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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 June 30, 2017
 
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
 
1-35747
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
 
 
 
 
 
 
 
 
 
 
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
 
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
10055 Grogans Mill Road
The Woodlands, Texas 77380
Telephone (409) 981-2000
61-1435798
 
 
 
 
 
 
 
 
 
 
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
47-4469646
 
1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
 
 
 
 
 
 
 
 
 
 
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
 
 
 
 
 
 
 
 
__________________________________________________________________________________________

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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 þ No o

Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files).  Yes þ No o

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
 
Large
accelerated
filer
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
 
Emerging
growth
company
Entergy Corporation
ü
 
 
 
 
 
 
 
 
Entergy Arkansas, Inc.
 
 
 
 
ü
 
 
 
 
Entergy Louisiana, LLC
 
 
 
 
ü
 
 
 
 
Entergy Mississippi, Inc.
 
 
 
 
ü
 
 
 
 
Entergy New Orleans, Inc.
 
 
 
 
ü
 
 
 
 
Entergy Texas, Inc.
 
 
 
 
ü
 
 
 
 
System Energy Resources, Inc.
 
 
 
 
ü
 
 
 
 

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Common Stock Outstanding
 
Outstanding at July 31, 2017
Entergy Corporation
($0.01 par value)
179,520,021

Entergy Corporation, Entergy Arkansas, Inc., 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, 2016 and the Quarterly Report for Form 10-Q for the quarter ended March 31, 2017, 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
June 30, 2017

 
Page Number
 
 
Part 1. Financial Information
 
Entergy Corporation and Subsidiaries
 
Notes to Financial Statements
Entergy Arkansas, Inc. and Subsidiaries
 
Entergy Louisiana, LLC and Subsidiaries
 

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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2017

 
Page Number
 
 
Entergy Mississippi, Inc.
 
Entergy New Orleans, Inc. and Subsidiaries
 
Entergy Texas, Inc. and Subsidiaries
 
System Energy Resources, Inc.
 
Part II.   Other Information
 


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FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, 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;
•
long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;
•
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the effect of current or projected MISO market rules and market 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 or the U.S. Department of Justice;
•
changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned potential or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, 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 and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;
•
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities;
•
the operation and maintenance of Entergy’s nuclear generating facilities require the commitment of substantial human and capital resources that can result in increased costs and capital expenditures;
•
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, emissions allowances, 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 laws and regulations or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter, heat, and other regulated air and water emissions, and changes in costs of compliance with environmental laws and regulations;
•
the effects of changes in federal, state or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, or energy policies;
•
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
•
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, 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, including the potential for increases in sea levels or coastal land and wetland loss;
•
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, including power prices, 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 and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, 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 effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
•
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 and the effects on benefits costs 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, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;
•
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by as early as 2021, including the implementation of the planned shutdown of Pilgrim, Palisades, Indian Point 2, and Indian Point 3;
•
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 strategic transactions Entergy may undertake, including mergers, acquisitions, or divestitures, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.


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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym
Term
 
 
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
Cajun
Cajun Electric Power Cooperative, Inc.
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council
Council of the City of New Orleans, Louisiana
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 Louisiana
Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana
Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas
Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities
Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA
United States Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2016 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment

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DEFINITIONS (Continued)
Abbreviation or Acronym
Term
 
 
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service
ISO
Independent System Operator
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 Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & Other
The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
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 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 Louisiana
SEC
Securities and Exchange Commission
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy
System Energy Resources, Inc.
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 Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas

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DEFINITIONS (Concluded)
Abbreviation or Acronym
Term
 
 
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014
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
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas


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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy operates primarily through 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, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  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. See “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.

Results of Operations

Second Quarter 2017 Compared to Second Quarter 2016

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 2017 to the second quarter 2016 showing how much the line item increased or (decreased) in comparison to the prior period:
 
 

Utility
 
Entergy
Wholesale
Commodities
 

Parent &
Other (a)
 

Entergy
 
 
(In Thousands)
2nd Quarter 2016 Consolidated Net Income (Loss)
 

$380,317

 

$250,874

 

($58,601
)
 

$572,590

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
25,287

 
(42,793
)
 
(13
)
 
(17,519
)
Other operation and maintenance
 
27,323

 
33,768

 
(52
)
 
61,039

Asset write-offs, impairments, and related charges
 
—

 
186,602

 
—

 
186,602

Taxes other than income taxes
 
10,604

 
(6,687
)
 
98

 
4,015

Depreciation and amortization
 
8,833

 
6,100

 
(273
)
 
14,660

Other income
 
16,843

 
26,306

 
594

 
43,743

Interest expense
 
(9,259
)
 
(379
)
 
1,993

 
(7,645
)
Other expenses
 
3,928

 
10,986

 
—

 
14,914

Income taxes
 
134,636

 
(219,889
)
 
(2,886
)
 
(88,139
)
 
 
 
 
 
 
 
 
 
2nd Quarter 2017 Consolidated Net Income (Loss)
 

$246,382

 

$223,886

 

($56,900
)
 

$413,368


(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.

Second quarter 2017 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant and $194 million ($126 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 10 to the financial statements herein for additional discussion of the tax elections and “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

Second quarter 2016 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016 :
 
Amount
 
(In Millions)
2016 net revenue

$1,524

Louisiana Act 55 financing savings obligation
16

Grand Gulf recovery
15

Retail electric price
14

Volume/weather
(18
)
Other
(2
)
2017 net revenue

$1,549

    
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The retail electric price variance is primarily due to:

•
the implementation of formula rate plan rates at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of January 2017;
•
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and
•
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

The retail electric price variance is partially offset by a decrease in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016, to reflect the effects of the termination of the System Agreement.

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

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 1,068 GWh, or 4%, in billed electricity usage, including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016 :
 
Amount
 
(In Millions)
2016 net revenue

$293

Nuclear volume
(74
)
FitzPatrick
(44
)
Nuclear realized price changes
57

Other
18

2017 net revenue

$250


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $43 million in the second quarter 2017 as compared to the second quarter 2016 primarily due to lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in second quarter 2017 as compared to second quarter 2016 and a decrease as a result of the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale. The decrease was partially offset by higher realized wholesale energy prices and higher capacity prices.

Following are key performance measures for Entergy Wholesale Commodities for the second quarter 2017 and 2016 :
 
2017
 
2016
Owned capacity (MW) (a)
3,962
 
4,880
GWh billed
6,019
 
7,866
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
59%
 
76%
GWh billed
5,393
 
7,308
Average energy and capacity revenue per MWh
$51.76
 
$42.34
Refueling outage days:
 
 
 
Indian Point 2
—
 
77
Indian Point 3
47
 
—
Pilgrim
43
 
—
Palisades
27
 
—

(a)
The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the FitzPatrick sale and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $582 million for the second quarter 2016 to $609 million for the second quarter 2017 primarily due to:

•
an increase of $18 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews; and
•
an increase of $8 million in transmission and distribution expenses due to higher vegetation maintenance costs in second quarter 2017 as compared to second quarter 2016.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes and local franchise taxes.

Other income increased primarily due to higher realized gains in second quarter 2017 as compared to second quarter 2016 on the decommissioning trust fund investments as a result of portfolio reallocations and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project.

Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $171 million for the second quarter 2016 to $204 million for the second quarter 2017 primarily due to the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million, and an increase of $28 million in severance and retention costs in the second quarter 2017 as compared to the second quarter 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale.

The asset write-offs, impairments, and related charges variance is primarily due to $194 million ($126 million net-of-tax) of impairment charges in the second quarter 2017 due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase in impairment charges in 2017 is primarily due to the impairment of the Indian Point and Palisades plants in fourth quarter 2016 and the timing of nuclear refueling outage spending for the Pilgrim plant. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale

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Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

Other income increased primarily due to higher realized gains in second quarter 2017 as compared to second quarter 2016 on the decommissioning trust fund investments primarily as a result of portfolio reallocations.

Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trust and decommissioning liability for the Indian Point 3 plant to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.

Income Taxes

The effective income tax rate was (442.1%) for the second quarter 2017 . The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 10 to the financial statements herein for additional discussion of the tax elections.

The effective income tax rate was (76.9%) for the second quarter 2016 . The difference in the effective income tax rate for the second quarter 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.


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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
 
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 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)
2016 Consolidated Net Income (Loss)
 

$579,968

 

$330,430

 

($102,566
)
 

$807,832

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
54,405

 
(14,889
)
 
(11
)
 
39,505

Other operation and maintenance
 
80,763

 
115,205

 
703

 
196,671

Asset write-offs, impairments, and related charges
 
—

 
391,033

 
—

 
391,033

Taxes other than income taxes
 
18,206

 
(8,008
)
 
391

 
10,589

Depreciation and amortization
 
25,283

 
2,587

 
(216
)
 
27,654

Gain on sale of assets
 
—

 
16,270

 
—

 
16,270

Other income
 
26,282

 
56,768

 
652

 
83,702

Interest expense
 
(13,233
)
 
(41
)
 
3,546

 
(9,728
)
Other expenses
 
10,339

 
41,654

 
—

 
51,993

Income taxes
 
125,292

 
(350,540
)
 
4,925

 
(220,323
)
 
 
 
 
 
 
 
 
 
2017 Consolidated Net Income (Loss)
 

$414,005

 

$196,689

 

($111,274
)
 

$499,420


(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 six months ended June 30, 2017 include $405 million ($263 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and Note 10 to the financial statements herein for additional discussion of the tax elections.

Results of operations for the six months ended June 30, 2016 include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

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Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 :
 
Amount
 
(In Millions)
2016 net revenue

$2,899

Retail electric price
45

Grand Gulf recovery
27

Louisiana Act 55 financing savings obligation
16

Volume/weather
(30
)
Other
(3
)
2017 net revenue

$2,954

    
The retail electric price variance is primarily due to:

•
an increase in base rates effective February 24, 2016 and the implementation of formula rate plan rates effective with the first billing cycle of January 2017 at Entergy Arkansas, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016;
•
an increase in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016;
•
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT;
•
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016; and
•
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016.

The retail electric price variance is partially offset by a decrease in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016, to reflect the effects of the termination of the System Agreement.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 551 GWh, or 1%, in billed electricity usage,

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including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals and industrial gases industries and expansion projects primarily in the chemicals industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 :
 
Amount
 
(In Millions)
2016 net revenue

$759

Nuclear volume
(79
)
FitzPatrick
(72
)
Nuclear fuel expenses
37

FitzPatrick reimbursement agreement
98

Other
1

2017 net revenue

$744


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $15 million in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 primarily due to lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 and a decrease as a result of the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale. The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the Pilgrim and Palisades plants and related assets and an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon was reimbursing Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon in 2017 under the reimbursement agreement were offset in other operation and maintenance expenses and taxes other than income taxes and had no material effect on net income. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for further discussion of the reimbursement agreement.

Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2017 and 2016 :
 
2017
 
2016
Owned capacity (MW) (a)
3,962
 
4,880
GWh billed
14,382
 
17,112
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
71%
 
83%
GWh billed
13,228
 
15,996
Average energy and capacity revenue per MWh
$53.79
 
$49.85
Refueling outage days:
 
 
 
FitzPatrick
42
 
—
Indian Point 2
—
 
102
Indian Point 3
66
 
—
Pilgrim
43
 
—
Palisades
27
 
—


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(a)
The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the FitzPatrick sale and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,096 million for the six months ended June 30, 2016 to $1,177 million for the six months ended June 30, 2017 primarily due to:

•
an increase of $18 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, and additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews;
•
the deferral in first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
•
an increase of $11 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 and an increase in net periodic pension and other postretirement benefits costs as a result of lower discount rates;
•
an increase of $10 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017; and
•
an increase of $5 million in information technology expenses including software maintenance costs and upgrade projects.

Taxes other than income taxes increased primarily due to increases in local franchise taxes and ad valorem taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

Other income increased primarily due to higher realized gains in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments, including portfolio reallocations, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project.


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Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $384 million for the six months ended June 30, 2016 to $500 million for the six months ended June 30, 2017 primarily due to:

•
FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the sales and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sales agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses were offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
•
the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
•
an increase of $39 million in severance and retention costs in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale.

The asset write-offs, impairments, and related charges variance is primarily due to $405 million ($263 million net-of-tax) of impairment charges in the six months ended June 30, 2017 due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The increase in impairment charges in 2017 is primarily due to the impairment of the Indian Point and Palisades plants in fourth quarter 2016 and the timing of nuclear fuel spending and nuclear refueling outage spending for the Pilgrim plant. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

The gain on sale of assets resulted from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 13 to the financial statements herein for a discussion of the sale.

Other income increased primarily due to higher realized gains in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments as a result of portfolio reallocations and the increase in value from year-end realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA.

Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point

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2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA and the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.

Income Taxes

The effective income tax rate was (193.7%) for the six months ended June 30, 2017 . The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant, which resulted in both permanent and temporary differences under the income tax accounting standards and the re-determined tax basis of the FitzPatrick plant as a result of its sale on March 31, 2017. See Note 10 to the financial statements herein for further discussion of the tax elections and the tax benefit associated with the sale of FitzPatrick.

The effective income tax rate was (15.6%) for the six months ended June 30, 2016 . The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.

ANO Damage, Outage, and NRC Reviews
 
See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
 
Entergy Wholesale Commodities Exit from the Merchant Power Business

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.  Following are updates to that discussion.

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet of approximately $110 million in 2017, of which $66 million had been incurred as of June 30, 2017, and approximately $250 million from 2018 through the end of 2021. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $194 million for the three months ended June 30, 2017, and $405 million for the six months ended June 30, 2017. These costs are charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets, and expects to continue to charge these costs to expense as incurred over the remaining operating lives of the plants because Entergy expects the value of those plants to continue to be impaired.

In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition

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to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy. See Note 13 to the financial statements herein for further discussion of the sale of FitzPatrick. As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants ” in the Form 10-K for a discussion of the NRC operating licensing proceedings for Indian Point 2 and Indian Point 3 and the settlement reached with New York State.  Following are updates to that discussion.

In accordance with the settlement with New York State, in March 2017 the New York State Department of State issued a concurrence with Indian Point’s new Coastal Zone Management Act (CZMA) consistency certification and, on Entergy’s motion, the U.S. District Court for the Northern District of New York dismissed Entergy’s appeal related to the initial Indian Point CZMA consistency certification. Also in March 2017 the Atomic Safety and Licensing Board of the NRC granted the motion of New York State and Riverkeeper to withdraw their pending contentions on the NRC license renewal application and terminated the proceedings.  Subsequent to the issuance of the water quality certification and water discharge permit in January 2017 by the New York State Department of Environmental Conservation (NYSDEC), in April 2017 the NYSDEC updated its environmental analysis to reflect the early shutdown per the settlement agreement. Both the water quality certification and the CZMA concurrence were filed with the NRC in April 2017.

In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named.

Liquidity and Capital Resources

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

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
 
June 30,
2017
 
December 31,
2016
Debt to capital
65.5
%
 
64.8
%
Effect of excluding securitization bonds
(0.8
%)
 
(1.0
%)
Debt to capital, excluding securitization bonds (a)
64.7
%
 
63.8
%
Effect of subtracting cash
(1.5
%)
 
(2.0
%)
Net debt to net capital, excluding securitization bonds (a)
63.2
%
 
61.8
%

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

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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.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2021.  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 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the six months ended June 30, 2017 was 2.38% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2017 :
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500
 
$225
 
$6
 
$3,269

A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy 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.

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million, which expires in January 2018. As of June 30, 2017, $71 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the six months ended June 30, 2017 was 2.44% on the drawn portion of the facility. Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million, which expires in January 2018. As of June 30, 2017, there were no cash borrowings outstanding under the uncommitted credit facility. See Note 4 to the financial statements herein for additional discussion of the Vermont Yankee facilities.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. As of June 30, 2017 , Entergy Corporation had $1.1 billion of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 2017 was 1.38%.

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 2017 through 2019. Following are updates to the discussion.


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Management's Financial Discussion and Analysis

Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2020.

New Orleans Power Station
 
In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans.  In July 2017 the Utility Committee of the City Council established a procedural schedule that provides for a hearing in December 2017 and the City Council’s decision in February 2018. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals. 

Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017, parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Also in June 2017, the administrative law judge issued a proposed order and remanded the proceeding to the PUCT for final decision. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

Washington Parish Energy Center

In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 360 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May

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Management's Financial Discussion and Analysis

2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with a hearing in March 2018.

Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities.  At its July 2017 meeting, the Board declared a dividend of $0.87 per share, which is the same quarterly dividend per share that Entergy has paid since the fourth quarter 2016.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Millions)
Cash and cash equivalents at beginning of period

$1,188

 

$1,351

 
 
 
 
Cash flow provided by (used in):
 

 
 

Operating activities
820

 
1,252

Investing activities
(1,770
)
 
(2,266
)
Financing activities
697

 
659

Net decrease in cash and cash equivalents
(253
)
 
(355
)
 
 
 
 
Cash and cash equivalents at end of period

$935

 

$996


Operating Activities

Net cash flow provided by operating activities decreased by $432 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
an increase of $160 million in spending on nuclear refueling outages in 2017 as compared to the same period in 2016;
•
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2017 as compared to the same period in 2016, as discussed above. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
•
a decrease due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•
an increase of $94 million in severance and retention payments in 2017 as compared to the same period in 2016. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” above and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; and
•
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement and refund.


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Management's Financial Discussion and Analysis

The decrease was partially offset by:

•
income tax refunds of $15 million in 2017 compared to income tax payments of $85 million in 2016. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax audit;
•
a decrease of $76 million in interest paid in 2017 as compared to the same period in 2016 primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets; and
•
a decrease of $23 million in spending in 2017 as compared to the same period in 2016 on activities related to the decommissioning of Vermont Yankee, which ceased power production in December 2014.

Investing Activities

Net cash flow used in investing activities decreased $496 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the purchase of the Union Power Station for approximately $948 million in March 2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase and Note 13 to the financial statements herein for a discussion of the sale of FitzPatrick.

The decrease was partially offset by:

•
an increase of $425 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $251 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017, including the St. Charles Power Station project, an increase of $73 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017, and an increase of $61 million in distribution construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;
•
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
•
proceeds of $25 million received in 2017 compared to proceeds of $89 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

Financing Activities

Net cash flow provided by financing activities increased $38 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to an increase of $372 million in net issuances of commercial paper in 2017 compared to the same period in 2016.

The increase was partially offset by:

•
long-term debt activity providing approximately $170 million of cash in 2017 compared to providing approximately $437 million of cash in 2016.  Included in the long-term debt activity is $475 million in 2017 and $595 million in 2016 for the repayment of borrowings on the Entergy Corporation long-term credit facility; and

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Management's Financial Discussion and Analysis

•
a decrease of $67 million in 2017 in short-term borrowings by the nuclear fuel company variable interest entities.

For the details of Entergy’s commercial paper program, the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K.

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

Market and Credit Risk Sensitive Instruments

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 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 June 30, 2017 ( 2017 represents the remainder of the year):

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Management's Financial Discussion and Analysis

Entergy Wholesale Commodities Nuclear Portfolio
 
 
2017
 
2018
 
2019
 
2020
 
2021
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
89%
 
76%
 
41%
 
—%
 
—%
Firm LD (c)
 
9%
 
7%
 
—%
 
—%
 
—%
Offsetting positions (d)
 
(9%)
 
(10%)
 
—%
 
—%
 
—%
Total
 
89%
 
73%
 
41%
 
—%
 
—%
Planned generation (TWh) (e) (f)
 
15.0
 
26.7
 
18.8
 
11.7
 
2.9
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
 
 
Minimum
 
$40.7
 
$35.9
 
$35.3
 
$—
 
$—
Expected based on market prices as of June 30, 2017
 
$40.7
 
$35.9
 
$35.3
 
$—
 
$—
Sensitivity: -/+ $10 per MWh market price change
 
$40.7-$40.8
 
$34.9-$36.9
 
$35.3
 
$—
 
$—
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (g):
 
 
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (h)
 
24%
 
11%
 
—%
 
—%
 
—%
Capacity contracts (i)
 
41%
 
24%
 
14%
 
—%
 
—%
Total
 
65%
 
35%
 
14%
 
—%
 
—%
Planned net MW in operation (average) (f)
 
3,568
 
3,365
 
2,356
 
1,384
 
347
Average revenue under contract per kW per month (applies to capacity contracts only)
 
$8.5
 
$9.1
 
$10.5
 
$—
 
$—
 
 
 
 
 
 
 
 
 
 
 
Total Nuclear Energy and Capacity Revenues (j)
 
 
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$47.4
 
$43.6
 
$43.9
 
$44.3
 
$50.0
Sensitivity: -/+ $10 per MWh market price change
 
$46.2-$48.6
 
$41.0-$46.3
 
$38.0-$49.8
 
$34.3-$54.3
 
$40.0-$60.0

(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 not 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, the seller is generally not liable to buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide 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.
(c)
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. This also includes option transactions that may expire without being exercised.
(d)
Transactions for the purchase of energy, generally to offset a Firm LD transaction.
(e)
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.

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Management's Financial Discussion and Analysis

(f)
Assumes the planned shutdown of Palisades on October 1, 2018, planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, and planned shutdown of Indian Point 3 on April 30, 2021, and reflects the sale of FitzPatrick in March 2017. Assumes NRC license renewals 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 while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the Palisades, Pilgrim, Indian Point 2, and Indian Point 3 plants, see “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” in the Form 10-K. For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “ Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants ” above and in the Form 10-K.
(g)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(h)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(i)
A contract for the sale of an installed capacity product in a regional market.
(j)
Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $19 million for the remainder of 2017. As of June 30, 2016 , a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $50 million for the remainder of 2016.  A negative $10 per MWh change in the annual average energy price in the markets based on June 30, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($17) million for the remainder of 2017. As of June 30, 2016 , a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($32) million for the remainder of 2016.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements.  The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of credit support to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of credit support.  At June 30, 2017 , based on power prices at that time, Entergy had liquidity exposure of $116 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8 million of posted cash collateral.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2017 , Entergy would have been required to provide approximately $50 million of additional cash or letters of credit under some of the agreements. As of June 30, 2017 , the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $236 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.  

As of June 30, 2017 , substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2021 is with counterparties or their guarantors that 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.


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Management's Financial Discussion and Analysis

Indian Point

During the scheduled refueling and maintenance outage at Indian Point 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program that calls for an in-depth inspection of the reactor vessel.  Inspections of more than 2,000 bolts in the reactor’s removable insert liner identified issues with roughly 11% of the bolts that required further analysis.  Entergy replaced bolts as appropriate, and the unit returned to service in June 2016. In 2016, Entergy evaluated the scope and duration of Indian Point 3’s scheduled refueling outage planned for 2017, which began in March 2017. Based on the results of the 2016 evaluation and analysis, Entergy extended Indian Point 3’s planned 2017 outage duration. Entergy performed the same in-depth inspection of the reactor vessel at Indian Point 3 during Indian Point 3’s spring 2017 refueling and maintenance outage that it performed for Indian Point 2. Based on inspection data, Entergy replaced approximately the same number of bolts at Indian Point 3 that it replaced at Indian Point 2 before returning the plant to service in May 2017.

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - New Accounting Pronouncements ” in the Form 10-K for a discussion of new accounting pronouncements. Following are updates to that discussion.

As discussed in the Form 10-K, ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” is effective for Entergy for the first quarter 2018.  Entergy has selected the modified retrospective transition method. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects will affect materially its results of operations, financial position, or cash flows. Entergy continues to monitor the development and finalization of industry-specific application guidance that could have an effect on this assessment.

In March 2017 the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period.  The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations.  In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization.  ASU 2017-07 is effective for Entergy for the first quarter 2018.  Entergy does not expect ASU 2017-07 to affect materially its results of operations, financial position, or cash flows.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
2017
 
2016
 
2017
 
2016
 
(In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
 
 
 
 
Electric

$2,271,220

 

$2,093,331

 

$4,262,960

 

$4,135,492

Natural gas
30,075

 
25,121

 
73,426

 
70,734

Competitive businesses
317,255

 
344,110

 
870,622

 
866,189

TOTAL
2,618,550

 
2,462,562

 
5,207,008

 
5,072,415

 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
395,947

 
381,465

 
813,513

 
886,432

Purchased power
416,497

 
242,672

 
774,264

 
504,996

Nuclear refueling outage expenses
38,288

 
47,045

 
80,853

 
98,276

Other operation and maintenance
820,297

 
759,258

 
1,687,845

 
1,491,174

Asset write-offs, impairments, and related charges
193,571

 
6,969

 
405,362

 
14,329

Decommissioning
100,296

 
76,625

 
214,669

 
145,253

Taxes other than income taxes
153,264

 
149,249

 
309,616

 
299,027

Depreciation and amortization
350,328

 
335,668

 
697,593

 
669,939

Other regulatory charges (credits)
6,553

 
21,353

 
(78,749
)
 
22,512

TOTAL
2,475,041

 
2,020,304

 
4,904,966

 
4,131,938

 
 
 
 
 
 
 
 
Gain on sale of assets
—

 
—

 
16,270

 
—

 
 
 
 
 
 
 
 
OPERATING INCOME
143,509

 
442,258

 
318,312

 
940,477

 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
Allowance for equity funds used during construction
22,376

 
13,860

 
41,384

 
32,792

Interest and investment income
80,097

 
46,375

 
136,646

 
79,128

Miscellaneous - net
(6,872
)
 
(8,377
)
 
(1,371
)
 
(18,963
)
TOTAL
95,601

 
51,858

 
176,659

 
92,957

 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
Interest expense
173,377

 
177,631

 
344,466

 
351,442

Allowance for borrowed funds used during construction
(10,523
)
 
(7,132
)
 
(19,565
)
 
(16,813
)
TOTAL
162,854

 
170,499

 
324,901

 
334,629

 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
76,256

 
323,617

 
170,070

 
698,805

 
 
 
 
 
 
 
 
Income taxes
(337,112
)
 
(248,973
)
 
(329,350
)
 
(109,027
)
 
 
 
 
 
 
 
 
CONSOLIDATED NET INCOME
413,368

 
572,590

 
499,420

 
807,832

 
 
 
 
 
 
 
 
Preferred dividend requirements of subsidiaries
3,446

 
5,276

 
6,892

 
10,552

 
 
 
 
 
 
 
 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION

$409,922

 

$567,314

 

$492,528

 

$797,280

 
 
 
 
 
 
 
 
Earnings per average common share:
 
 
 
 
 
 
 
Basic

$2.28

 

$3.17

 

$2.75

 

$4.46

Diluted

$2.27

 

$3.16

 

$2.74

 

$4.45

Dividends declared per common share

$0.87

 

$0.85

 

$1.74

 

$1.70

 
 
 
 
 
 
 
 
Basic average number of common shares outstanding
179,475,346

 
178,808,149

 
179,405,592

 
178,693,342

Diluted average number of common shares outstanding
180,234,694

 
179,503,582

 
180,032,233

 
179,233,209

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
2017
 
2016
 
2017
 
2016
 
(In Thousands)
 
 
 
 
 
 
 
 
Net Income

$413,368

 

$572,590

 

$499,420

 

$807,832


 
 
 
 
 
 
 
Other comprehensive income (loss)
 
 
 
 
 
 
 
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $10,684, ($34,576), $10,325, and ($39,777))
19,949

 
(64,041
)
 
19,421

 
(73,547
)
Pension and other postretirement liabilities (net of tax expense of $5,839, $2,779, $12,216, and $3,037)
10,916

 
5,043

 
19,548

 
12,605

Net unrealized investment gains (net of tax expense of $2,870, $19,515, $42,164, and $37,873)
11,696

 
20,955

 
49,523

 
44,024

Foreign currency translation (net of tax benefit of $403, $487, $403, and $640)
(748
)
 
(904
)
 
(748
)
 
(1,188
)
Other comprehensive income (loss)
41,813

 
(38,947
)
 
87,744

 
(18,106
)

 
 
 
 
 
 
 
Comprehensive Income
455,181

 
533,643

 
587,164

 
789,726

Preferred dividend requirements of subsidiaries
3,446

 
5,276

 
6,892

 
10,552

Comprehensive Income Attributable to Entergy Corporation

$451,735

 

$528,367

 

$580,272

 

$779,174

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 

$499,420

 

$807,832

Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
1,042,671

 
1,012,753

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(324,227
)
 
(170,026
)
Asset write-offs, impairments, and related charges
 
220,828

 
14,329

Gain on sale of assets
 
(16,270
)
 
—

Changes in working capital:
 
 
 
 
Receivables
 
6,091

 
(57,673
)
Fuel inventory
 
6,213

 
9,586

Accounts payable
 
9,687

 
45,412

Taxes accrued
 
(2,202
)
 
7,056

Interest accrued
 
(3,947
)
 
(9,543
)
Deferred fuel costs
 
(127,945
)
 
3,757

Other working capital accounts
 
(91,505
)
 
(121,929
)
Changes in provisions for estimated losses
 
(7,340
)
 
1,533

Changes in other regulatory assets
 
62,612

 
109,700

Changes in other regulatory liabilities
 
(8,250
)
 
70,505

Changes in pensions and other postretirement liabilities
 
(180,346
)
 
(168,856
)
Other
 
(265,807
)
 
(302,356
)
Net cash flow provided by operating activities
 
819,683

 
1,252,080

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction/capital expenditures
 
(1,719,712
)
 
