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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 March 31, 2019
 
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, LLC
(a Texas limited liability company)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
82-2212934
 
 
 
 
 
 
 
 
 
 
1-10764
ENTERGY ARKANSAS, LLC
(a Texas limited liability company)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
83-1918668
 
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, LLC
(a Texas limited liability company)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
83-1950019
 
 
 
 
 
 
 
 
__________________________________________________________________________________________


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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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit such files).  Yes þ No o

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

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



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Securities registered pursuant to Section 12(b) of the Act:
Registrant
Trading
Symbol
Title of Class
Name of Each Exchange
on Which Registered
 
 
 
 
Entergy Corporation
ETR
Common Stock, $0.01 Par Value – 189,926,451 shares outstanding at April 30, 2019
New York Stock Exchange LLC
NYSE Chicago, Inc.
 
 
 
 
Entergy Arkansas, LLC
EAB
Mortgage Bonds, 4.90% Series due December 2052
New York Stock Exchange LLC
 
EAE
Mortgage Bonds, 4.75% Series due June 2063
New York Stock Exchange LLC
 
EAI
Mortgage Bonds, 4.875% Series due September 2066
New York Stock Exchange LLC
 
 
 
 
Entergy Louisiana, LLC
ELJ
Mortgage Bonds, 5.25% Series due July 2052
New York Stock Exchange LLC
 
ELU
Mortgage Bonds, 4.70% Series due June 2063
New York Stock Exchange LLC
 
ELC
Mortgage Bonds, 4.875% Series due September 2066
New York Stock Exchange LLC
 
 
 
 
Entergy Mississippi, LLC
EMP
Mortgage Bonds, 4.90% Series due October 2066
New York Stock Exchange LLC
 
 
 
 
Entergy New Orleans, LLC
ENJ
Mortgage Bonds, 5.0% Series due December 2052
New York Stock Exchange LLC
 
ENO
Mortgage Bonds, 5.50% Series due April 2066
New York Stock Exchange LLC
 
 
 
 
Entergy Texas, Inc.
EZT
Mortgage Bonds, 5.625% Series due June 2064
New York Stock Exchange LLC

Entergy Corporation, Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company 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, 2018, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



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

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Page Number
 
 
Entergy Mississippi, LLC
 
Entergy New Orleans, LLC 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, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
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 benefits of continued MISO participation, 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 with respect to retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent 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 modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities;
increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating and industry issues, and the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities;
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown and sale of each of these nuclear plants;


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FORWARD-LOOKING INFORMATION (Continued)

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;
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter and other regulated air emissions, heat and other regulated discharges to water, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with environmental laws and regulations;
changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations;
the effects of changes in federal, state, or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, trade/tariff, or energy policies;
the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, 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 extreme weather events and 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 northern 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;
federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintended consequences on financial results and future cash flows;
the effects of Entergy’s strategies to reduce tax payments, especially in light of federal income tax reform;
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, 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 (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewable energy, energy efficiency, demand side management, and other measures that reduce load, and (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies 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, directors, and employees with specialized skills;

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FORWARD-LOOKING INFORMATION (Concluded)

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 mid-2022, including the implementation of the planned shutdowns of Pilgrim, Indian Point 2, Indian Point 3, and Palisades;
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, divestitures, or restructurings, 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, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana
Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas
Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities
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, 2018 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

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DEFINITIONS (Continued)
Abbreviation or Acronym
Term
 
 
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service
ISO
Independent System Operator
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, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Louisiana
SEC
Securities and Exchange Commission
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy
System Energy Resources, Inc.
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 the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s 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 and was disposed of in January 2019
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas


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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 and sale of each of the Entergy Wholesale Commodities nuclear power plants.

See Note 7 to the financial statements herein for financial information regarding Entergy’s business segments.

Results of Operations

First Quarter 2019 Compared to First Quarter 2018

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2019 to the first quarter 2018 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)
2018 Consolidated Net Income (Loss)
 

$217,940

 

($17,779
)
 

($63,961
)
 

$136,200

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
(43,585
)
 
10,643

 
19

 
(32,923
)
Other operation and maintenance
 
(2,636
)
 
(2,116
)
 
4,218

 
(534
)
Asset write-offs, impairments, and related charges
 

 
1,055

 

 
1,055

Taxes other than income taxes
 
(2,191
)
 
(3,607
)
 
(845
)
 
(6,643
)
Depreciation and amortization
 
10,020

 
(111
)
 
300

 
10,209

Other income
 
7,076

 
182,512

 
(1,738
)
 
187,850

Interest expense
 
5,650

 
919

 
7,317

 
13,886

Other expenses
 
229

 
15,171

 

 
15,400

Income taxes
 
(63,788
)
 
66,986

 
(4,090
)
 
(892
)
 
 
 
 
 
 
 
 
 
2019 Consolidated Net Income (Loss)
 

$234,147

 

$97,079

 

($72,580
)
 

$258,646


(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.


