $1.9 million for the nine months ended September 30, 2014 compared to increasing $15.5 million for the nine months ended September 30, 2013 .  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy New Orleans’s financing activities used $4.1 million of cash for the nine months ended September 30, 2014 compared to providing $27.7 million of cash for the nine months ended September 30, 2013 primarily due to the issuance of $100 million of 3.9% Series first mortgage bonds in June 2013, partially offset by the retirement of $70 million of 5.25% Series first mortgage bonds in August 2013. See Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in debt to capital ratio is due to an increase in retained earnings.  
 
September 30,
 2014
 
December 31,
2013
Debt to capital
47.4
%
 
50.0
%
Effect of subtracting cash
(4.7
%)
 
(4.0
%)
Net debt to net capital
42.7
%
 
46.0
%

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.

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Entergy New Orleans, 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 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 is developing its capital investment plan for 2015 through 2017 and currently anticipates making $235 million in capital investments during that period. The estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy New Orleans’s receivables from the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
$6,664
 
$4,737
 
$18,403
 
$2,923

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 2014.  No borrowings were outstanding under the facility as of September 30, 2014 .   See Note 4 to the financial statements herein for additional discussion of the credit facility. In addition, Entergy New Orleans entered into an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of September 30, 2014 , an $11.8 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility.

Entergy New Orleans has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2015, 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 for Entergy New Orleans are limited to amounts authorized by the City Council, and the current authorization extends through July 2016.

Entergy Louisiana’s Ninemile Point Unit 6 Self-Build Project

See the Form 10-K for a discussion of Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  The Ninemile 6 capacity and energy will be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Under terms approved by the City Council, non-fuel costs associated with Ninemile 6 may be recovered through a special rider for that purpose. The unit is expected to be placed in service by the end of 2014.

State and Local Rate Regulation

See " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation "   in the Form 10-K for a discussion of state and local rate regulation. The following is an update to that discussion.

Storm Cost Recovery Filings with Retail Regulators

As discussed in " MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources - Hurricane Isaac "   in the Form 10-K, total restoration costs for the repair and replacement of Entergy

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

New Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million. Entergy New Orleans withdrew $17.4 million from the storm reserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs. In July 2014 the City Council adopted a procedural schedule that provides for hearings on the merits in September 2015.

Algiers Asset Transfer

In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently support Entergy Louisiana’s customers in Algiers. The transaction is expected to result in the transfer of net assets of approximately $60 million. The Algiers asset transfer is also subject to regulatory review and approval of the FERC. As discussed previously, Entergy Louisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Entergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and the FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015.

Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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.

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ENTERGY NEW ORLEANS, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$165,218

 

$161,737

 

$453,386

 

$397,126

Natural gas
 
17,753

 
16,904

 
86,141

 
70,822

TOTAL
 
182,971

 
178,641

 
539,527

 
467,948

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
43,056

 
42,207

 
137,922

 
83,656

Purchased power
 
64,396

 
63,705

 
197,299

 
192,028

Other operation and maintenance
 
28,159

 
33,820

 
84,530

 
102,187

Taxes other than income taxes
 
12,539

 
13,373

 
37,153

 
37,141

Depreciation and amortization
 
9,834

 
9,392

 
29,040

 
28,394

Other regulatory charges - net
 
121

 
249

 
574

 
748

TOTAL
 
158,105

 
162,746

 
486,518

 
444,154

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
24,866

 
15,895

 
53,009

 
23,794

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
156

 
223

 
716

 
656

Interest and investment income
 
11

 
24

 
49

 
68

Miscellaneous - net
 
(213
)
 
(277
)
 
(797
)
 
(921
)
TOTAL
 
(46
)
 
(30
)
 
(32
)
 
(197
)
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
3,263

 
3,661

 
9,928

 
10,312

Allowance for borrowed funds used during construction
 
(76
)
 
(130
)
 
(350
)
 
(351
)
TOTAL
 
3,187

 
3,531

 
9,578

 
9,961

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
21,633

 
12,334

 
43,399

 
13,636

 
 
 
 
 
 
 
 
 
Income taxes
 
7,701

 
4,248

 
14,799

 
3,646

 
 
 
 
 
 
 
 
 
NET INCOME
 
13,932

 
8,086

 
28,600

 
9,990

 
 
 
 
 
 
 
 
 
Preferred dividend requirements and other
 
241

 
241

 
724

 
724

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$13,691

 

$7,845

 

$27,876

 

$9,266

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$28,600

 

$9,990

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
29,040

 
28,394

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
12,604

 
(13,649
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
11,491

 
(944
)
Fuel inventory
 
(75
)
 
(1,769
)
Accounts payable
 
(7,683
)
 
1,628

Prepaid taxes and taxes accrued
 
1,094

 
4,502

Interest accrued
 
(932
)
 
(266
)
Deferred fuel costs
 
(4,542
)
 
19,108

Other working capital accounts
 
(13,616
)
 
(9,813
)
Provisions for estimated losses
 
8,164

 
(1,871
)
Other regulatory assets
 
2,650

 
13,915

Pension and other postretirement liabilities
 
(11,444
)
 
(2,581
)
Other assets and liabilities
 
3,195

 
13,304

Net cash flow provided by operating activities
 
58,546

 
59,948

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(42,420
)
 
(68,643
)
Allowance for equity funds used during construction
 
716

 
656

Change in money pool receivable - net
 
(1,927
)
 
(15,480
)
Receipts from storm reserve escrow account
 
—

 
7,749

Payments to storm reserve escrow account
 
(5,638
)
 
(5,828
)
Net cash flow used in investing activities
 
(49,269
)
 
(81,546
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
—

 
98,495

Retirement of long-term debt
 
—

 
(70,061
)
Dividends paid:
 
 
 
 
Common stock
 
(3,000
)
 
—

Preferred stock
 
(724
)
 
(724
)
Other
 
(377
)
 
—

Net cash flow provided by (used in) financing activities
 
(4,101
)
 
27,710

 
 
 
 
 
Net increase in cash and cash equivalents
 
5,176

 
6,112

Cash and cash equivalents at beginning of period
 
33,489

 
9,391

Cash and cash equivalents at end of period
 

$38,665

 

$15,503

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$10,195

 

$9,775

Income taxes
 

$900

 

$425

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
 
 
 
Cash
 

$1,021

 

$317

Temporary cash investments
 
37,644

 
33,172

Total cash and cash equivalents
 
38,665

 
33,489

Accounts receivable:
 
 
 
 
Customer
 
42,941

 
38,872

Allowance for doubtful accounts
 
(366
)
 
(974
)
Associated companies
 
19,832

 
32,273

Other
 
1,830

 
2,667

Accrued unbilled revenues
 
17,782

 
18,745

Total accounts receivable
 
82,019

 
91,583

Accumulated deferred income taxes
 
7,322

 
12,018

Fuel inventory - at average cost
 
3,074

 
2,999

Materials and supplies - at average cost
 
12,412

 
11,696

Prepayments and other
 
12,263

 
4,178

TOTAL
 
155,755

 
155,963

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Non-utility property at cost (less accumulated depreciation)
 
1,016

 
1,016

Storm reserve escrow account
 
16,151

 
10,513

TOTAL
 
17,167

 
11,529

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
929,046

 
889,629

Natural gas
 
225,838

 
222,463

Construction work in progress
 
14,481

 
29,312

TOTAL UTILITY PLANT
 
1,169,365

 
1,141,404

Less - accumulated depreciation and amortization
 
588,813

 
566,948

UTILITY PLANT - NET
 
580,552

 
574,456

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
2,913

 
—

Deferred fuel costs
 
4,080

 
4,080

Other regulatory assets
 
131,628

 
137,191

Other
 
6,108

 
5,577

TOTAL
 
144,729

 
146,848

 
 
 
 
 
TOTAL ASSETS
 

$898,203

 

$888,796

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$28,392

 

$36,193

Other
 
26,493

 
27,840

Customer deposits
 
24,423

 
22,959

Taxes accrued
 
2,603

 
1,509

Interest accrued
 
2,666

 
3,598

Deferred fuel costs
 
18,603

 
23,145

System agreement cost equalization
 
6,569

 
17,040

Other
 
8,579

 
4,387

TOTAL CURRENT LIABILITIES
 
118,328

 
136,671

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
197,371

 
183,636

Accumulated deferred investment tax credits
 
918

 
1,082

Regulatory liability for income taxes - net
 
—

 
2,495

Other regulatory liabilities
 
27,600

 
26,361

Asset retirement cost liabilities
 
2,469

 
2,347

Accumulated provisions
 
23,164

 
15,000

Pension and other postretirement liabilities
 
21,053

 
32,497

Long-term debt
 
225,886

 
225,944

Gas system rebuild insurance proceeds
 
25,425

 
32,760

Other
 
5,050

 
3,940

TOTAL NON-CURRENT LIABILITIES
 
528,936

 
526,062

 
 
 
 
 
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 2014 and 2013
 
33,744

 
33,744

Paid-in capital
 
36,294

 
36,294

Retained earnings
 
161,121

 
136,245

TOTAL
 
231,159

 
206,283

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$898,203

 

$888,796

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2012

$33,744

 

$36,294

 

$125,527

 

$195,565

 
 
 
 
 
 
 
 
Net income
—

 
—

 
9,990

 
9,990

Preferred stock dividends
—

 
—

 
(724
)
 
(724
)
 
 
 
 
 
 
 
 
Balance at September 30, 2013

$33,744

 

$36,294

 

$134,793

 

$204,831

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$33,744

 

$36,294

 

$136,245

 

$206,283

 
 
 
 
 
 
 
 
Net income
—

 
—

 
28,600

 
28,600

Common stock dividends
—

 
—

 
(3,000
)
 
(3,000
)
Preferred stock dividends
—

 
—

 
(724
)
 
(724
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$33,744

 

$36,294

 

$161,121

 

$231,159

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$64

 

$67

 

($3
)
 
(4
)
Commercial
 
52

 
55

 
(3
)
 
(5
)
Industrial
 
9

 
11

 
(2
)
 
(18
)
Governmental
 
19

 
19

 
—

 
—

Total retail
 
144

 
152

 
(8
)
 
(5
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
16

 
6

 
10

 
167

Other
 
5

 
4

 
1

 
25

Total
 

$165

 

$162

 

$3

 
2

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
614

 
613

 
1

 
—

Commercial
 
589

 
576

 
13

 
2

Industrial
 
124

 
139

 
(15
)
 
(11
)
Governmental
 
219

 
206

 
13

 
6

Total retail
 
1,546

 
1,534

 
12

 
1

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
304

 
93

 
211

 
227

Non-associated companies
 
1

 
2

 
(1
)
 
(50
)
Total
 
1,851

 
1,629

 
222

 
14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 

Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 
 
 

 
 

 
 

Residential
 

$161

 

$155

 

$6

 
4

Commercial
 
140

 
140

 
—

 
—

Industrial
 
26

 
27

 
(1
)
 
(4
)
Governmental
 
50

 
51

 
(1
)
 
(2
)
Total retail
 
377

 
373

 
4

 
1

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
61

 
14

 
47

 
336

  Non associated companies
 
4

 
—

 
4

 
—

Other
 
11

 
10

 
1

 
10

Total
 

$453

 

$397

 

$56

 
14

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
1,549

 
1,438

 
111

 
8

Commercial
 
1,552

 
1,502

 
50

 
3

Industrial
 
344

 
358

 
(14
)
 
(4
)
Governmental
 
575

 
570

 
5

 
1

Total retail
 
4,020

 
3,868

 
152

 
4

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
1,004

 
249

 
755

 
303

Non-associated companies
 
12

 
4

 
8

 
200

Total
 
5,036

 
4,121

 
915

 
22



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ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2014 Compared to Third Quarter 2013

Net income increased $3.8 million primarily due to lower other operation and maintenance expenses and higher net revenue, partially offset by higher taxes other than income taxes.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income increased $23.6 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by higher taxes other than income taxes and higher depreciation and amortization expenses.