(1,294,498
)
Allowance for equity funds used during construction
 
41,877

 
33,152

Nuclear fuel purchases
 
(209,756
)
 
(124,107
)
Payment for purchase of plant
 
—

 
(947,903
)
Proceeds from sale of assets
 
100,000

 
—

Insurance proceeds received for property damages
 
26,157

 
—

Changes in securitization account
 
10,028

 
13,239

Payments to storm reserve escrow account
 
(1,124
)
 
(805
)
Receipts from storm reserve escrow account
 
8,836

 
—

Decreases in other investments
 
1,705

 
57

Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
25,493

 
89,407

Proceeds from nuclear decommissioning trust fund sales
 
1,462,698

 
1,232,672

Investment in nuclear decommissioning trust funds
 
(1,516,406
)
 
(1,267,452
)
Net cash flow used in investing activities
 
(1,770,204
)
 
(2,266,238
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

24
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
Long-term debt
 
1,036,529

 
3,856,768

Treasury stock
 
7,819

 
16,855

Retirement of long-term debt
 
(866,337
)
 
(3,420,196
)
Changes in credit borrowings and commercial paper - net
 
833,957

 
530,540

Other
 
4,305

 
(10,276
)
Dividends paid:
 
 
 
 
Common stock
 
(312,209
)
 
(303,843
)
Preferred stock
 
(6,892
)
 
(10,552
)
Net cash flow provided by financing activities
 
697,172

 
659,296


 
 
 
 
Net decrease in cash and cash equivalents
 
(253,349
)
 
(354,862
)

 
 
 
 
Cash and cash equivalents at beginning of period
 
1,187,844

 
1,350,961


 
 
 
 
Cash and cash equivalents at end of period
 

$934,495

 

$996,099

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

$334,555

 

$410,744

Income taxes
 

($14,673
)
 

$84,607

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


25
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$67,238

 

$129,579

Temporary cash investments
 
867,257

 
1,058,265

Total cash and cash equivalents
 
934,495

 
1,187,844

Accounts receivable:
 
 
 
 
Customer
 
579,674

 
654,995

Allowance for doubtful accounts
 
(12,947
)
 
(11,924
)
Other
 
138,285

 
158,419

Accrued unbilled revenues
 
415,424

 
368,677

Total accounts receivable
 
1,120,436

 
1,170,167

Deferred fuel costs
 
194,245

 
108,465

Fuel inventory - at average cost
 
173,387

 
179,600

Materials and supplies - at average cost
 
695,690

 
698,523

Deferred nuclear refueling outage costs
 
228,300

 
146,221

Prepayments and other
 
252,791

 
193,448

TOTAL
 
3,599,344

 
3,684,268

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliates - at equity
 
198

 
198

Decommissioning trust funds
 
6,796,911

 
5,723,897

Non-utility property - at cost (less accumulated depreciation)
 
247,363

 
233,641

Other
 
453,705

 
469,664

TOTAL
 
7,498,177

 
6,427,400

 
 
 
 
 
PROPERTY, PLANT, AND EQUIPMENT
 
 
 
 
Electric
 
45,916,902

 
45,191,216

Property under capital lease
 
618,731

 
619,527

Natural gas
 
426,674

 
413,224

Construction work in progress
 
1,741,867

 
1,378,180

Nuclear fuel
 
958,190

 
1,037,899

TOTAL PROPERTY, PLANT, AND EQUIPMENT
 
49,662,364

 
48,640,046

Less - accumulated depreciation and amortization
 
21,095,139

 
20,718,639

PROPERTY, PLANT, AND EQUIPMENT - NET
 
28,567,225

 
27,921,407

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
769,364

 
761,280

Other regulatory assets (includes securitization property of $550,077 as of June 30, 2017 and $600,996 as of December 31, 2016)
 
4,699,217

 
4,769,913

Deferred fuel costs
 
239,199

 
239,100

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
115,562

 
117,885

Other
 
141,777

 
1,606,009

TOTAL
 
6,342,291

 
7,871,359

 
 
 
 
 
TOTAL ASSETS
 

$46,007,037

 

$45,904,434

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

26
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$702,909

 

$364,900

Notes payable and commercial paper
 
1,248,969

 
415,011

Accounts payable
 
1,165,699

 
1,285,577

Customer deposits
 
401,089

 
403,311

Taxes accrued
 
178,912

 
181,114

Interest accrued
 
183,282

 
187,229

Deferred fuel costs
 
60,687

 
102,753

Obligations under capital leases
 
2,387

 
2,423

Pension and other postretirement liabilities
 
72,127

 
76,942

Other
 
224,469

 
180,836

TOTAL
 
4,240,530

 
3,200,096

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
7,246,612

 
7,495,290

Accumulated deferred investment tax credits
 
221,449

 
227,147

Obligations under capital leases
 
23,179

 
24,582

Other regulatory liabilities
 
1,564,679

 
1,572,929

Decommissioning and asset retirement cost liabilities
 
6,118,860

 
5,992,476

Accumulated provisions
 
474,020

 
481,636

Pension and other postretirement liabilities
 
2,860,479

 
3,036,010

Long-term debt (includes securitization bonds of $601,861 as of June 30, 2017 and $661,175 as of December 31, 2016)
 
14,307,759

 
14,467,655

Other
 
375,429

 
1,121,619

TOTAL
 
33,192,466

 
34,419,344

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Subsidiaries' preferred stock without sinking fund
 
203,185

 
203,185

 
 
 
 
 
SHAREHOLDERS' EQUITY
 
 
 
 
Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2017 and in 2016
 
2,548

 
2,548

Paid-in capital
 
5,409,862

 
5,417,245

Retained earnings
 
8,375,890

 
8,195,571

Accumulated other comprehensive income (loss)
 
52,773

 
(34,971
)
Less - treasury stock, at cost (75,233,350 shares in 2017 and 75,623,363 shares in 2016)
 
5,470,217

 
5,498,584

TOTAL
 
8,370,856

 
8,081,809

 
 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 

$46,007,037

 

$45,904,434

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


27
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2017 and 2016
(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, 2015

$—

 

$2,548

 

($5,552,379
)
 

$5,403,758

 

$9,393,913

 

$8,951

 

$9,256,791

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
10,552

 
—

 
—

 
—

 
797,280

 
—

 
807,832

Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
(18,106
)
 
(18,106
)
Common stock issuances related to stock plans
—

 
—

 
36,877

 
(11,212
)
 
—

 
—

 
25,665

Common stock dividends declared
—

 
—

 
—

 
—

 
(303,843
)
 
—

 
(303,843
)
Preferred dividend requirements of subsidiaries (a)
(10,552
)
 
—

 
—

 
—

 
—

 
—

 
(10,552
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2016

$—

 

$2,548

 

($5,515,502
)
 

$5,392,546

 

$9,887,350

 

($9,155
)
 

$9,757,787

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$—

 

$2,548

 

($5,498,584
)
 

$5,417,245

 

$8,195,571

 

($34,971
)
 

$8,081,809

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
6,892

 
—

 
—

 
—

 
492,528

 
—

 
499,420

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
87,744

 
87,744

Common stock issuances related to stock plans
—

 
—

 
28,367

 
(7,383
)
 
—

 
—

 
20,984

Common stock dividends declared
—

 
—

 
—

 
—

 
(312,209
)
 
—

 
(312,209
)
Preferred dividend requirements of subsidiaries (a)
(6,892
)
 
—

 
—

 
—

 
—

 
—

 
(6,892
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at June 30, 2017

$—

 

$2,548

 

($5,470,217
)
 

$5,409,862

 

$8,375,890

 

$52,773

 

$8,370,856

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $6.9 million and $10.6 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


28
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility electric operating revenues:
 
 
 
 
 
 
 
 
Residential
 

$748

 

$667

 

$81

 
12

Commercial
 
604

 
543

 
61

 
11

Industrial
 
651

 
551

 
100

 
18

Governmental
 
57

 
52

 
5

 
10

Total retail
 
2,060

 
1,813

 
247

 
14

Sales for resale
 
46

 
72

 
(26
)
 
(36
)
Other
 
165

 
208

 
(43
)
 
(21
)
Total
 

$2,271

 

$2,093

 

$178

 
9


 
 
 
 
 
 
 
 
Utility billed electric energy sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
7,340

 
7,081

 
259

 
4

Commercial
 
6,886

 
6,777

 
109

 
2

Industrial
 
12,209

 
11,509

 
700

 
6

Governmental
 
609

 
609

 
—

 
—

Total retail
 
27,044

 
25,976

 
1,068

 
4

Sales for resale
 
1,845

 
3,579

 
(1,734
)
 
(48
)
Total
 
28,889

 
29,555

 
(666
)
 
(2
)

 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating Revenues
 

$317

 

$344

 

($27
)
 
(8
)
Billed Electric Energy Sales (GWh)
 
6,019

 
7,866

 
(1,847
)
 
(23
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility electric operating revenues:
 
 
 
 
 
 
 
 
Residential
 

$1,453

 

$1,411

 

$42

 
3

Commercial
 
1,140

 
1,081

 
59

 
5

Industrial
 
1,216

 
1,111

 
105

 
9

Governmental
 
110

 
103

 
7

 
7

Total retail
 
3,919

 
3,706

 
213

 
6

Sales for resale
 
124

 
127

 
(3
)
 
(2
)
Other
 
220

 
302

 
(82
)
 
(27
)
Total
 

$4,263

 

$4,135

 

$128

 
3


 
 
 
 
 
 
 
 
Utility billed electric energy sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
14,977

 
15,218

 
(241
)
 
(2
)
Commercial
 
13,325

 
13,288

 
37

 
—

Industrial
 
23,326

 
22,564

 
762

 
3

Governmental
 
1,202

 
1,209

 
(7
)
 
(1
)
Total retail
 
52,830

 
52,279

 
551

 
1

Sales for resale
 
4,867

 
6,719

 
(1,852
)
 
(28
)
Total
 
57,697

 
58,998

 
(1,301
)
 
(2
)

 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating revenues
 

$871

 

$866

 

$5

 
1

Billed electric energy sales (GWh)
 
14,382

 
17,112

 
(2,730
)
 
(16
)


29
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.  COMMITMENTS AND CONTINGENCIES  (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business.  While management is unable to predict with certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report.  Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.

Vidalia Purchased Power Agreement

See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
    
ANO Damage, Outage, and NRC Reviews

See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.

Pilgrim NRC Oversight and Planned Shutdown

See Note 8 to the financial statements in the Form 10-K for a discussion of the NRC’s enhanced inspections of Pilgrim and Entergy’s planned shutdown of Pilgrim no later than June 1, 2019.

Spent Nuclear Fuel Litigation

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.

As discussed in the Form 10-K, in April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolution of the appeal on the same issues in the Entergy Arkansas and System Energy cases. Entergy Louisiana received payment from the U.S. Treasury in August 2016. In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 million . Entergy Louisiana received payment from the U.S. Treasury in January 2017.

As discussed in the Form 10-K, in September 2016 the U.S. Court of Federal Claims issued a judgment in the Entergy Nuclear Palisades case in the amount of $14 million , including $11 million related to costs previously capitalized and $3 million related to costs previously recorded as other operation and maintenance expense. Entergy Nuclear Palisades recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017.

As discussed in the Form 10-K, in October 2016 the U.S. Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million , including $14 million related to costs previously capitalized, $15 million related to costs previously recorded as other operation and maintenance expense, $3 million related to previously recorded decommissioning expense, and $2 million related to costs previously recorded

30
Entergy Corporation and Subsidiaries
Notes to Financial Statements

as taxes other than income taxes. Entergy Nuclear Indian Point 2 recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017.

Nuclear Insurance

See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.
 
Conventional Property Insurance

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.

Employment and Labor-related Proceedings

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

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

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.


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

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

Fuel and purchased power cost recovery

Entergy Arkansas

Energy Cost Recovery Rider

In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rate should be implemented with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.

Entergy Louisiana

As discussed in the Form 10-K, in June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. Discovery commenced in March 2017.


31
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Mississippi

Mississippi Attorney General Complaint

As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power. The defendants have denied the allegations. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery is currently in progress.

Entergy Texas

As discussed in the Form 10-K, in July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017. The fuel reconciliation settlement was approved by the PUCT in March 2017 and the refunds were made.

In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds will flow through bills for the months of July 2017 through September 2017. Also in June 2017, the PUCT’s administrative law judge approved the refund on an interim basis. A final decision in this matter remains pending.

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

2016 Formula Rate Plan Filing
    
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental filing on a concurrent schedule with the 2017 formula rate plan filing. In doing so, however, the APSC noted that a determination of whether the supplemental information supporting certain nuclear expenditures will be considered in the hearing for the 2017 formula rate plan filing or a separate hearing will be made at a later time.

2017 Formula Rate Plan Filing

In July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate plan bandwidth.  The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75% .  Because the projected revenue increase exceeds the four percent annual revenue constraint for each rate class, however, Entergy Arkansas proposed a $70.9 million revenue requirement increase. Entergy Arkansas requested an order approving its proposed formula rate plan adjustment by December 13, 2017. If a final order is not issued by this date, the proposed formula rate plan adjustment will become effective January 2, 2018, subject to refund.

32
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to suspend the procedural schedule pending the filing with the APSC of an agreement in principle on all issues.

Filings with the LPSC

Retail Rates - Electric

2014 Formula Rate Plan Filing

As discussed in the Form 10-K, in September 2015, Entergy Louisiana filed its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.

2015 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates already implemented.

Also, in November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved the stipulation in July 2017.

2016 Formula Rate Plan Filing

In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84% . As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the formula rate plan: The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $16.9 million , comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million , a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million , and a decrease in incremental formula rate plan revenue of $3.6 million . Additionally, the formula rate plan evaluation report calls for a decrease in the MISO cost recovery revenue requirement of $40.5 million , from the present level of $46.8 million to $6.3 million . Rates reflecting these adjustments will be implemented with the first billing cycle of September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established.


33
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Waterford 3 Replacement Steam Generator Project

See Note 2 to the financial statements in the Form 10-K for discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May 2017. In May 2017 the LPSC accepted the joint report of proceedings resolving the matter.

Union Power Station

As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1.  In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three year term permitted by MISO.  This matter is pending before an ALJ, with an evidentiary hearing scheduled in August 2017.

Retail Rates - Gas

2016 Rate Stabilization Plan Filing

In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37% . As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million . Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff confirmed Entergy Louisiana’s filing was consistent with the principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan pending LPSC consideration in a separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover the deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the extraordinary cost provision of the gas rate stabilization plan. A procedural schedule has been established, with a hearing in November 2017.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s

34
Entergy Corporation and Subsidiaries
Notes to Financial Statements

proposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation.

Filings with the MPSC

Formula Rate Plan

In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.

Filings with the City Council

Retail Rates

As discussed in the Form 10-K, in February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council identify its desired level of funding for the program during this time period and approve a cost recovery mechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the Energy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the Energy Smart program.

Internal Restructuring
    
As discussed in the Form 10-K, in July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans began

35
Entergy Corporation and Subsidiaries
Notes to Financial Statements

crediting retail customers in June 2017. Also pursuant to the agreement in principle, if FERC approval is received prior to December 31, 2018, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans received intervenor testimony that was generally supportive of AMI deployment. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certain modifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In June 2017 the procedural schedule was suspended to allow for settlement discussions. A settlement status conference is scheduled for August 2017.
    
Filings with the PUCT
 
Other Filings

In September 2016, Entergy Texas filed with the PUCT a request to amend its transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider. In September 2016 the PUCT suspended the effective date of the tariff change to March 2017. In December 2016, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million . The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.

In June 2017, Entergy Texas filed an application to amend its distribution cost recovery factor (DCRF) rider by increasing the total collection from $8.65 million to approximately $19 million . In July 2017, Entergy Texas, the PUCT, and the two other parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million , with the resulting rates effective for usage no later than October 1, 2017. PUCT action on the stipulation and settlement agreement remains pending.

Advanced Metering Infrastructure (AMI) Filing

In its most recent regular session, the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million . Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy Texas is seeking approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. Subject to approval by the PUCT, deployment of the communications network is expected to begin in 2018. Entergy Texas expects a decision from the PUCT by December 2017.

36
Entergy Corporation and Subsidiaries
Notes to Financial Statements

System Agreement Cost Equalization Proceedings

See the Form 10-K for a discussion of the litigation involving the System Agreement at the FERC and in federal courts.

Entergy Arkansas Opportunity Sales Proceedings

As discussed in the Form 10-K, in June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies.  The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds.

In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and an ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20% . The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.

In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order addressing the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. The rehearing and clarification requests filed in May 2016 are pending FERC action.

Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017, the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. The Utility operating companies have the opportunity to challenge the ALJ’s initial decision by filing a brief on exceptions with the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.

The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies.  Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time.  Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million , which includes interest, for its estimated increased costs and payment to the other

37
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Utility operating companies.  This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision.  Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion.  Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million , which represents its estimate of the retail portion of the costs.

Complaint Against System Energy

In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94% . The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017 as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67% . System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC is pending.

Unit Power Sales Agreement

In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017. Action by the FERC is pending.



38
Entergy Corporation and Subsidiaries
Notes to Financial Statements

NOTE 3.  EQUITY (Entergy Corporation and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
 
For the Three Months Ended June 30,
 
2017
 
2016
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$409.9

 
179.5

 

$2.28

 

$567.3

 
178.8

 

$3.17

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.2

 
—

 
 
 
0.2

 
—

Other equity plans
 
 
0.5

 
(0.01
)
 
 
 
0.5

 
(0.01
)
Diluted earnings per share

$409.9

 
180.2

 

$2.27

 

$567.3

 
179.5

 

$3.16


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 2.5 million for the three months ended June 30, 2017 and approximately 4.1 million for the three months ended June 30, 2016 .
 
For the Six Months Ended June 30,
 
2017
 
2016
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$492.5

 
179.4

 

$2.75

 

$797.3

 
178.7

 

$4.46

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.2

 
—

 
 
 
0.1

 
—

Other equity plans
 
 
0.4

 
(0.01
)
 
 
 
0.4

 
(0.01
)
Diluted earnings per share

$492.5

 
180.0

 

$2.74

 

$797.3

 
179.2

 

$4.45

    
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 3.7 million for the six months ended June 30, 2017 and approximately 5.1 million for the six months ended June 30, 2016 .

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 six months ended June 30, 2017 , Entergy Corporation issued 390,013 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards.  Entergy Corporation did not repurchase any of its common stock during the six months ended June 30, 2017 .

Retained Earnings

On July 28, 2017, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.87 per share, payable on September 1, 2017, to holders of record as of August 10, 2017.

39
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2017 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, April 1, 2017

$3,465

 

($460,814
)
 

$467,561

 

$748

 

$10,960

Other comprehensive income (loss) before reclassifications
28,057

 
—

 
33,870

 
(748
)
 
61,179

Amounts reclassified from accumulated other comprehensive income (loss)
(8,108
)
 
10,916

 
(22,174
)
 
—

 
(19,366
)
Net other comprehensive income (loss) for the period
19,949

 
10,916

 
11,696

 
(748
)
 
41,813

Ending balance, June 30, 2017

$23,414

 

($449,898
)
 

$479,257

 

$—

 

$52,773


The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2016 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, April 1, 2016

$96,464

 

($459,042
)
 

$390,626

 

$1,744

 

$29,792

Other comprehensive income (loss) before reclassifications
(34,138
)
 
—

 
24,016

 
(904
)
 
(11,026
)
Amounts reclassified from accumulated other comprehensive income (loss)
(29,903
)
 
5,043

 
(3,061
)
 
—

 
(27,921
)
Net other comprehensive income (loss) for the period
(64,041
)
 
5,043

 
20,955

 
(904
)
 
(38,947
)
Ending balance, June 30, 2016

$32,423

 

($453,999
)
 

$411,581

 

$840

 

($9,155
)


40
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2017 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, January 1, 2017

$3,993

 

($469,446
)
 

$429,734

 

$748

 

($34,971
)
Other comprehensive income (loss) before reclassifications
60,665

 
—

 
73,742

 
(748
)
 
133,659

Amounts reclassified from accumulated other comprehensive income (loss)
(41,244
)
 
19,548

 
(24,219
)
 
—

 
(45,915
)
Net other comprehensive income (loss) for the period
19,421

 
19,548

 
49,523

 
(748
)
 
87,744

Ending balance, June 30, 2017

$23,414

 

($449,898
)
 

$479,257

 

$—

 

$52,773


The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2016 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, January 1, 2016

$105,970

 

($466,604
)
 

$367,557

 

$2,028

 

$8,951

Other comprehensive income (loss) before reclassifications
56,169

 
—

 
49,048

 
(1,188
)
 
104,029

Amounts reclassified from accumulated other comprehensive income (loss)
(129,716
)
 
12,605

 
(5,024
)
 
—

 
(122,135
)
Net other comprehensive income (loss) for the period
(73,547
)
 
12,605

 
44,024

 
(1,188
)
 
(18,106
)
Ending balance, June 30, 2016

$32,423

 

($453,999
)
 

$411,581

 

$840

 

($9,155
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2017 and 2016:
 
 
Pension and Other
Postretirement Liabilities
 
 
2017
 
2016
 
 
(In Thousands)
Beginning balance, April 1,
 

($48,812
)
 

($56,675
)
Amounts reclassified from accumulated other
comprehensive income (loss)
 
(310
)
 
(230
)
Net other comprehensive income (loss) for the period
 
(310
)
 
(230
)
Ending balance, June 30,
 

($49,122
)
 

($56,905
)


41
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the six months ended June 30, 2017 and 2016:
 
 
Pension and Other
Postretirement Liabilities
 
 
2017
 
2016
 
 
(In Thousands)
Beginning balance, January 1,
 

($48,442
)
 

($56,412
)
Amounts reclassified from accumulated other
comprehensive income (loss)
 
(680
)
 
(493
)
Net other comprehensive income (loss) for the period
 
(680
)
 
(493
)
Ending balance, June 30,
 

($49,122
)
 

($56,905
)

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended June 30, 2017 and 2016 are as follows:

Amounts reclassified
from AOCI

Income Statement Location
 
2017
 
2016
 
 

(In Thousands)


Cash flow hedges net unrealized gain (loss)

 
 


   Power contracts

$12,695

 

$45,975


Competitive business operating revenues
   Interest rate swaps
(219
)
 
30


Miscellaneous - net
Total realized gain (loss) on cash flow hedges
12,476

 
46,005




(4,368
)
 
(16,102
)

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

$8,108

 

$29,903






 
 


Pension and other postretirement liabilities


 
 


   Amortization of prior-service credit

$6,564

 

$7,355


(a)
   Amortization of loss
(21,554
)
 
(15,177
)

(a)
   Settlement loss
(1,765
)
 
—


(a)
Total amortization
(16,755
)
 
(7,822
)



5,839

 
2,779


Income taxes
Total amortization (net of tax)

($10,916
)
 

($5,043
)




 
 


Net unrealized investment gain (loss)

 
 


Realized gain (loss)

$43,479

 

$6,000


Interest and investment income

(21,305
)
 
(2,939
)

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

$22,174

 

$3,061






 
 


Total reclassifications for the period (net of tax)

$19,366

 

$27,921




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


42
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the six months ended June 30, 2017 and 2016 are as follows:
 
Amounts reclassified
from AOCI
 
Income Statement Location
 
2017
 
2016
 
 
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
 
 
   Power contracts

$63,922

 

$199,933

 
Competitive business operating revenues
   Interest rate swaps
(469
)
 
(370
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
63,453

 
199,563

 
 
 
(22,209
)
 
(69,847
)
 
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

$41,244

 

$129,716

 
 
 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
 
 
   Amortization of prior-service credit

$13,126

 

$14,710

 
(a)
   Amortization of loss
(43,125
)
 
(30,352
)
 
(a)
   Settlement loss
(1,765
)
 
—

 
(a)
Total amortization
(31,764
)
 
(15,642
)
 
 
 
12,216

 
3,037

 
Income taxes
Total amortization (net of tax)

($19,548
)
 

($12,605
)
 
 
 
 
 
 
 
 
Net unrealized investment gain (loss)
 
 
 
 
 
Realized gain (loss)

$47,489

 

$9,850

 
Interest and investment income
 
(23,270
)
 
(4,826
)
 
Income taxes
Total realized investment gain (loss) (net of tax)

$24,219

 

$5,024

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

$45,915

 

$122,135

 
 

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




43
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended June 30, 2017 and 2016 are as follows:
 
 
Amounts reclassified
from AOCI
 
Income Statement Location
 
 
2017
 
2016
 
 
 
 
(In Thousands)
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
   Amortization of prior-service credit
 

$1,934

 

$1,947

 
(a)
   Amortization of loss
 
(1,332
)
 
(1,573
)
 
(a)
Total amortization
 
602

 
374

 
 
 
 
(292
)
 
(144
)
 
Income taxes
Total amortization (net of tax)
 
310

 
230

 
 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)
 

$310

 

$230

 
 

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

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the six months ended June 30, 2017 and 2016 are as follows:
 
 
Amounts reclassified
from AOCI
 
Income Statement Location
 
 
2017
 
2016
 
 
 
 
(In Thousands)
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
   Amortization of prior-service credit
 

$3,868

 

$3,894

 
(a)
   Amortization of loss
 
(2,664
)
 
(3,142
)
 
(a)
Total amortization
 
1,204

 
752

 
 
 
 
(524
)
 
(259
)
 
Income taxes
Total amortization (net of tax)
 
680

 
493

 
 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)
 

$680

 

$493

 
 

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


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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2021.  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 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the six months ended June 30,

44
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2017 was 2.38% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2017 .
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500
 
$225
 
$6
 
$3,269

Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  Entergy is in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating 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 June 30, 2017 , Entergy Corporation had $1.1 billion of commercial paper outstanding.  The weighted-average interest rate for the six months ended June 30, 2017 was 1.38% .

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 2017 as follows:
Company
 
Expiration
Date
 
Amount of
Facility
 
Interest Rate (a)
 
Amount Drawn
as of
June 30, 2017
 
Letters of Credit
Outstanding as of June 30, 2017
Entergy Arkansas
 
April 2018
 
$20 million (b)
 
2.48%
 
$—
 
$—
Entergy Arkansas
 
August 2021
 
$150 million (c)
 
2.48%
 
$—
 
$—
Entergy Louisiana
 
August 2021
 
$350 million (d)
 
2.48%
 
$—
 
$4.5 million
Entergy Mississippi
 
May 2018
 
$37.5 million (e)
 
2.73%
 
$—
 
$—
Entergy Mississippi
 
May 2018
 
$35 million (e)
 
2.73%
 
$—
 
$—
Entergy Mississippi
 
May 2018
 
$20 million (e)
 
2.73%
 
$—
 
$—
Entergy Mississippi
 
May 2018
 
$10 million (e)
 
2.73%
 
$—
 
$—
Entergy New Orleans
 
November 2018
 
$25 million (f)
 
2.70%
 
$—
 
$0.8 million
Entergy Texas
 
August 2021
 
$150 million (g)
 
2.73%
 
$—
 
$13.3 million

(a)
The interest rate is the rate as of June 30, 2017 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.  
(d)
The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  
(e)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
(f)
The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility.  
(g)
The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility.  


45
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The commitment fees on the credit facilities range from 0.075% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization.  Each Registrant Subsidiary is in compliance with this covenant.

In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of June 30, 2017 :
Company
 
Amount of
Uncommitted Facility
 
Letter of Credit Fee
 
Letters of Credit
Issued as of June 30, 2017 (a)
Entergy Arkansas
 
$25 million
 
0.70%
 
$1.0 million
Entergy Louisiana
 
$125 million
 
0.70%
 
$36.8 million
Entergy Mississippi
 
$40 million
 
0.70%
 
$7.8 million
Entergy New Orleans
 
$15 million
 
0.75%
 
$5.6 million
Entergy Texas
 
$50 million
 
0.70%
 
$22.3 million

(a)
As of June 30, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and $0.1 million for Entergy Mississippi. See Note 8 to the financial statements for discussion of financial transmission rights.

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, 2017. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements.  The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from internal and external short term borrowings combined may not exceed the FERC-authorized limits.  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of June 30, 2017 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 
Authorized
 
Borrowings
 
(In Millions)
Entergy Arkansas
$250
 
$14
Entergy Louisiana
$450
 
$—
Entergy Mississippi
$175
 
$56
Entergy New Orleans
$100
 
$—
Entergy Texas
$200
 
$39
System Energy
$200
 
$—

Entergy Nuclear Vermont Yankee Credit Facilities

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million , which expires in January 2018.  Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. The commitment fee is currently 0.20% of the undrawn commitment amount.   As of June 30, 2017 , $71 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the six months ended June 30, 2017 was 2.44% on the drawn portion of the facility.

Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million , which expires in January 2018.  Entergy Nuclear Vermont Yankee does not

46
Entergy Corporation and Subsidiaries
Notes to Financial Statements

have the ability to issue letters of credit against the credit facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee.  As of June 30, 2017 , there were no cash borrowings outstanding under the credit facility. The rate as of June 30, 2017 that would most likely apply to outstanding borrowings under the facility was 2.72% .