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


First quarter 2019 results of operations includes impairment charges of $74 million ($58 million net-of-tax) and first quarter 2018 results of operations includes impairment charges of $73 million ($58 million net-of-tax) due to costs being charged directly 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 exit the Entergy Wholesale Commodities’ merchant power business. See “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” below and in the Form 10-K for discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the first quarter 2019 to the first quarter 2018 :
 
Amount
 
(In Millions)
2018 net revenue

$1,460

Return of unprotected excess accumulated deferred income taxes to customers
(61
)
Volume/weather
(38
)
Retail electric price
61

Other
(6
)
2019 net revenue

$1,416


The return of unprotected excess accumulated deferred income taxes to customers resulted from activity in 2019 at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. There is no effect on net income as the reductions in net revenue were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily driven by continued growth from new and expansion projects and increased demand from existing customers.

The retail electric price variance is primarily due to:

the regulatory charges recorded in first quarter 2018 to reflect the effects of regulatory agreements to return the benefits of the lower income tax rate in 2018 to Entergy Louisiana customers;
an increase in formula rate plan rates effective with the first billing cycle of January 2019 at Entergy Arkansas, as approved by the APSC;
a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT;
an increase in formula rate plan revenues implemented with the first billing cycle of September 2018 at Entergy Louisiana, as approved by the LPSC; and
the implementation of an advanced metering system customer charge effective January 2019 at Entergy Louisiana, as approved by the LPSC.

See Note 2 to the financial statements in the Form 10-K for further discussion of the regulatory proceedings discussed above.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2019 to the first quarter 2018 :
 
Amount
 
(In Millions)
2018 net revenue

$382

Nuclear volume
15

Other
(4
)
2019 net revenue

$393


As shown in the table above, net revenue for Entergy Wholesale Commodities increased by $11 million in the first quarter 2019 as compared to the first quarter 2018 primarily due to higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer non-refueling outage days in the first quarter 2019 as compared to the first quarter 2018.

Following are key performance measures for Entergy Wholesale Commodities for the first quarters 2019 and 2018 :
 
2019
 
2018
Owned capacity (MW)
3,962
 
3,962
GWh billed
7,203
 
6,996
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
85%
 
83%
GWh billed
6,690
 
6,408
Average energy price ($/MWh)
$51.43
 
$52.29
Average capacity price ($/kW-month)
$4.71
 
$3.83
Refueling outage days:
 
 
 
Indian Point 2
 
13
Indian Point 3
21
 

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $588 million for the first quarter 2018 to $585 million for the first quarter 2019 primarily due to:

a decrease of $20 million in nuclear generation expenses primarily due to a lower scope of work performed in the first quarter 2019 as compared to first quarter 2018 and lower nuclear labor costs, including contract labor;
a decrease of $5 million in storm damage provisions at Entergy Mississippi. See Note 2 to the financial statements in the Form 10-K for discussion of storm cost recovery; and
a decrease of $4 million in energy efficiency costs due to the timing of recovery from customers.

The decrease was partially offset by:

an increase of $8 million in information technology costs primarily due to higher software maintenance costs and higher contract costs;
an increase of $5 million in outside legal costs primarily due to a settlement received in 2018 which reduced legal costs in the first quarter 2018;

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


an increase of $4 million in spending on customer initiatives to explore new technologies and services;
an increase of $3 million in advanced metering costs, including customer education costs; and
an increase of $3 million in fossil-fueled generation expenses due to a higher scope of work performed in the first quarter 2019 as compared to the first quarter 2018.

Depreciation and amortization expenses increased primarily due to additions to plant in service, partially offset by updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement as part of a settlement approved by the FERC in August 2018. See Note 2 to the financial statements in the Form 10-K for further discussion of the Unit Power Sales Agreement.

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 2019, which included the Lake Charles Power Station, St. Charles Power Station, Montgomery County Power Station, and New Orleans Power Station projects. The increase was partially offset by changes in decommissioning trust fund activity, including portfolio rebalancing of certain of the decommissioning trust funds in 2018.

Interest expense increased primarily due to an increase in debt outstanding at the Utility operating companies. See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for a discussion of long-term debt.

Entergy Wholesale Commodities

Other income increased primarily due to gains on decommissioning trust fund investments in the first quarter 2019 as compared to the first quarter 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization of higher costs associated with a refueling outage at Palisades.

Income Taxes

The effective income tax rate was 14.2% for the first quarter 2019 . The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, partially offset by the tax effects of the disposition of Vermont Yankee. See Notes 2 and 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the tax effects of the Vermont Yankee disposition.

The effective income tax rate was 24.3% for the first quarter 2018 . The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes, a write-off of a stock-based compensation deferred tax asset, and the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.


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Management's Financial Discussion and Analysis

Income Tax Legislation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation ” in the Form 10-K for a discussion of the Tax Cuts and Jobs Act enacted in December 2017.  Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

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 shut down and sell all remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet.  Following are updates to that discussion.
 
Vermont Yankee Disposition

As discussed in more detail in Note 16 to the financial statements herein, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.