Net Revenue

Third Quarter 2014 Compared to Third Quarter 2013

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 third quarter 2014 to the third quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$180.8

Purchased power capacity
7.7

Retail electric price
5.8

Transmission revenue
(2.4
)
Net wholesale revenue
(3.9
)
Reserve equalization
(4.4
)
Other
(0.4
)
2014 net revenue

$183.2


The purchased power capacity variance is primarily due to a decrease in expenses due to contract changes.

The retail electric price variance is primarily due to an annual base rate increase of $18.5 million, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case. See Note 2 to the financial statements herein for further discussion of the rate case.

The transmission revenue variance is primarily due to changes as a result of participation in the MISO RTO in 2014.

The net wholesale revenue variance is primarily due to a wholesale customer contract termination in December 2013.
    

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The reserve equalization variance is primarily due to an increase in reserve equalization expense as compared to the same period in 2013 primarily due to the changes in the Entergy System generation mix compared to the same period in 2013 as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to an increase of $10.6 million in fuel cost recovery revenues primarily due to higher fuel rates and the base rate increase, as discussed above, partially offset by a decrease of $13.8 million in gross wholesale revenues as a result of contract changes for municipals and co-ops customers and a decrease in sales to affiliated customers.

Fuel and purchased power expenses increased primarily due to an increase in the average market prices of natural gas and purchased power, partially offset by a decrease in deferred fuel expenses due to a decrease in recovery of fuel costs and higher interim fuel refunds in 2014 compared to 2013.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

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 nine months ended September 30, 2014 to the nine months ended September 30, 2013 :

 
Amount
 
(In Millions)
2013 net revenue

$445.9

Purchased power capacity
30.4

Volume/weather
14.8

Retail electric price
12.8

Transmission revenue
(6.5
)
Reserve equalization
(15.2
)
Net wholesale revenue
(15.7
)
Other
6.2

2014 net revenue

$472.7


The purchased power capacity variance is primarily due to a decrease in expenses due to contract changes.

The volume/weather variance is primarily due to an increase of 942 GWh, or 7%, in billed electricity usage, including the effect of favorable weather on residential sales and increased industrial usage primarily in the petroleum industry as a result of expansions.

The retail electric price variance is primarily due to an annual base rate increase of $18.5 million, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case. See Note 2 to the financial statements herein for further discussion of the rate case.

The transmission revenue variance is primarily due to changes as a result of participation in the MISO RTO in 2014.

The reserve equalization variance is primarily due to an increase in reserve equalization expense as compared to the same period in 2013 primarily due to the changes in the Entergy System generation mix compared to the same period in 2013 as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.


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Management's Financial Discussion and Analysis

The net wholesale revenue variance is primarily due to a wholesale customer contract termination in December 2013.
 
Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased primarily due to:

•
an increase of $167.9 million in fuel cost recovery revenues primarily due to higher fuel rates;
•
an increase related to volume/weather, as discussed above; and
•
the base rate increase, as discussed above.

The increase was partially offset by a decrease of $38.2 million in gross wholesale revenues, as discussed above, and a decrease in sales to affiliated customers.
    
Fuel and purchased power expenses increased primarily due to an increase in the average market prices of natural gas and purchased power, a shift from purchased power to higher-priced gas-fired generation, and an increase in deferred fuel expenses due to lower interim fuel refunds in 2014 compared to 2013, partially offset by a decrease in recovery of fuel costs.

Other Income Statement Variances

Third Quarter 2014 Compared to Third Quarter 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $5.1 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge in 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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
•
a decrease of $2.1 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes and an increase in ad valorem taxes. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $8.2 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge in 2013 related to the payment of lump sum benefits out of the non-qualified pension plan.  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;
•
a decrease of $6.2 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and

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Management's Financial Discussion and Analysis

•
a decrease of $6 million in fossil-fueled generation expenses resulting from an overall lower scope of work done compared to prior year.

The decrease was partially offset by an increase of $4.4 million primarily due to administration fees in 2014 related to participation in the MISO RTO.     

Taxes other than income taxes increased primarily due to a reduction in the provision recorded for sales and use taxes in 2013, an increase in ad valorem taxes, and an increase in local franchise taxes. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.

Income Taxes

The effective income tax rate was 37% for the third quarter 2014 and 38% for the nine months ended September 30, 2014. The differences in the effective income tax rates for the third quarter 2014 and for the nine months ended September 30, 2014 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.  

The effective income tax rate was 37.7% for the third quarter 2013 and 40.2% for the nine months ended September 30, 2013. The difference in the effective income tax rate for the third quarter 2013 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items and state income
taxes. The difference in the effective income tax rate for the nine months ended September 30, 2013 versus the federal
federal statutory rate of 35% was primarily 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.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$46,488

 

$60,236

Cash flow provided by (used in):
 
 
 
Operating activities
225,723

 
167,278

Investing activities
(123,573
)
 
(130,025
)
Financing activities
(108,580
)
 
(75,746
)
Net decrease in cash and cash equivalents
(6,430
)
 
(38,493
)
Cash and cash equivalents at end of period

$40,058

 

$21,743


Operating Activities

Net cash flow provided by operating activities increased $58.4 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
$86.1 million of fuel cost refunds in the first quarter 2013. See Note 2 to the financial statements in the Form 10-K for discussion of the fuel cost refunds;
•
System Agreement bandwidth remedy payments of $48.6 million received in the second quarter 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. Entergy Texas received approval to apply a portion of the payments to the under-collected fuel balance. The remaining balance to be refunded to customers is $24.6

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Management's Financial Discussion and Analysis

million of which $15.3 million has been credited to Entergy Texas customers as of September 30, 2014. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings; and
•
timing of collections from customers.

The increase was substantially offset by income tax payments of $2.8 million for the nine months ended September 30, 2014 compared to income tax refunds of $94.2 million for the nine months ended September 30, 2013. 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.

Investing Activities

Net cash flow used in investing activities decreased $6.5 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to money pool activity and lower fossil-fueled generation construction expenditures due to a greater scope of projects in 2013, partially offset by an increase in transmission construction expenditures due to a greater scope of projects in 2014.

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 $0.4 million for the nine months ended September 30, 2014 compared to increasing by $5.9 million for the nine months ended September 30, 2013 .  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 used in financing activities increased $32.8 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to the retirement of $150 million of 7.875% Series first mortgage bonds in June 2014 and an increase of $15 million in common stock dividends paid, partially offset by the issuance of $135 million of 5.625% Series first mortgage bonds in May 2014. See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for more details on long-term debt.

Capital Structure

Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio is primarily due to a decrease in long-term debt and an increase in retained earnings.
 
September 30,
2014
 
December 31,
2013
Debt to capital
61.9
%
 
63.7
%
Effect of excluding the securitization bonds
(12.0
%)
 
(12.6
%)
Debt to capital, excluding securitization bonds (a)
49.9
%
 
51.1
%
Effect of subtracting cash
(1.2
%)
 
(1.3
%)
Net debt to net capital, excluding securitization bonds (a)
48.7
%
 
49.8
%

(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

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Management's Financial Discussion and Analysis

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 is developing its capital investment plan for 2015 through 2017 and currently anticipates making $1.2 billion in capital investments during that period. The estimate includes amounts associated with specific investments such as environmental compliance spending, transmission upgrades, resource planning, generation projects, system improvements, and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Texas’s receivables from the money pool were as follows:
September 30, 2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
$6,727
 
$6,287
 
$25,105
 
$19,175

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 2019.  The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2014 , there were no cash borrowings and $31.4 million of letters of credit outstanding under the credit facility.  See Note 4 to the financial statements herein for additional discussion of the credit facility.

In May 2014, Entergy Texas issued $135 million of 5.625% Series first mortgage bonds due June 2064. Entergy Texas used the proceeds to pay, prior to maturity, a portion of its $150 million of 7.875% Series first mortgage bonds due June 2039.

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 September 2013, Entergy Texas filed a rate case requesting a $38.6 million base rate increase reflecting a 10.4% return on common equity based on an adjusted test year ending March 31, 2013.  The rate case also proposed (1) a rough production cost equalization adjustment rider recovering Entergy Texas’s payment to Entergy New Orleans to achieve rough production cost equalization based on calendar year 2012 production costs and (2) a rate case expense rider recovering the cost of the 2013 rate case and certain costs associated with previous rate cases. The rate case filing also included a request to reconcile $0.9 billion of fuel and purchased power costs and fuel revenues covering the period July 2011 through March 2013.  The fuel reconciliation also reflects special circumstances fuel cost recovery of approximately $22 million of purchased power capacity costs. In January 2014 the PUCT staff filed direct testimony recommending a retail rate reduction of $0.3 million and a 9.2% return on common equity. In March 2014, Entergy Texas filed an Agreed Motion for Interim Rates. The motion explained that the parties to this proceeding have agreed that Entergy Texas should be allowed to implement new rates reflecting an $18.5 million base rate increase, effective for usage on and after April 1, 2014, as well as recovery of charges for rough production cost equalization and rate

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Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis

case expenses. In March 2014 the State Office of Administrative Hearings, the body assigned to hear the case, approved the motion. In April 2014, Entergy Texas filed a unanimous stipulation in this case. Among other things, the stipulation provides for an $18.5 million base rate increase, recovery over three years of the calendar year 2012 rough production cost equalization charges and rate case expenses, and states a 9.8% return on common equity. In addition, the stipulation finalizes the fuel and purchased power reconciliation covering the period July 2011 through March 2013, with the parties stipulating an immaterial fuel disallowance. No special circumstances recovery of purchased power capacity costs was allowed. In April 2014 the State Office of Administrative Hearings remanded the case back to the PUCT for final processing. In May 2014 the PUCT approved the stipulation. No motions for rehearing were filed during the statutory rehearing period.

In September 2014, Entergy Texas filed for a distribution cost recovery factor rider based on a law that was passed in 2011 allowing for the recovery of increases in capital costs associated with distribution plant. Entergy Texas is requesting collection of approximately $7 million annually from retail customers. The PUCT has not yet acted on this filing.

Federal Regulation

See “ Entergy’s Integration Into the MISO Regional Transmission Organization ” and “ System Agreement ” 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 unbilled revenue and qualified pension and other postretirement benefits.