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

See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs).  To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper as of June 30, 2017 as follows:
Company
 
Expiration
Date
 
Amount
of
Facility
 
Weighted Average Interest Rate on Borrowings (a)
 
Amount
Outstanding as of
June 30, 2017
 
 

 
(Dollars in Millions)
Entergy Arkansas VIE
 
May 2019
 
$80
 
2.39%
 
$31.4 (b)
Entergy Louisiana River Bend VIE
 
May 2019
 
$105
 
2.12%
 
$15.5
Entergy Louisiana Waterford VIE
 
May 2019
 
$85
 
2.38%
 
$70.8 (c)
System Energy VIE
 
May 2019
 
$120
 
2.42%
 
$103.2 (d)

(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 Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
(b)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Arkansas VIE as of June 30, 2017 was $14.7 million .
(c)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Louisiana Waterford VIE as of June 30, 2017 was $34.5 million .
(d)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for System Energy VIE as of June 30, 2017 was $53.2 million .

The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy VIEs.  Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.


47
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of June 30, 2017 as follows:
Company
 
Description
 
Amount
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 Arkansas VIE
 
3.17% Series M due December 2023
 
$40 million
Entergy Louisiana River Bend VIE
 
3.25% Series Q due July 2017
 
$75 million
Entergy Louisiana River Bend VIE
 
3.38% Series R due August 2020
 
$70 million
Entergy Louisiana Waterford VIE
 
3.25% Series G due July 2017
 
$25 million
Entergy Louisiana Waterford VIE
 
3.92% Series H due February 2021
 
$40 million
Entergy Louisiana Waterford VIE
 
3.22% Series I due December 2023
 
$20 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.

Debt Issuances and Retirements

(Entergy Arkansas)

In May 2017, Entergy Arkansas issued $220 million of 3.5% Series first mortgage bonds due April 2026. These bonds were a further issuance of the 3.5% Series first mortgage bonds issued in January 2016 and June 2016. Entergy Arkansas used a portion of the proceeds from the May 2017 issuance for general corporate purposes and plans to use the remainder of the proceeds to pay, at maturity, its $54.7 million of 1.55% pollution control revenue refunding bonds due October 2017.

(Entergy Louisiana)

In May 2017, Entergy Louisiana issued $450 million of 3.12% collateral trust mortgage bonds due September 2027. Entergy Louisiana used the proceeds to finance the construction of the St. Charles Power Station, to pay, at maturity, its $45.3 million of Waterford Series collateral trust mortgage notes, and for general corporate purposes.

In July 2017 the Entergy Louisiana River Bend nuclear fuel company variable interest entity paid, at maturity, its $75 million of 3.25% Series Q notes.

In July 2017 the Entergy Louisiana Waterford nuclear fuel company variable interest entity paid, at maturity, its $25 million of 3.25% Series G notes.

(System Energy)

In February 2017 the System Energy nuclear fuel company variable interest entity paid, at maturity, its $50 million of 4.02% Series H notes.


48
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 June 30, 2017 are as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$15,010,668

 

$15,239,655

Entergy Arkansas

$3,064,261

 

$2,942,288

Entergy Louisiana

$6,246,015

 

$6,484,470

Entergy Mississippi

$1,121,356

 

$1,137,274

Entergy New Orleans

$444,159

 

$467,094

Entergy Texas

$1,471,091

 

$1,560,208

System Energy

$551,296

 

$482,650


(a)
The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $182 million at Entergy Arkansas, 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 herein 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, 2016 were as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$14,832,555

 

$14,815,535

Entergy Arkansas

$2,829,785

 

$2,623,910

Entergy Louisiana

$5,812,791

 

$5,929,488

Entergy Mississippi

$1,120,916

 

$1,086,203

Entergy New Orleans

$448,994

 

$455,459

Entergy Texas

$1,508,407

 

$1,600,156

System Energy

$551,132

 

$529,520


(a)
The values exclude lease obligations of $57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $182 million at Entergy Arkansas, 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 herein and are based on prices derived from inputs such as benchmark yields and reported trades.


NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

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


49
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Effective January 1, 2017, Entergy adopted ASU 2016-09, which permits the election of an accounting policy change to the method of recognizing forfeitures of stock-based compensation. Previously, Entergy recorded an estimate of the number of forfeitures expected to occur each period. Entergy elected to change this policy to account for forfeitures when they occur. This accounting change was applied retrospectively, but did not result in an adjustment to retained earnings as of January 1, 2017.

Stock Options

Entergy granted options on 791,900 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 2017 with a weighted-average fair value of $6.54 per option.  As of June 30, 2017 , there were options on 6,162,359 shares of common stock outstanding with a weighted-average exercise price of $81.65 .  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2017 .  Because Entergy’s stock price at June 30, 2017 was less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of June 30, 2017 was zero. The intrinsic value of all “in the money” stock options was $21.5 million as of June 30, 2017 .    

The following table includes financial information for outstanding stock options for the three months ended June 30, 2017 and 2016 :

 
2017
 
2016
 
(In Millions)
Compensation expense included in Entergy’s net income

$1.1

 

$1.1

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 outstanding stock options for the six months ended June 30, 2017 and 2016 :
 
2017
 
2016
 
(In Millions)
Compensation expense included in Entergy’s net income

$2.2

 

$2.2

Tax benefit recognized in Entergy’s net income

$0.8

 

$0.8

Compensation cost capitalized as part of fixed assets and inventory

$0.4

 

$0.4


Other Equity Awards

In January 2017 the Board approved and Entergy granted 379,850 restricted stock awards and 220,450 long-term incentive awards under the 2015 Equity Ownership Plan.  The restricted stock awards were made effective as of January 26, 2017 and were valued at $70.53 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.  In addition, long-term incentive awards were granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned.  The performance units were granted effective as of January 26, 2017 and were valued at $71.40 per share.  Entergy considers various factors, primarily market conditions, in determining the value of the performance units.  Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3 -year vesting period.  Performance units have the same dividend rights as shares of Entergy common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3 -year vesting period.

50
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table includes financial information for other outstanding equity awards for the three months ended June 30, 2017 and 2016 :
 
2017
 
2016
 
(In Millions)
Compensation expense included in Entergy’s net income

$8.2

 

$8.5

Tax benefit recognized in Entergy’s net income

$3.2

 

$3.3

Compensation cost capitalized as part of fixed assets and inventory

$2.2

 

$1.9


The following table includes financial information for other outstanding equity awards for the six months ended June 30, 2017 and 2016 :
 
2017
 
2016
 
(In Millions)
Compensation expense included in Entergy’s net income

$16.4

 

$16.9

Tax benefit recognized in Entergy’s net income

$6.3

 

$6.5

Compensation cost capitalized as part of fixed assets and inventory

$4.2

 

$3.7



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

Components of Qualified Net Pension Cost
    
Entergy’s qualified pension cost, including amounts capitalized, for the second quarters of 2017 and 2016, included the following components:
 
2017
 
2016
 
(In Thousands)
Service cost - benefits earned during the period

$33,410

 

$35,811

Interest cost on projected benefit obligation
65,206

 
65,403

Expected return on assets
(102,056
)
 
(97,366
)
Amortization of prior service cost
65

 
270

Amortization of loss
56,930

 
48,824

Net pension costs

$53,555

 

$52,942

    
Entergy’s qualified pension cost, including amounts capitalized, for the six months ended June 30, 2017 and 2016, included the following components:
 
2017
 
2016
 
(In Thousands)
Service cost - benefits earned during the period

$66,820

 

$71,622

Interest cost on projected benefit obligation
130,412

 
130,806

Expected return on assets
(204,112
)
 
(194,732
)
Amortization of prior service cost
130

 
540

Amortization of loss
113,860

 
97,648

Net pension costs

$107,110

 

$105,884



51
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the second quarters of 2017 and 2016, included the following components:

2017
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$5,090

 

$6,925

 

$1,472

 

$625

 

$1,364

 

$1,536

Interest cost on projected benefit obligation
 
12,944

 
14,809

 
3,732

 
1,791

 
3,392

 
3,091

Expected return on assets
 
(20,427
)
 
(23,017
)
 
(6,131
)
 
(2,800
)
 
(6,180
)
 
(4,663
)
Amortization of loss
 
11,640

 
12,354

 
3,053

 
1,658

 
2,310

 
2,964

Net pension cost
 

$9,247

 

$11,071

 

$2,126

 

$1,274

 

$886

 

$2,928

2016
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$5,181

 

$7,049

 

$1,562

 

$656

 

$1,416

 

$1,566

Interest cost on projected benefit obligation
 
13,055

 
14,870

 
3,811

 
1,814

 
3,557

 
2,992

Expected return on assets
 
(19,772
)
 
(22,096
)
 
(5,981
)
 
(2,687
)
 
(6,062
)
 
(4,459
)
Amortization of loss
 
10,936

 
11,946

 
2,985

 
1,615

 
2,340

 
2,604

Net pension cost
 

$9,400

 

$11,769

 

$2,377

 

$1,398

 

$1,251

 

$2,703


The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the six months ended June 30, 2017 and 2016, included the following components:
2017
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$10,180

 

$13,850

 

$2,944

 

$1,250

 

$2,728

 

$3,072

Interest cost on projects benefit obligation
 
25,888

 
29,618

 
7,464

 
3,582

 
6,784

 
6,182

Expected return on assets
 
(40,854
)
 
(46,034
)
 
(12,262
)
 
(5,600
)
 
(12,360
)
 
(9,326
)
Amortization of loss
 
23,280

 
24,708

 
6,106

 
3,316

 
4,620

 
5,928

Net pension cost
 

$18,494

 

$22,142

 

$4,252

 

$2,548

 

$1,772

 

$5,856

2016
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$10,362

 

$14,098

 

$3,124

 

$1,312

 

$2,832

 

$3,132

Interest cost on projected benefit obligation
 
26,110

 
29,740

 
7,622

 
3,628

 
7,114

 
5,984

Expected return on assets
 
(39,544
)
 
(44,192
)
 
(11,962
)
 
(5,374
)
 
(12,124
)
 
(8,918
)
Amortization of loss
 
21,872

 
23,892

 
5,970

 
3,230

 
4,680

 
5,208

Net pension cost
 

$18,800

 

$23,538

 

$4,754

 

$2,796

 

$2,502

 

$5,406


52
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Non-Qualified Net Pension Cost

Entergy recognized $8.5 million and $4.3 million in pension cost for its non-qualified pension plans in the second quarters of 2017 and 2016 , respectively. Reflected in the pension cost for non-qualified pension plans in the second quarter 2017 is a $4 million settlement charge recognized in June 2017 related to the payment of lump sum benefits out of this plan. Entergy recognized $13.1 million and $8.5 million in pensions costs for its non-qualified pension plans for the six months ended June 30, 2017 and 2016, respectively. Reflected in the pension cost for non-qualified pension plans for the six months ended June 30, 2017 is a $4 million settlement charge recognized in June 2017 related to the payment of lump sum benefits out of this plan.

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the second quarters of 2017 and 2016:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
2017

$267

 

$47

 

$63

 

$18

 

$126

2016

$106

 

$59

 

$59

 

$16

 

$127


The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the six months ended June 30, 2017 and 2016:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
2017

$372

 

$96

 

$127

 

$36

 

$253

2016

$212

 

$118

 

$118

 

$32

 

$254


Reflected in Entergy Arkansas’s non-qualified pension costs in the second quarter 2017 and for the six months ended June 30, 2017 is $163 thousand in settlement charges recognized in June 2017 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 second quarters of 2017 and 2016, included the following components:
 
2017
 
2016
 
(In Thousands)
Service cost - benefits earned during the period

$6,729

 

$8,073

Interest cost on accumulated postretirement benefit obligation (APBO)
13,960

 
14,083

Expected return on assets
(9,408
)
 
(10,455
)
Amortization of prior service credit
(10,356
)
 
(11,373
)
Amortization of loss
5,476

 
4,554

Net other postretirement benefit cost

$6,401

 

$4,882



53
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy’s other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2017 and 2016, included the following components:
 
2017
 
2016
 
(In Thousands)
Service cost - benefits earned during the period

$13,458

 

$16,146

Interest cost on accumulated postretirement benefit obligation (APBO)
27,920

 
28,166

Expected return on assets
(18,816
)
 
(20,910
)
Amortization of prior service credit
(20,712
)
 
(22,746
)
Amortization of loss
10,952

 
9,108

Net other postretirement benefit cost

$12,802

 

$9,764


The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the second quarters of 2017 and 2016, included the following components:
2017
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$863

 

$1,593

 

$290

 

$142

 

$372

 

$320

Interest cost on APBO
 
2,255

 
3,025

 
690

 
469

 
1,124

 
559

Expected return on assets
 
(3,959
)
 
—

 
(1,200
)
 
(1,159
)
 
(2,180
)
 
(717
)
Amortization of prior service credit
 
(1,278
)
 
(1,934
)
 
(456
)
 
(186
)
 
(579
)
 
(378
)
Amortization of loss
 
1,115

 
465

 
419

 
105

 
826

 
390

Net other postretirement benefit cost
 

($1,004
)
 

$3,149

 

($257
)
 

($629
)
 

($437
)
 

$174

2016
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$978

 

$1,869

 

$386

 

$156

 

$398

 

$334

Interest cost on APBO
 
2,324

 
3,260

 
709

 
448

 
1,039

 
529

Expected return on assets
 
(4,464
)
 
—

 
(1,379
)
 
(1,154
)
 
(2,394
)
 
(814
)
Amortization of prior service credit
 
(1,368
)
 
(1,947
)
 
(234
)
 
(186
)
 
(681
)
 
(393
)
Amortization of loss
 
1,064

 
732

 
223

 
37

 
537

 
287

Net other postretirement benefit cost
 

($1,466
)
 

$3,914

 

($295
)
 

($699
)
 

($1,101
)
 

($57
)

54
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the six months ended June 30, 2017 and 2016, included the following components:
2017
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$1,726

 

$3,186

 

$580

 

$284

 

$744

 

$640

Interest cost on APBO
 
4,510

 
6,050

 
1,380

 
938

 
2,248

 
1,118

Expected return on assets
 
(7,918
)
 
—

 
(2,400
)
 
(2,318
)
 
(4,360
)
 
(1,434
)
Amortization of prior service credit
 
(2,556
)
 
(3,868
)
 
(912
)
 
(372
)
 
(1,158
)
 
(756
)
Amortization of loss
 
2,230

 
930

 
838

 
210

 
1,652

 
780

Net other postretirement benefit cost
 

($2,008
)
 

$6,298

 

($514
)
 

($1,258
)
 

($874
)
 

$348


2016
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$1,956

 

$3,738

 

$772

 

$312

 

$796

 

$668

Interest cost on APBO
 
4,648

 
6,520

 
1,418

 
896

 
2,078

 
1,058

Expected return on assets
 
(8,928
)
 
—

 
(2,758
)
 
(2,308
)
 
(4,788
)
 
(1,628
)
Amortization of prior service credit
 
(2,736
)
 
(3,894
)
 
(468
)
 
(372
)
 
(1,362
)
 
(786
)
Amortization of loss
 
2,128

 
1,464

 
446

 
74

 
1,074

 
574

Net other postretirement benefit cost
 

($2,932
)
 

$7,828

 

($590
)
 

($1,398
)
 

($2,202
)
 

($114
)

Reclassification out of Accumulated Other Comprehensive Income (Loss)

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the second quarters of 2017 and 2016:
2017
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service (cost)/credit
 

($65
)
 

$6,718

 

($89
)
 

$6,564

Amortization of loss
 
(18,450
)
 
(2,202
)
 
(902
)
 
(21,554
)
Settlement loss
 
—

 
—

 
(1,765
)
 
(1,765
)
 
 

($18,515
)
 

$4,516

 

($2,756
)
 

($16,755
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service credit
 

$—

 

$1,934

 

$—

 

$1,934

Amortization of loss
 
(865
)
 
(465
)
 
(2
)
 
(1,332
)
 
 

($865
)
 

$1,469

 

($2
)
 

$602


55
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2016

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service (cost)/credit


($270
)


$7,738



($113
)


$7,355

Amortization of loss

(12,482
)

(2,063
)

(632
)

(15,177
)



($12,752
)


$5,675



($745
)


($7,822
)
Entergy Louisiana








Amortization of prior service credit


$—



$1,947



$—



$1,947

Amortization of loss

(836
)

(732
)

(5
)

(1,573
)



($836
)


$1,215



($5
)


$374


Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the six months ended June 30, 2017 and 2016:
2017

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service (cost)/credit


($130
)


$13,435



($179
)


$13,126

Amortization of loss

(36,899
)

(4,404
)

(1,822
)

(43,125
)
Settlement loss

—


—


(1,765
)

(1,765
)



($37,029
)


$9,031



($3,766
)


($31,764
)
Entergy Louisiana








Amortization of prior service credit


$—



$3,868



$—



$3,868

Amortization of loss

(1,730
)

(930
)

(4
)

(2,664
)



($1,730
)


$2,938



($4
)


$1,204

2016
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service (cost)/credit
 

($540
)
 

$15,476

 

($226
)
 

$14,710

Amortization of loss
 
(24,964
)
 
(4,126
)
 
(1,262
)
 
(30,352
)
 
 

($25,504
)
 

$11,350

 

($1,488
)
 

($15,642
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service credit
 

$—

 

$3,894

 

$—

 

$3,894

Amortization of loss
 
(1,672
)
 
(1,464
)
 
(6
)
 
(3,142
)
 
 

($1,672
)
 

$2,430

 

($6
)
 

$752



56
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Employer Contributions

Based on current assumptions, Entergy expects to contribute $409.9 million to its qualified pension plans in 2017.  As of June 30, 2017 , Entergy had contributed $176 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 2017 :
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
(In Thousands)
Expected 2017 pension contributions

$79,495

 

$87,923

 

$19,146

 

$9,920

 

$17,064

 

$18,180

Pension contributions made through June 2017

$34,507

 

$37,519

 

$8,251

 

$4,361

 

$7,227

 

$8,182

Remaining estimated pension contributions to be made in 2017

$44,988

 

$50,404

 

$10,895

 

$5,559

 

$9,837

 

$9,998



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

Entergy Corporation

Entergy’s reportable segments as of June 30, 2017 are Utility and Entergy Wholesale Commodities.  Utility 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.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  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.  “All Other” includes the parent company, Entergy Corporation, and other business activity.

Entergy’s segment financial information for the second quarters of 2017 and 2016 is as follows:    
 
 
Utility
 
Entergy
Wholesale
Commodities
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2017
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,301,332

 

$317,255

 

$—

 

($37
)
 

$2,618,550

Income taxes
 

$130,851

 

($454,944
)
 

($13,019
)
 

$—

 

($337,112
)
Consolidated net income (loss)
 

$246,382

 

$223,886

 

($25,001
)
 

($31,899
)
 

$413,368

2016
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,118,478

 

$344,110

 

$—

 

($26
)
 

$2,462,562

Income taxes
 

($3,785
)
 

($235,055
)
 

($10,133
)
 

$—

 

($248,973
)
Consolidated net income (loss)
 

$380,317

 

$250,874

 

($26,703
)
 

($31,898
)
 

$572,590

 
 
 
 
 
 
 
 
 
 
 

57
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy’s segment financial information for the six months ended June 30, 2017 and 2016 is as follows:
 
 
Utility
 
Entergy
Wholesale
Commodities
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2017
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$4,336,444

 

$870,622

 

$—

 

($58
)
 

$5,207,008

Income taxes
 

$229,343

 

($533,281
)
 

($25,412
)
 

$—

 

($329,350
)
Consolidated net income (loss)
 

$414,005

 

$196,689

 

($47,477
)
 

($63,797
)
 

$499,420

Total assets as of June 30, 2017
 

$42,263,832

 

$5,627,284

 

$1,165,157

 

($3,049,236
)
 

$46,007,037

2016
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$4,206,272

 

$866,189

 

$—

 

($46
)
 

$5,072,415

Income taxes
 

$104,051

 

($182,741
)
 

($30,337
)
 

$—

 

($109,027
)
Consolidated net income (loss)
 

$579,968

 

$330,430

 

($38,769
)
 

($63,797
)
 

$807,832

Total assets as of December 31, 2016
 

$41,098,751

 

$6,696,038

 

$1,283,816

 

($3,174,171
)
 

$45,904,434


The Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.

As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions in 2016.

Additional restructuring charges for the second quarter 2017 were comprised of the following:
 
Employee retention and severance
expenses and other benefits-related costs
 
Contracted economic development costs
 
Total
 
(In Millions)
Balance as of April 1, 2017

$94

 

$21

 

$115

Restructuring costs accrued
42

 
—

 
42

Cash paid out
100

 
—

 
100

Balance as of June 30, 2017

$36

 

$21

 

$57


In addition, Entergy incurred $194 million of impairment charges in the second quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

    

58
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Additional restructuring charges for the six months ended June 30, 2017 were comprised of the following:
 
Employee retention and severance
expenses and other benefits-related costs
 
Contracted economic development costs
 
Total
 
(In Millions)
Balance as of January 1, 2017

$70

 

$21

 

$91

Restructuring costs accrued
66

 
—

 
66

Cash paid out
100

 
—

 
100

Balance as of June 30, 2017

$36

 

$21

 

$57


In addition, Entergy incurred $405 million of impairment charges in the six months ended June 30, 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets.

Registrant Subsidiaries

Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business.  Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.


NOTE 8.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy 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 and gas 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

59
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.  Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at June 30, 2017 is approximately 2.5 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 89% for the remainder of 2017 , of which approximately 59% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2017 is 15 TWh.

Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  As of June 30, 2017 , there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $3 million in cash collateral and $19 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2016 , derivative contracts with three counterparties were in a liability position (approximately $8 million total). In addition to the corporate guarantee, $2 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. 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 manages fuel price volatility for its Louisiana jurisdictions (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 at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy Louisiana and Entergy New Orleans.  The

60
Entergy Corporation and Subsidiaries
Notes to Financial Statements

total volume of natural gas swaps outstanding as of June 30, 2017 is 34,696,750 MMBtu for Entergy, including 29,110,800 MMBtu for Entergy Louisiana and 5,585,950 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2017, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2017 through May 31, 2018. Financial transmission rights 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 financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2017 is 106,060 GWh for Entergy, including 24,188 GWh for Entergy Arkansas, 47,173 GWh for Entergy Louisiana, 14,075 GWh for Entergy Mississippi, 5,316 GWh for Entergy New Orleans, and 14,572 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2017 and December 31, 2016. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas and Entergy Mississippi as of June 30, 2017 and December 31, 2016.


61
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2017 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
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)
 
$40
 
($23)
 
$17
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$19
 
($9)
 
$10
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$15
 
($15)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$12
 
($10)
 
$2
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$16
 
($3)
 
$13
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
Financial transmission rights
 
Prepayments and other
 
$61
 
($4)
 
$57
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities(current portion)
 
$10
 
($10)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$1
 
($1)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$5
 
$—
 
$5
 
Utility


62
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, 2016 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
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)
 
$25
 
($14)
 
$11
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$6
 
($6)
 
$—
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$11
 
($10)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$16
 
($7)
 
$9
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$18
 
($13)
 
$5
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$5
 
($5)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps
 
Prepayments and other
 
$13
 
$—
 
$13
 
Utility
Financial transmission rights
 
Prepayments and other
 
$22
 
($1)
 
$21
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$18
 
($17)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$4
 
($4)
 
$—
 
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 Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)
Excludes cash collateral in the amount of $1 million posted and $3 million held as of June 30, 2017 and $2 million posted as of December 31, 2016. Also excludes $19 million in letters of credit held as of June 30, 2017.



63
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended June 30, 2017 and 2016 are as follows:
Instrument
 
Amount of gain (loss)
recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain
reclassified from
accumulated other comprehensive income into income (a)
 
 
(In Millions)
 
 
 
(In Millions)
2017
 
 
 
 
 
 
Electricity swaps and options
 
$43
 
Competitive businesses operating revenues
 
$13
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Electricity swaps and options
 
($53)
 
Competitive businesses operating revenues
 
$46

(a)
Before taxes of $4 million and $16 million for the three months ended June 30, 2017 and 2016, respectively

The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the six months ended June 30, 2017 and 2016 are as follows:
Instrument
 
Amount of gain
recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain
reclassified from
accumulated other comprehensive income into income (a)

 
(In Millions)
 
 
 
(In Millions)
2017
 
 
 
 
 
 
Electricity swaps and options
 
$93
 
Competitive businesses operating revenues
 
$64
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Electricity swaps and options
 
$86
 
Competitive businesses operating revenues
 
$200
    
(a)
Before taxes of $22 million and $70 million for the six months ended June 30, 2017 and 2016, respectively

At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended June 30, 2017 and 2016 was $5 million and ($3) million , respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the six months ended June 30, 2017 and 2016 was $4 million and ($0.3) million , respectively.

Based on market prices as of June 30, 2017 , unrealized gains recorded in AOCI on cash flow hedges relating to power sales totaled $39 million of net unrealized gains.  Approximately $30 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.    


64
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended June 30, 2017 and 2016 are as follows:
Instrument
 
Amount of loss recognized in accumulated other comprehensive income
 
Income Statement
location
 
Amount of gain (loss)
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2017
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($9)
FTRs
 
$—
 
Purchased power expense
(b)
$44
Electricity swaps and options
 
($5)
(c)
Competitive business operating revenues
 
$—
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($6)
FTRs
 
$—
 
Purchased power expense
(b)
$38
Electricity swaps and options
 
($10)
(c)
Competitive business operating revenues
 
($6)


65
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the six months ended June 30, 2017 and 2016 are as follows:
Instrument

Amount of gain recognized in accumulated other comprehensive income

Income Statement
location

Amount of gain (loss)
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2017
 

 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($16)
Financial transmission rights

$—

Purchased power expense
(b)
$75
Electricity swaps and options
 
$4
(c)
Competitive business operating revenues
 
$—
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($30)
Financial transmission rights
 
$—
 
Purchased power expense
(b)
$59
Electricity swaps and options
 
$15
(c)
Competitive business operating revenues
 
($9)

(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 financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)
Amount of gain (loss) recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items.


66
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 June 30, 2017 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$8.3
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$28.3
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$9.1
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$5.2
 
Entergy New Orleans
Financial transmission rights
 
Prepayments and other
 
$5.5
 
Entergy Texas
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Natural gas swaps
 
Other current liabilities
 
$4.5
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.8
 
Entergy Mississippi

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2016 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
Natural gas swaps
 
Prepayments and other
 
$10.9
 
Entergy Louisiana
Natural gas swaps
 
Prepayments and other
 
$2.3
 
Entergy Mississippi
Natural gas swaps
 
Prepayments and other
 
$0.2
 
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$5.4
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$8.5
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$3.2
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$1.1
 
Entergy New Orleans
Financial transmission rights
 
Prepayments and other
 
$3.1
 
Entergy Texas

(a)
As of June 30, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and $0.1 million for Entergy Mississippi. As of December 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and $0.1 million for Entergy Mississippi.

67
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 June 30, 2017 and 2016 are as follows:
Instrument
 
Income Statement Location
 
Amount of gain
(loss) recorded
in the income statement
 
Registrant
 
 
 
 
(In Millions)
 
 
2017
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($7.6)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.4)
(a)
Entergy Mississippi
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$10.5
(b)
Entergy Arkansas
FTRs
 
Purchased power expense
 
$14.3
(b)
Entergy Louisiana
FTRs
 
Purchased power expense
 
$8.5
(b)
Entergy Mississippi
FTRs
 
Purchased power expense
 
$3.4
(b)
Entergy New Orleans
FTRs
 
Purchased power expense
 
$6.9
(b)
Entergy Texas
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($4.9)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.9)
(a)
Entergy Mississippi
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$5.5
(b)
Entergy Arkansas
FTRs
 
Purchased power expense
 
$21.6
(b)
Entergy Louisiana
FTRs
 
Purchased power expense
 
$3.6
(b)
Entergy Mississippi
FTRs
 
Purchased power expense
 
$1.4
(b)
Entergy New Orleans
FTRs
 
Purchased power expense
 
$5.4
(b)
Entergy Texas




68
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2017 and 2016 are as follows:
Instrument

Income Statement Location

Amount of gain
(loss) recorded
in the income statement

Registrant
 
 
 
 
(In Millions)
 
 
2017
 
 
 

 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($13.7)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($2.5)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.1)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power expense
 
$15.1
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power expense
 
$29.5
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power expense
 
$11.6
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power expense
 
$5.7
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power expense
 
$12.1
(b)
Entergy Texas
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($24.2)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($5.0)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.5)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power expense
 
$13.3
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power expense
 
$32.1
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power expense
 
$4.4
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power expense
 
$1.9
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power expense
 
$6.9
(b)
Entergy Texas

(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 financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are

69
Entergy Corporation and Subsidiaries
Notes to Financial Statements

simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments 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.

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.

•
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

70
Entergy Corporation and Subsidiaries
Notes to Financial Statements

estimate of fair value for the asset or liability.  Level 3 consists primarily of financial transmission rights 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 Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group.  The primary functions of the Business Unit 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 Business Unit Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Accounting Policy and Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Business Unit Risk Control group reports to the Vice President and Treasurer while the Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

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

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 U.S. 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, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options.  The Business Unit 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 compared with other 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’ portfolio.  In particular, the credit and liquidity effects are calculated for this analysis.  This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.