Planned Sale of Pilgrim

As discussed in the Form 10-K, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, for $1,000 (subject to adjustments for net liabilities and other amounts). The sale of Entergy Nuclear Generation Company will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. Subject to the conditions discussed in the Form 10-K, the transaction is expected to close by the end of 2019. The transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in Entergy Nuclear Generation Company and the sale price plus any agreed adjustments. As of March 31, 2019, Entergy’s adjusted net investment in Entergy Nuclear Generation Company was $180 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trust and the asset retirement obligation at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.

Planned Sale of Indian Point Energy Center

In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec International subsidiary for decommissioning. The sale includes the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units.

The transaction is subject to closing conditions, including approval from the NRC. Entergy and Holtec also plan to seek an order from the New York State Public Service Commission disclaiming jurisdiction, or alternatively approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. The transaction closing is targeted for third quarter 2021, following the defueling of Indian Point 3.


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Management's Financial Discussion and Analysis


As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of March 31, 2019, Entergy’s adjusted net investment in the Indian Point units was $315 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of unrealized any deferred tax balances at closing. The terms of the transaction include limitations on withdrawals from the nuclear decommissioning trusts to fund decommissioning activities and controls on how Entergy manages the investment of nuclear decommissioning trust assets between signing and closing; however, the agreement does not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing.

Costs Associated with Entergy Wholesale Commodities Strategic Transactions

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 $130 million in 2019, of which $34 million has been incurred as of March 31, 2019, and a total of approximately $110 million from 2020 through 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $74 million for the three months ended March 31, 2019. These costs were charged to expense as incurred as a result of the impaired value of certain 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, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired.

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 debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2019 is primarily due to the net issuance of debt in 2019.
 
March 31,
2019
 
December 31,
2018
Debt to capital
67.8
%
 
66.7
%
Effect of excluding securitization bonds
(0.5
%)
 
(0.6
%)
Debt to capital, excluding securitization bonds (a)
67.3
%
 
66.1
%
Effect of subtracting cash
(1.2
%)
 
(0.6
%)
Net debt to net capital, excluding securitization bonds (a)
66.1
%
 
65.5
%

(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.


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Management's Financial Discussion and Analysis

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents.  Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2023.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2019 was 4.03% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2019 :
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500
 
$320
 
$6
 
$3,174

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. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets.  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 Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion . As of March 31, 2019 , Entergy Corporation had approximately $1,942 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 2019 was 3.03% .

In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in November 2020. As of March 31, 2019 , $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the three months ended March 31, 2019 was 4.28% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.

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 2019 through 2021. Following are updates to that discussion.

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Management's Financial Discussion and Analysis



Choctaw Generating Station

In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi.  The purchase price is expected to be approximately $314 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred.  In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. Closing is expected to occur by the end of 2019. Due diligence performed on the plant indicates that there exists a potential mechanical issue that must be addressed prior to closing.  There is some possibility that closing may be delayed to allow time for this issue to be resolved.

Searcy Solar Facility

                In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas.  The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies.  The project will be constructed by a subsidiary of NextEra Energy Resources.  Entergy Arkansas will purchase the facility upon completion and after the other purchase contingencies have been met.   Closing is expected to occur by the end of 2021.

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 April 2019 meeting, the Board declared a dividend of $0.91 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2018.


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Management's Financial Discussion and Analysis

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Millions)
Cash and cash equivalents at beginning of period

$481

 

$781

 
 
 
 
Cash flow provided by (used in):
 

 
 

Operating activities
501

 
557

Investing activities
(951
)
 
(974
)
Financing activities
952

 
841

Net increase in cash and cash equivalents
502

 
424

 
 
 
 
Cash and cash equivalents at end of period

$983

 

$1,205


Operating Activities

Net cash flow provided by operating activities decreased by $56 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;
the effect of less favorable weather on billed Utility sales in 2019;
an increase of $41 million in spending on nuclear refueling outages in 2019 as compared to the same period in 2018; and
an increase of $29 million in interest paid in 2019 as compared to the same period in 2018 resulting from an increase in debt outstanding.

The decrease was partially offset by:

an increase due to the timing of recovery of fuel and purchased power costs in 2019 as compared to the same period in 2018. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery; and
a decrease of $80 million in pension contributions in 2019 as compared to same period in 2018. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities decreased $23 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

a decrease in collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants; and
an increase of $11 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

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Management's Financial Discussion and Analysis



The decrease was partially offset by changes in the decommissioning trust funds and an increase of $20 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 $32 million in transmission construction expenditures due to a higher scope of work performed in 2019 on various projects;
an increase of $27 million in distribution construction expenditures primarily due to a higher scope of work performed in 2019 on various projects; and
an increase of $21 million in nuclear construction expenditures primarily due to higher spending on various nuclear projects.

The increase in construction expenditures was partially offset by:

a decrease of $33 million in fossil-fueled generation construction expenditures primarily due to lower spending in 2019 on self-build projects in the Utility business; and
a decrease of $22 million in information technology capital expenditures primarily due to lower spending in 2019 on various projects.