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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$528,508

 

$526,978

 

$1,451,696

 

$1,288,251

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
92,748

 
101,094

 
232,974

 
135,038

Purchased power
 
228,755

 
220,490

 
686,794

 
647,437

Other operation and maintenance
 
56,367

 
60,913

 
166,556

 
184,580

Taxes other than income taxes
 
18,873

 
16,805

 
52,631

 
46,506

Depreciation and amortization
 
25,041

 
23,659

 
74,398

 
70,731

Other regulatory charges - net
 
23,813

 
24,587

 
59,218

 
59,897

TOTAL
 
445,597

 
447,548

 
1,272,571

 
1,144,189

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
82,911

 
79,430

 
179,125

 
144,062

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
726

 
890

 
2,182

 
3,559

Interest and investment income
 
307

 
228

 
782

 
914

Miscellaneous - net
 
(277
)
 
(625
)
 
(1,617
)
 
(1,968
)
TOTAL
 
756

 
493

 
1,347

 
2,505

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
21,352

 
23,069

 
66,961

 
69,401

Allowance for borrowed funds used during construction
 
(505
)
 
(647
)
 
(1,520
)
 
(2,533
)
TOTAL
 
20,847

 
22,422

 
65,441

 
66,868

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
62,820

 
57,501

 
115,031

 
79,699

 
 
 
 
 
 
 
 
 
Income taxes
 
23,261

 
21,700

 
43,722

 
32,023

 
 
 
 
 
 
 
 
 
NET INCOME
 

$39,559

 

$35,801

 

$71,309

 

$47,676

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$71,309

 

$47,676

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
74,398

 
70,731

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(46,976
)
 
78,717

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(14,671
)
 
(63,375
)
Fuel inventory
 
2,115

 
(968
)
Accounts payable
 
(4,292
)
 
13,450

Prepaid taxes and taxes accrued
 
84,155

 
39,644

Interest accrued
 
(9,744
)
 
(9,190
)
Deferred fuel costs
 
(10,807
)
 
(92,604
)
Other working capital accounts
 
(2,589
)
 
4,689

Provisions for estimated losses
 
(255
)
 
2,358

Other regulatory assets
 
70,811

 
78,433

Pension and other postretirement liabilities
 
(18,803
)
 
(8,983
)
Other assets and liabilities
 
31,072

 
6,700

Net cash flow provided by operating activities
 
225,723

 
167,278

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(130,710
)
 
(133,489
)
Allowance for equity funds used during construction
 
2,193

 
3,559

Change in money pool receivable - net
 
(440
)
 
(5,930
)
Changes in securitization account
 
5,384

 
5,877

Other
 
—

 
(42
)
Net cash flow used in investing activities
 
(123,573
)
 
(130,025
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
131,170

 
—

Retirement of long-term debt
 
(202,055
)
 
(50,579
)
Dividends paid:
 
 
 
 
Common stock
 
(40,000
)
 
(25,000
)
Other
 
2,305

 
(167
)
Net cash flow used in financing activities
 
(108,580
)
 
(75,746
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(6,430
)
 
(38,493
)
Cash and cash equivalents at beginning of period
 
46,488

 
60,236

Cash and cash equivalents at end of period
 

$40,058

 

$21,743

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid (received) during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$73,816

 

$75,500

Income taxes
 

$2,780

 

($94,233
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$2,028

 

$2,432

Temporary cash investments
 
38,030

 
44,056

Total cash and cash equivalents
 
40,058

 
46,488

Securitization recovery trust account
 
32,128

 
37,511

Accounts receivable:
 
 
 
 
Customer
 
85,038

 
76,957

Allowance for doubtful accounts
 
(813
)
 
(443
)
Associated companies
 
76,560

 
76,494

Other
 
15,188

 
10,897

Accrued unbilled revenues
 
46,110

 
43,067

Total accounts receivable
 
222,083

 
206,972

Deferred fuel costs
 
6,714

 
—

Accumulated deferred income taxes
 
17,600

 
—

Fuel inventory - at average cost
 
53,220

 
55,335

Materials and supplies - at average cost
 
34,466

 
34,068

System agreement cost equalization
 
—

 
16,040

Prepaid taxes
 
—

 
55,635

Prepayments and other
 
47,467

 
34,458

TOTAL
 
453,736

 
486,507

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investments in affiliates - at equity
 
661

 
687

Non-utility property - at cost (less accumulated depreciation)
 
376

 
376

Other
 
18,942

 
18,161

TOTAL
 
19,979

 
19,224

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
3,724,088

 
3,616,061

Construction work in progress
 
95,913

 
94,743

TOTAL UTILITY PLANT
 
3,820,001

 
3,710,804

Less - accumulated depreciation and amortization
 
1,443,022

 
1,387,303

UTILITY PLANT - NET
 
2,376,979

 
2,323,501

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
126,893

 
129,069

Other regulatory assets (includes securitization property of $535,167 as of September 30, 2014 and $585,152 as of December 31, 2013)
 
850,599

 
919,234

Long-term receivables - associated companies
 
26,558

 
27,900

Other
 
15,707

 
16,425

TOTAL
 
1,019,757

 
1,092,628

 
 
 
 
 
TOTAL ASSETS
 

$3,870,451

 

$3,921,860

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$200,000

 

$—

Accounts payable:
 
 
 
 
Associated companies
 
102,796

 
112,309

Other
 
74,882

 
73,682

Customer deposits
 
42,900

 
38,721

Taxes accrued
 
28,520

 
—

Accumulated deferred income taxes
 
—

 
33,847

Interest accrued
 
21,502

 
31,246

Deferred fuel costs
 
—

 
4,093

Pension and other postretirement liabilities
 
722

 
786

System agreement cost equalization
 
—

 
12,000

Other
 
26,089

 
23,490

TOTAL
 
497,411

 
330,174

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,026,601

 
1,022,955

Accumulated deferred investment tax credits
 
15,084

 
16,147

Other regulatory liabilities
 
12,837

 
5,194

Asset retirement cost liabilities
 
4,543

 
4,349

Accumulated provisions
 
8,824

 
9,079

Pension and other postretirement liabilities
 
32,514

 
51,253

Long-term debt (includes securitization bonds of $577,049 as of September 30, 2014 and $629,087 as of December 31, 2013)
 
1,290,216

 
1,556,939

Other
 
64,085

 
38,743

TOTAL
 
2,454,704

 
2,704,659

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2014 and 2013
 
49,452

 
49,452

Paid-in capital
 
481,994

 
481,994

Retained earnings
 
386,890

 
355,581

TOTAL
 
918,336

 
887,027

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,870,451

 

$3,921,860

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2012

$49,452

 

$481,994

 

$322,700

 

$854,146

 
 
 
 
 
 
 
 
Net income
—

 
—

 
47,676

 
47,676

Common stock dividends
—

 
—

 
(25,000
)
 
(25,000
)
 
 
 
 
 
 
 
 
Balance at September 30, 2013

$49,452

 

$481,994

 

$345,376

 

$876,822

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$49,452

 

$481,994

 

$355,581

 

$887,027

 
 
 
 
 
 
 
 
Net income
—

 
—

 
71,309

 
71,309

Common stock dividends
—

 
—

 
(40,000
)
 
(40,000
)
 
 
 
 
 
 
 
 
Balance at September 30, 2014

$49,452

 

$481,994

 

$386,890

 

$918,336

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$210

 

$213

 

($3
)
 
(1
)
Commercial
 
109

 
102

 
7

 
7

Industrial
 
106

 
98

 
8

 
8

Governmental
 
7

 
7

 
—

 
—

Total retail
 
432

 
420

 
12

 
3

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
82

 
90

 
(8
)
 
(9
)
Non-associated companies
 
5

 
10

 
(5
)
 
(50
)
Other
 
10

 
7

 
3

 
43

Total
 

$529

 

$527

 

$2

 
—

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,845

 
1,917

 
(72
)
 
(4
)
Commercial
 
1,292

 
1,291

 
1

 
—

Industrial
 
1,823

 
1,768

 
55

 
3

Governmental
 
73

 
77

 
(4
)
 
(5
)
Total retail
 
5,033

 
5,053

 
(20
)
 
—

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,353

 
1,713

 
(360
)
 
(21
)
Non-associated companies
 
14

 
142

 
(128
)
 
(90
)
Total
 
6,400

 
6,908

 
(508
)
 
(7
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$516

 

$450

 

$66

 
15

Commercial
 
294

 
240

 
54

 
23

Industrial
 
322

 
233

 
89

 
38

Governmental
 
20

 
17

 
3

 
18

Total retail
 
1,152

 
940

 
212

 
23

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
252

 
283

 
(31
)
 
(11
)
Non-associated companies
 
20

 
28

 
(8
)
 
(29
)
Other
 
28

 
37

 
(9
)
 
(24
)
Total
 

$1,452

 

$1,288

 

$164

 
13

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
4,547

 
4,383

 
164

 
4

Commercial
 
3,387

 
3,306

 
81

 
2

Industrial
 
5,405

 
4,704

 
701

 
15

Governmental
 
209

 
213

 
(4
)
 
(2
)
Total retail
 
13,548

 
12,606

 
942

 
7

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
3,806

 
4,778

 
(972
)
 
(20
)
Non-associated companies
 
168

 
464

 
(296
)
 
(64
)
Total
 
17,522

 
17,848

 
(326
)
 
(2
)

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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.
 
Third Quarter 2014 Compared to Third Quarter 2013

Net income decreased $8.4 million primarily due to a higher effective income tax rate and lower operating revenues resulting from lower rate base as compared with the same period in the prior year, partially offset by higher other regulatory credits. System Energy records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The increase in regulatory credits for the third quarter 2014 compared to the same period in prior year is primarily caused by regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment.
    
Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013

Net income decreased $13.6 million primarily due to a higher effective income tax rate and lower operating revenues resulting from lower rate base as compared with the same period in the prior year, partially offset by higher other regulatory credits. System Energy records a regulatory credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The increase in regulatory credits for the third quarter 2014 compared to the same period in prior year is primarily caused by increases in depreciation and accretion expenses and regulatory credits recorded in the third quarter 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment.
    
Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Thousands)
Cash and cash equivalents at beginning of period

$127,142

 

$83,622

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
296,114

 
136,814

Investing activities
(204,522
)
 
(59,890
)
Financing activities
(83,903
)
 
(156,734
)
Net increase (decrease) in cash and cash equivalents
7,689

 
(79,810
)
 
 
 
 
Cash and cash equivalents at end of period

$134,831

 

$3,812


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System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Operating Activities

Net cash flow provided by operating activities increased $159.3 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to a decrease of $211.5 million in income tax payments in 2014. The decrease was partially offset by spending on the Grand Gulf refueling outage in 2014 and an increase of $11.8 million in pension contributions in 2014. 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. 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 $144.6 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to 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 and money pool activity.

Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased by $14.5 million for the nine months ended September 30, 2014 compared to decreasing by $22.9 million for the nine months ended September 30, 2013 .  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 used by financing activities decreased $72.8 million for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 primarily due to:

•
the redemption of $70 million of 6.29% Series F notes by the nuclear fuel company variable interest entity in September 2013; and
•
borrowings of $40.8 million on the nuclear fuel company variable interest entity’s credit facility in 2014 compared to borrowings of $6.5 million on the nuclear fuel company variable interest entity’s credit facility in 2013.