The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the

71
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Business Unit Risk Control group.  The values are calculated internally and verified against the data published by MISO. Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk Control groups report to the Vice President and Treasurer.  The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 .  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.
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$867

 

$—

 

$—

 

$867

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
469

 
—

 
—

 
469

Debt securities
 
1,032

 
1,376

 
—

 
2,408

Common trusts (b)
 
 
 
 
 
 
 
3,920

Power contracts
 
—

 
—

 
40

 
40

Securitization recovery trust account
 
36

 
—

 
—

 
36

Escrow accounts
 
416

 
—

 
—

 
416

Financial transmission rights
 
—

 
—

 
57

 
57

 
 

$2,820

 

$1,376

 

$97

 

$8,213

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$2

 

$2

Gas hedge contracts
 
5

 
—

 
—

 
5

 
 

$5

 

$—

 

$2

 

$7


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$1,058

 

$—

 

$—

 

$1,058

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
480

 
—

 
—

 
480

Debt securities
 
985

 
1,228

 
—

 
2,213

Common trusts (b)
 
 
 
 
 
 
 
3,031

Power contracts
 
—

 
—

 
16

 
16

Securitization recovery trust account
 
46

 
—

 
—

 
46

Escrow accounts
 
433

 
—

 
—

 
433

Gas hedge contracts
 
13

 
—

 
—

 
13

Financial transmission rights
 
—

 
—

 
21

 
21

 
 

$3,015

 

$1,228

 

$37

 

$7,311

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$11

 

$11


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

72
Entergy Corporation and Subsidiaries
Notes to Financial Statements

(b)
Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2017 and 2016 :
 
2017
 
2016
 
Power Contracts
 
Financial transmission rights
 
Power Contracts
 
Financial transmission rights
 
(In Millions)
Balance as of April 1,

$5

 

$8

 

$183

 

$9

Total gains (losses) for the period (a)
 
 
 
 
 
 
 
Included in earnings
4

 
—

 
(9
)
 
—

Included in OCI
43

 
—

 
(53
)
 
—

Included as a regulatory liability/asset
—

 
31

 
—

 
20

Issuances of FTRs
—

 
62

 
—

 
55

Purchases
—

 
—

 
—

 
—

Settlements
(14
)
 
(44
)
 
(55
)
 
(38
)
Balance as of June 30,

$38

 

$57

 

$66

 

$46


(a)
Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($0.1) million for the three months ended June 30, 2017 and ($6) million for the three months ended June 30, 2016.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2017 and 2016 :
 
2017
 
2016
 
Power Contracts
 
Financial transmission rights
 
Power Contracts
 
Financial transmission rights

(In Millions)
Balance as of January 1,

$5

 

$21

 

$189

 

$23

Total gains (losses) for the period (a)
 
 
 
 
 
 
 
Included in earnings
4

 
—

 
(9
)
 
—

Included in OCI
93

 
—

 
86

 
—

Included as a regulatory liability/asset
—

 
48

 
—

 
27

Issuances of financial transmission rights
—

 
62

 
—

 
55

Purchases
—

 
—

 
—

 
—

Settlements
(64
)
 
(74
)
 
(200
)
 
(59
)
Balance as of June 30,

$38

 

$57

 

$66

 

$46


(a)
Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.3 million for the six months ended June 30, 2017. For the six months ended June 30, 2016, there is no change in unrealized gains or losses included in earnings for derivatives held at the end of the reporting period.


73
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of June 30, 2017 :
Transaction Type
 
Fair Value
as of
June 30, 2017
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
 
 
(In Millions)
 
 
 
 
 
 
(In Millions)
Power contracts - electricity swaps
 
$38
 
Unit contingent discount
 
+/-
4%
 
$3

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)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 .  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
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$10.7

 

$—

 

$—

 

$10.7

Debt securities
 
129.7

 
198.3

 
—

 
328.0

Common trusts (b)
 
 
 
 
 
 
 
545.6

Securitization recovery trust account
 
3.6

 
—

 
—

 
3.6

Escrow accounts
 
4.7

 
—

 
—

 
4.7

Financial transmission rights
 
—

 
—

 
8.3

 
8.3

 
 

$148.7

 

$198.3

 

$8.3

 

$900.9


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$3.6

 

$—

 

$—

 

$3.6

Debt securities
 
112.5

 
196.8

 
—

 
309.3

Common trusts (b)
 
 
 
 
 
 
 
521.8

Securitization recovery trust account
 
4.1

 
—

 
—

 
4.1

Escrow accounts
 
7.1

 
—

 
—

 
7.1

Financial transmission rights
 
—

 
—

 
5.4

 
5.4

 
 

$127.3

 

$196.8

 

$5.4

 

$851.3



74
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Louisiana
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$211.9

 

$—

 

$—

 

$211.9

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
11.2

 
—

 
—

 
11.2

Debt securities
 
137.5

 
326.6

 
—

 
464.1

Common trusts (b)
 
 
 
 
 
 
 
745.4

Escrow accounts
 
292.9

 
—

 
—

 
292.9

Securitization recovery trust account
 
2.8

 
—

 
—

 
2.8

Financial transmission rights
 
—

 
—

 
28.3

 
28.3

 
 

$656.3

 

$326.6

 

$28.3

 

$1,756.6

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$4.5

 

$—

 

$—

 

$4.5


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$163.9

 

$—

 

$—

 

$163.9

Decommissioning trust funds (a):
 
 

 
 

 
 

 
 

Equity securities
 
13.9

 
—

 
—

 
13.9

Debt securities
 
132.3

 
292.5

 
—

 
424.8

Common trusts (b)
 
 
 
 
 
 
 
702.0

Escrow accounts
 
305.7

 
—

 
—

 
305.7

Securitization recovery trust account
 
2.8

 
—

 
—

 
2.8

Gas hedge contracts
 
10.9

 
—

 
—

 
10.9

Financial transmission rights
 
—

 
—

 
8.5

 
8.5

 
 

$629.5

 

$292.5

 

$8.5

 

$1,632.5


Entergy Mississippi
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Escrow accounts
 

$31.9

 

$—

 

$—

 

$31.9

Financial transmission rights
 
—

 
—

 
9.1

 
9.1

 
 

$31.9

 

$—

 

$9.1

 

$41.0

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.8

 

$—

 

$—

 

$0.8



75
Entergy Corporation and Subsidiaries
Notes to Financial Statements

2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$76.8

 

$—

 

$—

 

$76.8

Escrow accounts
 
31.8

 
—

 
—

 
31.8

Gas hedge contracts
 
2.3

 
—

 
—

 
2.3

Financial transmission rights
 
—

 
—

 
3.2

 
3.2

 
 

$110.9

 

$—

 

$3.2

 

$114.1


Entergy New Orleans
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$60.7

 

$—

 

$—

 

$60.7

Securitization recovery trust account
 
1.1

 
—

 
—

 
1.1

Escrow accounts
 
86.4

 
—

 
—

 
86.4

Financial transmission rights
 
—

 
—

 
5.2

 
5.2

 
 

$148.2

 

$—

 

$5.2

 

$153.4


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$103.0

 

$—

 

$—

 

$103.0

Securitization recovery trust account
 
1.7

 
—

 
—

 
1.7

Escrow accounts
 
88.6

 
—

 
—

 
88.6

Gas hedge contracts
 
0.2

 
—

 
—

 
0.2

Financial transmission rights
 
—

 
—

 
1.1

 
1.1

 
 

$193.5

 

$—

 

$1.1

 

$194.6


Entergy Texas
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Securitization recovery trust account
 

$28.7

 

$—

 

$—

 

$28.7

Financial transmission rights
 
—

 
—

 
5.5

 
5.5

 
 

$28.7

 

$—

 

$5.5

 

$34.2


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$5.0

 

$—

 

$—

 

$5.0

Securitization recovery trust account
 
37.5

 
—

 
—

 
37.5

Financial transmission rights
 
—

 
—

 
3.1

 
3.1

 
 

$42.5

 

$—

 

$3.1

 

$45.6



76
Entergy Corporation and Subsidiaries
Notes to Financial Statements

System Energy
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$337.0

 

$—

 

$—

 

$337.0

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
1.6

 
—

 
—

 
1.6

Debt securities
 
208.9

 
113.6

 
—

 
322.5

Common trusts (b)
 
 
 
 
 
 
 
515.3

 
 

$547.5

 

$113.6

 

$—

 

$1,176.4


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$245.1

 

$—

 

$—

 

$245.1

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
0.3

 
—

 
—

 
0.3

Debt securities
 
248.3

 
58.3

 
—

 
306.6

Common trusts (b)
 
 
 
 
 
 
 
473.6

 
 

$493.7

 

$58.3

 

$—

 

$1,025.6


(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 for additional information on the investment portfolios.
(b)
Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2017.
    
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of April 1,

$0.9

 

$4.1

 

$1.3

 

$0.5

 

$1.0

Issuances of FTRs
8.9

 
31.0

 
9.6

 
5.0

 
7.1

Gains included as a regulatory liability/asset
9.0

 
7.5

 
6.7

 
3.1

 
4.3

Settlements
(10.5
)
 
(14.3
)
 
(8.5
)
 
(3.4
)
 
(6.9
)
Balance as of June 30,

$8.3

 

$28.3

 

$9.1

 

$5.2

 

$5.5



77
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 June 30, 2016.
    
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of April 1,

$3.7

 

$3.3

 

$0.9

 

$0.6

 

$0.9

Issuances of FTRs
18.8

 
18.1

 
5.9

 
2.8

 
9.3

Gains (losses) included as a regulatory liability/asset
(3.0
)
 
16.4

 
2.4

 
—

 
3.2

Settlements
(5.5
)
 
(21.6
)
 
(3.6
)
 
(1.4
)
 
(5.4
)
Balance as of June 30,

$14.0

 

$16.2

 

$5.6

 

$2.0

 

$8.0


The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2017 .
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$5.4

 

$8.5

 

$3.2

 

$1.1

 

$3.1

Issuances of FTRs
8.9

 
31.0

 
9.6

 
5.0

 
7.1

Gains included as a regulatory liability/asset
9.1

 
18.3

 
7.9

 
4.8

 
7.4

Settlements
(15.1
)
 
(29.5
)
 
(11.6
)
 
(5.7
)
 
(12.1
)
Balance as of June 30,

$8.3

 

$28.3

 

$9.1

 

$5.2

 

$5.5


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 six months ended June 30, 2016 .
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$7.9

 

$8.5

 

$2.4

 

$1.5

 

$2.2

Issuances of FTRs
18.8

 
18.1

 
5.9

 
2.8

 
9.3

Gains (losses) included as a regulatory liability/asset
0.6

 
21.7

 
1.7

 
(0.4
)
 
3.4

Settlements
(13.3
)
 
(32.1
)
 
(4.4
)
 
(1.9
)
 
(6.9
)
Balance as of June 30,

$14.0

 

$16.2

 

$5.6

 

$2.0

 

$8.0



NOTE 9.  DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, 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, Indian Point 2, Indian Point 3, Vermont Yankee,

78
Entergy Corporation and Subsidiaries
Notes to Financial Statements

and Palisades.  The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.

See Note 16 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. In January 2017, NYPA transferred to Entergy the Indian Point 3 decommissioning trust fund with a fair value of $726 million and the FitzPatrick decommissioning trust fund with a fair value of $793 million .

As discussed in Note 13 to the financial statements herein, in March 2017, Entergy closed on the sale of the FitzPatrick plant to Exelon. As part of the transaction, Entergy transferred the FitzPatrick decommissioning trust fund to Exelon. The FitzPatrick decommissioning trust fund had a disposition-date fair value of $805 million and was classified as held for sale within other deferred debits as of December 31, 2016.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale.  Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporary and therefore recorded in earnings.  Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The securities held as of June 30, 2017 and December 31, 2016 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2017
 
 
 
 
 
 
Equity Securities
 

$4,389

 

$1,857

 

$1

Debt Securities
 
2,408

 
45

 
15

Total
 

$6,797

 

$1,902

 

$16

 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2016
 
 
 
 
 
 
Equity Securities
 

$3,511

 

$1,673

 

$1

Debt Securities
 
2,213

 
34

 
27

Total
 

$5,724

 

$1,707

 

$28


The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of June 30, 2017 are $465 million for Indian Point 1, $591 million for Indian Point 2, $758 million for Indian Point 3, $434 million for Palisades, $1,010 million for Pilgrim, and $595 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

79
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 $441 million and $399 million as of June 30, 2017 and December 31, 2016 , respectively.  The amortized cost of debt securities was $2,378 million as of June 30, 2017 and $2,212 million as of December 31, 2016 .  As of June 30, 2017 , the debt securities have an average coupon rate of approximately 3.21% , an average duration of approximately 6.14 years, and an average maturity of approximately 9.96 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 June 30, 2017 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$2

 

$1

 

$997

 

$12

More than 12 months
—

 
—

 
47

 
3

Total

$2

 

$1

 

$1,044

 

$15


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, 2016 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$23

 

$1

 

$1,169

 

$26

More than 12 months
1

 
—

 
20

 
1

Total

$24

 

$1

 

$1,189

 

$27


The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$106

 

$125

1 year - 5 years
805

 
763

5 years - 10 years
795

 
719

10 years - 15 years
111

 
109

15 years - 20 years
88

 
73

20 years+
503

 
424

Total

$2,408

 

$2,213


During the three months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $949 million and $504 million , respectively.  During the three months ended June 30, 2017 and 2016 , gross gains

80
Entergy Corporation and Subsidiaries
Notes to Financial Statements

of $61 million and $10 million , respectively, and gross losses of $2 million and $2 million , respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $1,463 million and $1,233 million , respectively.  During the six months ended June 30, 2017 and 2016 , gross gains of $70 million and $20 million , respectively, and gross losses of $7 million and $5 million , respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2017 and December 31, 2016 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2017
 
 
 
 
 
 
Equity Securities
 

$556.3

 

$308.0

 

$—

Debt Securities
 
328.0

 
3.3

 
2.3

Total
 

$884.3

 

$311.3

 

$2.3

 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Equity Securities
 

$525.4

 

$281.5

 

$—

Debt Securities
 
309.3

 
3.4

 
4.2

Total
 

$834.7

 

$284.9

 

$4.2


The amortized cost of debt securities was $327 million as of June 30, 2017 and $310.1 million as of December 31, 2016 .  As of June 30, 2017 , the debt securities have an average coupon rate of approximately 2.53% , an average duration of approximately 5.83 years, and an average maturity of approximately 6.87 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 June 30, 2017 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$118.1

 

$1.7

More than 12 months
—

 
—

 
10.1

 
0.6

Total

$—

 

$—

 

$128.2

 

$2.3



81
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, 2016 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$146.7

 

$4.2

More than 12 months
—

 
—

 
—

 
—

Total

$—

 

$—

 

$146.7

 

$4.2


The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$16.8

 

$16.7

1 year - 5 years
102.6

 
106.2

5 years - 10 years
183.5

 
161.2

10 years - 15 years
4.4

 
7.7

15 years - 20 years
1.1

 
1.0

20 years+
19.6

 
16.5

Total

$328.0

 

$309.3


During the three months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $131.3 million and $45.2 million , respectively.  During the three months ended June 30, 2017 and 2016 , gross gains of $11.2 million and $0.4 million , respectively, and gross losses of $0.1 million and $0.2 million , respectively were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $167.3 million and $103.8 million , respectively.  During the six months ended June 30, 2017 and 2016 , gross gains of $11.7 million and $1.2 million , respectively, and gross losses of $0.2 million and $0.3 million , respectively were reclassified out of other regulatory liabilities/assets into earnings.


82
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 June 30, 2017 and December 31, 2016 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2017
 
 
 
 
 
 
Equity Securities
 

$756.6

 

$395.6

 

$—

Debt Securities
 
464.1

 
10.9

 
2.9

Total
 

$1,220.7

 

$406.5

 

$2.9

 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Equity Securities
 

$715.9

 

$346.6

 

$—

Debt Securities
 
424.8

 
8.0

 
5.0

Total
 

$1,140.7

 

$354.6

 

$5.0


The amortized cost of debt securities was $456.1 million as of June 30, 2017 and $421.9 million as of December 31, 2016 .  As of June 30, 2017 , the debt securities have an average coupon rate of approximately 3.79% , an average duration of approximately 5.8 years, and an average maturity of approximately 11.49 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 June 30, 2017 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$164.4

 

$2.4

More than 12 months
—

 
—

 
9.7

 
0.5

Total

$—

 

$—

 

$174.1

 

$2.9


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, 2016 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$198.8

 

$4.8

More than 12 months
—

 
—

 
4.8

 
0.2

Total

$—

 

$—

 

$203.6

 

$5.0



83
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$28.5

 

$31.4

1 year - 5 years
105.2

 
99.1

5 years - 10 years
131.9

 
122.8

10 years - 15 years
44.3

 
41.4

15 years - 20 years
38.6

 
30.9

20 years+
115.6

 
99.2

Total

$464.1

 

$424.8


During the three months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $85 million and $69.7 million , respectively.  During the three months ended June 30, 2017 and 2016 , gross gains of $5 million and $1.7 million , respectively, and gross losses of $0.1 million and $0.04 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $125.6 million and $123.5 million , respectively.  During the six months ended June 30, 2017 and 2016 , gross gains of $5 million and $2.6 million , respectively, and gross losses of $0.3 million and $0.1 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

System Energy

System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of June 30, 2017 and December 31, 2016 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2017
 
 
 
 
 
 
Equity Securities
 

$516.9

 

$257.6

 

$—

Debt Securities
 
322.5

 
3.3

 
2.3

Total
 

$839.4

 

$260.9

 

$2.3

 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Equity Securities
 

$473.9

 

$221.9

 

$0.1

Debt Securities
 
306.6

 
2.0

 
4.5

Total
 

$780.5

 

$223.9

 

$4.6


The amortized cost of debt securities was $321.5 million as of June 30, 2017 and $309.1 million as of December 31, 2016 .  As of June 30, 2017 , the debt securities have an average coupon rate of approximately 2.37% , an average duration of approximately 6.45 years, and an average maturity of approximately 8.84 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.


84
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2017 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$199.5

 

$2.0

More than 12 months
—

 
—

 
8.6

 
0.3

Total

$—

 

$—

 

$208.1

 

$2.3


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, 2016 :
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$220.9

 

$4.4

More than 12 months
—

 
0.1

 
0.8

 
0.1

Total

$—

 

$0.1

 

$221.7

 

$4.5


The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$8.6

 

$6.6

1 year - 5 years
159.6

 
188.2

5 years - 10 years
86.4

 
78.5

10 years - 15 years
2.3

 
1.3

15 years - 20 years
7.8

 
7.8

20 years+
57.8

 
24.2

Total

$322.5

 

$306.6


During the three months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $177.7 million and $100.9 million , respectively.  During the three months ended June 30, 2017 and 2016 , gross gains of $0.4 million and $0.9 million , respectively, and gross losses of $0.6 million and $0.1 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2017 and 2016 , proceeds from the dispositions of securities amounted to $253.5 million and $289.4 million , respectively.  During the six months ended June 30, 2017 and 2016 , gross gains of $0.5 million and $2.5 million , respectively, and gross losses of $1.3 million and $0.4 million , respectively, were reclassified out of other regulatory liabilities/assets into earnings.


85
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Other-than-temporary impairments and unrealized gains and losses

Entergy evaluates investment securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and six months ended June 30, 2017 and 2016 .  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is 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 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 for the three and six months ended June 30, 2017 and 2016 , 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 Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See “ Income Tax Audits ” and “ Other Tax Matters ” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits and other income tax matters involving Entergy. The following are updates to that discussion.

As discussed in the Form 10-K, in the second quarter 2016, Entergy made a tax election to treat as a corporation for federal income tax purposes its subsidiary that owned the FitzPatrick nuclear power plant.  The effect of the election was that the plant and associated assets were deemed to be contributed to a new corporation for federal income tax purposes, which created permanent and temporary differences, as discussed in the Form 10-K.  One permanent difference, which increased tax expense in 2016 under the applicable accounting standards, was the reduction to the plant’s tax basis to the extent that it exceeded its fair market value.  Entergy sold the FitzPatrick plant on March 31, 2017.  The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis, using the closing price as indicative of a higher fair market value for the plant.  The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy made tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. This resulted in a constructive contribution of all the assets and liabilities associated with the plants to new subsidiary corporations for federal income tax purposes, and generated both permanent and temporary differences under the income tax accounting standards. The constructive contributions required the Entergy subsidiary that constructively contributed the assets and liabilities to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in permanent differences. The accrual of the nuclear decommissioning liabilities required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets constructively contributed to the subsidiaries. Recognition of the gain and the increase in tax basis of the assets represents a temporary difference. The permanent differences reduced income tax expense, net of unrecognized tax benefits, by $373 million .

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred

86
Entergy Corporation and Subsidiaries
Notes to Financial Statements

tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements in the Form 10-K.


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

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at June 30, 2017 are $198 million for Entergy, $47.8 million for Entergy Arkansas, $55.1 million for Entergy Louisiana, $5.3 million for Entergy Mississippi, $1.1 million for Entergy New Orleans, $15.2 million for Entergy Texas, and $28.1 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2016 are $253 million for Entergy, $40.9 million for Entergy Arkansas, $114.8 million for Entergy Louisiana, $11.5 million for Entergy Mississippi, $2.3 million for Entergy New Orleans, $9.3 million for Entergy Texas, and $6.2 million for System Energy.


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

See Note 17 to the financial statements in the Form 10-K for a discussion of variable interest entities.  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 was considered to hold a variable interest in the lessor from which it leased an undivided interest representing approximately 9.3% of the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million through March 2016. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements in the Form 10-K. System Energy made payments on its lease, including interest, of $8.6 million in the six months ended June 30, 2017 and $8.6 million in the six months ended June 30, 2016 .


NOTE 13.  DISPOSITIONS (Entergy Corporation)

In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million , including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million . At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy.

As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick on March 31, 2017, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017.

The assets and liabilities associated with the sale of FitzPatrick to Exelon were classified as held for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. The disposition-date

87
Entergy Corporation and Subsidiaries
Notes to Financial Statements

fair value of the decommissioning trust fund was $805 million , classified within other deferred debits, and the disposition-date fair value of the asset retirement obligation was $727 million , classified within other non-current liabilities. The transaction also included property, plant, and equipment with a net book value of zero , materials and supplies, and prepaid assets.

As discussed in Note 14 to the financial statements in the Form 10-K, Entergy entered into a reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with Entergy’s operation of FitzPatrick. In the first quarter 2017, Entergy billed Exelon for reimbursement of $98 million of other operation and maintenance expenses, $7 million in lost operating revenues, and $3 million in taxes other than income taxes, partially offset by a $10 million defueling credit to Exelon.


NOTE 14.  ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. Following is an update to that discussion.

In the second quarter 2017, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $35.9 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.

________________

In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented.  Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters.  The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.



88

Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk

See “ Market and Credit Risk Sensitive Instruments ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2017 , evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended June 30, 2017 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


89
Table of Contents


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2017 Compared to Second Quarter 2016
    
Net income increased $4.7 million primarily due to higher other income.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income remained relatively unchanged, decreasing by $0.3 million, primarily due to higher other operation and maintenance expenses, higher nuclear refueling outage expenses, and higher depreciation and amortization expenses, substantially offset by higher other income and higher net revenue.

Net Revenue

Second Quarter 2017 Compared to Second Quarter 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$365.7

Retail electric price
9.8

Asset retirement obligation
(7.8
)
Other
(1.2
)
2017 net revenue

$366.5

    
The retail electric price variance is primarily due to the implementation of formula rate plan rates, as approved by the APSC, effective with the first billing cycle of January 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits because of an increase in decommissioning trust earnings, including portfolio reallocations for the ANO 1 decommissioning trust fund.


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

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
    
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$687.4

Retail electric price
24.1

Opportunity sales
7.5

Asset retirement obligation
(10.5
)
Volume/weather
(15.1
)
Other
3.4

2017 net revenue

$696.8

    
The retail electric price variance is primarily due to an increase in base rates effective February 24, 2016 and the implementation of formula rate plan rates effective with the first billing cycle of January 2017, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016. The increase was partially offset by decreases in the energy efficiency rider, as approved by the APSC, effective April 2016 and January 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case and formula rate plan filings. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

The opportunity sales variance results from the estimated net revenue effect recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements in the Form 10-K for further discussion of the opportunity sales proceeding.

The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits because of an increase in decommissioning trust earnings, including portfolio reallocations for the ANO 1 decommissioning trust fund.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather.  This decrease was partially offset by an increase of 307 GWh, or 3%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales and an increase in industrial usage.  The increase in industrial usage is primarily due to a new customer in the primary metals industry.

Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $5.1 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs; and
•
a decrease of $2.7 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs, partially offset by higher nuclear labor costs, including contract labor, in second quarter 2017 as compared to second quarter 2016 primarily due to increased operating costs to position the nuclear fleet to meet its operational goals. The decrease in regulatory compliance costs is primarily related to additional NRC inspection

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

activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals.

The decrease was partially offset by an increase of $2.7 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017 as compared to the same period in 2016 and an increase of $1.6 million in compensation and benefits costs primarily due to an increase in net periodic pension and other postretirement benefits costs as a result of a lower discount rate.

Other income increased primarily due to higher realized gains in 2017 as compared to 2016 on the decommissioning trust fund investments, including portfolio reallocations for the ANO 1 decommissioning trust fund.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages as compared to the previous outages.

Other operation and maintenance expenses increased primarily due to:

•
the deferral in first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
•
an increase of $5.4 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017; and
•
an increase of $4 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 and an increase in net periodic pension and other postretirement benefits costs as a result of a lower discount rate .

The increase was partially offset by a decrease of $16.1 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs as compared to the prior year, partially offset by higher nuclear labor costs, including contract labor, in 2017 compared to the same period in 2016 primarily due to increased operating costs to position the nuclear fleet to meet its operational goals. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes, higher local franchise taxes, and an increase in payroll taxes. Ad valorem taxes increased primarily due to higher assessments and higher millage rates. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to 2016.    

Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.


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Other income increased primarily due to higher realized gains in 2017 as compared to 2016 on the decommissioning trust fund investments, including portfolio reallocations for the ANO 1 decommissioning trust fund.

Interest expense decreased primarily due to $5.1 million in estimated interest expense recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements in the Form 10-K for further discussion of the opportunity sales proceeding.

Income Taxes

The effective income tax rate was 38.4% for the second quarter 2017. The difference in the effective income tax rate for the second quarter 2017 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 allowance for equity funds used during construction.

The effective income tax rate was 40.2% for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to state income taxes, a write-off of a stock-based compensation deferred tax asset, 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.

The effective income tax rates were 40.1% for the second quarter 2016 and 40% for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 30, 2016 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, 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, Outage, and NRC Reviews ” in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
 
Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$20,509

 

$9,135

 
 
 
 
Cash flow provided by (used in):


 
 

Operating activities
191,161

 
253,703

Investing activities
(418,321
)
 
(577,426
)
Financing activities
209,728

 
339,700

Net increase (decrease) in cash and cash equivalents
(17,432
)
 
15,977

 
 
 
 
Cash and cash equivalents at end of period

$3,077

 

$25,112



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Operating Activities

Net cash flow provided by operating activities decreased $62.5 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to an increase of $43.8 million in spending on nuclear refueling outages in 2017 and the timing of payments to vendors.

Investing Activities

Net cash flow used in investing activities decreased $159.1 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million and a decrease of $27.5 million in transmission construction expenditures primarily due to a lower scope of non-storm related work performed in 2017. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

The decrease was partially offset by:

•
an increase of $56.6 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017;
•
an increase of $17.8 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017; and
•
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 service deliveries, and the timing of cash payments during the nuclear fuel cycle.

Financing Activities

Net cash flow provided by financing activities decreased $130 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station;
•
the issuance of $325 million of 3.5% Series first mortgage bonds in January 2016, a portion of the proceeds of which were used to pay, prior to maturity, $175 million of 5.66% Series first mortgage bonds; and
•
the issuance of $55 million of 3.5% Series first mortgage bonds in June 2016.

The decrease was partially offset by:

•
the issuance of $220 million of 3.5% Series first mortgage bonds in May 2017;
•
net borrowings of $31.4 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017 compared to net borrowings of $0.9 million in 2016; and
•
money pool activity.

Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $37.6 million in 2017 compared to decreasing by $52.7 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

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


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Management's Financial Discussion and Analysis

Capital Structure

Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Arkansas is primarily due to the issuance of long-term debt in 2017.

 
June 30,
2017
 
December 31,
2016
Debt to capital
56.9
%
 
55.3
%
Effect of excluding the securitization bonds
(0.4
%)
 
(0.4
%)
Debt to capital, excluding securitization bonds (a)
56.5
%
 
54.9
%
Effect of subtracting cash
—
%
 
(0.2
%)
Net debt to net capital, excluding securitization bonds (a)
56.5
%
 
54.7
%

(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 updates to the information provided in the Form 10-K.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
($13,669)
 
($51,232)
 
$1,453
 
($52,742)

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

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in August 2021. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2018. The $150 million credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of June 30, 2017, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.


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The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in May 2019.  As of June 30, 2017, $14.7 million in letters of credit to support a like amount of commercial paper issued and $16.7 million in loans were outstanding under the Entergy Arkansas nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
    
State and Local Rate Regulation and Fuel-Cost Recovery

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

2016 Formula Rate Plan Filing
    
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental filing on a concurrent schedule with the 2017 formula rate plan filing. In doing so, however, the APSC noted that a determination of whether the supplemental information supporting certain nuclear expenditures will be considered in the hearing for the 2017 formula rate plan filing or a separate hearing will be made at a later time.