Financing Activities

Net cash flow provided by financing activities increased $111 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to a decrease in net repayments of $812 million of commercial paper in 2019. The increase was partially offset by:

long-term debt activity providing approximately $1,145 million of cash in 2019 compared to approximately $1,772 million in 2018;
the repurchase in first quarter 2019 of $50 million of Class A mandatorily redeemable preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, that were held by a third party; and
short-term borrowings of $39 million in 2018 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.


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Management's Financial Discussion and Analysis

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.  Entergy Wholesale Commodities also 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 may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. 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 March 31, 2019 (2019 represents the remainder of the year):

Entergy Wholesale Commodities Nuclear Portfolio
 
 
2019
 
2020
 
2021
 
2022
Energy
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
98%
 
95%
 
91%
 
66%
Planned generation (TWh) (c) (d)
 
18.6
 
17.7
 
9.6
 
2.8
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
Expected based on market prices as of March 31, 2019
 
$34.7
 
$42.0
 
$56.9
 
$58.8
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
Percent of capacity sold forward (e):
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (f)
 
27%
 
37%
 
68%
 
97%
Capacity contracts (g)
 
30%
 
27%
 
—%
 
—%
Total
 
57%
 
64%
 
68%
 
97%
Planned net MW in operation (average) (d)
 
3,167
 
2,195
 
1,158
 
338
Average revenue under contract per kW per month (applies to capacity contracts only)
 
$5.1
 
$3.2
 
$—
 
$—
 
 
 
 
 
 
 
 
 
Total Energy and Capacity Revenues (h)
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$38.9
 
$45.1
 
$55.0
 
$47.5
Sensitivity: -/+ $10 per MWh market price change
 
$38.7-$39.1
 
$45.0-$45.2
 
$54.1-$55.9
 
$44.1-$51.0

(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the planned generation under contract.

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Management's Financial Discussion and Analysis


(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 the 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)
Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics and outage schedules.
(d)
Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31, 2022. For a discussion regarding the planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” above.
(e)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(f)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(g)
A contract for the sale of an installed capacity product in a regional market.
(h)
Includes assumptions on converting a portion of the portfolio to contracted with fixed price 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 March 31, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $4 million for the remainder of 2019. As of March 31, 2018, a positive $10 per MW change would have had a corresponding effect on pre-tax income of $1.4 million for the remainder of 2018. A negative $10 per MWh change in the annual average energy price in the markets based on March 31, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($4) million for the remainder of 2019. As of March 31, 2018, a negative $10 per MW change would have had a corresponding effect on pre-tax income of ($1.4) million for the remainder of 2018.

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 guarantee.  Cash and letters of credit are also acceptable forms of credit support. At March 31, 2019, based on power prices at that time, Entergy had liquidity exposure of $121 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $34 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 March 31, 2019, Entergy would have been required to provide approximately $75 million of additional cash or letters of credit under some of the agreements. As of March 31, 2019, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $235 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

As of March 31, 2019 , substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 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

Pilgrim

In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1.

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, 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 Note 1 to the financial statements in the Form 10-K for discussion of new accounting pronouncements.



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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
2019
 
2018
 
(In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
Electric

$2,121,024

 

$2,248,262

Natural gas
54,948

 
56,695

Competitive businesses
433,612

 
418,924

TOTAL
2,609,584

 
2,723,881

 
 
 
 
OPERATING EXPENSES
 
 
 
Operation and Maintenance:
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
478,330

 
443,296

Purchased power
339,507

 
396,023

Nuclear refueling outage expenses
50,441

 
42,760

Other operation and maintenance
783,051

 
783,585

Asset write-offs, impairments, and related charges
73,979

 
72,924

Decommissioning
102,119

 
94,400

Taxes other than income taxes
158,575

 
165,218

Depreciation and amortization
357,274

 
347,065

Other regulatory charges (credits)
(16,946
)
 
42,946

TOTAL
2,326,330

 
2,388,217

 
 
 
 
OPERATING INCOME
283,254

 
335,664

 
 
 
 
OTHER INCOME
 
 
 
Allowance for equity funds used during construction
38,216

 
28,343

Interest and investment income
228,149

 
16,870

Miscellaneous - net
(64,658
)
 
(31,356
)
TOTAL
201,707

 
13,857

 
 
 
 
INTEREST EXPENSE
 
 
 
Interest expense
200,993

 
182,923

Allowance for borrowed funds used during construction
(17,449
)
 
(13,265
)
TOTAL
183,544

 
169,658

 
 
 
 
INCOME BEFORE INCOME TAXES
301,417

 
179,863

 
 
 
 
Income taxes
42,771

 
43,663

 
 
 
 
CONSOLIDATED NET INCOME
258,646

 
136,200

 
 
 
 
Preferred dividend requirements of subsidiaries
4,109

 
3,439

 
 
 
 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION

$254,537

 

$132,761

 
 
 
 
Earnings per average common share:
 
 
 
Basic

$1.34

 

$0.73

Diluted

$1.32

 

$0.73

 
 
 
 
Basic average number of common shares outstanding
189,575,187

 
180,707,575

Diluted average number of common shares outstanding
192,234,191

 
181,431,968

 
 
 
 
See Notes to Financial Statements.
 