This decrease was offset by an increase of $28 million in common stock dividends paid in 2014.

See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for details on long-term debt.

Capital Structure

System Energy’s capitalization is balanced between equity and debt, as shown in the following table.  
 
September 30,
 2014
 
December 31,
2013
Debt to capital
46.2
%
 
46.4
%
Effect of subtracting cash
(4.9
%)
 
(4.6
%)
Net debt to net capital
41.3
%
 
41.8
%

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

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System Energy Resources, Inc.
Management's Financial Discussion and Analysis

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.

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. System Energy is developing its capital investment plan for 2015 through 2017 and currently anticipates making $170 million in capital investments during that period. The estimate includes amounts associated with specific investments, such as plant improvements.

System Energy’s receivables from the money pool were as follows:
September 30,
2014
 
December 31,
2013
 
September 30,
2013
 
December 31,
2012
(In Thousands)
$23,768
 
$9,223
 
$4,008
 
$26,915

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 September 30, 2014 , $40.9 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 herein 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.






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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
2014
 
2013
 
2014
 
2013
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$172,151

 

$192,679

 

$493,648

 

$533,434

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
23,286

 
26,974

 
60,545

 
77,077

Nuclear refueling outage expenses
 
5,808

 
7,418

 
17,501

 
22,133

Other operation and maintenance
 
44,573

 
43,577

 
113,373

 
123,955

Decommissioning
 
10,546

 
8,946

 
31,106

 
26,364

Taxes other than income taxes
 
6,283

 
6,291

 
19,157

 
19,264

Depreciation and amortization
 
33,941

 
51,981

 
107,252

 
119,427

Other regulatory credits - net
 
(10,770
)
 
(4,537
)
 
(22,346
)
 
(10,499
)
TOTAL
 
113,667

 
140,650

 
326,588

 
377,721

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
58,484

 
52,029

 
167,060

 
155,713

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
1,295

 
2,267

 
3,499

 
5,470

Interest and investment income
 
2,921

 
1,259

 
8,724

 
6,450

Miscellaneous - net
 
(88
)
 
(134
)
 
(289
)
 
(493
)
TOTAL
 
4,128

 
3,392

 
11,934

 
11,427

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
15,501

 
9,756

 
43,102

 
28,411

Allowance for borrowed funds used during construction
 
(338
)
 
(223
)
 
(920
)
 
(604
)
TOTAL
 
15,163

 
9,533

 
42,182

 
27,807

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
47,449

 
45,888

 
136,812

 
139,333

 
 
 
 
 
 
 
 
 
Income taxes
 
20,719

 
10,783

 
59,532

 
48,488

 
 
 
 
 
 
 
 
 
NET INCOME
 

$26,730

 

$35,105

 

$77,280

 

$90,845

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$77,280

 

$90,845

Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
187,357

 
206,699

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
56,268

 
57,096

Changes in assets and liabilities:
 
 
 
 
Receivables
 
23,355

 
4,180

Accounts payable
 
(9,193
)
 
(2,039
)
Prepaid taxes and taxes accrued
 
(6,724
)
 
(219,221
)
Interest accrued
 
20,266

 
(127
)
Other working capital accounts
 
(20,848
)
 
17,025

Other regulatory assets
 
2,802

 
13,724

Pension and other postretirement liabilities
 
(14,384
)
 
(4,891
)
Other assets and liabilities
 
(20,065
)
 
(26,477
)
Net cash flow provided by operating activities
 
296,114

 
136,814

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(50,379
)
 
(37,731
)
Allowance for equity funds used during construction
 
3,499

 
5,470

Nuclear fuel purchases
 
(163,492
)
 
(53,666
)
Proceeds from the sale of nuclear fuel
 
43,992

 
26,522

Proceeds from nuclear decommissioning trust fund sales
 
333,046

 
144,631

Investment in nuclear decommissioning trust funds
 
(356,643
)
 
(168,023
)
Changes in money pool receivable - net
 
(14,545
)
 
22,907

Net cash flow used in investing activities
 
(204,522
)
 
(59,890
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Retirement of long-term debt
 
(46,743
)
 
(111,479
)
Changes in credit borrowings - net
 
40,846

 
6,531

Dividends paid:
 
 
 
 
Common stock
 
(77,977
)
 
(50,000
)
Other
 
(29
)
 
(1,786
)
Net cash flow used in financing activities
 
(83,903
)
 
(156,734
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
7,689

 
(79,810
)
Cash and cash equivalents at beginning of period
 
127,142

 
83,622

Cash and cash equivalents at end of period
 

$134,831

 

$3,812

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$16,364

 

$20,708

Income taxes
 

$5,564

 

$217,089

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$570

 

$62,561

Temporary cash investments
 
134,261

 
64,581

Total cash and cash equivalents
 
134,831

 
127,142

Accounts receivable:
 
 
 
 
Associated companies
 
96,728

 
104,419

Other
 
5,281

 
6,400

Total accounts receivable
 
102,009

 
110,819

Materials and supplies - at average cost
 
81,284

 
85,118

Deferred nuclear refueling outage costs
 
32,759

 
7,853

Prepayments and other
 
4,009

 
1,727

TOTAL
 
354,892

 
332,659

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
650,700

 
603,896

TOTAL
 
650,700

 
603,896

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
4,142,718

 
4,124,647

Property under capital lease
 
570,872

 
570,872

Construction work in progress
 
39,679

 
29,061

Nuclear fuel
 
261,710

 
188,824

TOTAL UTILITY PLANT
 
5,014,979

 
4,913,404

Less - accumulated depreciation and amortization
 
2,785,310

 
2,699,263

UTILITY PLANT - NET
 
2,229,669

 
2,214,141

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
108,335

 
115,492

Other regulatory assets
 
266,095

 
261,740

Other
 
14,390

 
15,996

TOTAL
 
388,820

 
393,228

 
 
 
 
 
TOTAL ASSETS
 

$3,624,081

 

$3,543,924

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$76,310

 

$48,653

Short-term borrowings
 
40,846

 
—

Accounts payable:
 
 
 
 
Associated companies
 
4,801

 
12,778

Other
 
33,152

 
31,862

Taxes accrued
 
4,397

 
11,121

Accumulated deferred income taxes
 
12,676

 
2,310

Interest accrued
 
32,091

 
11,825

Other
 
2,316

 
2,312

TOTAL
 
206,589

 
120,861

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
789,524

 
737,973

Accumulated deferred investment tax credits
 
53,120

 
54,786

Other regulatory liabilities
 
352,681

 
349,846

Decommissioning
 
647,263

 
616,157

Pension and other postretirement liabilities
 
65,027

 
79,411

Long-term debt
 
634,467

 
708,783

TOTAL
 
2,542,082

 
2,546,956

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2014 and 2013
 
789,350

 
789,350

Retained earnings
 
86,060

 
86,757

TOTAL
 
875,410

 
876,107

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,624,081

 

$3,543,924

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2012

$789,350

 

$43,379

 

$832,729

 
 
 
 
 
 
Net income
—

 
90,845

 
90,845

Common stock dividends
—

 
(50,000
)
 
(50,000
)
 
 
 
 
 
 
Balance at September 30, 2013

$789,350

 

$84,224

 

$873,574

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$789,350

 

$86,757

 

$876,107

 
 
 
 
 
 
Net income
—

 
77,280

 
77,280

Common stock dividends
—

 
(77,977
)
 
(77,977
)
 
 
 
 
 
 
Balance at September 30, 2014

$789,350

 

$86,060

 

$875,410

 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See " PART I, Item 1, Litigation " in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.  Also see "Item 5, Other Information, Environmental Regulation " below, for updates regarding environmental proceedings and regulation.

Item 1A.  Risk Factors

There have been no material changes to the risk factors discussed in " PART I, Item 1A, Risk Factors " in the Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)
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)
 
 
 
 
 
 
 
 
 
7/01/2014-7/31/2014
 
—

 

$—

 
—

 

$350,052,918

8/01/2014-8/31/2014
 
—

 

$—

 
—

 

$350,052,918

9/01/2014-9/30/2014
 
—

 

$—

 
—

 

$350,052,918

Total
 
—

 

$—

 
—

 
 

In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock.  According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.  Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.  In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.  In addition, in the first quarter 2014, Entergy withheld 55,076 shares of its common stock at $61.29 per share and 43,246 shares of its common stock at $63.03 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 relates only to the $500 million plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.



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Item 5.  Other Information

Regulation of the Nuclear Power Industry

Nuclear Waste Policy Act of 1982

Spent Nuclear Fuel

Following the current Presidential administration’s defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.

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.  In March 2014, Entergy Nuclear Operations made filings with the NRC reporting on decommissioning funding for certain of Entergy’s nuclear plants.  Those reports all showed that decommissioning funding for those 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

Cross-State Air Pollution

In March 2005, the EPA finalized the Clean Air Interstate Rule (CAIR), which was intended to reduce SO 2 and NO X emissions from electric generation plants in order to improve air quality in twenty-nine eastern states.  The rule required a combination of capital investment to install pollution control equipment and increased operating costs through the purchase of emission allowances.  Entergy began implementation in 2007, including installation of controls at several facilities and the development of an emission allowance procurement strategy.

Based on several court challenges, the CAIR was vacated and remanded to the EPA by the D.C. Circuit in 2008.  The court allowed the CAIR to become effective in January 2009, while the EPA revised the rule.  On July 7, 2011, the EPA released its final Cross-State Air Pollution Rule (CSAPR, which previously was referred to as the Transport Rule).  The rule was directed at limiting the interstate transport of emissions of NO X and SO 2 as precursors to ozone and fine particulate matter.  The final rule provided a significantly lower number of allowances to Entergy’s Utility states than did the draft rule.  Entergy’s capital investment and annual allowance purchase costs under the CSAPR would depend on the economic assessment of NO X and SO 2 allowance markets, the cost of control technologies, generation unit utilization, and the availability and cost of purchased power.

Entergy filed a petition for review with the United States Court of Appeals for the D.C. Circuit and a petition with the EPA for reconsideration of the rule and stay of its effectiveness. Several other parties filed similar petitions. In December 2011 the Court of Appeals for the D.C. Circuit Court 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

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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. In April 2014 the Supreme Court reversed the D.C. Circuit and remanded the case to the D.C. Circuit for further proceedings. In June 2014 the EPA filed a motion with the D.C. Circuit Court requesting that the court lift the stay and extend CSAPR’s deadlines by three years so that the Phase 1 emissions budgets apply in 2015 and 2016 and the Phase 2 emissions budgets apply in 2017 and beyond. Until the courts or the EPA issue further guidance on this rule and its applicability, Entergy will continue to comply with CAIR as directed by the D.C. Circuit in its original opinion.

New Source Performance Standards for Greenhouse Gas Emissions

As a part of a climate plan announced in June 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. In September 2013 the EPA issued the proposed New Source Performance Standards rule for new sources. The rule was published in the Federal Register in January 2014. Entergy is actively engaged in the rulemaking process. In June 2014 the EPA issued proposed standards for existing power plants.  Comments on this rule are due to the EPA by December 1, 2014.  Entergy is reviewing this rule and will be actively engaged in the rulemaking process.  Cost and methods of compliance remain unknown at this time. 