2017 Formula Rate Plan Filing

In July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate plan bandwidth.  The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%.  Because the projected revenue increase exceeds the four percent annual revenue constraint for each rate class, however, Entergy Arkansas proposed a $70.9 million revenue requirement increase. Entergy Arkansas requested an order approving its proposed formula rate plan adjustment by December 13, 2017. If a final order is not issued by this date, the proposed formula rate plan adjustment will become effective January 2, 2018, subject to refund.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to suspend the procedural schedule pending the filing with the APSC of an agreement in principle on all issues.

Energy Cost Recovery Rider

In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rate should be implemented with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect

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on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.

Opportunity Sales Proceedings

As discussed in the Form 10-K, in June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies.  The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds.

In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and an ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.

In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order addressing the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. The rehearing and clarification requests filed in May 2016 are pending FERC action.

Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017, the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. The Utility operating companies have the opportunity to challenge the ALJ’s initial decision by filing a brief on exceptions with the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.

The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies.  Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time.  Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million, which includes interest, for its estimated increased costs and payment to the other Utility operating companies.  This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision.  Entergy Arkansas’s increased

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costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion.  Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million, which represents its estimate of the retail portion of the costs.

Federal Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation ”   in the Form 10-K for a discussion of federal regulation. 

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$496,662

 

$504,252

 

$971,013

 

$969,625

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
50,691

 
88,022

 
150,100

 
168,959

Purchased power
 
74,552

 
49,714

 
129,685

 
111,518

Nuclear refueling outage expenses
 
17,335

 
14,981

 
36,954

 
30,050

Other operation and maintenance
 
171,821

 
173,909

 
337,678

 
326,815

Decommissioning
 
14,106

 
13,301

 
28,001

 
26,404

Taxes other than income taxes
 
25,128

 
22,961

 
49,179

 
46,047

Depreciation and amortization
 
69,087

 
67,115

 
136,153

 
130,288

Other regulatory charges (credits) - net
 
4,948

 
802

 
(5,578
)
 
1,719

TOTAL
 
427,668

 
430,805

 
862,172

 
841,800

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
68,994

 
73,447

 
108,841

 
127,825

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
5,432

 
3,995

 
9,782

 
8,927

Interest and investment income
 
14,195

 
5,770

 
21,127

 
9,364

Miscellaneous - net
 
(57
)
 
(1,020
)
 
(164
)
 
(1,795
)
TOTAL
 
19,570

 
8,745

 
30,745

 
16,496

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
28,514

 
27,792

 
55,766

 
60,574

Allowance for borrowed funds used during construction
 
(2,552
)
 
(2,136
)
 
(4,514
)
 
(4,851
)
TOTAL
 
25,962

 
25,656

 
51,252

 
55,723

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
62,602

 
56,536

 
88,334

 
88,598

 
 
 
 
 
 
 
 
 
Income taxes
 
24,052

 
22,645

 
35,480

 
35,413

 
 
 
 
 
 
 
 
 
NET INCOME
 
38,550

 
33,891

 
52,854

 
53,185

 
 
 
 
 
 
 
 
 
Preferred dividend requirements
 
357

 
1,718

 
714

 
3,437

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$38,193

 

$32,173

 

$52,140

 

$49,748

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$52,854

 

$53,185

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
198,082

 
211,630

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
38,005

 
122,195

Changes in assets and liabilities:
 
 
 
 
Receivables
 
12,092

 
(42,371
)
Fuel inventory
 
(1,602
)
 
5,093

Accounts payable
 
(29,109
)
 
66,118

Prepaid taxes and taxes accrued
 
937

 
(89,124
)
Interest accrued
 
1,816

 
(1,093
)
Deferred fuel costs
 
(48,442
)
 
(40,847
)
Other working capital accounts
 
(32,055
)
 
25,021

Provisions for estimated losses
 
7,457

 
1,142

Other regulatory assets
 
(5,592
)
 
7,048

Pension and other postretirement liabilities
 
(40,637
)
 
(45,752
)
Other assets and liabilities
 
37,355

 
(18,542
)
Net cash flow provided by operating activities
 
191,161

 
253,703

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(381,197
)
 
(316,569
)
Allowance for equity funds used during construction
 
10,198

 
9,229

Payment for purchase of plant
 
—

 
(236,969
)
Nuclear fuel purchases
 
(92,927
)
 
(64,689
)
Proceeds from sale of nuclear fuel
 
51,029

 
40,336

Proceeds from nuclear decommissioning trust fund sales
 
167,329

 
103,815

Investment in nuclear decommissioning trust funds
 
(173,324
)
 
(112,040
)
Change in money pool receivable - net
 
—

 
(1,453
)
Changes in securitization account
 
571

 
1,017

Other
 
—

 
(103
)
Net cash flow used in investing activities
 
(418,321
)
 
(577,426
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
222,937

 
380,141

Retirement of long-term debt
 
(6,799
)
 
(181,604
)
Capital contribution from parent
 
—

 
200,000

Changes in short-term borrowings - net
 
31,436

 
908

Changes in money pool payable - net
 
(37,563
)
 
(52,742
)
Dividends paid:
 
 
 
 
Preferred stock
 
(714
)
 
(3,437
)
Other
 
431

 
(3,566
)
Net cash flow provided by financing activities
 
209,728

 
339,700

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(17,432
)
 
15,977

Cash and cash equivalents at beginning of period
 
20,509

 
9,135

Cash and cash equivalents at end of period
 

$3,077

 

$25,112

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

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

$51,232

 

$58,733

Income taxes
 

$—

 

$7,242

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$2,741

 

$20,174

Temporary cash investments
 
336

 
335

Total cash and cash equivalents
 
3,077

 
20,509

Securitization recovery trust account
 
3,569

 
4,140

Accounts receivable:
 
 
 
 
Customer
 
96,720

 
102,229

Allowance for doubtful accounts
 
(1,084
)
 
(1,211
)
Associated companies
 
36,015

 
35,286

Other
 
40,672

 
58,153

Accrued unbilled revenues
 
110,235

 
100,193

Total accounts receivable
 
282,558

 
294,650

Deferred fuel costs
 
145,033

 
96,690

Fuel inventory - at average cost
 
34,362

 
32,760

Materials and supplies - at average cost
 
182,839

 
182,600

Deferred nuclear refueling outage costs
 
109,546

 
81,313

Prepayments and other
 
19,691

 
14,293

TOTAL
 
780,675

 
726,955

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
884,308

 
834,735

Other
 
5,536

 
7,912

TOTAL
 
889,844

 
842,647

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
10,726,461

 
10,488,060

Property under capital lease
 
637

 
716

Construction work in progress
 
328,037

 
304,073

Nuclear fuel
 
259,901

 
307,352

TOTAL UTILITY PLANT
 
11,315,036

 
11,100,201

Less - accumulated depreciation and amortization
 
4,666,137

 
4,635,885

UTILITY PLANT - NET
 
6,648,899

 
6,464,316

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
66,024

 
62,646

Other regulatory assets (includes securitization property of $35,365 as of June 30, 2017 and $41,164 as of December 31, 2016)
 
1,430,243

 
1,428,029

Deferred fuel costs
 
66,997

 
66,898

Other
 
16,577

 
14,626

TOTAL
 
1,579,841

 
1,572,199

 
 
 
 
 
TOTAL ASSETS
 

$9,899,259

 

$9,606,117

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$114,700

 

$114,700

Short-term borrowings
 
14,696

 
—

Accounts payable:
 
 
 
 
Associated companies
 
152,723

 
239,711

Other
 
204,921

 
185,153

Customer deposits
 
97,425

 
97,512

Taxes accrued
 
8,131

 
7,194

Interest accrued
 
18,396

 
16,580

Other
 
36,150

 
36,557

TOTAL
 
647,142

 
697,407

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
2,224,030

 
2,186,623

Accumulated deferred investment tax credits
 
34,704

 
35,305

Other regulatory liabilities
 
330,797

 
305,907

Decommissioning
 
952,353

 
924,353

Accumulated provisions
 
26,139

 
18,682

Pension and other postretirement liabilities
 
383,543

 
424,234

Long-term debt (includes securitization bonds of $41,502 as of June 30, 2017 and $48,139 as of December 31, 2016)
 
2,949,561

 
2,715,085

Other
 
14,183

 
13,854

TOTAL
 
6,915,310

 
6,624,043

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Preferred stock without sinking fund
 
31,350

 
31,350

 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2017 and 2016
 
470

 
470

Paid-in capital
 
790,243

 
790,243

Retained earnings
 
1,514,744

 
1,462,604

TOTAL
 
2,305,457

 
2,253,317

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$9,899,259

 

$9,606,117

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Common Equity
 
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015
 

$470

 

$588,493

 

$1,302,695

 

$1,891,658

 
 
 
 
 
 
 
 
 
Net income
 
—

 
—

 
53,185

 
53,185

Capital contribution from parent
 
—

 
200,000

 
—

 
200,000

Preferred stock dividends
 
—

 
—

 
(3,437
)
 
(3,437
)
 
 
 
 
 
 
 
 
 
Balance at June 30, 2016
 

$470

 

$788,493

 

$1,352,443

 

$2,141,406

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
 

$470

 

$790,243

 

$1,462,604

 

$2,253,317

 
 
 
 
 
 
 
 
 
Net income
 
—

 
—

 
52,854

 
52,854

Preferred stock dividends
 
—

 
—

 
(714
)
 
(714
)
 
 
 
 
 
 
 
 
 
Balance at June 30, 2017
 

$470

 

$790,243

 

$1,514,744

 

$2,305,457

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%

 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$160

 

$153

 

$7

 
5

Commercial
 
119

 
115

 
4

 
3

Industrial
 
114

 
100

 
14

 
14

Governmental
 
5

 
4

 
1

 
25

Total retail
 
398

 
372

 
26

 
7

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
31

 
25

 
6

 
24

Non-associated companies
 
6

 
37

 
(31
)
 
(84
)
Other
 
62

 
70

 
(8
)
 
(11
)
Total
 

$497

 

$504

 

($7
)
 
(1
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,462

 
1,409

 
53

 
4

Commercial
 
1,372

 
1,350

 
22

 
2

Industrial
 
1,829

 
1,582

 
247

 
16

Governmental
 
57

 
55

 
2

 
4

Total retail
 
4,720

 
4,396

 
324

 
7

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
387

 
539

 
(152
)
 
(28
)
Non-associated companies
 
386

 
2,252

 
(1,866
)
 
(83
)
Total
 
5,493

 
7,187

 
(1,694
)
 
(24
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$343

 

$345

 

($2
)
 
(1
)
Commercial
 
225

 
225

 
—

 
—

Industrial
 
210

 
200

 
10

 
5

Governmental
 
9

 
8

 
1

 
13

Total retail
 
787

 
778

 
9

 
1

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
63

 
(7
)
 
70

 
1,000

Non-associated companies
 
51

 
75

 
(24
)
 
(32
)
Other
 
70

 
124

 
(54
)
 
(44
)
Total
 

$971

 

$970

 

$1

 
—

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
3,389

 
3,433

 
(44
)
 
(1
)
Commercial
 
2,687

 
2,690

 
(3
)
 
—

Industrial
 
3,510

 
3,158

 
352

 
11

Governmental
 
113

 
111

 
2

 
2

Total retail
 
9,699

 
9,392

 
307

 
3

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
833

 
964

 
(131
)
 
(14
)
Non-associated companies
 
2,348

 
4,808

 
(2,460
)
 
(51
)
Total
 
12,880

 
15,164

 
(2,284
)
 
(15
)

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MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2017 Compared to Second Quarter 2016

Net income decreased $128.8 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit which resulted in a $136.1 million reduction of income tax expense in 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income decreased $146.1 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit which resulted in a $136.1 million reduction of income tax expense in 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

Net Revenue

Second Quarter 2017 Compared to Second Quarter 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016:
 
Amount
 
(In Millions)
2016 net revenue

$608.2

Louisiana Act 55 financing savings obligation
16.1

Volume/weather
(6.7
)
Other
5.6

2017 net revenue

$623.2


The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.
    
The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 507 GWh, or 4%, in billed electricity usage, including an increase in industrial usage. The increase in industrial usage is primarily due to an increase in demand from cogeneration customers and an increase in demand for existing customers as well as expansion projects in the chemicals industry, partially offset by extended seasonal outages for an existing large refinery customer.


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Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016:
 
Amount
 
(In Millions)
2016 net revenue

$1,172.1

Louisiana Act 55 financing savings obligation
16.1

Retail electric price
9.3

Volume/weather
(11.0
)
Other
(2.2
)
2017 net revenue

$1,184.3


The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

The retail electric price variance is primarily due to an increase in formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of formula rate plan revenues.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period and the effect of less favorable weather on residential sales. This decrease was partially offset by an increase of 328 GWh, or 2%, in industrial usage primarily due to an increase in demand from cogeneration customers and an increase in demand for existing customers as well as expansion projects in the chemicals industry, partially offset by extended seasonal outages for an existing large refinery customer.
        
Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $3.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plant outages in the second quarter 2017 as compared to the second quarter 2016. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals ;
•
an increase of $2.6 million in transmission and distribution expenses due to higher vegetation maintenance costs;
•
an increase of $1.9 million due to the effect of recording in 2016 a final court decision in the Entergy Louisiana lawsuit against the DOE related to the River Bend spent nuclear fuel storage costs. The damages awarded included the reimbursement in 2016 of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense;
•
an increase of $1 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements herein and in the Form 10-K for further information on the recovery of these costs ; and

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Management's Financial Discussion and Analysis

•
several individually insignificant items.

The increase was partially offset by a decrease of $3.1 million in loss provisions.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project, and higher realized gains in 2017 on the River Bend decommissioning trust fund investments as a result of portfolio reallocations to the 30% interest in River Bend formerly owned by Cajun.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $3.9 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 ;
•
an increase of $3.5 million in fossil-fueled generation expenses primarily due to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016, partially offset by asbestos loss provisions in 2016;
•
an increase of $2.9 million in other loss provisions in 2017;
•
an increase of $2.2 million in information technology expenses including software maintenance costs and upgrade projects;
•
an increase of $2.1 million in transmission expenses primarily due to higher labor costs, including contract labor;
•
an increase of $2.1 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements herein and in the Form 10-K for further information on the recovery of these costs;
•
an increase of $1.9 million due to the effect of recording in 2016 a final court decision in the Entergy Louisiana lawsuit against the DOE related to the River Bend spent nuclear fuel storage costs. The damages awarded included the reimbursement in 2016 of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense; and
•
an increase of $1.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plant outages in 2017 as compared to 2016. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters ” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project, and higher realized gains in 2017 on the River Bend decommissioning trust fund investments as a result of portfolio reallocations to the 30% interest in River Bend formerly owned by Cajun.

Income Taxes

The effective income tax rates were 31.3% for the second quarter 2017 and 31.3% for the six months ended June 30, 2017. The differences in the effective income tax rates for the second quarter 2017 and the six months ended June 30, 2017 versus the federal statutory rate of 35% were 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.


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The effective income tax rates were (50.6%) for the second quarter 2016 and (10.7%) for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 30, 2016 versus the federal statutory rate of 35% were primarily due to the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for additional discussion of the 2010-2011 IRS audit settlement.

Louisiana Tax Legislation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Louisiana Tax Legislation ” in the Form 10-K for a discussion of the Louisiana tax legislation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$213,850

 

$35,102

 
 
 
 
Cash flow provided by (used in):
 
 
 
    Operating activities
533,755

 
440,356

    Investing activities
(900,210
)
 
(859,906
)
    Financing activities
367,888

 
459,253

Net increase in cash and cash equivalents
1,433

 
39,703

 
 
 
 
Cash and cash equivalents at end of period

$215,283

 

$74,805


Operating Activities

Net cash flow provided by operating activities increased $93.4 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
income tax refunds of $116.9 million in 2017 compared to income tax payments of $62.7 million in 2016. Entergy Louisiana received income tax refunds in 2017 and made income tax payments in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the utilization of Entergy Louisiana’s net operating losses. The income tax payments in 2016 related to the 2016 payments for state taxes resulting from the effect of the final settlement of the 2006-2007 IRS audit and the effect of net operating loss limitations. See Note 3 to the financial statements in the Form 10-K for a discussion of the audit. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Louisiana Tax Legislation ” in the Form 10-K for a discussion on the net operating loss limitations;
•
an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets; and
•
the timing of collections from customers and payments to vendors.


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The increase was partially offset by:

•
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement and refund;
•
a decrease due to the timing of recovery of fuel and purchased power costs in 2017; and
•
an increase of $47.8 million in spending on nuclear refueling outages in 2017.

Investing Activities

Net cash flow used in investing activities increased $40.3 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
an increase of $205.5 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station project in 2017;
•
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 service deliveries, and the timing of cash payments during the nuclear fuel cycle;
•
an increase of $75.8 million in transmission construction expenditures due to a higher scope of work performed in 2017 as compared to the same period in 2016;
•
an increase of $44.1 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017; and
•
money pool activity.

The increase was partially offset by the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $474 million in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana‘s receivable from the money pool increased by $33 million for the six months ended June 30, 2017 compared to increasing by $0.2 million for the six months ended June 30, 2016. 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 $91.4 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the net issuance of $430.4 million of long-term debt in 2017 compared to the net issuance of $568.7 million in 2016. The decrease was partially offset by:

•
net borrowings of $30.7 million on the nuclear fuel company variable interest entities’ credit facilities in 2017 compared to net repayments of $0.9 million in 2016; and
•
a decrease of $14.3 million of common equity distributions primarily as a result of higher construction expenditures and higher nuclear fuel purchases in 2017 as compared to the same period in 2016.

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


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Management's Financial Discussion and Analysis

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 the issuance of long-term debt in 2017.
 
 
June 30,
2017
 
December 31,
2016
Debt to capital
54.7
%
 
53.4
%
Effect of excluding securitization bonds
(0.4
%)
 
(0.5
%)
Debt to capital, excluding securitization bonds (a)
54.3
%
 
52.9
%
Effect of subtracting cash
(0.9
%)
 
(0.9
%)
Net debt to net capital, excluding securitization bonds (a)
53.4
%
 
52.0
%
(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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

Entergy Louisiana’s receivables from the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$55,542
 
$22,503
 
$6,322
 
$6,154

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
    
Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in August 2021.  The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of June 30, 2017 , there were no cash borrowings and $4.5 million of letters of credit outstanding under the credit facility.  In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017 , a $36.8 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, one in the amount of $105 million and one in the amount of $85 million, both scheduled to expire in May 2019.  As of June 30, 2017 , $15.5 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of June 30, 2017, $34.5 million in letters of credit to support a like amount of commercial paper issued and $36.3 million in loans were outstanding under the Entergy Louisiana Waterford

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nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.

Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2020.

Washington Parish Energy Center

In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 360 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with a hearing in March 2018.

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

2014 Formula Rate Plan Filing

As discussed in the Form 10-K, in September 2015, Entergy Louisiana filed its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.

2015 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates already implemented.

Also, in November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved the stipulation in July 2017.

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2016 Formula Rate Plan Filing

In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the formula rate plan. The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and a decrease in incremental formula rate plan revenue of $3.6 million. Additionally, the formula rate plan evaluation report calls for a decrease in the MISO cost recovery revenue requirement of $40.5 million, from the present level of $46.8 million to $6.3 million. Rates reflecting these adjustments will be implemented with the first billing cycle of September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established.

Waterford 3 Replacement Steam Generator Project

See Note 2 to the financial statements in the Form 10-K for discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May 2017. In May 2017 the LPSC accepted the joint report of proceedings resolving the matter.

Union Power Station

As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1.  In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three year term permitted by MISO.  This matter is pending before an ALJ, with an evidentiary hearing scheduled in August 2017.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation.

Retail Rates - Gas

2016 Rate Stabilization Plan Filing

In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37%. As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred operation and maintenance expenses

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Management's Financial Discussion and Analysis

incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff confirmed Entergy Louisiana’s filing was consistent with the principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan pending LPSC consideration in a separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover the deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the extraordinary cost provision of the gas rate stabilization plan. A procedural schedule has been established with a hearing in November 2017.

Fuel and purchased power cost recovery
    
As discussed in the Form 10-K, in June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. Discovery commenced in March 2017.

Industrial and Commercial Customers

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers ” in the Form 10-K for a discussion of industrial and commercial customers.

Federal Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation ”   in the Form 10-K for a discussion of federal regulation. 

Nuclear Matters

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters ” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.

River Bend’s operating license is currently due to expire in August 2025. In May 2017, Entergy Louisiana filed an application with the NRC for an extension of River Bend’s operating license to 2045.

Environmental Risks

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

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

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Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 
$1,072,126

 

$989,732

 
$1,936,202

 

$1,926,163

Natural gas
 
11,308

 
9,302

 
28,015

 
28,016

TOTAL
 
1,083,434

 
999,034

 
1,964,217

 
1,954,179

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
180,056

 
152,340

 
334,100

 
354,423

Purchased power
 
282,673

 
224,699

 
522,500

 
416,097

Nuclear refueling outage expenses
 
12,764

 
12,974

 
24,949

 
25,754

Other operation and maintenance
 
243,217

 
232,957

 
466,447

 
439,021

Decommissioning
 
12,283

 
11,658

 
24,406

 
23,166

Taxes other than income taxes
 
45,076

 
44,366

 
90,359

 
86,728

Depreciation and amortization
 
116,107

 
112,452

 
231,737

 
222,043

Other regulatory charges (credits) - net
 
(2,521
)
 
13,836

 
(76,708
)
 
11,577

TOTAL
 
889,655

 
805,282

 
1,617,790

 
1,578,809

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
193,779

 
193,752

 
346,427

 
375,370

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
11,109

 
4,506

 
21,099

 
11,744

Interest and investment income
 
41,919

 
40,251

 
81,749

 
77,667

Miscellaneous - net
 
(2,650
)
 
(1,870
)
 
(5,674
)
 
(5,615
)
TOTAL
 
50,378

 
42,887

 
97,174

 
83,796

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
68,483

 
70,787

 
135,798

 
135,863

Allowance for borrowed funds used during construction
 
(5,541
)
 
(2,383
)
 
(10,715
)
 
(6,280
)
TOTAL
 
62,942

 
68,404

 
125,083

 
129,583

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
181,215

 
168,235

 
318,518

 
329,583

 
 
 
 
 
 
 
 
 
Income taxes
 
56,736

 
(85,090
)
 
99,661

 
(35,348
)
 
 
 
 
 
 
 
 
 
NET INCOME
 

$124,479

 

$253,325

 

$218,857

 

$364,931

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
2017
 
2016
 
2017
 
2016
 
(In Thousands)
 
(In Thousands)
 
 
 
 
 
 
 
 
Net Income
$124,479

 

$253,325

 
$218,857

 

$364,931

Other comprehensive loss
 
 
 
 
 
 
 
Pension and other postretirement liabilities (net of tax benefit of $292, $144, $524, and $259)
(310
)
 
(230
)
 
(680
)
 
(493
)
Other comprehensive loss
(310
)
 
(230
)
 
(680
)
 
(493
)
Comprehensive Income

$124,169

 

$253,095

 

$218,177

 

$364,438

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$218,857

 

$364,931

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
300,805

 
301,815

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
220,492

 
(49,661
)
Changes in working capital:
 
 
 
 
Receivables
 
950

 
(72,931
)
Fuel inventory
 
4,534

 
(5,053
)
Accounts payable
 
42,079

 
(22,830
)
Prepaid taxes and taxes accrued
 
52,686

 
23,850

Interest accrued
 
(2,883
)
 
(4,216
)
Deferred fuel costs
 
(74,113
)
 
4,093

Other working capital accounts
 
(61,515
)
 
(26,514
)
Changes in provisions for estimated losses
 
(6,108
)
 
1,734

Changes in other regulatory assets
 
39,711

 
58,429

Changes in other regulatory liabilities
 
(64,293
)
 
30,116

Changes in pension and other postretirement liabilities
 
(38,175
)
 
(35,869
)
Other
 
(99,272
)
 
(127,538
)
Net cash flow provided by operating activities
 
533,755

 
440,356

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(755,158
)
 
(403,387
)
Allowance for equity funds used during construction
 
21,099

 
11,744

Payment for purchase of plant
 
—

 
(473,956
)
Nuclear fuel purchases
 
(156,246
)
 
(38,773
)
Proceeds from the sale of nuclear fuel
 
28,884

 
64,498

Receipts from storm reserve escrow account
 
8,836

 
—

Payments to storm reserve escrow account
 
(802
)
 
—

Changes to securitization account
 
79

 
225

Proceeds from nuclear decommissioning trust fund sales
 
125,600

 
123,546

Investment in nuclear decommissioning trust funds
 
(144,768
)
 
(143,091
)
Changes in money pool receivable - net
 
(33,039
)
 
(168
)
Insurance proceeds
 
5,305

 
—

Changes in other investments - net
 
—

 
(544
)
Net cash flow used in investing activities
 
(900,210
)
 
(859,906
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
532,219

 
1,128,580

Retirement of long-term debt
 
(101,789
)
 
(559,839
)
Changes in credit borrowings - net
 
30,696

 
(888
)
Distributions paid:
 
 
 
 
Common equity
 
(91,250
)
 
(105,500
)
Other
 
(1,988
)
 
(3,100
)
Net cash flow provided by financing activities
 
367,888

 
459,253

 
 
 
 
 
Net increase in cash and cash equivalents
 
1,433

 
39,703

Cash and cash equivalents at beginning of period
 
213,850

 
35,102

Cash and cash equivalents at end of period
 

$215,283

 

$74,805

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

$134,513

 

$196,514

Income taxes
 

($116,937
)
 

$62,676

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$3,419

 

$49,972

Temporary cash investments
 
211,864

 
163,878

Total cash and cash equivalents
 
215,283

 
213,850

Accounts receivable:
 
 
 
 
Customer
 
222,291

 
213,517

Allowance for doubtful accounts
 
(7,459
)
 
(6,277
)
Associated companies
 
173,665

 
155,794

Other
 
44,855

 
54,186

Accrued unbilled revenues
 
170,863

 
159,176

Total accounts receivable
 
604,215

 
576,396

Deferred fuel costs
 
25,902

 
—

Fuel inventory
 
46,204

 
50,738

Materials and supplies - at average cost
 
289,985

 
294,421

Deferred nuclear refueling outage costs
 
94,772

 
22,535

Prepaid taxes
 
57,418

 
110,104

Prepayments and other
 
59,527

 
41,687

TOTAL
 
1,393,306

 
1,309,731

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliate preferred membership interests
 
1,390,587

 
1,390,587

Decommissioning trust funds
 
1,220,699

 
1,140,707

Storm reserve escrow account
 
283,451

 
291,485

Non-utility property - at cost (less accumulated depreciation)
 
231,512

 
217,494

Other
 
24,481

 
28,844

TOTAL
 
3,150,730

 
3,069,117

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
19,117,749

 
18,827,532

Natural gas
 
178,932

 
172,816

Construction work in progress
 
919,336

 
670,201

Nuclear fuel
 
361,502

 
249,807

TOTAL UTILITY PLANT
 
20,577,519

 
19,920,356

Less - accumulated depreciation and amortization
 
8,530,511

 
8,420,596

UTILITY PLANT - NET
 
12,047,008

 
11,499,760

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
475,836

 
470,480

Other regulatory assets (includes securitization property of $83,050 as of June 30, 2017 and $92,951 as of December 31, 2016)
 
1,122,991

 
1,168,058

Deferred fuel costs
 
168,122

 
168,122

Other
 
20,420

 
16,003

TOTAL
 
1,787,369

 
1,822,663

 
 
 
 
 
TOTAL ASSETS
 

$18,378,413

 

$17,701,271

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$517,706

 

$200,198

Short-term borrowings
 
34,490

 
3,794

Accounts payable:
 
 
 
 
Associated companies
 
75,909

 
82,106

Other
 
334,472

 
358,741

Customer deposits
 
146,633

 
148,601

Interest accrued
 
72,715

 
75,598

Deferred fuel costs
 
—

 
48,211

Other
 
101,702

 
80,013

TOTAL
 
1,283,627

 
997,262

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
2,910,546

 
2,691,118

Accumulated deferred investment tax credits
 
124,306

 
126,741

Other regulatory liabilities
 
816,681

 
880,974

Decommissioning
 
1,111,194

 
1,082,685

Accumulated provisions
 
304,664

 
310,772

Pension and other postretirement liabilities
 
741,841

 
780,278

Long-term debt (includes securitization bonds of $89,364 as of June 30, 2017 and $99,217 as of December 31, 2016)
 
5,728,309

 
5,612,593

Other
 
148,536

 
137,039

TOTAL
 
11,886,077

 
11,622,200

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Member's equity
 
5,257,831

 
5,130,251

Accumulated other comprehensive loss
 
(49,122
)
 
(48,442
)
TOTAL
 
5,208,709

 
5,081,809

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$18,378,413

 

$17,701,271

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2015

$4,793,724

 

($56,412
)
 

$4,737,312

 
 
 
 
 
 
Net income
364,931

 
—

 
364,931

Other comprehensive loss
—

 
(493
)
 
(493
)
Distributions declared on common equity
(105,500
)
 
—

 
(105,500
)
Other
(15
)
 
—

 
(15
)
 
 
 
 
 
 
Balance at June 30, 2016

$5,053,140

 

($56,905
)
 

$4,996,235

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$5,130,251

 

($48,442
)
 

$5,081,809

 
 
 
 
 
 
Net income
218,857

 
—

 
218,857

Other comprehensive loss
—

 
(680
)
 
(680
)
Distributions declared on common equity
(91,250
)
 
—

 
(91,250
)
Other
(27
)
 
—

 
(27
)
 
 
 
 
 
 
Balance at June 30, 2017

$5,257,831

 

($49,122
)
 

$5,208,709

 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$279

 

$246

 

$33

 
13

Commercial
 
236

 
212

 
24

 
11

Industrial
 
394

 
319

 
75

 
24

Governmental
 
17

 
16

 
1

 
6

Total retail
 
926

 
793

 
133

 
17

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
73

 
105

 
(32
)
 
(30
)
Non-associated companies
 
16

 
18

 
(2
)
 
(11
)
Other
 
57

 
74

 
(17
)
 
(23
)
Total
 

$1,072

 

$990

 

$82

 
8

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
3,001

 
2,919

 
82

 
3

Commercial
 
2,729

 
2,693

 
36

 
1

Industrial
 
7,684

 
7,294

 
390

 
5

Governmental
 
194

 
195

 
(1
)
 
(1
)
Total retail
 
13,608

 
13,101

 
507

 
4

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,241

 
2,175

 
(934
)
 
(43
)
Non-associated companies
 
369

 
698

 
(329
)
 
(47
)
Total
 
15,218

 
15,974

 
(756
)
 
(5
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$500

 

$500

 

$—

 
—

Commercial
 
431

 
421

 
10

 
2

Industrial
 
719

 
645

 
74

 
11

Governmental
 
32

 
32

 
—

 
—

Total retail
 
1,682

 
1,598

 
84

 
5

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
135

 
194

 
(59
)
 
(30
)
Non-associated companies
 
30

 
24

 
6

 
25

Other
 
89

 
110

 
(21
)
 
(19
)
Total
 

$1,936

 

$1,926

 

$10

 
1

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
5,853

 
5,973

 
(120
)
 
(2
)
Commercial
 
5,269

 
5,259

 
10

 
—

Industrial
 
14,645

 
14,317

 
328

 
2

Governmental
 
387

 
394

 
(7
)
 
(2
)
Total retail
 
26,154

 
25,943

 
211

 
1

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
2,235

 
3,744

 
(1,509
)
 
(40
)
Non-associated companies
 
664

 
986

 
(322
)
 
(33
)
Total
 
29,053

 
30,673

 
(1,620
)
 
(5
)
 
 
 
 
 
 
 
 
 

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ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2017 Compared to Second Quarter 2016

Net income decreased $3.9 million primarily due to higher taxes other than income taxes, lower net revenue, and a higher effective income tax rate, partially offset by lower interest expense.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income decreased $3.9 million primarily due to higher taxes other than income taxes, higher depreciation and amortization expenses, higher other operation and maintenance expenses, and a higher effective income tax rate, partially offset by lower interest expense.