 
 


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
2019
 
2018
 
(In Thousands)
 
 
 
 
Net Income

$258,646

 

$136,200


 
 
 
Other comprehensive income
 
 
 
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($5,352) and $25,349)
(12,426
)
 
95,427

Pension and other postretirement liabilities (net of tax expense of $3,249 and $4,568)
11,550

 
16,574

Net unrealized investment gain (loss) (net of tax expense of $8,073 and $5,375)
13,703

 
(32,856
)
Other comprehensive income
12,827

 
79,145


 
 
 
Comprehensive Income
271,473

 
215,345

Preferred dividend requirements of subsidiaries
4,109

 
3,439

Comprehensive Income Attributable to Entergy Corporation

$267,364

 

$211,906

 
 
 
 
See Notes to Financial Statements.
 
 
 

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 

$258,646

 

$136,200

Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
530,224

 
525,181

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
104,884

 
104,607

Asset write-offs, impairments, and related charges
 
25,462

 
25,800

Changes in working capital:
 
 
 
 
Receivables
 
39,697

 
131,150

Fuel inventory
 
(4,401
)
 
(16,261
)
Accounts payable
 
(63,613
)
 
(68,857
)
Taxes accrued
 
(44,083
)
 
(56,301
)
Interest accrued
 
(20,546
)
 
(10,011
)
Deferred fuel costs
 
20,201

 
(76,238
)
Other working capital accounts
 
(42,016
)
 
(28,004
)
Changes in provisions for estimated losses
 
13,720

 
10,744

Changes in other regulatory assets
 
(162,192
)
 
84,349

Changes in other regulatory liabilities
 
130,924

 
(31,380
)
Changes in pensions and other postretirement liabilities
 
(7,713
)
 
(97,418
)
Other
 
(278,005
)
 
(76,168
)
Net cash flow provided by operating activities
 
501,189

 
557,393

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction/capital expenditures
 
(951,629
)
 
(931,479
)
Allowance for equity funds used during construction
 
38,322

 
28,512

Nuclear fuel purchases
 
(38,445
)
 
(49,647
)
Insurance proceeds received for property damages
 

 
1,582

Changes in securitization account
 
(1,084
)
 
(7,063
)
Payments to storm reserve escrow account
 
(2,285
)
 
(1,175
)
Decrease (increase) in other investments
 
39,045

 
(406
)
Proceeds from nuclear decommissioning trust fund sales
 
1,307,547

 
1,091,332

Investment in nuclear decommissioning trust funds
 
(1,342,429
)
 
(1,106,094
)
Net cash flow used in investing activities
 
(950,958
)
 
(974,438
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

16

Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
Long-term debt
 
3,444,230

 
2,505,726

Treasury stock
 
35,577

 
1,952

Retirement of long-term debt
 
(2,298,855
)
 
(734,000
)
Repurchase of preferred membership units
 
(50,000
)
 

Changes in credit borrowings and commercial paper - net
 
(17
)
 
(773,177
)
Other
 
(1,945
)
 
5,193

Dividends paid:
 
 
 
 
Common stock
 
(172,591
)
 
(160,887
)
Preferred stock
 
(4,109
)
 
(3,439
)
Net cash flow provided by financing activities
 
952,290

 
841,368


 
 
 
 
Net increase in cash and cash equivalents
 
502,521

 
424,323


 
 
 
 
Cash and cash equivalents at beginning of period
 
480,975

 
781,273


 
 
 
 
Cash and cash equivalents at end of period
 

$983,496

 

$1,205,596

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

$214,935

 

$185,606

Income taxes
 

($13,844
)
 

($4,297
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


17

Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$118,384

 

$56,690

Temporary cash investments
 
865,112

 
424,285

Total cash and cash equivalents
 
983,496

 
480,975

Accounts receivable:
 
 
 
 
Customer
 
589,519

 
558,494

Allowance for doubtful accounts
 
(7,458
)
 
(7,322
)
Other
 
158,293

 
167,722

Accrued unbilled revenues
 
334,355

 
395,511

Total accounts receivable
 
1,074,709

 
1,114,405

Deferred fuel costs
 
19,209

 
27,251

Fuel inventory - at average cost
 
121,705

 
117,304

Materials and supplies - at average cost
 
771,707

 
752,843

Deferred nuclear refueling outage costs
 
231,628

 
230,960

Prepayments and other
 
205,322

 
234,326

TOTAL
 
3,407,776

 
2,958,064

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
6,877,865

 
6,920,164

Non-utility property - at cost (less accumulated depreciation)
 
310,215

 
304,382

Other
 
439,849

 
437,265

TOTAL
 
7,627,929

 
7,661,811

 
 
 
 
 
PROPERTY, PLANT, AND EQUIPMENT
 
 
 
 
Electric
 
50,260,871

 
49,831,486

Natural gas
 
509,987

 
496,150

Construction work in progress
 
3,289,734

 
2,888,639

Nuclear fuel
 
790,398

 
861,272

TOTAL PROPERTY, PLANT, AND EQUIPMENT
 
54,850,990

 
54,077,547

Less - accumulated depreciation and amortization
 
22,198,769

 
22,103,101

PROPERTY, PLANT, AND EQUIPMENT - NET
 
32,652,221

 
31,974,446

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Other regulatory assets (includes securitization property of $333,783 as of March 31, 2019 and $360,790 as of December 31, 2018)
 