Clean Water Act

NPDES Permits and Section 401 Water Quality Certifications

Indian Point

See the Form 10-K for discussion of Entergy’s application for renewal of Indian Point 2 and Indian Point 3 discharge permit and Entergy’s application for a water quality certification. Hearings were held in July 2013 before New York State Department of Environmental Conservation (NYSDEC) ALJs on environmental issues related to Indian Point’s wedgewire screen proposal for “best technology available." In 2014, hearings were held on NYSDEC’s proposed best technology available, closed cycle cooling. The NYSDEC also has proposed annual fish protection outages of 42, 62, or 92 days at both units or at one unit with closed cycle cooling at the other. Hearings on this alternative technology are expected to occur in early 2015, to be followed by post-hearing briefing. The ALJs have issued no partial decisions on the several issues that have been litigated during the past two years and have not announced a schedule for doing so. After the full hearing on the merits, the ALJs will issue a recommended decision to the NYSDEC Commissioner who will then issue the final agency decision.  A party to the proceeding can appeal the decision of the NYSDEC Commissioner to state court.

Effluent Limitation Guidelines

In April 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 limitations proposed primarily affect coal units. The proposal includes several options for public consideration.  Entergy submitted comments on the proposed rule and will continue to engage in the public comment process as appropriate. The EPA announced that the final rule will be issued no later than September 30, 2015.


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316(b) Cooling Water Intake Structures

See the Form 10-K for discussion of this rule. In May 2014 the EPA issued the final 316(b) rule, followed by publication in the Federal Register in August 2014, with the final rule effective in October 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.

Entergy filed as a co-petitioner with the Utility Water Act Group (UWAG) a petition for review of the final rule. The case will be heard in the U.S. Court of Appeals for the 4 th Circuit in Richmond, Virginia. Entergy expects briefing on the case to occur in early 2015, with a decision by late 2015 or early 2016.

Federal Jurisdiction of Waters of the United States

In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the "connectivity" of waters that the agency says will inform the rulemaking. The proposed rule was published in the Federal Register on April 21, 2014. The initial 90-day public comment period has been extended until November 14, 2014. Preliminary review indicates that this proposal could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. Entergy is actively engaged in the rulemaking process.

Entergy Louisiana Officer Election (Entergy Louisiana)

On May 6, 2014, the Board of Directors of Entergy Louisiana elected Andrew S. Marsh to the position of Executive Vice President and Chief Financial Officer.  Upon his election, Mr. Marsh became Entergy Louisiana’s principal financial officer.  Alyson M. Mount, Entergy Louisiana’s Senior Vice President and Chief Accounting Officer, previously served as Entergy Louisiana’s acting principal financial officer and will continue to serve as its principal accounting officer. 

Mr. Marsh, age 42, continues to serve as Executive Vice President and Chief Financial Officer for Entergy Corporation.  Mr. Marsh previously served as Vice President, System Planning for Entergy Services, Inc. (ESI), from June 2010 until February 2013, Vice President, Planning and Financial Communications of ESI from July 2007 through June 2010 and as Vice President, Strategic Planning of ESI from October 2004 through June 2007. Mr. Marsh receives compensation for serving as an executive officer of Entergy Corporation and will not receive any additional compensation as Entergy Louisiana’s Executive Vice President and Chief Financial Officer.

Earnings Ratios (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)


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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,
 
September 30,
 
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
Entergy Arkansas
 
2.39
 
3.91
 
4.31
 
3.79

 
3.62

 
3.31
Entergy Gulf States Louisiana
 
2.99
 
3.58
 
4.36
 
3.48

 
3.63

 
4.07
Entergy Louisiana
 
3.52
 
3.41
 
1.86
 
2.08

 
3.13

 
3.37
Entergy Mississippi
 
3.31
 
3.35
 
3.55
 
2.79

 
3.19

 
2.78
Entergy New Orleans
 
3.61
 
4.43
 
5.37
 
3.02

 
1.93

 
4.11
Entergy Texas
 
1.92
 
2.10
 
2.34
 
1.76

 
1.94

 
2.35
System Energy
 
3.73
 
3.64
 
3.85
 
5.12

 
5.66

 
4.35
 
 
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions
 
 
Twelve Months Ended
 
 
December 31,
 
September 30,
 
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
Entergy Arkansas
 
2.09
 
3.60
 
3.83
 
3.36

 
3.25

 
2.96
Entergy Gulf States Louisiana
 
2.95
 
3.54
 
4.30
 
3.43

 
3.57

 
4.01
Entergy Louisiana
 
3.27
 
3.19
 
1.70
 
1.93

 
2.92

 
3.15
Entergy Mississippi
 
3.06
 
3.16
 
3.27
 
2.59

 
2.97

 
2.58
Entergy New Orleans
 
3.33
 
4.08
 
4.74
 
2.67

 
1.74

 
3.69

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 *
 
10(a) -
Fifth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014.
 
 
 
 
10(b) -
Third Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 25, 2013.
 
 
 
 
10(c) -
Fourth Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014.
 
 
 
 
10(d) -
Fifth Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014.
 
 
 
 
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.
 
 
 

213
Table of Contents

 
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.
 
 
 

214
Table of Contents

 
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.


215
Table of Contents

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:     November 6, 2014


216



Exhibit 10(a)

PENSION EQUALIZATION PLAN
OF ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective January 1, 2009)

Certificate of Amendment
Amendment No. 5


THIS INSTRUMENT, executed this 30th day of June, 2014, and effective July 1, 2014 constitutes the Fifth 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, in order to clarify certain provisions of the Plan, and further to implement the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of January 30, 2014 excluding from participation in the Plan any Employee who is a participant in the Entergy Corporation Cash Balance Plan for Non- Bargaining Employees or the Entergy Corporation Cash Balance Plan for Bargaining Employees and limiting benefit accruals under the Plan by certain other Employees who are rehired by any System Company on or after July 1, 2014, the Plan is hereby clarified and amended effective July 1, 2014, as follows:

1.
Section 1.10, the definition of “Eligible Employee,” is clarified to read as follows:
“1.10
“Eligible Employee” shall mean a non-bargaining Employee who satisfies the eligibility requirements of Section 2.01.”
2.
Section 1.16, the definition of “Key Employee,” is clarified to read as follows:
“1.16
“Key Employee” shall mean a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Administrator, in its sole discretion, in a manner consistent with the regulations issued under Code Section 409A.”
3.
Section 1.24, the definition of “Qualified Plan,” is amended by adding the following sentence at the end thereof:
“The term “Qualified Plan” shall exclude the Entergy Corporation Cash Balance Plan for Non-Bargaining Employees and the Entergy Corporation Cash Balance Plan for Bargaining Employees; and any reference herein to the “Qualified Cash Balance Plan” shall mean the Entergy Corporation Cash Balance Plan for Non-Bargaining Employees or the Entergy Corporation Cash Balance Plan for Bargaining Employees.”
4.
Section 1.28, “Supplemental Credited Service,” is amended by adding the following sentence at the end thereof:




“Notwithstanding the preceding sentence, “Supplemental Credited Service” shall not include any service which was not approved and accepted in writing by the Administrator prior to July 1, 2014.”
5.
Section 2.01, “Eligible Employees,” is amended by adding the following sentence at the end thereof:
“An Employee who on or after July 1, 2014 is reemployed in a position covered by a Qualified Cash Balance Plan and who continues to be eligible to receive a benefit under a Qualified Plan based on a prior period of employment with a System Company shall nevertheless be an Eligible Employee with respect to the benefits determined under Article III hereunder based on such prior period of employment, even if he first satisfies the eligibility requirements of this Section 2.01 while he was a participant in a Qualified Cash Balance Plan.”
6.
Section 2.02, “Participation,” is amended by adding the following sentence at the end thereof:
“Notwithstanding the preceding, if an Employee who is a Participant under this Plan is reemployed by a System Company on or after July 1, 2014 and becomes a participant in a Qualified Cash Balance Plan, service during the period of participation in the Qualified Cash Balance Plan shall be recognized under this Plan only to the extent such service is recognized under the Qualified Plans in which the Employee was a participant prior to July 1, 2014, such as for vesting, or eligibility for and the amount of any subsidized early retirement benefits or death benefits.”
7.
Section 3.02(a) is clarified to read as follows:
“(a)
Basic Excess Benefit . Subject to the remaining Subsections of this Section 3.02 and Subsection 4.01(c), each Participant who is fully vested in his Qualified Plan benefit and is a non-bargaining Employee at the time of his Separation from Service, shall be entitled to a single-sum payment under this Plan equal to the Present Value of the excess of (1) over (2), where (1) and (2) are as follows:”
8.
The introductory clause of Section 3.02(d) is clarified to read as follows:
“(d)
Death Benefit . Except as otherwise provided in Subsection 4.01(c), in the event of a Participant’s death prior to his Income Payment Date, if such Participant is fully vested in his Qualified Plan benefit and is a non-bargaining Employee at the time of his death, the Participant’s Beneficiary shall receive a death benefit under this Plan in a single-sum amount equal to the Present Value of the excess of (1) over (2), where (1) and (2) are as follows:”
9.
Sections 4.01(a) and 4.01(b) are clarified to read as follows:
“(a)
Retirement/Vested Termination Benefit . Subject to the remaining Subsections of this Section 4.01, each Participant, regardless of whether he has been granted Supplemental Credited Service, shall receive a single-sum payment equal to the Present Value of the Participant’s benefit determined under Article III, but taking into account the forfeiture provisions of Subsection 3.02(e). Payment of such single-sum benefit shall be made as soon as reasonably practicable following the Participant’s Income Payment Date. In all events, the single-sum payment shall be made no later than the end of the calendar year that includes the Participant’s Income Payment Date or, if later, by the 15th day of the third calendar month following the Participant’s Income Payment Date. A Participant’s benefits




under this Plan shall be paid in accordance with the terms of this Article IV, regardless of the date of benefit commencement under the Qualified Plan.
(b)
Death Benefit . In the event of a Participant’s death prior to his Income Payment Date, the Participant’s Beneficiary shall receive a death benefit under this Plan as determined under Subsection 3.02(d) in a single-sum payment as soon as reasonably practicable following the first day of the first month next following the Participant’s date of death (i.e., the “Beneficiary’s Income Payment Date”). In all events, the single-sum payment shall be made no later than the end of the calendar year that includes the Beneficiary’s Income Payment Date, or, if later, by the 15th day of the third calendar month following the Beneficiary’s Income Payment Date.”
10.
The first sentence of Section 4.02, “Participation in Additional Non-Account Balance Plans,” is amended to read as follows:
“Notwithstanding any other Plan provision to the contrary, the following provisions of this Section 4.02 shall apply. to the extent applicable, with respect to any Participant who also participates in any or all of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries (“SERP”), the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries (“SRP”), and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, which plans, together with this Plan, constitute Non-Account Balance Plans for purposes of Code Section 409A,”
11.
Section 4.02(c) is amended in its entirety to read as follows:
“(c)
Timing of Benefit Payments . A Participant’s benefit commencement date shall be the same under this Plan, the SRP, the SERP, and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, to the extent applicable.”
12.
Section 4.03 is clarified to read as follows:
“4.03
Code Section 409A Delayed Payments . Notwithstanding any Plan provision to the contrary, no Plan benefits shall be paid to a Participant who is a Specified Employee at the time of his Separation from Service until the earlier of the Participant’s death or six months following the Participant’s Separation from Service. If distribution is delayed pursuant to this Section 4.03, the delayed distribution amount shall be credited with investment returns to the payment date as if such amount were invested in the Entergy Stable Income Fund or such other investment fund as from time-to-time may be designated in advance and in writing by the Administrator. The full amount of the Participant’s delayed distribution amount, including investment returns deemed credited pursuant to this Section 4.03, shall be distributed to the Participant as soon as reasonably practicable following the first day of the first month next following the earlier of the Participant’s date of death or the last day of the six-month delay period (the ‘Delayed Payment Date”). In all events, such payment shall be made no later than the end of the calendar year that includes the Delayed Payment Date, or, if later, by the 5th day of the third calendar month following the Participant’s Delayed Payment Date.”
13.
The introductory clause of Section 6.02 is clarified to read as follows:




“6.02
Accelerated Vesting . Notwithstanding any Plan provisions to the contrary, if during a Change in Control Period there should occur a Qualifying Event with respect to a Participant, Participant shall not cease to be a Participant and shall, regardless of his vested status under the Qualified Plan, become fully vested in, and have a non-forfeitable right to, all benefits accrued under the Plan as of the date of such Qualifying Event, provided the Participant is a non-bargaining Employee at the time of the Qualifying Event, except that all such benefits shall be subject to forfeiture upon occurrence of any of the following events:”
14.
Section 6.03 is clarified to read as follows:
“6.03
Benefit Commencement Date . Notwithstanding any Plan provision to the contrary except Section 4.03, if during a Change in Control Period there should occur a Qualifying Event with respect to a Participant who is a non-bargaining Employee at the time of such Qualifying Event and if there does not occur a forfeiture event referenced in Section 6.02, the Participant’s Plan benefit amount, if payable under Subsection 4.02(b), shall be determined pursuant to Article III (taking into account the accelerated vesting of Section 6.02) and shall be payable pursuant to the provisions of this Plan as soon as reasonably practicable following the first day of the first month next following the Participant’s Qualifying Event, subject to the delay requirement set forth in Section 4.03 to the extent applicable. In all events, distributions shall be made no later than the end of the calendar year that includes the first day of the first month next following such Qualifying Event or, if later, by the 15th day of the third calendar month following the first day of the first month next following the Participant’s Qualifying Event.”
15.
Section 6.04 is clarified to read as follows:
“6.04
No Benefit Reduction . Notwithstanding anything stated above to the contrary, an amendment to, or termination of, the Plan following a Change in Control shall not reduce a Participant’s benefits accrued under this Plan through the date of any such amendment or termination. In no event shall a Participant’s benefits accrued under this Plan following a Change in Control be less than such Participant’s benefits accrued under this Plan immediately prior to the Change in Control Period, subject, however, to the forfeiture provisions described in Section 6.02 as in existence on the date immediately preceding the commencement date of the Change in Control Period, and provided further that the Participant is a non-bargaining Employee as of the date immediately prior to the Change in Control.
16.
Section 7.10 of the Plan, “Judicial Proceedings for Benefits,” is clarified to read as follows:
“7.10
Judicial Proceeding for Benefits . In order to institute any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, a claimant/appellant must initiate such action or proceeding within 90 days from the later of: (i) the earlier of (a) the date of the adverse appeal notification from the Claims Appeal Administrator or (b) 120 days from the date the appeal is received by the Claims Appeal Administrator, and (ii) the end of the 60 days in which a claimant has to appeal an adverse benefit determination, as described in Section 7.09. Notwithstanding the foregoing, a claimant must exhaust all procedures set forth herein prior to instituting any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, for a claim for benefits under the Plan.”




17.
Section 8.02(d), regarding restrictions on amendment or termination, is clarified to read as follows:
“(d)
Unless agreed to in writing and signed by the affected Participant and by the Plan Administrator, no provision of this Plan may be modified, waived or discharged during the period after the Potential Change in Control and before the earlier of: (i) the expiration of the two-year period commencing on the date of a Potential Change in Control, or (ii) the date on which the Change in Control event contemplated by the Potential Change in Control is terminated.”

IN WITNESS WHEREOF, the Personnel Committee has caused this Fifth 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 1, 2014.

ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned authorized representative


/s/ Donald W. Vinci_________________________
DONALD W. VINCI
Senior Vice-President
Human Resources & Chief Diversity Officer








Exhibit 10(b)

SUPPLEMENTAL RETIREMENT PLAN
OF ENTERGY CORPORATION AND SUBSIDIARIES
(As Amended and Restated Effective January 1, 2009)

Certificate of Amendment
Amendment No. 3

THIS INSTRUMENT, executed this 25th day of July, 2013, and effective July 25, 2013, constitutes the Third Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries (As Amended and Restated effective January 1, 2009) (the “Plan”).
All capitalized terms used in this Amendment No. 3 shall have the meanings assigned to them in the Plan unless otherwise herein defined.
Pursuant to Section 10.01 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 13 (“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 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 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 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 B 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 B Participant’s age as of his Separation from Service Date and the date the Eligible Appendix B Participant will attain age fifty-five (55).
(b)
An Eligible Appendix B 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 B Participant shall have credited ten (10) Years of Service as of his Separation from Service Date.
(c)
An Eligible Appendix B 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 B 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 B Participant’s age as of his Separation from Service Date and the date the Eligible Appendix B Participant will attain age sixty-five (65).
(d)
Notwithstanding Subsections B-31(a), B-31(b) or B-3.1(c) to the contrary, in no event shall an Eligible Appendix B Participant who is not accruing benefits as of the date immediately




preceding his Universal Separation Date (as defined in the Severance Program) due to a Demotion as described in Section 4.02 or otherwise be imputed with any additional Years of Service pursuant to this Section B-3.1.
B-3.2
Early Retirement Reduction Factors .
For purposes of computing Present Value in Section 1.24, Subsection 1.24(a) shall apply as if the Eligible Appendix B Participant was eligible for Retirement from Service on his Separation from Service Date, benefits are assumed to commence as of the Separation from Service Income Payment Date and shall not be reduced if his Income Payment Date precedes his Normal Retirement Income Payment Date, provided however, if the Eligible Appendix B Participant has not attained age fifty-five (55) as of his Separation from Service Income Payment Date benefits shall be reduced by ¼ of 1% for each month by which the Eligible Appendix B Participant’s Separation from Service Income Payment Date precedes the first day of the first month following the Eligible Appendix B Participant’s 55th birthday.
ARTICLE B-IV - EFFECT ON AMOUNT OF BENEFITS
B-4.1
Imputed Service Included in Calculating Benefits . Years of Service which are imputed pursuant to Article B-III, shall be taken into account as additional Years of Service for purposes of computing benefits under Section 4.01. 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 Third Amendment to the Supplemental 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 10(c)
SUPPLEMENTAL 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 30th day of June, 2014, and effective July 1, 2014 constitutes the Fourth Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries (As Amended and Restated effective January 1, 2009) (the “Plan”).

All capitalized terms used in this Amendment No. 4 shall have the meanings assigned to them in the Plan unless otherwise herein defined.

Pursuant to Section 10.01 of the Plan, in order to clarify certain provisions of the Plan, and further to implement the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of January 30, 2014 excluding from participation in the Plan any Employee who is hired, rehired or promoted by a System Company on or after July 1, 2014, the Plan is hereby clarified and amended effective July 1, 2014, as follows:

1.
Section 1.17, the definition of “Key Employee,” is clarified to read as follows:

“1.17
“Key Employee” shall mean a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Administrator, in its sole discretion, in a manner consistent with the regulations issued under Code Section 409A.”

2.
Section 1.19, the definition of “Participant,” is amended by adding the following sentence at the end thereof:

“Notwithstanding the preceding, no Employee may become a Participant in the Plan after June 30, 2014.”

3.
Section 1.26, the definition of “Retirement from Service,” is clarified to read as follows:
“1.26
“Retirement from Service” or “Retirement” shall mean the Participant’s retirement from service with the Employer in accordance with Section 3.01 or 3.02, provided that such Participant has a separation from service which meets the requirements of Code Section 409A and the regulations thereunder.”

4.
Section 4.02, “Effect of Officer Status Demotion,” is amended in its entirety to read as follows:

“4.02
Effect of Officer Status Demotion . If a Participant is demoted from the position he held on the date he commenced participation in the Plan (“Demotion”), the period of System Company employment subsequent to the date of such Demotion shall not be included in determining such Participant’s Years of Service for any purpose under the Plan including, without limitation, the calculation of benefits under Section 4.01. Notwithstanding the immediately preceding sentence to the contrary, in the event a Participant experiences a




Demotion, the Administrator, in its sole discretion, may permit such Participant to continue the accrual of benefits under the Plan based on the period of his employment subsequent to the date of his Demotion, provided such Participant remains an Employee. Unless the Administrator determines that such demoted Participant is eligible to continue the accrual of benefits subsequent to his Demotion within sixty (60) days from the date of such Demotion, but no later than June 30, 2014, the calculation of such Participant’s benefits under the Plan shall be subject to the limitation described in the first sentence of this Section 4.02. If a Participant whose benefits are limited in accordance with the first sentence of this Section 4.02 is subsequently reinstated prior to July 1, 2014 to at least the position or level he held on the date he commenced participation in the Plan, the period of employment subsequent to such reinstatement shall be included in determining his Years of Service under the Plan. There shall be no recognition under the Plan of reinstatements that occur on or after July 1, 2014. The provisions of this Section 4.02 with respect to Demotions of Participants who were System Company officers shall be effective as of November 1, 1991; provided, however, that the date of Demotion for a Participant who was a System Company officer and who experienced such Demotion prior to November 1, 1991, shall be deemed to be November 1, 1991 for purposes of this Section 4.02. The provisions of this Section 4.02 with respect to Demotions of Participants who were not System Company officers shall be effective as of September 30, 2002; provided, however, that the date of Demotion for a Participant who was not a System Company officer and who experienced such Demotion prior to September 30, 2002, shall be deemed to be September 30, 2002 for purposes of this Section 4.02.”

5.
The first sentence of Section 4.03. “Participation in Additional Non-Account Balance Plans,” is amended to read as follows:

“Notwithstanding any other Plan provision to the contrary, the following provisions of this Section 4.03 shall apply, to the extent applicable, with respect to any Participant who also participates in any or all of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries (“SERP”), the Pension Equalization Plan of Entergy Corporation and Subsidiaries (“PEP”), and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, which plans, together with this Plan, constitute Non-Account Balance Plans for purposes of Code Section 409A.”

6.
Section 4.03(c) is amended in its entirety to read as follows:

“(c)
Timing of Benefit Payments . A Participant’s benefit commencement date shall be the same under this Plan, the PEP, the SERP, and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, to the extent applicable.”