Net Revenue

Second Quarter 2017 Compared to Second Quarter 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$176.8

Volume/weather
(8.0
)
Retail electric price
4.9

Other
0.5

2017 net revenue

$174.2

    
The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 96 GWh, or 3%, in billed electricity usage, including the effect of more favorable weather on residential sales and an increase in industrial usage. The increase in industrial usage is primarily due to an increase in usage by the mid to small industrial sector, expansion projects in the pulp and paper industry, and new customers in the wood products industry.
    
The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, as approved by the MPSC, effective with the first billing cycle of July 2016.  See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan.


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Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$326.4

Retail electric price
11.2

Volume/weather
(10.3
)
Other
1.0

2017 net revenue

$328.3

    
The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, as approved by the MPSC, effective with the first billing cycle of July 2016.  See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan.

The volume/weather variance is primarily due to decreased usage during the billed and unbilled sales periods, including the effect of weather, primarily in the residential and commercial sectors, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to an increase in usage by the mid to small industrial sector, expansion projects in the pulp and paper industry, and new customers in the wood products industry.
    
Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses decreased primarily due to a decrease of $1.7 million in storm damage provisions and a decrease of $1.6 million in loss provisions. The decrease was partially offset by an increase of $2 million in fossil-fueled generation expenses primarily due to a higher scope of work done in 2017 as compared to the same period in 2016. See Note 2 to the financial statements in the Form 10-K for a discussion on storm cost recovery.

Taxes other than income taxes increased primarily due to the MPSC’s June 2016 approval of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expense and the amount approved in base rates in the 2016 formula rate plan order. See Note 2 in the Form 10-K for further discussion of the ad valorem tax rider.

Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statements in the Form 10-K for details of long-term debt.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operation and maintenance expenses increased primarily due to an increase of $2.5 million in fossil-fueled generation expenses primarily due to a higher scope of work done in 2017 as compared to the same period in 2016 and an increase of $1.9 million in energy efficiency costs . The increase was partially offset by a decrease of $1.7 million in storm damage provisions. See Note 2 to the financial statements in the Form 10-K for a discussion on storm cost recovery.


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Management's Financial Discussion and Analysis

Taxes other than income taxes increased primarily due to the MPSC’s June 2016 approval of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expense and the amount approved in base rates in the 2016 formula rate plan order. See Note 2 in the Form 10-K for further discussion of the ad valorem tax rider.
    
Depreciation and amortization expenses increased primarily due to additions to plants in service.
    
Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statements in the Form 10-K for details of long-term debt.

Income Taxes

The effective income tax rate was 37.6% for the second quarter 2017 . The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 39.0% for the six months ended June 30, 2017 . The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to state income taxes and a write-off of a stock-based compensation deferred tax asset, partially offset by book and tax differences related to the allowance for equity funds used during construction.
    
The effective income tax rate was 32.7% for the second quarter 2016 . The difference in the effective income tax rate for the second quarter 2016 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items, partially offset by state income taxes.
    
The effective income tax rate was 35.2% for the six months ended June 30, 2016 . The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$76,834

 

$145,605

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
53,839

 
77,063

Investing activities
(185,687
)
 
(128,241
)
Financing activities
55,736

 
14,126

Net decrease in cash and cash equivalents
(76,112
)
 
(37,052
)
 
 
 
 
Cash and cash equivalents at end of period

$722

 

$108,553



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Management's Financial Discussion and Analysis

Operating Activities

Net cash flow provided by operating activities decreased $23.2 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the timing of payments to vendors and the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016. The decrease was partially offset by an increase of $11.5 million in income tax refunds in 2017 as compared to the same period in 2016. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 and $3.6 million in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the carryback of net operating losses.

Investing Activities

Net cash flow used in investing activities increased $57.4 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
an increase of $41.5 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;
•
an increase of $10.4 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to the same period in 2016; and
•
an increase of $7.4 million in storm spending in 2017.

Financing Activities

Net cash flow provided by financing activities increased $41.6 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to money pool activity and $24 million in common stock dividends paid in 2016, partially offset by the net issuance of $39.5 million of long-term debt in 2016. The decrease in dividends paid was primarily because of lower operating cash flow and higher capital expenditures, each discussed above. See Note 5 to the financial statements in the Form 10-K for details of long-term debt.

Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi’s payable to the money pool increased by $56.3 million for the six months ended June 30, 2017 . The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Capital Structure

Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
 
June 30, 2017
 
December 31, 2016
Debt to capital
49.2
%
 
50.2
%
Effect of subtracting cash
—
%
 
(1.8
%)
Net debt to net capital
49.2
%
 
48.4
%

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.

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Management's Financial Discussion and Analysis

Uses and Sources of Capital

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

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
June 30, 2017
 
December 31, 2016
 
June 30, 2016
 
December 31, 2015
(In Thousands)
($56,299)
 
$10,595
 
$13,514
 
$25,930

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 in May 2018. No borrowings were outstanding under the credit facilities as of June 30, 2017 .  In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017 , a $7.8 million letter of credit was outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

State and Local Rate Regulation and Fuel-Cost Recovery

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery ” in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.

Formula Rate Plan

In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.

Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.
    
Mississippi Attorney General Complaint

As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power. The defendants have

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Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis

denied the allegations. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery is currently in progress.
    
Federal Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation ”   in the Form 10-K for a discussion of federal regulation. 

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.


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ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$291,212

 

$248,138

 

$549,655

 

$511,184

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
46,048

 
(34
)
 
85,188

 
61,346

Purchased power
 
75,253

 
74,361

 
146,323

 
129,744

Other operation and maintenance
 
59,535

 
60,381

 
114,708

 
111,654

Taxes other than income taxes
 
23,978

 
20,487

 
47,950

 
43,984

Depreciation and amortization
 
35,442

 
34,010

 
70,759

 
67,308

Other regulatory credits - net
 
(4,306
)
 
(2,957
)
 
(10,143
)
 
(6,315
)
TOTAL
 
235,950

 
186,248

 
454,785

 
407,721

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
55,262

 
61,890

 
94,870

 
103,463

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
2,332

 
1,345

 
4,175

 
2,631

Interest and investment income
 
7

 
240

 
33

 
361

Miscellaneous - net
 
(553
)
 
(1,050
)
 
(978
)
 
(1,755
)
TOTAL
 
1,786

 
535

 
3,230

 
1,237

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
12,568

 
15,258

 
25,240

 
30,000

Allowance for borrowed funds used during construction
 
(913
)
 
(691
)
 
(1,633
)
 
(1,358
)
TOTAL
 
11,655

 
14,567

 
23,607

 
28,642

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
45,393

 
47,858

 
74,493

 
76,058

 
 
 
 
 
 
 
 
 
Income taxes
 
17,090

 
15,664

 
29,032

 
26,746

 
 
 
 
 
 
 
 
 
NET INCOME
 
28,303

 
32,194

 
45,461

 
49,312

 
 
 
 
 
 
 
 
 
Preferred dividend requirements and other
 
239

 
707

 
477

 
1,414

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$28,064

 

$31,487

 

$44,984

 

$47,898

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$45,461

 

$49,312

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
70,759

 
67,308

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
31,740

 
21,934

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(7,952
)
 
(24,273
)
Fuel inventory
 
6,312

 
(5,040
)
Accounts payable
 
(1,398
)
 
21,359

Taxes accrued
 
(21,361
)
 
(20,417
)
Interest accrued
 
40

 
(584
)
Deferred fuel costs
 
(13,622
)
 
108

Other working capital accounts
 
(1,473
)
 
(8,266
)
Provisions for estimated losses
 
(6,699
)
 
(188
)
Other regulatory assets
 
(26,958
)
 
(1,913
)
Pension and other postretirement liabilities
 
(10,692
)
 
(10,922
)
Other assets and liabilities
 
(10,318
)
 
(11,355
)
Net cash flow provided by operating activities
 
53,839

 
77,063

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(199,873
)
 
(143,171
)
Allowance for equity funds used during construction
 
4,175

 
2,631

Changes in money pool receivable - net
 
10,595

 
12,416

Other
 
(584
)
 
(117
)
Net cash flow used in investing activities
 
(185,687
)
 
(128,241
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
—

 
371,940

Retirement of long-term debt
 
—

 
(332,400
)
Change in money pool payable - net
 
56,299

 
—

Dividends paid:
 
 
 
 
Common stock
 
—

 
(24,000
)
Preferred stock
 
(477
)
 
(1,414
)
Other
 
(86
)
 
—

Net cash flow provided by financing activities
 
55,736

 
14,126

 
 
 
 
 
Net decrease in cash and cash equivalents
 
(76,112
)
 
(37,052
)
Cash and cash equivalents at beginning of period
 
76,834

 
145,605

Cash and cash equivalents at end of period
 

$722

 

$108,553

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

$24,021

 

$29,157

Income taxes
 

($15,087
)
 

($3,561
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$715

 

$16

Temporary cash investments
 
7

 
76,818

Total cash and cash equivalents
 
722

 
76,834

Accounts receivable:
 
 

 
 

Customer
 
57,539

 
51,218

Allowance for doubtful accounts
 
(540
)
 
(549
)
Associated companies
 
34,939

 
45,973

Other
 
8,223

 
12,006

Accrued unbilled revenues
 
57,170

 
51,327

Total accounts receivable
 
157,331

 
159,975

Deferred fuel costs
 
20,579

 
6,957

Fuel inventory - at average cost
 
44,560

 
50,872

Materials and supplies - at average cost
 
42,065

 
41,146

Prepayments and other
 
15,742

 
8,873

TOTAL
 
280,999

 
344,657

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property - at cost (less accumulated depreciation)
 
4,600

 
4,608

Escrow accounts
 
31,875

 
31,783

TOTAL
 
36,475

 
36,391

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
4,409,179

 
4,321,214

Property under capital lease
 
873

 
1,590

Construction work in progress
 
176,623

 
118,182

TOTAL UTILITY PLANT
 
4,586,675

 
4,440,986

Less - accumulated depreciation and amortization
 
1,626,005

 
1,602,711

UTILITY PLANT - NET
 
2,960,670

 
2,838,275

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
39,337

 
38,284

Other regulatory assets
 
368,118

 
342,213

Other
 
3,549

 
2,320

TOTAL
 
411,004

 
382,817

 
 
 
 
 
TOTAL ASSETS
 

$3,689,148

 

$3,602,140

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 

 
 

Accounts payable:
 
 

 
 

Associated companies
 

$99,489

 

$43,647

Other
 
73,037

 
80,227

Customer deposits
 
83,928

 
84,112

Taxes accrued
 
42,679

 
64,040

Interest accrued
 
21,693

 
21,653

Other
 
15,465

 
9,554

TOTAL
 
336,291

 
303,233

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
892,081

 
861,331

Accumulated deferred investment tax credits
 
8,587

 
8,667

Asset retirement cost liabilities
 
8,967

 
8,722

Accumulated provisions
 
47,741

 
54,440

Pension and other postretirement liabilities
 
98,865

 
109,551

Long-term debt
 
1,121,356

 
1,120,916

Other
 
15,104

 
20,108

TOTAL
 
2,192,701

 
2,183,735

 
 
 
 
 
Commitments and Contingencies
 
 

 
 

 
 
 
 
 
Preferred stock without sinking fund
 
20,381

 
20,381

 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2017 and 2016
 
199,326

 
199,326

Capital stock expense and other
 
167

 
167

Retained earnings
 
940,282

 
895,298

TOTAL
 
1,139,775

 
1,094,791

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,689,148

 

$3,602,140

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Capital Stock
Expense and
Other
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2015

$199,326

 

($690
)
 

$813,414

 

$1,012,050

 
 
 
 
 
 
 
 
Net income
—

 
—

 
49,312

 
49,312

Common stock dividends
—

 
—

 
(24,000
)
 
(24,000
)
Preferred stock dividends
—

 
—

 
(1,414
)
 
(1,414
)
 
 
 
 
 
 
 
 
Balance at June 30, 2016

$199,326

 

($690
)
 

$837,312

 

$1,035,948

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$199,326

 

$167

 

$895,298

 

$1,094,791

 
 
 
 
 
 
 
 
Net income
—

 
—

 
45,461

 
45,461

Preferred stock dividends
—

 
—

 
(477
)
 
(477
)
 
 
 
 
 
 
 
 
Balance at June 30, 2017

$199,326

 

$167

 

$940,282

 

$1,139,775

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$111

 

$88

 

$23

 
26

Commercial
 
101

 
81

 
20

 
25

Industrial
 
38

 
29

 
9

 
31

Governmental
 
10

 
9

 
1

 
11

Total retail
 
260

 
207

 
53

 
26

Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
7

 
5

 
2

 
40

Other
 
24

 
36

 
(12
)
 
(33
)
Total
 

$291

 

$248

 

$43

 
17

 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
1,135

 
1,085

 
50

 
5

Commercial
 
1,142

 
1,126

 
16

 
1

Industrial
 
618

 
587

 
31

 
5

Governmental
 
101

 
102

 
(1
)
 
(1
)
Total retail
 
2,996

 
2,900

 
96

 
3

Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
312

 
243

 
69

 
28

Total
 
3,308

 
3,143

 
165

 
5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 

Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 

 
 

 
 

 
 

Residential
 

$222

 

$204

 

$18

 
9

Commercial
 
193

 
173

 
20

 
12

Industrial
 
74

 
63

 
11

 
17

Governmental
 
19

 
19

 
—

 
—

Total retail
 
508

 
459

 
49

 
11

Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
12

 
10

 
2

 
20

Other
 
30

 
42

 
(12
)
 
(29
)
Total
 

$550

 

$511

 

$39

 
8

 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,325

 
2,370

 
(45
)
 
(2
)
Commercial
 
2,204

 
2,205

 
(1
)
 
—

Industrial
 
1,204

 
1,136

 
68

 
6

Governmental
 
199

 
200

 
(1
)
 
(1
)
Total retail
 
5,932

 
5,911

 
21

 
—

Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
493

 
375

 
118

 
31

Total
 
6,425

 
6,286

 
139

 
2



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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2017 Compared to Second Quarter 2016

Net income increased $3 million primarily due to lower other operation and maintenance expenses and a lower effective income tax rate, partially offset by higher taxes other than income taxes.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income increased $2.9 million primarily due to lower other operation and maintenance expenses and a lower effective income tax rate, partially offset by higher taxes other than income taxes.

Net Revenue

Second Quarter 2017 Compared to Second Quarter 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the changes in net revenue comparing the second quarter 2017 to the second quarter 2016:
 
Amount
 
(In Millions)
2016 net revenue

$80.4

Retail electric price
(2.3
)
Other
1.2

2017 net revenue

$79.3


The retail electric price variance is primarily due to a decrease in the purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the credits associated with Entergy New Orleans’s internal restructuring.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the changes in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016:
 
Amount
 
(In Millions)
2016 net revenue

$148.4

Retail electric price
3.0

Volume/weather
(3.1
)
Other
1.2

2017 net revenue

$149.5


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The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016. The increase was partially offset by credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the purchased power and capacity acquisition cost recovery rider and see Note 2 to the financial statements herein for further discussion of the credits associated with Entergy New Orleans’s internal restructuring.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather, and a decrease of 27 GWh, or 1%, in billed electricity usage, primarily in the residential sector.

Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $2.4 million in other loss provisions; and
•
a decrease of $2 million in fossil-fueled generation expenses primarily due to the deactivation of Michoud Units 2 and 3 effective May 2016 and asbestos loss provisions recorded in second quarter 2016.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher electric retail revenues in 2017 as compared to the same period in 2016 and an increase in ad valorem taxes resulting from higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $2.8 million in fossil-fueled generation expenses primarily due to the deactivation of Michoud Units 2 and 3 effective May 2016 and asbestos loss provisions recorded in 2016, partially offset by an increase as a result of the purchase of Power Block 1 of the Union Power Station in March 2016; and
•
a decrease of $2 million in other loss provisions.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher electric retail revenues in 2017 as compared to the same period in 2016 and an increase in ad valorem taxes resulting from higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017, partially offset by higher capitalized taxes.

Income Taxes

The effective income tax rates were 35.8% for the second quarter 2017 and 36.1% for the six months ended June 30, 2017. The differences in the effective income tax rates for the second quarter 2017 and the six months ended June 30, 2017 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, partially offset by flow-through tax accounting.

The effective income tax rates were 44.5% for the second quarter 2016 and 41.2% for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 30, 2016 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, partially offset by flow-through tax accounting.


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Management's Financial Discussion and Analysis

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$103,068

 

$88,876

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
36,750

 
39,268

Investing activities
(49,005
)
 
(258,036
)
Financing activities
(29,284
)
 
154,510

Net decrease in cash and cash equivalents
(41,539
)
 
(64,258
)
 
 
 
 
Cash and cash equivalents at end of period

$61,529

 

$24,618


Operating Activities

Net cash flow provided by operating activities decreased $2.5 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the timing of payments to vendors and an increase in interest paid in 2017 as compared to 2016. The decrease was substantially offset by the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016 and income tax payments of $2.5 million in 2016 primarily due to payments made for state tax liabilities.

Investing Activities

Net cash flow used in investing activities decreased $209 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016, partially offset by money pool activity and an increase of $7.7 million in storm spending in 2017. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

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 $1.7 million in 2017 compared to decreasing $12.8 million in 2016. 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 $29.3 million of cash for the six months ended June 30, 2017 compared to providing $154.5 million of cash for the six months ended June 30, 2016 primarily due to the following activity:

•
the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016;
•
the issuance of $85 million of 4% Series first mortgage bonds in May 2016. Entergy New Orleans used the proceeds to pay, prior to maturity, its $33.271 million of 5.6% Series first mortgage bonds due September 2024 and to pay, prior to maturity, its $37.772 million of 5.65% Series first mortgage bonds due September 2029;
•
a $47.8 million capital contribution received from Entergy Corporation in March 2016 in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase; and

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•
$24.2 million in common stock dividends paid in 2017 as compared to $7 million in common stock dividends paid in 2016. There were no common stock dividends paid in first quarter 2016 in anticipation of the purchase of Power Block 1 of the Union Power Station in March 2016.

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.
 
June 30,
2017
 
December 31,
2016
Debt to capital
49.8
%
 
50.1
%
Effect of excluding securitization bonds
(4.9
%)
 
(5.2
%)
Debt to capital, excluding securitization bonds (a)
44.9
%
 
44.9
%
Effect of subtracting cash
(4.6
%)
 
(8.0
%)
Net debt to net capital, excluding securitization bonds (a)
40.3
%
 
36.9
%

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

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, long-term debt, including the currently maturing portion, and the long-term payable to Entergy Louisiana.  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 ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources ” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.  
    
Entergy New Orleans’s receivables from the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$15,960
 
$14,215
 
$3,007
 
$15,794

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 2018. The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. As of June 30, 2017 , there were no cash borrowings and a $0.8 million letter of credit was outstanding under the facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017 , a $5.6 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

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New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans.  In July 2017 the Utility Committee of the City Council established a procedural schedule that provides for a hearing in December 2017 and the City Council’s decision in February 2018. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals. 

State and Local Rate Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation ”   in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.

Retail Rates

As discussed in the Form 10-K, in February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council identify its desired level of funding for the program during this time period and approve a cost recovery mechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the Energy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the Energy Smart program.

Internal Restructuring
    
As discussed in the Form 10-K, in July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans began crediting retail customers in June 2017. Also pursuant to the agreement in principle, if FERC approval is received prior to December 31, 2018, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020.
 

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Advanced Metering Infrastructure (AMI) Filing

As discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans received intervenor testimony that was generally supportive of AMI deployment. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certain modifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In June 2017 the procedural schedule was suspended to allow for settlement discussions. A settlement status conference is scheduled for August 2017.

Federal Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation ”   in the Form 10-K for a discussion of federal regulation. 

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.


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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$157,455

 

$149,101

 

$299,800

 

$271,542

Natural gas
 
18,767

 
15,819

 
45,411

 
42,718

TOTAL
 
176,222

 
164,920

 
345,211

 
314,260

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
22,961

 
12,554

 
53,036

 
23,475

Purchased power
 
73,105

 
70,583

 
141,464

 
139,108

Other operation and maintenance
 
25,296

 
28,659

 
47,808

 
51,501

Taxes other than income taxes
 
13,416

 
10,925

 
26,262

 
22,437

Depreciation and amortization
 
13,020

 
13,908

 
26,070

 
25,672

Other regulatory charges - net
 
818

 
1,378

 
1,203

 
3,274

TOTAL
 
148,616

 
138,007

 
295,843

 
265,467

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
27,606

 
26,913

 
49,368

 
48,793

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
552

 
143

 
1,002

 
456

Interest and investment income
 
164

 
30

 
299

 
99

Miscellaneous - net
 
40

 
192

 
138

 
(53
)
TOTAL
 
756

 
365

 
1,439

 
502

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
5,356

 
5,984

 
10,699

 
10,357

Allowance for borrowed funds used during construction
 
(193
)
 
(49
)
 
(351
)
 
(175
)
TOTAL
 
5,163

 
5,935

 
10,348

 
10,182

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
23,199

 
21,343

 
40,459

 
39,113

 
 
 
 
 
 
 
 
 
Income taxes
 
8,317

 
9,500

 
14,599

 
16,103

 
 
 
 
 
 
 
 
 
NET INCOME
 
14,882

 
11,843

 
25,860

 
23,010

 
 
 
 
 
 
 
 
 
Preferred dividend requirements and other
 
241

 
241

 
482

 
482

 
 
 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$14,641

 

$11,602

 

$25,378

 

$22,528

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$25,860

 

$23,010

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
26,070

 
25,672

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
14,764

 
(2,665
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
(5,979
)
 
(16,285
)
Fuel inventory
 
(465
)
 
1,822

Accounts payable
 
(8,761
)
 
6,362

Prepaid taxes and taxes accrued
 
38

 
36,982

Interest accrued
 
(469
)
 
255

Deferred fuel costs
 
2,087

 
(13,664
)
Other working capital accounts
 
(11,774
)
 
(7,310
)
Provisions for estimated losses
 
(1,794
)
 
1,804

Other regulatory assets
 
2,719

 
5,799

Pension and other postretirement liabilities
 
(8,049
)
 
(8,245
)
Other assets and liabilities
 
2,503

 
(14,269
)
Net cash flow provided by operating activities
 
36,750

 
39,268

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(48,683
)
 
(37,345
)
Allowance for equity funds used during construction
 
1,002

 
456

Payment for purchase of plant
 
—

 
(236,978
)
Investment in affiliates
 
—

 
(38
)
Changes in money pool receivable - net
 
(1,745
)
 
12,787

Receipts from storm reserve escrow account
 
—

 
3

Payments to storm reserve escrow account
 
(235
)
 
(206
)
Changes in securitization account
 
656

 
3,285

Net cash flow used in investing activities
 
(49,005
)
 
(258,036
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
—

 
190,672

Retirement of long-term debt
 
(5,114
)
 
(77,094
)
Capital contribution from parent
 
—

 
47,750

Dividends paid:
 
 
 
 
Common stock
 
(24,150
)
 
(7,000
)
Preferred stock
 
(482
)
 
(482
)
Other
 
462

 
664

Net cash flow provided by (used in) financing activities
 
(29,284
)
 
154,510

 
 
 
 
 
Net decrease in cash and cash equivalents
 
(41,539
)
 
(64,258
)
Cash and cash equivalents at beginning of period
 
103,068

 
88,876

Cash and cash equivalents at end of period
 

$61,529

 

$24,618

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

$10,637

 

$9,435

Income taxes
 

$—

 

$2,500

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
 
 
 
Cash
 

$862

 

$28

Temporary cash investments
 
60,667

 
103,040

Total cash and cash equivalents
 
61,529

 
103,068

Securitization recovery trust account
 
1,082

 
1,738

Accounts receivable:
 
 
 
 
Customer
 
47,162

 
43,536

Allowance for doubtful accounts
 
(3,074
)
 
(3,059
)
Associated companies
 
18,045

 
16,811

Other
 
6,891

 
5,926

Accrued unbilled revenues
 
20,168

 
18,254

Total accounts receivable
 
89,192

 
81,468

Deferred fuel costs
 
2,731

 
4,818

Fuel inventory - at average cost
 
2,306

 
1,841

Materials and supplies - at average cost
 
10,494

 
8,416

Prepaid taxes
 
4,341

 
4,379

Prepayments and other
 
20,353

 
6,587

TOTAL
 
192,028

 
212,315

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Non-utility property at cost (less accumulated depreciation)
 
1,016

 
1,016

Storm reserve escrow account
 
81,672

 
81,437

Other
 
4,787

 
7,160

TOTAL
 
87,475

 
89,613

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
1,262,714

 
1,258,934

Natural gas
 
247,742

 
240,408

Construction work in progress
 
38,314

 
24,975

TOTAL UTILITY PLANT
 
1,548,770

 
1,524,317

Less - accumulated depreciation and amortization
 
610,405

 
604,825

UTILITY PLANT - NET
 
938,365

 
919,492

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Deferred fuel costs
 
4,080

 
4,080

Other regulatory assets (includes securitization property of $77,936 as of June 30, 2017 and $82,272 as of December 31, 2016)
 
265,387

 
268,106

Other
 
1,522

 
963

TOTAL
 
270,989

 
273,149

 
 
 
 
 
TOTAL ASSETS
 

$1,488,857

 

$1,494,569

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Payable due to Entergy Louisiana
 

$2,104

 

$2,104

Accounts payable:
 
 
 
 
Associated companies
 
41,981

 
39,260

Other
 
23,206

 
35,920

Customer deposits
 
28,773

 
28,667

Interest accrued
 
4,974

 
5,443

Other
 
13,006

 
11,415

TOTAL CURRENT LIABILITIES
 
114,044

 
122,809

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
352,001

 
334,953

Accumulated deferred investment tax credits
 
559

 
622

Regulatory liability for income taxes - net
 
5,844

 
9,074

Asset retirement cost liabilities
 
2,974

 
2,875

Accumulated provisions
 
86,719

 
88,513

Pension and other postretirement liabilities
 
28,701

 
36,750

Long-term debt (includes securitization bonds of $79,784 as of June 30, 2017 and $84,776 as of December 31, 2016)
 
423,632

 
428,467

Long-term payable due to Entergy Louisiana
 
18,423

 
18,423

Gas system rebuild insurance proceeds
 
—

 
447

Other
 
8,006

 
4,910

TOTAL NON-CURRENT LIABILITIES
 
926,859

 
925,034

 
 
 
 
 
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 2017 and 2016
 
33,744

 
33,744

Paid-in capital
 
171,544

 
171,544

Retained earnings
 
222,886

 
221,658

TOTAL
 
428,174

 
426,946

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$1,488,857

 

$1,494,569

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2015

$33,744

 

$123,794

 

$192,494

 

$350,032

 
 
 
 
 
 
 
 
Net income
—

 
—

 
23,010

 
23,010

Capital contribution from parent
—

 
47,750

 
—

 
47,750

Common stock dividends
—

 
—

 
(7,000
)
 
(7,000
)
Preferred stock dividends
—

 
—

 
(482
)
 
(482
)
 
 
 
 
 
 
 
 
Balance at June 30, 2016

$33,744

 

$171,544

 

$208,022

 

$413,310

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$33,744

 

$171,544

 

$221,658

 

$426,946

 
 
 
 
 
 
 
 
Net income
—

 
—

 
25,860

 
25,860

Common stock dividends
—

 
—

 
(24,150
)
 
(24,150
)
Preferred stock dividends
—

 
—

 
(482
)
 
(482
)
 
 
 
 
 
 
 
 
Balance at June 30, 2017

$33,744

 

$171,544

 

$222,886

 

$428,174

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$56

 

$50

 

$6

 
12

Commercial
 
56

 
51

 
5

 
10

Industrial
 
9

 
8

 
1

 
13

Governmental
 
19

 
17

 
2

 
12

Total retail
 
140

 
126

 
14

 
11

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
—

 
12

 
(12
)
 
(100
)
Non-associated companies
 
9

 
1

 
8

 
800

Other
 
8

 
10

 
(2
)
 
(20
)
Total
 

$157

 

$149

 

$8

 
5

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
468

 
459

 
9

 
2

Commercial
 
541

 
538

 
3

 
1

Industrial
 
105

 
107

 
(2
)
 
(2
)
Governmental
 
188

 
190

 
(2
)
 
(1
)
Total retail
 
1,302

 
1,294

 
8

 
1

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
—

 
556

 
(556
)
 
(100
)
Non-associated companies
 
508

 
41

 
467

 
1,139

Total
 
1,810

 
1,891

 
(81
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 

Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 
 
 

 
 

 
 

Residential
 

$109

 

$97

 

$12

 
12

Commercial
 
110

 
95

 
15

 
16

Industrial
 
17

 
15

 
2

 
13

Governmental
 
37

 
32

 
5

 
16

Total retail
 
273

 
239

 
34

 
14

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
—

 
19

 
(19
)
 
(100
)
  Non associated companies
 
18

 
1

 
17

 
1,700

Other
 
9

 
13

 
(4
)
 
(31
)
Total
 

$300

 

$272

 

$28

 
10

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
924

 
958

 
(34
)
 
(4
)
Commercial
 
1,056

 
1,048

 
8

 
1

Industrial
 
203

 
208

 
(5
)
 
(2
)
Governmental
 
372

 
368

 
4

 
1

Total retail
 
2,555

 
2,582

 
(27
)
 
(1
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
—

 
798

 
(798
)
 
(100
)
Non-associated companies
 
1,015

 
55

 
960

 
1,745

Total
 
3,570

 
3,435

 
135

 
4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2017 Compared to Second Quarter 2016

Net income decreased $3 million primarily due to lower net revenue, higher depreciation and amortization expenses, and higher other operation and maintenance expenses, partially offset by a lower effective income tax rate.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income decreased $6.7 million primarily due to higher depreciation and amortization expenses, higher other operation and maintenance expenses, and lower net revenue.