4,908,688

 
4,746,496

Deferred fuel costs
 
239,595

 
239,496

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
61,255

 
54,593

Other
 
330,745

 
262,988

TOTAL
 
5,917,455

 
5,680,745

 
 
 
 
 
TOTAL ASSETS
 

$49,605,381

 

$48,275,066

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

18

Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$150,010

 

$650,009

Notes payable and commercial paper
 
1,942,322

 
1,942,339

Accounts payable
 
1,406,327

 
1,496,058

Customer deposits
 
409,433

 
411,505

Taxes accrued
 
210,156

 
254,241

Interest accrued
 
172,645

 
193,192

Deferred fuel costs
 
64,653

 
52,396

Pension and other postretirement liabilities
 
62,218

 
61,240

Current portion of unprotected excess accumulated deferred income taxes
 
239,664

 
248,127

Other
 
203,655

 
134,437

TOTAL
 
4,861,083

 
5,443,544

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
4,252,292

 
4,107,152

Accumulated deferred investment tax credits
 
211,013

 
213,101

Regulatory liability for income taxes-net
 
1,737,479

 
1,817,021

Other regulatory liabilities
 
1,839,183

 
1,620,254

Decommissioning and asset retirement cost liabilities
 
6,577,180

 
6,355,543

Accumulated provisions
 
527,866

 
514,107

Pension and other postretirement liabilities
 
2,607,394

 
2,616,085

Long-term debt (includes securitization bonds of $398,291 as of March 31, 2019 and $423,858 as of December 31, 2018)
 
17,167,886

 
15,518,303

Other
 
634,211

 
1,006,249

TOTAL
 
35,554,504

 
33,767,815

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Subsidiaries' preferred stock without sinking fund
 
219,427

 
219,402

 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, $.01 par value, authorized 500,000,000 shares; issued 261,587,009 shares in 2019 and in 2018
 
2,616

 
2,616

Paid-in capital
 
5,920,183

 
5,951,431

Retained earnings
 
8,809,902

 
8,721,150

Accumulated other comprehensive loss
 
(551,152
)
 
(557,173
)
Less - treasury stock, at cost (71,670,773 shares in 2019 and 72,530,866 shares in 2018)
 
5,211,182

 
5,273,719

TOTAL
 
8,970,367

 
8,844,305

 
 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
 

$49,605,381

 

$48,275,066

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


19

Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 2018
(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, 2017

$—

 

$2,548

 

($5,397,637
)
 

$5,433,433

 

$7,977,702

 

($23,531
)
 

$7,992,515

Implementation of accounting standards

 

 

 

 
576,257

 
(632,617
)
 
(56,360
)
Balance at January 1, 2018

$—

 

$2,548

 

($5,397,637
)
 

$5,433,433

 

$8,553,959

 

($656,148
)
 

$7,936,155

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income
3,439

 

 

 

 
132,761

 

 
136,200

Other comprehensive income

 

 

 

 

 
79,145

 
79,145

Common stock issuances related to stock plans

 

 
20,477

 
(16,170
)
 

 

 
4,307

Common stock dividends declared

 

 

 

 
(160,887
)
 

 
(160,887
)
Preferred dividend requirements of subsidiaries
(3,439
)
 

 

 

 

 

 
(3,439
)
Reclassification pursuant to ASU 2018-02

 

 

 

 
(32,043
)
 
15,505

 
(16,538
)
Balance at March 31, 2018

$—

 

$2,548

 

($5,377,160
)
 

$5,417,263

 

$8,493,790

 

($561,498
)
 

$7,974,943

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

$—

 

$2,616

 

($5,273,719
)
 

$5,951,431

 

$8,721,150

 

($557,173
)
 

$8,844,305

Implementation of accounting standards

 

 

 

 
6,806

 
(6,806
)
 

Balance at January 1, 2019

$—

 

$2,616

 

($5,273,719
)
 

$5,951,431

 

$8,727,956

 

($563,979
)
 

$8,844,305

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income
4,109

 

 

 

 
254,537

 

 
258,646

Other comprehensive income

 

 

 

 

 
12,827

 
12,827

Common stock issuances related to stock plans

 

 
62,537

 
(31,248
)
 

 

 
31,289

Common stock dividends declared

 

 

 

 
(172,591
)
 

 
(172,591
)
Preferred dividend requirements of subsidiaries
(4,109
)
 

 

 

 

 

 
(4,109
)
Balance at March 31, 2019

$—

 

$2,616

 

($5,211,182
)
 

$5,920,183

 

$8,809,902

 

($551,152
)
 

$8,970,367

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 


20

Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2019
 
2018
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility electric operating revenues:
 
 
 
 
 
 
 
 
Residential
 

$803

 

$892

 

($89
)
 
(10
)
Commercial
 
554

 
596

 
(42
)
 