7.
Sections 5.01(a) and 5.01(b) are clarified to read as follows:

“(a)
Retirement/Separation Benefit . A Participant’s Plan benefit, as determined in accordance with Article IV, shall be payable in the form of a single-sum distribution as soon as reasonably practicable following the applicable Income Payment Date. In all events, the single-sum distribution shall be made no later than the end of the calendar year that includes the Participant’s Income Payment Date or, if later, by the 15th day of the third calendar month following the Participant’s Income Payment Date.





(b)
Death Benefit . In the event of a Participant’s death prior to his Retirement or Separation from Service Income Payment Date, the Participant’s Beneficiary shall receive a death benefit under this Plan, as determined under Section 4.04, in a single-sum distribution as soon as reasonably practicable following the first day of the first month next following the Participant’s date of death (i.e., the “Beneficiary’s Income Payment Date”). In all events, the single-sum distribution shall be made no later than the end of the calendar year that includes the Beneficiary’s Income Payment Date, or, if later, by the 15th day of the third calendar month following the Beneficiary’s Income Payment Date.”

8.
Section 5.03 is clarified to read as follows:

“5.03
Code Section 409A Delayed Payments . Notwithstanding any Plan provision to the contrary, no Plan benefits shall be paid to a Participant who is a Specified Employee at the time of his Retirement or Separation from Service until the earlier of the Participant’s death or six months following the Participant’s Retirement or Separation from Service. If distribution is delayed pursuant to this Section 5.03, the delayed distribution amount shall be credited with investment returns to the payment date as if such amount were invested in the Entergy Stable Income Fund or such other investment fund as from time-to-time may be designated in advance and in writing by the Administrator. The full amount of the Participant’s delayed distribution amount, including investment returns deemed credited pursuant to this Section 5.03, shall be distributed to the Participant as soon as reasonably practicable following the first day of the first month next following the earlier of the Participant’s date of death or the last day of the six-month delay period (the “Delayed Payment Date”). In all events, such payment shall be made no later than the end of the calendar year that includes the Delayed Payment Date, or, if later, by the 15th day of the third calendar month following the Participant’s Delayed Payment Date.”

9.
Section 8.03 is clarified to read as follows:

“8.03
Benefit Commencement Date . Notwithstanding any Plan provision to the contrary except Section 5.03, if during a Change in Control Period there should occur a Qualifying Event with respect to a Participant and if there does not occur a forfeiture event referenced in Section 8.02, the Participant’s Plan benefit amount, if payable under Subsection 4.03(b), shall be determined according to Section 4.01 without regard to the Section’s eligibility requirements. Notwithstanding the provisions of Article III to the contrary, such Participant’s Income Payment Date shall be as soon as reasonably practicable following the first day of the first month next following the Participant’s Qualifying Event, subject to the delay requirement set forth in Section 5.03 to the extent applicable. In all events, distributions shall be made no later than the end of the calendar year that includes the first day of the first month next following such Qualifying Event or, if later, by the 15th day of the third calendar month following the first day of the first month next following the Participant’s Qualifying Event.”

10.
Section 9.10 of the Plan, “Judicial Proceedings for Benefits,” is clarified to read as follows:

“9.10
Judicial Proceeding for Benefits . In order to institute any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, a claimant/appellant must initiate such action or proceeding within 90 days from the later of: (i) the earlier of (a) the date of the adverse appeal notification from the Claims Appeal Administrator or (b) 120 days from the date the appeal is received by the Claims Appeal




Administrator, and (ii) the end of the 60 days in which a claimant has to appeal an adverse benefit determination, as described in Section 9.09. Notwithstanding the foregoing, a claimant must exhaust all procedures set forth herein prior to instituting any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, for a claim for benefits under the Plan.”

11.
Section 10.02(d) is clarified to read as follows:

“(d)
Unless agreed to in writing and signed by the affected Participant and by the Plan Administrator, no provision of this Plan may be modified, waived or discharged during the period after the Potential Change in Control and before the earlier of: (i) the expiration of the two-year period commencing on the date of a Potential Change in Control, or (ii) the date on which the Change in Control event contemplated by the Potential Change in Control is terminated.”

IN WITNESS WHEREOF, the Personnel Committee has caused this Fourth Amendment to the Supplemental 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 1, 2014.

ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned authorized representative


/s/ Donald W. Vinci_________________________
DONALD W. VINCI
Senior Vice-President
Human Resources & Chief Diversity Officer









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. 5


THIS INSTRUMENT, executed this 30th day of June, 2014, and effective July 1, 2014 constitutes the Fifth 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 defined in this document.

Pursuant to Section 9.01 of the Plan, in order to clarify certain provisions of the Plan, and further to implement the Resolutions of the Personnel Committee of the Board of Directors adopted at its meeting of January 30, 2014, excluding from participation in the Plan any Employee who is hired, rehired or promoted by a System Company on or after July 1, 2014, the Plan is hereby clarified and amended effective July 1, 2014, as follows:

1.
Section 1.21, the definition of “Key Employee,” is clarified to read as follows:

“1.21
“Key Employee” shall mean a “Key Employee” (as defined in Code Section 416(i) without regard to paragraph (5) thereof), as determined by the Administrator, in its sole discretion, in a manner consistent with the regulations issued under Code Section 409A.”

2.
The following clarifying change is made to Section 1.23, the definition of “Normal Retirement Date.” As clarified, Section 1.23 reads as follows:

“1.23
“Normal Retirement Date” shall mean the date on which a Participant, who has attained age sixty-five (65) elects to Retire from Service.”

3.
Section 1.24, the definition of “Participant,” is amended by adding the following sentence at the end thereof:

“Notwithstanding the preceding, no Employee may become a Participant in the Plan after June 30, 2014 and no inactive Participant may become an active Participant after June 30, 2014.”

4.
Section 1.32, the definition of “Retirement,” “Retires,” Retire,” or “Retired from Service,” is clarified to read as follows:

“1.32
“Retirement,” “Retires,” “Retire,” “Retire from Service” shall mean the retirement of a Participant from employment with the Employer in accordance with Article II, provided that such Participant has a separation from service which meets the requirements of the Code Section 409A and regulations thereunder.”





5.
The first sentence of Section 2.05, “Participation in Additional Non-Account Balance Plans,” is amended to read as follows:

“Notwithstanding any other Plan provision to the contrary, the following provisions of this Section 2.05 shall apply, to the extent applicable, with respect to any Participant who also participates in any or all of the Pension Equalization Plan of Entergy Corporation and Subsidiaries (“PEP”), the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries (“SRP”), and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, which plans, together with this Plan, constitute Non-Account Balance Plans for purposes of Code Section 409A.”

6.
Section 2.05(c) is amended in its entirety to read as follows:

“(c)
Timing of Benefit Payments . A Participant’s benefit commencement date shall be the same under this Plan, the PEP, the SRP, and the Cash Balance Equalization Plan of Entergy Corporation and Subsidiaries, to the extent applicable.”

7.
Section 2.07, “Inactive Participant,” is amended by modifying the first sentence thereof to read as follows:

“If an individual remains employed by his Employer, but is demoted to a position whereby he no longer satisfies the Participant eligibility criteria set forth in Section 1.24 and does not reattain the status of an active Participant prior to July 1, 2014, such individual shall be considered an inactive Participant for as long as he remains employed by a System Company.”

8.
Section 3.01, Single-Sum Form of Payment, is clarified to read as follows:

“3.01
Single-Sum Form of Payment . Subject to the remaining Sections of this Article III, a Participant’s Plan benefit shall be payable in the form of a single-sum distribution equal in amount to the Present Value of the Participant’s Benefit Base determined under Section 2.01. Payment of such single-sum benefit shall be made as soon as reasonably practicable following the Participant’s applicable Income Payment Date (i.e., on the Income Payment Date of the earlier to occur of the Participant’s Separation from Service Date, Early Retirement Date or Normal Retirement Date). In all events, distribution shall be made no later than the end of the calendar year in which such Income Payment Date occurs or, if later, by the 15th day of the third calendar month following such Income Payment Date.”

9.
Section 3.03, Code Section 409A Delayed Payments, is clarified to read as follows:

“3.03
Code Section 409A Delayed Payments . Notwithstanding any Plan provision to the contrary, no Plan benefits shall be paid to a Participant who is a Specified Employee at the time of his Retirement or Separation from Service until the earlier of the Participant’s death or six months following the Participant’s Retirement or Separation from Service. If distribution is delayed pursuant to this Section 3.03, the delayed distribution amount shall be credited with investment returns to the payment date as if such amount were invested in the Entergy Stable Income Fund or such other investment fund as from time-to-time may be designated in advance and in writing by the Administrator. The full amount of the Participant’s delayed distribution amount, including investment returns deemed credited pursuant to this Section 3.03, shall be distributed to the Participant as soon as reasonably practicable after the first day of the first month next following the




earlier of the Participant’s date of death or the last day of the six-month delay period (the “Delayed Payment Date”). In all events, such payment shall be made no later than the end of the calendar year that includes the Delayed Payment Date, or, if later, by the 15th day of the third calendar month following the Participant’s Delayed Payment Date.”

10.
Section 4.02, Form and Timing of Death Benefit Payment, is clarified to read as follows:

“4.02
Form and Timing of Death Benefit Payment . The death benefit payable under this Article IV shall be paid in a single-sum distribution as soon as reasonably practicable following the first day of the first month next following the death of the Participant (i.e., the “Beneficiary’s Income Payment Date”). In all events, the single-sum payment shall be made no later than the end of the calendar year that includes the Beneficiary’s Income Payment Date, or, if later, by the 15th day of the third calendar month following the Beneficiary’s Income Payment Date.”

11.
Section 7.03, Benefit Amount and Income Payment Date, is clarified to read as follows:

“7.03
Benefit Amount and Income Payment Date . Notwithstanding any Plan provision to the contrary except Section 3.03, if during a Change in Control Period there should occur a Qualifying Event with respect to a Participant and if there does not occur a forfeiture event described in Section 7.02, the Participant’s Plan benefit amount, if payable under Subsection 2.05(b), shall be determined according to Section 2.03 (subject to Section 2.07 in the case of an inactive Participant) without regard to that Section’s eligibility requirements. Notwithstanding the provisions of Article II or Article III to the contrary, such Participant’s Income Payment Date shall be as soon as reasonably practicable following the first day of the first month next following the Participant’s Qualifying Event, subject to the delay requirement set forth in Section 3.03 to the extent applicable. In determining the death benefit provided under Article IV, the Participant will be deemed to have met the five (5) actual Years of Service requirement regardless of his actual Years of Service. In all events, distributions shall be made no later than the end of the calendar year that includes the first day of the first month next following the Qualifying Event or, if later, by the 15th day of the third calendar month following the first day of the first month next following the Participant’s Qualifying Event.”

12.
Section 8.10 of the Plan, “Judicial Proceedings for Benefits,” is clarified to read as follows:

“8.10
Judicial Proceeding for Benefits . In order to institute any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, a claimant/appellant must initiate such action or proceeding within 90 days from the later of: (i) the earlier of (a) the date of the adverse appeal notification from the Claims Appeal Administrator or (b) 120 days from the date the appeal is received by the Claims Appeal Administrator, and (ii) the end of the 60 days in which a claimant has to appeal an adverse benefit determination, as described in Section 8.09. Notwithstanding the foregoing, a claimant must exhaust all procedures set forth herein prior to instituting any action or proceeding in any state or federal court of law or equity, or before any administrative tribunal or arbitrator, for a claim for benefits under the Plan.”