Net Revenue

Second Quarter 2017 Compared to Second Quarter 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the second quarter 2017 to the second quarter 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$157.0

Net wholesale revenue
(10.9
)
Retail electric price
6.8

Other
0.1

2017 net revenue

$153.0

    
The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.

The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filings.


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Management's Financial Discussion and Analysis

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2017 to the six months ended June 30, 2016 :

 
Amount
 
(In Millions)
2016 net revenue

$295.2

Net wholesale revenue
(20.9
)
Volume/weather
9.1

Retail electric price
11.3

Other
(1.4
)
2017 net revenue

$293.3

    
The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.

The volume/weather variance is primarily due to an increase in usage during the unbilled sales period, including the effect of weather.

The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filings.
    
Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $2 million in transmission and distribution expenses due to higher vegetation maintenance costs;
•
an increase of $1.2 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2017 compared to the same period in 2016; and
•
an increase of $0.7 million in energy efficiency costs.

The increase was partially offset by a $2 million decrease due to lower transmission equalization expenses, as allocated under the System Agreement, as compared to the same period in 2016 primarily as a result of Entergy Texas’s exit from the System Agreement in August 2016.

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

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $1.8 million in transmission and distribution expenses due to higher vegetation maintenance costs;
•
an increase of $1.4 million in customer service costs;

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Management's Financial Discussion and Analysis

•
an increase of $1.3 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2017 as compared to the same period in 2016;
•
an increase of $1.2 million in information technology expenses including software maintenance costs and upgrade projects;
•
an increase of $0.9 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016; and
•
an increase of $0.7 million in energy efficiency costs.

The increase was partially offset by a decrease of $4.5 million due to lower transmission equalization expenses, as allocated under the System Agreement, in 2017 as compared to the same period in 2016 primarily as a result of Entergy Texas’s exit from the System Agreement in August 2016.
 
Depreciation and amortization expenses increased primarily due to additions to plant in service.

Income Taxes

The effective income tax rate was 26.2% for the second quarter 2017 . The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions 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.

The effective income tax rate was 33% for the six months ended June 30, 2017 . The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions 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 a nd a write-off of a stock-based compensation deferred tax asset.

The effective income tax rates were 39.9% for the second quarter 2016 and 39.2% for the six months ended June 30, 2016 . The differences in the effective income tax rates for the second quarter 2016 and for the six months ended June 30, 2016 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, 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 six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$6,181

 

$2,182

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
132,397

 
172,175

Investing activities
(140,929
)
 
(179,483
)
Financing activities
3,416

 
61,063

Net increase (decrease) in cash and cash equivalents
(5,116
)
 
53,755

 
 
 
 
Cash and cash equivalents at end of period

$1,065

 

$55,937



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

Operating Activities

Net cash flow provided by operating activities decreased $39.8 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the timing of recovery of fuel and purchased power costs.

Investing Activities

Net cash flow used in investing activities decreased $38.6 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
a decrease of $49 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to the same period in 2016, partially offset by an increase in baseline work performed in 2017 as compared to the same period in 2016; and
•
money pool activity.

The decrease was partially offset by an increase of $16.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016.

Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased by $0.7 million for the six months ended June 30, 2017 compared to increasing by $7 million for the six months ended June 30, 2016 . 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 $57.6 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, partially offset by money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $39.2 million for the six months ended June 30, 2017 compared to decreasing by $22.1 million for the six months ended June 30, 2016 .

Capital Structure

Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.
 
June 30,
2017
 
December 31, 2016
Debt to capital
57.2
%
 
58.5
%
Effect of excluding the securitization bonds
(7.7
%)
 
(8.3
%)
Debt to capital, excluding securitization bonds (a)
49.5
%
 
50.2
%
Effect of subtracting cash
—
%
 
(0.1
%)
Net debt to net capital, excluding securitization bonds (a)
49.5
%
 
50.1
%

(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

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Management's Financial Discussion and Analysis

condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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

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

June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
($39,222)
 
$681
 
$7,011
 
($22,068)

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 August 2021.  The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of June 30, 2017 , there were no cash borrowings and $13.3 million of letters of credit outstanding under the credit facility.  In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017 , a $22.3 million letter of credit was outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017, parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Also in June 2017, the administrative law judge issued a proposed order and remanded the proceeding to the PUCT for final decision. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

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.

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Management's Financial Discussion and Analysis

Retail Rates

In September 2016, Entergy Texas filed with the PUCT a request to amend its transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider. In September 2016 the PUCT suspended the effective date of the tariff change to March 2017. In December 2016, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.

In June 2017, Entergy Texas filed an application to amend its distribution cost recovery factor (DCRF) rider by increasing the total collection from $8.65 million to approximately $19 million. In July 2017, Entergy Texas, the PUCT, and the two other parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. PUCT action on the stipulation and settlement agreement remains pending.

Fuel and purchased power cost recovery

As discussed in the Form 10-K, in July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017. The fuel reconciliation settlement was approved by the PUCT in March 2017 and the refunds were made.

In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds will flow through bills for the months of July 2017 through September 2017. Also in June 2017, the PUCT’s administrative law judge approved the refund on an interim basis. A final decision in this matter remains pending.

Advanced Metering Infrastructure (AMI) Filing

In its most recent regular session, the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy Texas is seeking approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. Subject to approval by the PUCT, deployment of the communications network is expected to begin in 2018. Entergy Texas expects a decision from the PUCT by December 2017.
    

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Federal Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation ”   in the Form 10-K for a discussion of federal regulation. 

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 “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters ” in the Form 10-K for further discussion.

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 utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$378,488

 

$412,922

 

$742,415

 

$791,226

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
46,142

 
71,478

 
104,155

 
163,882

Purchased power
 
160,325

 
167,071

 
310,709

 
297,483

Other operation and maintenance
 
56,577

 
54,135

 
110,483

 
107,170

Taxes other than income taxes
 
19,251

 
18,285

 
38,695

 
36,595

Depreciation and amortization
 
29,373

 
26,495

 
57,484

 
52,114

Other regulatory charges - net
 
19,033

 
17,419

 
34,260

 
34,674

TOTAL
 
330,701

 
354,883

 
655,786

 
691,918

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
47,787

 
58,039

 
86,629

 
99,308

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
1,632

 
2,270

 
2,913

 
4,702

Interest and investment income
 
211

 
268

 
412

 
468

Miscellaneous - net
 
(631
)
 
(54
)
 
(813
)
 
(470
)
TOTAL
 
1,212

 
2,484

 
2,512

 
4,700

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
21,427

 
21,976

 
43,235

 
43,577

Allowance for borrowed funds used during construction
 
(1,001
)
 
(1,473
)
 
(1,762
)
 
(3,054
)
TOTAL
 
20,426

 
20,503

 
41,473

 
40,523

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
28,573

 
40,020

 
47,668

 
63,485

 
 
 
 
 
 
 
 
 
Income taxes
 
7,472

 
15,962

 
15,713

 
24,865

 
 
 
 
 
 
 
 
 
NET INCOME
 

$21,101

 

$24,058

 

$31,955

 

$38,620

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$31,955

 

$38,620

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
57,484

 
52,114

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(16,766
)
 
(40,175
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
(15,969
)
 
(37,832
)
Fuel inventory
 
(4,813
)
 
14,129

Accounts payable
 
24,900

 
17,883

Prepaid taxes and taxes accrued
 
23,064

 
51,640

Interest accrued
 
(471
)
 
(2,719
)
Deferred fuel costs
 
6,144

 
54,066

Other working capital accounts
 
4,132

 
2,774

Provisions for estimated losses
 
83

 
(2,126
)
Other regulatory assets
 
45,306

 
43,378

Pension and other postretirement liabilities
 
(13,286
)
 
(12,850
)
Other assets and liabilities
 
(9,366
)
 
(6,727
)
Net cash flow provided by operating activities
 
132,397

 
172,175

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(155,755
)
 
(185,945
)
Allowance for equity funds used during construction
 
2,992

 
4,761

Insurance proceeds received for property damages
 
2,431

 
—

Changes in money pool receivable - net
 
681

 
(7,011
)
Changes in securitization account
 
8,722

 
8,712

Net cash flow used in investing activities
 
(140,929
)
 
(179,483
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
—

 
123,605

Retirement of long-term debt
 
(38,134
)
 
(36,659
)
Change in money pool payable - net
 
39,222

 
(22,068
)
Other
 
2,328

 
(3,815
)
Net cash flow provided by financing activities
 
3,416

 
61,063

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(5,116
)
 
53,755

Cash and cash equivalents at beginning of period
 
6,181

 
2,182

Cash and cash equivalents at end of period
 

$1,065

 

$55,937

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

$42,430

 

$45,056

Income taxes
 

($1,446
)
 

$3,443

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$1,036

 

$1,216

Temporary cash investments
 
29

 
4,965

Total cash and cash equivalents
 
1,065

 
6,181

Securitization recovery trust account
 
28,729

 
37,451

Accounts receivable:
 
 
 
 
Customer
 
70,008

 
71,803

Allowance for doubtful accounts
 
(791
)
 
(828
)
Associated companies
 
40,867

 
39,447

Other
 
13,121

 
14,756

Accrued unbilled revenues
 
56,988

 
39,727

Total accounts receivable
 
180,193

 
164,905

Fuel inventory - at average cost
 
41,990

 
37,177

Materials and supplies - at average cost
 
38,807

 
36,631

Prepayments and other
 
14,585

 
18,599

TOTAL
 
305,369

 
300,944

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investments in affiliates - at equity
 
573

 
600

Non-utility property - at cost (less accumulated depreciation)
 
376

 
376

Other
 
19,018

 
18,801

TOTAL
 
19,967

 
19,777

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
4,367,085

 
4,274,069

Construction work in progress
 
135,733

 
111,227

TOTAL UTILITY PLANT
 
4,502,818

 
4,385,296

Less - accumulated depreciation and amortization
 
1,542,664

 
1,526,057

UTILITY PLANT - NET
 
2,960,154

 
2,859,239

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
105,086

 
105,816

Other regulatory assets (includes securitization property of $353,726 as of June 30, 2017 and $384,609 as of December 31, 2016)
 
695,580

 
740,156

Other
 
8,674

 
7,149

TOTAL
 
809,340

 
853,121

 
 
 
 
 
TOTAL ASSETS
 

$4,094,830

 

$4,033,081

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$86,811

 

$47,867

Other
 
108,341

 
77,342

Customer deposits
 
44,329

 
44,419

Taxes accrued
 
38,415

 
15,351

Interest accrued
 
25,506

 
25,977

Deferred fuel costs
 
60,687

 
54,543

Other
 
11,753

 
9,388

TOTAL
 
375,842

 
274,887

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,008,466

 
1,027,647

Accumulated deferred investment tax credits
 
12,459

 
12,934

Other regulatory liabilities
 
5,574

 
8,502

Asset retirement cost liabilities
 
6,650

 
6,470

Accumulated provisions
 
7,667

 
7,584

Pension and other postretirement liabilities
 
54,043

 
67,313

Long-term debt (includes securitization bonds of $391,212 as of June 30, 2017 and $429,043 as of December 31, 2016)
 
1,471,091

 
1,508,407

Other
 
52,089

 
50,343

TOTAL
 
2,618,039

 
2,689,200

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016
 
49,452

 
49,452

Paid-in capital
 
481,994

 
481,994

Retained earnings
 
569,503

 
537,548

TOTAL
 
1,100,949

 
1,068,994

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$4,094,830

 

$4,033,081

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2015

$49,452

 

$481,994

 

$430,010

 

$961,456

 
 
 
 
 
 
 
 
Net income
—

 
—

 
38,620

 
38,620

 
 
 
 
 
 
 
 
Balance at June 30, 2016

$49,452

 

$481,994

 

$468,630

 

$1,000,076

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$49,452

 

$481,994

 

$537,548

 

$1,068,994

 
 
 
 
 
 
 
 
Net income
—

 
—

 
31,955

 
31,955

 
 
 
 
 
 
 
 
Balance at June 30, 2017

$49,452

 

$481,994

 

$569,503

 

$1,100,949

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$143

 

$130

 

$13

 
10

Commercial
 
91

 
85

 
6

 
7

Industrial
 
95

 
94

 
1

 
1

Governmental
 
6

 
6

 
—

 
—

Total retail
 
335

 
315

 
20

 
6

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
16

 
64

 
(48
)
 
(75
)
Non-associated companies
 
9

 
12

 
(3
)
 
(25
)
Other
 
18

 
22

 
(4
)
 
(18
)
Total
 

$378

 

$413

 

($35
)
 
(8
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,274

 
1,209

 
65

 
5

Commercial
 
1,102

 
1,070

 
32

 
3

Industrial
 
1,973

 
1,938

 
35

 
2

Governmental
 
69

 
68

 
1

 
1

Total retail
 
4,418

 
4,285

 
133

 
3

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
425

 
1,683

 
(1,258
)
 
(75
)
Non-associated companies
 
271

 
345

 
(74
)
 
(21
)
Total
 
5,114

 
6,313

 
(1,199
)
 
(19
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Increase/
 
 
Description
 
2017
 
2016
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$280

 

$265

 

$15

 
6

Commercial
 
181

 
169

 
12

 
7

Industrial
 
195

 
188

 
7

 
4

Governmental
 
12

 
12

 
—

 
—

Total retail
 
668

 
634

 
34

 
5

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
29

 
117

 
(88
)
 
(75
)
Non-associated companies
 
14

 
18

 
(4
)
 
(22
)
Other
 
31

 
22

 
9

 
41

Total
 

$742

 

$791

 

($49
)
 
(6
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,487

 
2,484

 
3

 
—

Commercial
 
2,108

 
2,087

 
21

 
1

Industrial
 
3,763

 
3,745

 
18

 
—

Governmental
 
132

 
138

 
(6
)
 
(4
)
Total retail
 
8,490

 
8,454

 
36

 
—

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
763

 
3,105

 
(2,342
)
 
(75
)
Non-associated companies
 
348

 
494

 
(146
)
 
(30
)
Total
 
9,601

 
12,053

 
(2,452
)
 
(20
)

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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.

Second Quarter 2017 Compared to Second Quarter 2016

Net income decreased $5.7 million primarily due to a higher effective income tax rate in 2017 and provisions against revenue being recorded in 2017 in connection with the complaint against System Energy’s return on equity. See Note 2 to the financial statements herein and “ Federal Regulation - Complaint Against System Energy ” below for further discussion of the complaint against System Energy.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net income decreased $11.4 million primarily due to a higher effective income tax rate in 2017 and provisions against revenue being recorded in 2017 in connection with the complaint against System Energy’s return on equity. See Note 2 to the financial statements herein and “ Federal Regulation - Complaint Against System Energy ” below for further discussion of the complaint against System Energy.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2017 and 2016 were as follows:
 
2017
 
2016
 
(In Thousands)
Cash and cash equivalents at beginning of period

$245,863

 

$230,661

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
171,460

 
137,292

Investing activities
(65,983
)
 
(167,749
)
Financing activities
(13,740
)
 
(61,410
)
Net increase (decrease) in cash and cash equivalents
91,737

 
(91,867
)
 
 
 
 
Cash and cash equivalents at end of period

$337,600

 

$138,794


Operating Activities

Net cash flow provided by operating activities increased $34.2 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to a decrease in spending of $33.8 million on nuclear refueling outages in 2017 as compared to the same period in 2016.


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System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Investing Activities

Net cash flow used in investing activities decreased $101.8 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 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
•
a decrease of $28.1 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 2016 on Grand Gulf outage projects and lower spending in 2017 on compliance with NRC post-Fukushima requirements.

The decrease was partially offset by 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 $54.9 million for the six months ended June 30, 2017 compared to decreasing by $22.2 million for the six months ended June 30, 2016 .  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 $47.7 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to:

•
common stock dividends and distributions of $139 million in 2016 in order to maintain the targeted capital structure; and
•
the partial repayment caused by System Energy in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.

The decrease was partially offset by:

•
a decrease in net borrowings of $63.3 million on the nuclear fuel company variable interest entity’s credit facility in 2017 compared to the same period in 2016; and
•
the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s 4.02% Series H notes.

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

Capital Structure

System Energy’s 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.
 
June 30,
2017
 
December 31, 2016
Debt to capital
43.7
%
 
45.5
%
Effect of subtracting cash
(18.2
%)
 
(12.0
%)
Net debt to net capital
25.5
%
 
33.5
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt 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’s receivables from the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$88,669
 
$33,809
 
$17,718
 
$39,926

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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in May 2019 . As of June 30, 2017 , $53.2 million in letters of credit to support a like amount of commercial paper issued and $50 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation - Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.

Complaint Against System Energy

In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC is pending.


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System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Unit Power Sales Agreement

In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017. Action by the FERC is pending.

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.


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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
2017
 
2016
 
2017
 
2016
 
 
(In Thousands)
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
 
 
 
 
Electric
 

$164,956

 

$151,323

 

$319,743

 

$289,016

 
 
 
 
 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
 
 
 
 
Operation and Maintenance:
 
 
 
 
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
21,660

 
20,394

 
36,994

 
33,822

Nuclear refueling outage expenses
 
4,387

 
4,905

 
9,160

 
9,489

Other operation and maintenance
 
54,310

 
35,766

 
102,711

 
67,926

Decommissioning
 
13,452

 
12,593

 
26,684

 
24,980

Taxes other than income taxes
 
6,664

 
6,385

 
13,088

 
12,637

Depreciation and amortization
 
35,187

 
35,384

 
70,628

 
70,091

Other regulatory credits - net
 
(11,421
)
 
(9,124
)
 
(21,783
)
 
(22,415
)
TOTAL
 
124,239

 
106,303

 
237,482

 
196,530

 
 
 
 
 
 
 
 
 
OPERATING INCOME
 
40,717

 
45,020

 
82,261

 
92,486

 
 
 
 
 
 
 
 
 
OTHER INCOME
 
 
 
 
 
 
 
 
Allowance for equity funds used during construction
 
1,318

 
1,602

 
2,412

 
4,331

Interest and investment income
 
3,723

 
5,124

 
8,397

 
8,398

Miscellaneous - net
 
(103
)
 
(164
)
 
(231
)
 
(256
)
TOTAL
 
4,938

 
6,562

 
10,578

 
12,473

 
 
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
 
 
 
 
Interest expense
 
9,181

 
9,382

 
18,300

 
18,934

Allowance for borrowed funds used during construction
 
(322
)
 
(401
)
 
(589
)
 
(1,097
)
TOTAL
 
8,859

 
8,981

 
17,711

 
17,837

 
 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
36,796

 
42,601

 
75,128

 
87,122

 
 
 
 
 
 
 
 
 
Income taxes
 
17,446

 
17,511

 
35,431

 
36,074

 
 
 
 
 
 
 
 
 
NET INCOME
 

$19,350

 

$25,090

 

$39,697

 

$51,048

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$39,697

 

$51,048

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
128,679

 
123,424

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
35,498

 
83,733

Changes in assets and liabilities:
 
 
 
 
Receivables
 
10,077

 
3,731

Accounts payable
 
3,469

 
(3,200
)
Prepaid taxes and taxes accrued
 
(10,086
)
 
(60,954
)
Interest accrued
 
(609
)
 
(145
)
Other working capital accounts
 
2,960

 
(28,319
)
Other regulatory assets
 
(4,904
)
 
(9,844
)
Pension and other postretirement liabilities
 
(8,116
)
 
(9,071
)
Other assets and liabilities
 
(25,205
)
 
(13,111
)
Net cash flow provided by operating activities
 
171,460

 
137,292

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(32,799
)
 
(57,429
)
Allowance for equity funds used during construction
 
2,412

 
4,331

Nuclear fuel purchases
 
(22,510
)
 
(130,275
)
Proceeds from the sale of nuclear fuel
 
60,188

 
11,467

Proceeds from nuclear decommissioning trust fund sales
 
253,487

 
289,414

Investment in nuclear decommissioning trust funds
 
(271,901
)
 
(307,465
)
Changes in money pool receivable - net
 
(54,860
)
 
22,208

Net cash flow used in investing activities
 
(65,983
)
 
(167,749
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Retirement of long-term debt
 
(50,001
)
 
(22,001
)
Changes in credit borrowings - net
 
36,289

 
99,617

Common stock dividends and distributions
 
—

 
(139,000
)
Other
 
(28
)
 
(26
)
Net cash flow used in financing activities
 
(13,740
)
 
(61,410
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
91,737

 
(91,867
)
Cash and cash equivalents at beginning of period
 
245,863

 
230,661

Cash and cash equivalents at end of period
 

$337,600

 

$138,794

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

$17,656

 

$18,494

Income taxes
 

$—

 

$3,402

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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Table of Contents

SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$555

 

$786

Temporary cash investments
 
337,045

 
245,077

Total cash and cash equivalents
 
337,600

 
245,863

Accounts receivable:
 
 
 
 
Associated companies
 
147,497

 
104,390

Other
 
5,313

 
3,637

Total accounts receivable
 
152,810

 
108,027

Materials and supplies - at average cost
 
84,418

 
82,469

Deferred nuclear refueling outage costs
 
15,867

 
24,729

Prepaid taxes
 
25,968

 
15,882

Prepayments and other
 
8,183

 
4,229

TOTAL
 
624,846

 
481,199

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
839,385

 
780,496

TOTAL
 
839,385

 
780,496

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
4,304,301

 
4,331,668

Property under capital lease
 
585,084

 
585,084

Construction work in progress
 
61,617

 
43,888

Nuclear fuel
 
199,686

 
259,635

TOTAL UTILITY PLANT
 
5,150,688

 
5,220,275

Less - accumulated depreciation and amortization
 
3,125,020

 
3,063,249

UTILITY PLANT - NET
 
2,025,668

 
2,157,026

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
88,924

 
93,127

Other regulatory assets
 
420,319

 
411,212

Other
 
4,492

 
4,652

TOTAL
 
513,735

 
508,991

 
 
 
 
 
TOTAL ASSETS
 

$4,003,634

 

$3,927,712

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$3

 

$50,003

Short-term borrowings
 
53,182

 
66,893

Accounts payable:
 
 
 
 
Associated companies
 
6,719

 
5,843

Other
 
48,251

 
50,558

Interest accrued
 
13,440

 
14,049

Other
 
2,958

 
2,957

TOTAL
 
124,553

 
190,303

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,142,955

 
1,112,865

Accumulated deferred investment tax credits
 
39,686

 
41,663

Other regulatory liabilities
 
406,570

 
370,862

Decommissioning
 
845,001

 
854,202

Pension and other postretirement liabilities
 
109,734

 
117,850

Long-term debt
 
551,293

 
501,129

Other
 
5,322

 
15

TOTAL
 
3,100,561

 
2,998,586

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016
 
679,350

 
679,350

Retained earnings
 
99,170

 
59,473

TOTAL
 
778,520

 
738,823

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$4,003,634

 

$3,927,712

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2015

$719,350

 

$61,729

 

$781,079

 
 
 
 
 
 
Net income
—

 
51,048

 
51,048

Common stock dividends and distributions
(40,000
)
 
(99,000
)
 
(139,000
)
 
 
 
 
 
 
Balance at June 30, 2016

$679,350

 

$13,777

 

$693,127

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$679,350

 

$59,473

 

$738,823

 
 
 
 
 
 
Net income
—

 
39,697

 
39,697

 
 
 
 
 
 
Balance at June 30, 2017

$679,350

 

$99,170

 

$778,520

 
 
 
 
 
 
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 Note 1 and Note 2 to the financial statements herein and “ Item 5, Other Information, Environmental Regulation ” below for updates regarding environmental proceedings and regulation.

Item 1A.  Risk Factors

There have been no material changes to the risk factors discussed in “ PART I, Item 1A, Risk Factors” in the Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)
Period
 
Total Number of
Shares Purchased
 
Average Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
 
Maximum $
Amount
of Shares that May
Yet be Purchased
Under a Plan (b)
 
 
 
 
 
 
 
 
 
4/01/2017-4/30/2017
 
—

 

$—

 
—

 

$350,052,918

5/01/2017-5/31/2017
 
—

 

$—

 
—

 

$350,052,918

6/01/2017-6/30/2017
 
—

 

$—

 
—

 

$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 2017, Entergy withheld 1,054 shares of its common stock at $70.58 per share, 122,148 shares of its common stock at $70.61 per share, and 31,243 shares of its common stock at $71.89 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.

(a)
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

Following are updates to the Regulation of the Nuclear Power Industry section of Part I, Item 1 of the Form 10-K.

Nuclear Waste Policy Act of 1982

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 are updates to that discussion.  

In March 2017 filings with the NRC were made for certain Entergy subsidiaries’ nuclear plants reporting on decommissioning funding.  Those reports showed that decommissioning funding for each of those nuclear plants met the NRC’s financial assurance requirements.

In March 2017, Entergy sold the FitzPatrick plant to Exelon, and as part of the transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of the transaction.

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

Regional Haze

In June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a requirement to install SO 2 and NO x pollution control technology as Best Available Retrofit Control Technology (BART) to continue operating certain of Entergy’s fossil generation units.  The rule leaves certain CAVR determinations to the states.

In Arkansas, the Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the CAVR.   In April 2012 the EPA finalized a decision addressing the Arkansas Regional Haze SIP, in which it disapproved a large portion of the Arkansas Regional Haze SIP, including the emission limits for NO x and SO 2 at White Bluff.    By Court order, the EPA had to issue a final federal implementation plan (FIP) for Arkansas Regional Haze by no later than August 31, 2016. In April 2015 the EPA published a proposed FIP for Arkansas, taking comment on requiring installation of scrubbers and low NO x burners to continue operating both units at the White Bluff plant and both units at the Independence plant and NO x controls to continue operating the Lake Catherine plant. Entergy filed comments by the deadline in August 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergy proposed to meet more stringent SO 2 and NO x limits at both White Bluff and Independence within three years of the effective date of the final FIP and to cease the use of coal at the White Bluff units at a later date.