(7
)
Industrial
 
601

 
597

 
4

 
1

Governmental
 
53

 
57

 
(4
)
 
(7
)
Total billed retail
 
2,011

 
2,142

 
(131
)
 
(6
)
Sales for resale
 
84

 
69

 
15

 
22

Other
 
26

 
37

 
(11
)
 
(30
)
Total
 

$2,121

 

$2,248

 

($127
)
 
(6
)

 
 
 
 
 
 
 
 
Utility billed electric energy sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
8,471

 
9,287

 
(816
)
 
(9
)
Commercial
 
6,423

 
6,732

 
(309
)
 
(5
)
Industrial
 
11,683

 
11,405

 
278

 
2

Governmental
 
601

 
608

 
(7
)
 
(1
)
Total retail
 
27,178

 
28,032

 
(854
)
 
(3
)
Sales for resale
 
3,814

 
3,244

 
570

 
18

Total
 
30,992

 
31,276

 
(284
)
 
(1
)

 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating revenues
 

$434

 

$419

 

$15

 
4

Billed electric energy sales (GWh)
 
7,203

 
6,996

 
207

 
3



21

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 on May 31, 2019. In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1.

Spent Nuclear Fuel Litigation

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

Nuclear Insurance

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

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

Employment and Labor-related Proceedings

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


22

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order.

Entergy Louisiana

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. In January 2019 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $7.3 million , plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in the first quarter 2019 for the potential outcome of the audit.

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 alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The defendants have denied the allegations. In December 2008 the Attorney General’s lawsuit was removed to U.S. District Court in Jackson, Mississippi. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trial to April 2019. In April 2019 the District Court remanded the Attorney General’s lawsuit to the Hinds County Chancery Court in Jackson, Mississippi.


23

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Retail Rate Proceedings

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

Filings with the APSC (Entergy Arkansas)

Formula Rate Plan

As discussed in the Form 10-K, the formula rate plan filing that will be made in July 2019 to set the formula rates for the 2020 calendar year will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017 formula rate plan filing to actual 2018 costs and sales data. In the fourth quarter 2018 Entergy Arkansas recorded a provision of $35.1 million that reflected the estimate of the historical year netting adjustment that will be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 results when compared to the allowed rate of return on equity. In the first quarter 2019, Entergy Arkansas recorded an additional $10.5 million provision to reflect the current estimate of the historical year netting adjustment to be included in the 2019 filing.  

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan

In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base, within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the estimate of the difference between the 2018 expected earned rate of return on rate base and an established performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism. In the first quarter 2019, Entergy Mississippi recorded a $0.8 million increase in the provision to reflect the amount shown in the look-back filing. The filing is currently subject to MPSC review. A final order is expected in the second quarter 2019, with the resulting rates effective for the first billing cycle of July 2019.

Filings with the PUCT (Entergy Texas)

Base Rate Case

In January 2019, Entergy Texas filed for recovery of rate case expenses totaling $7.2 million . The amounts requested primarily include internal and external expenses related to litigating the 2018 base rate case. Parties filed testimony in April 2019 recommending a disallowance ranging from $3.2 million to $4.2 million of the $7.2 million requested. Entergy Texas is evaluating its response to the parties’ positions. A hearing is scheduled for June 2019.

Other Filings

In March 2019, Entergy Texas filed with the PUCT a request to set a new distribution cost recovery factor (DCRF) rider. The proposed new DCRF rider is designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2018 and December 31, 2018. A procedural schedule has been established, with a hearing in June 2019.


24

Entergy Corporation and Subsidiaries
Notes to Financial Statements

In December 2018, Entergy Texas filed with the PUCT a request to set a new transmission cost recovery factor (TCRF) rider. The proposed new TCRF rider is designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed testimony proposing a load growth adjustment, which would fully offset Entergy Texas’s proposed TCRF revenue requirement. The PUCT has previously ruled that load growth adjustments should not be included in a TCRF. Entergy Texas filed a motion for interim rates to be effective April 2019. In April 2019 the hearing on Entergy Texas’s motion and the hearing on the merits were held, and the ALJ suspended the date on which the TCRF would be put into permanent effect until July 2019, unless an earlier decision is issued by the PUCT. This matter is currently awaiting the ALJ’s proposal for decision.

Entergy Arkansas Opportunity Sales Proceeding

As discussed in the Form 10-K, in December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order in the opportunity sales proceeding. The compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. No protests were filed in response to the December 2018 compliance filing. The December 2018 compliance filing is pending FERC action.

In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity sales proceeding, but that, in its October 2018 order, the FERC held were outside the scope of the proceeding. In March 2019, Entergy Services filed an answer and motion to dismiss the new complaint.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

See the Form 10-K for a discussion of the return on equity complaints filed by the APSC and the MPSC and by the LPSC against System Energy. The LPSC’s complaint also includes a challenge to System Energy’s capital structure. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of April 2018. The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearing has been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involving New England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy submitted a response in October 2018. In January 2019 the FERC set the amended capital structure complaint for settlement and hearing proceedings. Settlement procedures in the capital structure proceeding commenced in February 2019.