13.
Section 9.02(d), regarding restrictions on amendment or termination, is clarified to read as follows:





“(d)
Unless agreed to in writing and signed by the affected Participant and by the Plan Administrator, no provision of this Plan may be modified, waived or discharged during the period after the Potential Change in Control and before the earlier of: (i) the expiration of the two-year period commencing on the date of a Potential Change in Control, or (ii) the date on which the Change in Control event contemplated by the Potential Change in Control is terminated.”


IN WITNESS WHEREOF, the Personnel Committee has caused this Fifth 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 1, 2014.

ENTERGY CORPORATION
PERSONNEL COMMITTEE
through the undersigned authorized representative


/s/ Donald W. Vinci_________________________
DONALD W. VINCI
Senior Vice-President
Human Resources & Chief Diversity Officer







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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest Charges
$
92,340

$
91,598

$
83,545

$
82,860

$
91,318

$
91,891

  Interest applicable to rentals
14,440

6,612

6,492

5,768

5,350

4,737

 
 
 
 
 
 
 
Total fixed charges, as defined
106,780

98,210

90,037

88,628

96,668

96,628

 
 
 
 
 
 
 
Preferred dividends, as defined (a)
15,275

8,483

11,310

11,310

11,310

11,310

 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined
$
122,055

$
106,693

$
101,347

$
99,938

$
107,978

$
107,938

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
  Net Income
$
66,875

$
172,618

$
164,891

$
152,365

$
161,948

$
144,524

  Add:
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
       Total
81,756

112,944

132,765

94,806

91,787

78,846

    Fixed charges as above
106,780

98,210

90,037

88,628

96,668

96,628

 
 
 
 
 
 
 
Total earnings, as defined
$
255,411

$
383,772

$
387,693

$
335,799

$
350,403

$
319,998

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
2.39

3.91

4.31

3.79

3.62

3.31

 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 preferred dividends, as defined
2.09

3.60

3.83

3.36

3.25

2.96

 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest charges
$
118,243

$
101,318

$
84,356

$
83,251

$
81,118

$
85,500

  Interest applicable to rentals
3,767

2,204

2,309

2,074

1,902

1,846

 
 
 
 
 
 
 
Total fixed charges, as defined
122,010

103,522

86,665

85,325

83,020

87,346

 
 
 
 
 
 
 
Preferred dividends, as defined (a)
1,306

1,006

1,341

1,341

1,341

1,344

 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined
$
123,316

$
104,528

$
88,006

$
86,666

$
84,361

$
88,690

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
  Net Income
$
153,281

$
174,319

$
201,604

$
158,977

$
161,662

$
180,312

  Add:
 
 
 
 
 
 
    Income Taxes
88,951

92,297

89,736

52,616

56,819

87,921

    Fixed charges as above
122,010

103,522

86,665

85,325

83,020

87,346

 
 
 
 
 
 
 
Total earnings, as defined
$
364,242

$
370,138

$
378,005

$
296,918

$
301,501

$
355,579

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
2.99

3.58

4.36

3.48

3.63

4.07

 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 preferred dividends, as defined
2.95

3.54

4.30

3.43

3.57

4.01

 
 
 
 
 
 
 
_______________________
 
 
 
 
 
 
(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 Distributions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
Total Interest
$
103,671

$
119,484

$
116,803

$
136,967

$
153,529

$
164,699

  Interest applicable to rentals
6,810

4,103

4,269

3,928

3,544

3,412

 
 
 
 
 
 
 
Total fixed charges, as defined
110,481

123,587

121,072

140,895

157,073

168,111

 
 
 
 
 
 
 
Preferred distributions, as defined (a)
8,295

8,474

11,297

11,297

11,297

11,328

 
 
 
 
 
 
 
Combined fixed charges and preferred distributions, as defined
$
118,776

$
132,061

$
132,369

$
152,192

$
168,370

$
179,439

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
  Net Income
$
232,845

$
231,435

$
473,923

$
281,081

$
252,464

$
296,980

  Add:
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
Total Taxes (Benefit)
45,050

66,546

(370,211
)
(128,922
)
81,877

100,975

    Fixed charges as above
110,481

123,587

121,072

140,895

157,073

168,111

 
 
 
 
 
 
 
Total earnings, as defined
$
388,376

$
421,568

$
224,784

$
293,054

$
491,414

$
566,066

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.52

3.41

1.86

2.08

3.13

3.37

 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
preferred distributions, as defined
3.27

3.19

1.70

1.93

2.92

3.15

 
 
 
 
 
 
 
_______________________
 
 
 
 
 
 
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest
$
51,282

$
55,774

$
52,273

$
57,345

$
59,031

$
57,201

  Interest applicable to rentals
1,959

1,921

1,731

1,637

1,148

1,411

 
 
 
 
 
 
 
Total fixed charges, as defined
53,241

57,695

54,004

58,982

60,179

58,612

 
 
 
 
 
 
 
Preferred dividends, as defined (a)
4,370

3,435

4,580

4,580

4,580

4,580

 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined
$
57,611

$
61,130

$
58,584

$
63,562

$
64,759

$
63,192

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income
$
79,367

$
85,377

$
108,729

$
46,768

$
82,159

$
61,397

  Add:
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
    Total income taxes
43,395

50,111

28,801

58,679

49,757

42,945

    Fixed charges as above
53,241

57,695

54,004

58,982

60,179

58,612

 
 
 
 
 
 
 
Total earnings, as defined
$
176,003

$
193,183

$
191,534

$
164,429

$
192,095

$
162,954

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.31

3.35

3.55

2.79

3.19

2.78

 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 preferred dividends, as defined
3.06

3.16

3.27

2.59

2.97

2.58

 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________
 
 
 
 
 
 
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest
$
16,965

$
13,170

$
11,114

$
11,344

$
13,675

$
13,291

  Interest applicable to rentals
593

751

743

670

564

561

 
 
 
 
 
 
 
Total fixed charges, as defined
17,558

13,921

11,857

12,014

14,239

13,852

 
 
 
 
 
 
 
Preferred dividends, as defined (a)
1,454

1,177

1,569

1,569

1,569

1,569

 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined
$
19,012

$
15,098

$
13,426

$
13,583

$
15,808

$
15,421

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income
$
30,479

$
31,114

$
35,976

$
17,065

$
11,683

$
30,293

  Add:
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
     Total
15,346

16,601

15,862

7,240

1,619

12,772

    Fixed charges as above
17,558

13,921

11,857

12,014

14,239

13,852

 
 
 
 
 
 
 
Total earnings, as defined
$
63,383

$
61,636

$
63,695

$
36,319

$
27,541

$
56,917

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined (b)
3.61

4.43

5.37

3.02

1.93

4.11

 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 preferred dividends, as defined
3.33

4.08

4.74

2.67

1.74

3.69

 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest charges
$
106,163

$
95,272

$
93,554

$
96,035

$
92,156

$
89,716

  Interest applicable to rentals
3,069

3,178

3,497

2,750

1,918

1,920

 
 
 
 
 
 
 
Total fixed charges, as defined
$
109,232

$
98,450

$
97,051

$
98,785

$
94,074

$
91,636

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
  Net Income
$
63,841

$
66,200

$
80,845

$
41,971

$
57,881

$
81,514

  Add:
 
 
 
 
 
 
    Income Taxes
36,915

42,383

49,492

33,118

30,108

41,807

    Fixed charges as above
109,232

98,450

97,051

98,785

94,074

91,636

 
 
 
 
 
 
 
Total earnings, as defined
$
209,988

$
207,033

$
227,388

$
173,874

$
182,063

$
214,957

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
1.92

2.10

2.34

1.76

1.94

2.35

 
 
 
 
 
 
 





Exhibit 12(g)
 
 
 
 
 
 
 
 
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2009
2010
2011
2012
2013
2014
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
  Total Interest
$
47,570

$
51,912

$
48,117

$
45,214

$
38,173

$
52,864

  Interest applicable to rentals
5,885

634

684

655

974

922

 
 
 
 
 
 
 
Total fixed charges, as defined
$
53,455

$
52,546

$
48,801

$
45,869

$
39,147

$
53,786

 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
  Net Income
$
48,908

$
82,624

$
64,197

$
111,866

$
113,664

$
100,099

  Add:
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
      Total
96,901

56,049

74,953

77,115

68,853

79,897

    Fixed charges as above
53,455

52,546

48,801

45,869

39,147

53,786

 
 
 
 
 
 
 
Total earnings, as defined
$
199,264

$
191,219

$
187,951

$
234,850

$
221,664

$
233,782

 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.73

3.64

3.85

5.12

5.66

4.35

 
 
 
 
 
 
 





Exhibit 31(a)
CERTIFICATIONS

I, Leo P. Denault, certify that:

I have reviewed this quarterly report on Form 10-Q of Entergy Corporation;
1.
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;
2.
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;
3.
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
4.
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:   November 6, 2014





Exhibit 31(b)
CERTIFICATIONS

I, Andrew S. Marsh, certify that:
I have reviewed this quarterly report on Form 10-Q of Entergy Corporation;
1.
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;
2.
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;
3.
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
4.
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:   November 6, 2014





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:   November 6, 2014




Exhibit 31(d)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Arkansas, Inc.

Date:   November 6, 2014





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:   November 6, 2014





Exhibit 31(f)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Gulf States Louisiana, L.L.C.

Date:   November 6, 2014





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:   November 6, 2014





Exhibit 31(h)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Louisiana, LLC

Date:   November 6, 2014





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:   November 6, 2014





Exhibit 31(j)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Mississippi, Inc.

Date:   November 6, 2014





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:   November 6, 2014





Exhibit 31(l)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy New Orleans, Inc.

Date:   November 6, 2014





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:   November 6, 2014





Exhibit 31(n)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Texas, Inc.

Date:   November 6, 2014





Exhibit 31(o)
CERTIFICATIONS

I, Theodore H. Bunting, Jr., 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/ Theodore H. Bunting, Jr.
Theodore H. Bunting, Jr.
President and Chief Executive Officer
of System Energy Resources, Inc.

Date:   November 6, 2014





Exhibit 31(p)
CERTIFICATIONS

I, Andrew S. Marsh, 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/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial
Officer of System Energy Resources, Inc.

Date:   November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 Arkansas, Inc.


Date:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 Gulf States Louisiana, L.L.C.


Date:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 Louisiana, LLC


Date:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 Mississippi, Inc.


Date:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 New Orleans, Inc.


Date:  November 6, 2014





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 September 30, 2014 (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:  November 6, 2014





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, Andrew S. Marsh, Executive Vice President and Chief Financial 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 September 30, 2014 (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 Texas, Inc.


Date:  November 6, 2014





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, Theodore H. Bunting, Jr., 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 September 30, 2014 (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/ Theodore H. Bunting, Jr.
 Theodore H. Bunting, Jr.
President and Chief Executive Officer
of System Energy Resources, Inc.


Date:  November 6, 2014





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, Andrew S. Marsh, Executive 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 September 30, 2014 (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 System Energy Resources, Inc.


Date:  November 6, 2014