In September 2016 the EPA published the final Arkansas Regional Haze FIP. In most respects, the EPA finalized its original proposal but shortened the time for compliance for installation of the NO x controls. The FIP requires an emission limitation consistent with SO 2 scrubbers at both White Bluff and Independence by October 2021 and NO x controls by April 2018. The EPA declined to adopt Entergy’s proposals related to ceasing coal use as an alternative to SO 2 scrubbers for White Bluff SO 2 BART. For some or all of the FIP, Entergy anticipates that Arkansas will submit a SIP to replace the FIP. In November 2016, Entergy and other interested parties such as the State of Arkansas filed

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petitions for administrative reconsideration and stay at the EPA as well as petitions for judicial review to the U.S. Court of Appeals for the Eighth Circuit. In February 2017, Entergy, the State of Arkansas, and other parties requested the Court to judicially stay the FIP.  In March 2017 the EPA granted in part the petitions for reconsideration and stated its intent to stay the FIP compliance deadlines by at least 90 days. Subsequently, the EPA granted a 90 day stay of the FIP effective dates and the Eighth Circuit granted the government’s motion to hold the appeal litigation in abeyance pending settlement discussions.

In Louisiana, Entergy is working with the Louisiana Department of Environmental Quality (LDEQ) and the EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May 2017 the EPA proposed to approve a majority of the revisions, with a second SIP and EPA review to follow on the Nelson plant, with a final EPA decision expected in the fourth quarter 2017. At this time, it is premature to predict what controls, if any, might be required for compliance. Entergy continues to monitor the submission and to file comments in the process as appropriate.

New and Existing Source Performance Standards for Greenhouse Gas Emissions

As a part of a climate plan announced in June 2013, the EPA was directed 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 January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants.  Entergy has been actively engaged in the rulemaking process, having submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existing sources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires states to develop compliance plans with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and the U.S. Supreme Court, if review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and Economic Growth” instructing the EPA to review, suspend, revise, or rescind the Clean Power Plan if appropriate. The EPA subsequently asked the D.C. Circuit to hold the challenges to the Clean Power Plan and the greenhouse gas new source performance standards in abeyance and signed a notice of withdrawal of the proposed federal plan, model trading rules, and the Clean Energy Incentive Program. The court placed the litigation in abeyance in April 2017. The EPA Administrator also sent a letter to the affected governors explaining that states are not currently required to meet Clean Power Plan deadlines, some of which have passed. In June 2017 the EPA submitted a rule, “Review of the Clean Power Plan” to the Office of Management and Budget to review, which typically takes 60-90 days. The content of this rule has not been made public.

Clean Water Act

The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States.  The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted.  Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.

NPDES Permits and Section 401 Water Quality Certifications

NPDES permits are subject to renewal every five years. Consequently, Entergy is currently in various stages of the data evaluation and discharge permitting process for its power plants.


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For thirteen years, Entergy participated in an administrative permitting process with the New York State Department of Environmental Conservation (NYSDEC) for renewal of the Indian Point 2 and Indian Point 3 discharge permit. That proceeding recently was settled along with other ongoing proceedings. In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named. For a discussion of the recent Indian Point settlement, see “ Entergy Wholesale Commodities Authorization to Operate Its Nuclear Power Plants ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

316(b) Cooling Water Intake Structures

The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule. After litigation, in May 2014, the EPA issued a new 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 a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The case will be heard in the U.S. Court of Appeals for the Second Circuit. Briefing is complete and Entergy expects oral argument to be scheduled in mid- to late-2017.

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 said would inform the rulemaking. This report was finalized in January 2015. The final rule was published in the Federal Register in June 2015. The rule 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. The final rule has been challenged in federal court by several parties, including most states. In August 2015 the District Court for North Dakota issued a preliminary injunction staying the new rule in 13 states. In October 2015 the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule. Entergy will continue to monitor this rulemaking and ensure compliance with existing permitting processes. In response to the stay, the EPA and the U.S. Army Corps of Engineers resumed nationwide use of the agencies’ regulations as they existed prior to August 27, 2015. In February 2017 the current administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of the United States rule and to revise or rescind, as appropriate. In June 2017 the EPA and the U.S. Army Corps of Engineers released a proposed rule that rescinds the June 2015 rule and recodifies the definition of “waters of the U.S.” that was in effect prior to the 2015 rule. The administration is expected to propose a definition of “waters of the U.S.” at a later date.

Other Environmental Matters

Entergy Louisiana and Entergy Texas

Several class action and other lawsuits have been filed in state and federal courts seeking relief from Entergy Gulf States, Inc. and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.’s premises (see “Litigation” below).

Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, currently is involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana.  A

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manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931.  Coal tar, a by-product of the distillation process employed at MGPs, apparently was routed to a portion of the property for disposal.  The same area also has been used as a landfill.  In 1999, Entergy Gulf States, Inc. signed a second administrative consent order with the EPA to perform a removal action at the site.  In 2002 approximately 7,400 tons of contaminated soil and debris were excavated and disposed of from an area within the service center.  In 2003 a cap was constructed over the remedial area to prevent the migration of contamination to the surface.  In August 2005 an administrative order was issued by the EPA requiring that a 10-year groundwater study be conducted at this site.  The groundwater monitoring study commenced in January 2006 and is continuing.  The EPA released the second Five Year Review in 2015. The EPA indicated that the current remediation technique was insufficient and that Entergy would need to utilize other remediation technologies on the site. In July 2015, Entergy submitted a Focused Feasibility Study to the EPA outlining the potential remedies and suggesting installation of a waterloo barrier. The estimated cost for this remedy is approximately $2 million. Entergy is awaiting comments and direction from the EPA on the Focused Feasibility Study and potential remedy selection.  In early 2017 the EPA indicated that the new remedial method (waterloo barrier) may not be necessary. Entergy is continuing discussions with the EPA regarding the ongoing actions at the site.

Earnings Ratios (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
 
 
Ratios of Earnings to Fixed Charges
 
 
Twelve Months Ended
 
Six Months Ended
 
 
December 31,
 
June 30,
 
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017
Entergy Arkansas
 
3.79

 
3.62

 
3.08

 
2.04

 
3.32

 
2.54
Entergy Louisiana
 
2.61

 
3.30

 
3.44

 
3.36

 
3.57

 
3.30
Entergy Mississippi
 
2.79

 
3.19

 
3.23

 
3.59

 
3.96

 
3.86
Entergy New Orleans
 
2.91

 
1.85

 
3.55

 
4.90

 
4.61

 
4.62
Entergy Texas
 
1.76

 
1.94

 
2.39

 
2.22

 
2.92

 
2.08
System Energy
 
5.12

 
5.66

 
4.04

 
4.53

 
5.39

 
5.01
 
 
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions
 
 
Twelve Months Ended
 
Six Months Ended
 
 
December 31,
 
June 30,
 
 
2012
 
2013
 
2014
 
2015
 
2016
 
2017
Entergy Arkansas
 
3.36

 
3.25

 
2.76

 
1.85

 
3.09

 
2.49
Entergy Louisiana
 
2.47

 
3.14

 
3.28

 
3.24

 
3.57

 
3.30
Entergy Mississippi
 
2.59

 
2.97

 
3.00

 
3.34

 
3.71

 
3.75
Entergy New Orleans
 
2.63

 
1.70

 
3.26

 
4.50

 
4.30

 
4.32

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.

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Item 6.  Exhibits
 
4(a) -
Eighty-eighth Supplemental Indenture, dated as of May 1, 2017, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944 (4.43 to Form 8-K filed May 23, 2017 in 1-32718).
 
 
 
 
4(b) -
Eighty-eighth Supplemental Indenture, dated as of May 1, 2017, to Entergy Louisiana Mortgage and Deed of Trust, dated as of September 1, 1926 (4.42 to Form 8-K filed May 23, 2017 in 1-32718).
 
 
 
 
4(c) -
Eighth Supplemental Indenture, dated as of May 1, 2017, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4.41 to Form 8-K filed May 23, 2017 in 1-32718).
 
 
 
 
4(d) -
Officer’s Certificate No. 8-B-7, dated May 17, 2017, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed May 23, 2017 in 1-32718).
 
 
 
 
*10(a) -
First Amendment to The 2015 Entergy Corporation Non-Employee Director Stock Program Established under the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries.
 
 
 
 
*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 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 Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
 
 
 
 
*12(d) -
Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
 
 
 
 
*12(e) -
Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined.
 
 
 
 
*12(f) -
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 Louisiana.
 
 
 
 
*31(f) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
 
 
 
 
*31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
 
 
 
 
*31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
 
 
 
 
*31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
 
 
 
 
*31(j) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
 
 
 
 
*31(k) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
 
 
 
 
*31(l) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
 
 
 
 
*31(m) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
 
 
 
 
*31(n) -
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.
 
 
 

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*32(d) -
Section 1350 Certification for Entergy Arkansas.
 
 
 
 
*32(e) -
Section 1350 Certification for Entergy Louisiana.
 
 
 
 
*32(f) -
Section 1350 Certification for Entergy Louisiana.
 
 
 
 
*32(g) -
Section 1350 Certification for Entergy Mississippi.
 
 
 
 
*32(h) -
Section 1350 Certification for Entergy Mississippi.
 
 
 
 
*32(i) -
Section 1350 Certification for Entergy New Orleans.
 
 
 
 
*32(j) -
Section 1350 Certification for Entergy New Orleans.
 
 
 
 
*32(k) -
Section 1350 Certification for Entergy Texas.
 
 
 
 
*32(l) -
Section 1350 Certification for Entergy Texas.
 
 
 
 
*32(m) -
Section 1350 Certification for System Energy.
 
 
 
 
*32(n) -
Section 1350 Certification for System Energy.
 
 
 
 
*101 INS -
XBRL Instance Document.
 
 
 
 
*101 SCH -
XBRL Taxonomy Extension Schema Document.
 
 
 
 
*101 PRE -
XBRL Taxonomy Presentation Linkbase Document.
 
 
 
 
*101 LAB -
XBRL Taxonomy Label Linkbase Document.
 
 
 
 
*101 CAL -
XBRL Taxonomy Calculation Linkbase Document.
 
 
 
 
*101 DEF -
XBRL Definition Linkbase Document.
___________________________

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.

*
Filed herewith.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Alyson M. Mount
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)


Date:     August 3, 2017


178


Exhibit 10(a)

First Amendment to
The 2015 Entergy Corporation Non-Employee Director Stock Program
Established under the 2015 Equity Ownership Plan
of Entergy Corporation and Subsidiaries

1.
General

This First Amendment (the “Amended 2015 Stock Program”) hereby amends and restates the 2015 Entergy Corporation Non-Employee Director Stock Program established pursuant to Article 12 of the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the “Plan”), the terms of which are incorporated into this Amended 2015 Stock Program. References in this Amended 2015 Stock Program to any specific Plan provision do not limit the applicability of any other Plan provision. This Amended 2015 Stock Program shall be effective as of June 1, 2017 (the “Effective Date”) and shall, along with the terms of the Plan, govern Awards granted after the Effective Date. . Capitalized terms used in this Amended 2015 Stock Program shall have the meanings assigned to them in the Plan. As of the Effective Date, this Amended 2015 Stock Program shall supersede and replace the 2015 Entergy Corporation Non-Employee Director Stock Program. In the event of a conflict between the terms of the Plan and the Amended 2015 Stock Program, the terms of the Amended 2015 Stock Program shall prevail.

2.
Purpose

The purpose of the Amended 2015 Stock Program is to promote the interests of Entergy and its shareholders by attracting and retaining Non-Employee Directors of outstanding ability and enabling Non-Employee Directors to participate in the long-term growth and financial success of Entergy.

3.
Eligibility

The only persons eligible to participate in this Amended 2015 Stock Program are Non-Employee Directors.

4.
Administration

Pursuant to Article 3 of the Plan, the Board shall administer the Plan with respect to any Award granted to a Non-Employee Director; provided , however , that the Board may delegate its authority to administer the Amended 2015 Stock Program to any committee or subcommittee of the Board that is comprised solely of Non-Employee Directors.

5.
Quarterly Stock Awards

a.
Quarterly Stock Awards . Subject to the provisions of Section 4.1 and Article 12 of the Plan and Sections 6 and 7 of this Amended 2015 Stock Program, each Non-Employee Director shall receive on an Award Date (as defined in Section 5.3 below) a quarterly grant of shares of Common Stock equal in value to $16,250 (the “Quarterly Stock Award”) as of such Award Date for serving as an Non-Employee Director during the entire calendar quarter ending on, or immediately prior to, such Award Date; provided however, that each Non-Employee Director for the May 31, 2017 Award Date shall receive a grant of shares of Common Stock equal in value to $15,000. The number of shares of Common Stock granted on an Award Date shall be determined by dividing (a) $16,250 (or in the case of the May 31, 2017 Award Date, $15,000) by (b) the closing price of a share of Common Stock on the New York Stock




Exchange (“NYSE”) on such Award Date. Any fractional share that results from this determination shall be rounded up to the next whole share and shall be included in the applicable Quarterly Stock Award.

b.
Consideration . Each Quarterly Stock Award is granted in exchange for services rendered during the calendar quarter ending on, or immediately prior to, the Award Date and does not require the payment of consideration.

c.
Award Dates . Quarterly Stock Awards will be granted on the last day of May, August, November and February of each year or, if such date is a day on which the NYSE is not open for trading, the next succeeding NYSE trading day (each an “Award Date”):

5.4.
Proration . If a Non-Employee Director serves as a Non-Employee Director for less than the full calendar quarter ending on, or immediately prior to, an Award Date, the number of shares of Common Stock awarded to the Non-Employee Director on such Award Date shall be determined by multiplying the number of shares (including fractional shares) of Common Stock such Non-Employee Director would have received on such Award Date had he or she served as a Non-Employee Director for the full calendar quarter by a fraction, the numerator of which is the actual number of days (up to 90) the individual served as a Non-Employee Director during the applicable calendar quarter and the denominator of which is 90 days. Any fractional share that results from this determination shall be rounded up to the next whole share and shall be included in the pro-rated Award to the Non-Employee Director.

5.5.
Employment by System Company . If a Non-Employee Director subsequently becomes an employee of a System Company while remaining a member of the Board, the former Non-Employee Director’s participation in the Amended 2015 Stock Program will be terminated effective immediately upon his or her employment by the System Company. The change in the Non-Employee Director’s employment status shall have no effect on Quarterly Stock Awards granted prior to his or her employment by a System Company; provided that the former Non-Employee Director shall be entitled to a pro-rated Award for the calendar quarter in which he or she becomes an employee of a System Company in accordance with Section 5.4 of the Amended 2015 Stock Program.

5.6.
Taxes . If required by applicable law, the Non-Employee Director shall pay to Entergy any amount necessary to satisfy applicable federal, state or local tax withholding requirements attributable to the Quarterly Stock Awards promptly upon notification of the amounts due. If required to pay withholding taxes, the Non-Employee Director may, to the extent consistent with the requirements of Code Section 409A and regulations thereunder, elect to pay such taxes from the shares of Common Stock that otherwise would be distributed to such Non-Employee Director, or from a combination of cash and shares of Common Stock. As provided in Section 4.4 of the Plan, Common Stock related to that portion of an Award utilized for the payment of withholding taxes shall not again be available for Awards under the Plan.

5.7.
Delivery . Entergy may deliver shares of Common Stock representing a Quarterly Stock Award by book-entry credit to the account of the Non-Employee Director or by the delivery of certificated shares. Entergy may affix to these shares any legend that Entergy determines to be necessary or advisable.

6.
Deferral





In lieu of taking delivery of shares of Common Stock on an Award Date, a Non-Employee Director may elect to defer the receipt of such Quarterly Stock Award to a subsequent calendar year provided that he or she files an irrevocable written deferral election with the Board no later than the 31 st day of December of the calendar year immediately preceding the calendar year in which the Non-Employee Director commence the services to which the Award Date relates. Accordingly, for those Quarterly Stock Awards granted with respect to the quarters ending on the last day of May, August and November, such deferral election must be filed by December 31 of the calendar year immediately preceding such Award Dates and, for those Quarterly Stock Awards granted with respect to quarters ending on the last day of February, such deferral election must be filed by December 31 of the second calendar year immediately preceding such Award Dates. Quarterly Stock Awards deferred pursuant to this Section 6 shall be deferred as equity units, each of which shall have the value, as of the Award Date, of one (1) share of Common Stock. Equity units do not represent actual shares of Common Stock and no shares of Common Stock will be purchased or acquired for the payout of any Quarterly Stock Award deferred under this Amended 2015 Stock Program. On each Award Date, the deferred equity units shall be credited to each Non-Employee’s bookkeeping account maintained by Entergy with respect to such Non-Employee Director’s deferrals.

The Non-Employee Director’s written deferral election must specify the date on which the deferred equity units will be paid (“Payment Date”), which Payment Date must be no earlier than January 2nd of the third calendar year immediately following the calendar year in which the applicable Award Date occurs. Quarterly Stock Awards deferred pursuant to this Section shall accrue dividend equivalents, which Dividend Equivalents will be paid on the Payment Date together with interest calculated at an annual rate based upon the 52-week U.S. Treasury Bill Rate as in effect on the first business day of each year. On each Payment Date, equity units deferred and elected to be paid out on such date shall be paid in cash in an amount equal to (a) the number of equity units outstanding on the Payment Date multiplied by the closing price of a share of Common Stock on the NYSE as of the close of business on the Payment Date or, if such Payment Date is a day on which the NYSE is not open for trading, the closing price of Common Stock on the next succeeding NYSE trading day, plus (b) the amount of all accrued Dividend Equivalents with respect to such equity units and (c) interest on the Dividend Equivalents.

In the case of any Quarterly Stock Award deferred pursuant to this Section 6, no shares of Common Stock shall be purchased, distributed or contributed at the time of the deferral, and none of Entergy, the Plan or the Amended 2015 Stock Program shall be required to set aside a fund or assets for the payment of any such deferred amount. No Non-Employee Director shall look to any other person or entity other than Entergy for the payment of benefits under the Amended 2015 Stock Program. The Non-Employee Directors or any other person or entity having or claiming a right to payments hereunder shall rely solely on the unsecured obligation of Entergy to the Non-Employee Director set forth herein. Nothing in this Amended 2015 Stock Program shall be construed to give a Non-Employee Director or any other person or entity any right, title, interest, or claim in or to any specific asset, fund, reserve, account or property of any kind whatsoever, owned by Entergy or any of its affiliates or in which Entergy or any of its affiliates may have any right, title or interest now or in the future. Each Non-Employee Director shall have the right to enforce his or her claim under the Amended 2015 Stock Program in the same manner as any other unsecured creditor of Entergy and its affiliates.

7.
Miscellaneous

The Board reserves the right at any time to amend the terms and conditions set forth in this Amended 2015 Stock Program to the extent permitted under the Plan. Further, the Amended 2015 Stock Program is intended to comply with the requirements of Code Section 409A and the regulations thereunder and shall be administered in accordance with Code Section 409A and the regulations thereunder to the extent the Amended 2015 Stock Program is subject thereto. To the extent that any provision of the Amended 2015 Stock Program




would conflict with the requirements of Code Section 409A and the regulations thereunder or would cause the administration of the Amended 2015 Stock Program to fail to satisfy such requirements, such provision shall be deemed null and void to the extent permitted by applicable law.






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
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
  Total Interest Charges

$82,860


$91,318


$93,921


$105,622


$115,311

 
55,766

  Interest applicable to rentals
5,768

5,350

4,539

5,109

3,210

 
1,534

 
 
 
 
 
 
 
 
Total fixed charges, as defined
88,628

96,668

98,460

110,731

118,521

 
57,300

 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
11,310

11,310

11,310

11,310

8,672

 
1,175

 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$99,938


$107,978


$109,770


$122,041


$127,193

 

$58,475

 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
  Net Income

$152,365


$161,948


$121,392


$74,272


$167,212

 
52,854

  Add:
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
       Total
94,806

91,787

83,629

40,541

107,773

 
35,480

    Fixed charges as above
88,628

96,668

98,460

110,731

118,521

 
57,300

 
 
 
 
 
 
 
 
Total earnings, as defined

$335,799


$350,403


$303,481


$225,544


$393,506

 

$145,634

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.79

3.62

3.08

2.04

3.32

 
2.54

 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and preferred dividends, as defined
3.36

3.25

2.76

1.85

3.09

 
2.49

 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
 
(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 Louisiana, LLC
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Distributions
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
Total Interest

$220,218


$234,647


$253,455


$259,894


$273,283

 

$135,798

  Interest applicable to rentals
6,002

5,445

5,238

5,534

4,041

 
2,553

 
 
 
 
 
 
 
 
Total fixed charges, as defined
226,220

240,092

258,693

265,428

277,324

 
138,351

 
 
 
 
 
 
 
 
Preferred distributions, as defined (a)
12,638

12,638

12,672

9,325

—

 
—

 
 
 
 
 
 
 
 
Combined fixed charges and preferred distributions, as defined

$238,858


$252,730


$271,365


$274,753


$277,324

 

$138,351

 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
  Net Income

$440,058


$414,126


$446,022


$446,639


$622,047

 

$218,857

  Add:
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
Total Taxes (Benefit)
(76,306
)
138,696

185,052

178,671

89,734

 
99,661

    Fixed charges as above
226,220

240,092

258,693

265,428

277,324

 
138,351

 
 
 
 
 
 
 
 
Total earnings, as defined

$589,972


$792,914


$889,767


$890,738


$989,105

 

$456,869

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
2.61

3.30

3.44

3.36

3.57

 
3.30

 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and preferred distributions, as defined
2.47

3.14

3.28

3.24

3.57

 
3.30

 
 
 
 
 
 
 
 
_______________________
 
 
 
 
 
 
 
(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(c)
 
 
 
 
 
 
 
 
 
Entergy Mississippi, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
  Total Interest

$57,345


$59,031


$57,002


$57,842


$57,114

 

$25,240

  Interest applicable to rentals
1,637

1,148

1,498

1,765

1,269

 
813

 
 
 
 
 
 
 
 
Total fixed charges, as defined
58,982

60,179

58,500

59,607

58,383

 
26,053

 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
4,580

4,580

4,580

4,580

3,956

 
772

 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$63,562


$64,759


$63,080


$64,187


$62,339

 

$26,825

 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income

$46,768


$82,159


$74,821


$92,708


$109,184

 

$45,461

  Add:
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
    Total income taxes
58,679

49,757

55,710

61,872

63,854

 
29,032

    Fixed charges as above
58,982

60,179

58,500

59,607

58,383

 
26,053

 
 
 
 
 
 
 
 
Total earnings, as defined

$164,429


$192,095


$189,031


$214,187


$231,421

 

$100,546

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
2.79

3.19

3.23

3.59

3.96

 
3.86

 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and preferred dividends, as defined
2.59

2.97

3.00

3.34

3.71

 
3.75

 
 
 
 
 
 
 
 
_______________
 
 
 
 
 
 
 
(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(d)
 
 
 
 
 
 
 
 
 
Entergy New Orleans, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
  Total Interest

$14,196


$16,892


$16,820


$17,312


$21,061

 

$10,699

  Interest applicable to rentals
747

635

620

676

422

 
470

 
 
 
 
 
 
 
 
Total fixed charges, as defined
14,943

17,527

17,440

17,988

21,483

 
11,169

 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
1,569

1,569

1,569

1,569

1,569

 
783

 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$16,512


$19,096


$19,009


$19,557


$23,052

 

$11,952

 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income

$19,878


$12,608


$31,030


$44,925


$48,849

 

$25,860

  Add:
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
     Total
8,645

2,277

13,450

25,190

28,705

 
14,599

    Fixed charges as above
14,943

17,527

17,440

17,988

21,483

 
11,169

 
 
 
 
 
 
 
 
Total earnings, as defined

$43,466


$32,412


$61,920


$88,103


$99,037

 

$51,628

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
2.91

1.85

3.55

4.90

4.61

 
4.62

 
 
 
 
 
 
 
 
 Ratio of earnings to combined fixed charges and preferred dividends, as defined
2.63

1.70

3.26

4.50

4.30

 
4.32

 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
 
(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 Texas, Inc. and Subsidiaries
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
  Total Interest charges

$96,035


$92,156


$88,049


$86,024


$87,776

 

$43,235

  Interest applicable to rentals
2,750

1,918

1,782

1,794

1,145

 
755

 
 
 
 
 
 
 
 
Total fixed charges, as defined

$98,785


$94,074


$89,831


$87,818


$88,921

 

$43,990

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
  Net Income

$41,971


$57,881


$74,804


$69,625


$107,538

 

$31,955

  Add:
 
 
 
 
 
 
 
    Income Taxes
33,118

30,108

49,644

37,250

63,097

 
15,713

    Fixed charges as above
98,785

94,074

89,831

87,818

88,921

 
43,990

 
 
 
 
 
 
 
 
Total earnings, as defined

$173,874


$182,063


$214,279


$194,693


$259,556

 

$91,658

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
1.76

1.94

2.39

2.22

2.92

 
2.08

 
 
 
 
 
 
 
 





Exhibit 12(f)
 
 
 
 
 
 
 
 
 
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Six Months Ended
 
December 31,
 
June 30,
 
2012
2013
2014
2015
2016
 
2017
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
  Total Interest

$45,214


$38,173


$58,384


$45,532


$37,529

 

$18,300

  Interest applicable to rentals
655

974

799

1,091

654

 
448

 
 
 
 
 
 
 
 
Total fixed charges, as defined

$45,869


$39,147


$59,183


$46,623


$38,183

 

$18,748

 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
  Net Income

$111,866


$113,664


$96,334


$111,318


$96,744

 

$39,697

  Add:
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
      Total
77,115

68,853

83,310

53,077

71,061

 
35,431

    Fixed charges as above
45,869

39,147

59,183

46,623

38,183

 
18,748

 
 
 
 
 
 
 
 
Total earnings, as defined

$234,850


$221,664


$238,827


$211,018


$205,988

 

$93,876

 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
5.12

5.66

4.04

4.53

5.39

 
5.01

 
 
 
 
 
 
 
 





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:   August 3, 2017





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:   August 3, 2017





Exhibit 31(c)
CERTIFICATIONS

I, Richard C. Riley, 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/ Richard C. Riley
Richard C. Riley
Chairman of the Board, President, and
Chief Executive Officer of Entergy Arkansas, Inc.

Date:   August 3, 2017




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:   August 3, 2017





Exhibit 31(e)
CERTIFICATIONS

I, Phillip R. May, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Louisiana, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Phillip R. May, Jr.
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Louisiana, LLC
Date:   August 3, 2017





Exhibit 31(f)
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:   August 3, 2017





Exhibit 31(g)
CERTIFICATIONS

I, Haley R. Fisackerly, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Haley R. Fisackerly
Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive Officer
of Entergy Mississippi, Inc.

Date:   August 3, 2017





Exhibit 31(h)
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:   August 3, 2017





Exhibit 31(i)
CERTIFICATIONS

I, Charles L. Rice, Jr., certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Charles L. Rice, Jr.
Charles L. Rice, Jr.
Chairman of the Board, President, and Chief Executive Officer
of Entergy New Orleans, Inc.

Date:   August 3, 2017





Exhibit 31(j)
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:   August 3, 2017





Exhibit 31(k)
CERTIFICATIONS

I, Sallie T. Rainer, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Texas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Sallie T. Rainer
Sallie T. Rainer
Chair of the Board, President, and Chief Executive Officer
of Entergy Texas, Inc.

Date:   August 3, 2017





Exhibit 31(l)
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:   August 3, 2017





Exhibit 31(m)
CERTIFICATIONS

I, Roderick K. West, 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/ Roderick K. West
Roderick K. West
Chairman of the Board, President, and Chief Executive Officer
of System Energy Resources, Inc.

Date:   August 3, 2017





Exhibit 31(n)
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:   August 3, 2017





Exhibit 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Leo P. Denault, Chairman of the Board and Chief Executive Officer of Entergy Corporation (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Leo P. Denault
     Leo P. Denault
Chairman of the Board and Chief Executive Officer
of Entergy Corporation
 
Date:  August 3, 2017





Exhibit 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Corporation (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Andrew S. Marsh
     Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Corporation


Date:  August 3, 2017





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, Richard C. Riley, Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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/ Richard C. Riley
Richard C. Riley
Chairman of the Board, President, and Chief Executive
Officer of Entergy Arkansas, Inc.


Date:  August 3, 2017





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 June 30, 2017 (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:  August 3, 2017





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 Louisiana, LLC (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Phillip R. May, Jr.
     Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Louisiana, LLC


Date:  August 3, 2017





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 Louisiana, LLC (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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:  August 3, 2017





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, Haley R. Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Haley R. Fisackerly
     Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive
Officer of Entergy Mississippi, Inc.


Date:  August 3, 2017





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 Mississippi, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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:  August 3, 2017





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, Charles L. Rice, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Charles L. Rice, Jr.
     Charles L. Rice, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy New Orleans, Inc.


Date:  August 3, 2017





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 New Orleans, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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:  August 3, 2017





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, Sallie T. Rainer, Chair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.
/s/ Sallie T. Rainer
     Sallie T. Rainer
Chair of the Board, President, and Chief Executive Officer
of Entergy Texas, Inc.


Date:  August 3, 2017





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 Texas, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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:  August 3, 2017





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, Roderick K. West, Chairman of the Board, President, and Chief Executive Officer of System Energy Resources, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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/ Roderick K. West
Roderick K. West
Chairman of the Board, President, and Chief Executive Officer
of System Energy Resources, Inc.


Date:  August 3, 2017





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 System Energy Resources, Inc. (the "Company"), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)
The Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2017 (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:  August 3, 2017