In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.24% . For the refund period April 27, 2018 through July 27, 2019, and for application on a prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.41% . In March 2019, System Energy submitted answering testimony in the return on equity proceeding. For the first refund period, System Energy’s testimony argues for a return on equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).

25

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Grand Gulf Sale-leaseback Renewal Complaint

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.

In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC and City Council filed direct testimony. The LPSC testimony seeks refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions (claimed to be approximately $334.5 million as of December 2018), and the cost of capital additions associated with the sale-leaseback interest (claimed to be approximately $274.8 million ), as well as interest on those amounts. The direct testimony of the City Council and the APSC and MPSC address various issues raised by the LPSC. System Energy disputes that any refunds are owed for billings under the Unit Power Sales Agreement. A hearing has been scheduled for November 2019.


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 March 31,
 
2019
 
2018
 
(In Millions, Except Per Share Data)
 
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Basic earnings per share
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Entergy Corporation

$254.5

 
189.6

 

$1.34

 

$132.8

 
180.7

 

$0.73

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.4

 

 
 
 
0.2

 

Other equity plans
 
 
0.5

 
(0.01
)
 
 
 
0.5

 

Equity forwards
 
 
1.7

 
(0.01
)
 
 
 

 

Diluted earnings per share

$254.5

 
192.2

 

$1.32

 

$132.8

 
181.4

 

$0.73


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.7 million for the three months ended March 31, 2019 and approximately 4 million for the three months ended March 31, 2018 .

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

Dividends declared per common share were $0.91 for the three months ended March 31, 2019 and $0.89 for the three months ended March 31, 2018.

26

Entergy Corporation and Subsidiaries
Notes to Financial Statements


Equity Forward Sale Agreements

As discussed in Note 7 to the financial statements in the Form 10-K, in June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the time of the offering, Entergy entered into forward sale agreements with various investment banks. In December 2018, Entergy physically settled a portion of its obligations under the forward sale agreements by delivering 6,834,221 shares of common stock in exchange for cash proceeds of approximately $500 million . Entergy is required to settle its remaining obligations under the forward sale agreements with respect to the remaining 8,448,171 shares of common stock on a settlement date or dates on or prior to June 7, 2019.

Until settlement of the remaining equity forwards, earnings per share dilution resulting from the agreements, if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higher than the average forward sales price. If Entergy had elected to net share settle the forward sale agreements as of March 31, 2019, Entergy would have been required to deliver 2.0 million shares.

Treasury Stock

During the three months ended March 31, 2019 , Entergy Corporation issued 860,093 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 three months ended March 31, 2019 .

Retained Earnings

On April 3, 2019, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.91 per share, payable on June 3, 2019, to holders of record as of May 9, 2019.

Entergy implemented ASU No. 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” effective January 1, 2019. The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges. Entergy implemented this standard using a modified retrospective method, and recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

Entergy implemented ASU 2017-08 “Receivables (Topic 310): Nonrefundable Fees and Other Costs” effective January 1, 2019. The ASU amends the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Entergy implemented this standard using the modified retrospective approach, and recorded an adjustment decreasing retained earnings and decreasing accumulated other comprehensive loss by approximately $1 million as of January 1, 2019 for the cumulative effect of the amended amortization period.

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 March 31, 2019 by component:

27

Entergy Corporation and Subsidiaries
Notes to Financial Statements

 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Ending balance, December 31, 2018

($23,135
)
 

($531,922
)
 

($2,116
)
 

($557,173
)
Implementation of accounting standards
(7,685
)
 

 
879

 
(6,806
)
Beginning balance, January 1, 2019

($30,820
)
 

($531,922
)
 

($1,237
)
 

($563,979
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications
28,312

 

 
13,539

 
41,851

Amounts reclassified from accumulated other comprehensive income (loss)
(40,738
)
 
11,550

 
164

 
(29,024
)
Net other comprehensive income (loss) for the period
(12,426
)
 
11,550

 
13,703

 
12,827

Ending balance, March 31, 2019

($43,246
)
 

($520,372
)
 

$12,466

 

($551,152
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2018 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
 
 
 
 
 
 
 
 
Ending balance, December 31, 2017

($37,477
)
 

($531,099
)
 

$545,045

 

($23,531
)
Implementation of accounting standards

 

 
(632,617
)
 
(632,617
)
Beginning balance, January 1, 2018

($37,477
)
 

($531,099
)
 

($87,572
)
 

($656,148
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss) before reclassifications
71,566

 

 
838

 
72,404

Amounts reclassified from accumulated other comprehensive income (loss)
23,861

 
16,574

 
(33,694
)
 
6,741

Net other comprehensive income (loss) for the period
95,427

 
16,574

 
(32,856
)
 
79,145

 
 
 
 
 
 
 
 
Reclassification pursuant to ASU 2018-02
(7,756
)
 
(90,966
)
 
114,227

 
15,505

 
 
 
 
 
 
 
 
Ending balance, March 31, 2018

$50,194

 

($605,491
)
 

($6,201
)
 

($561,498
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

28

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2019 and 2018:
 
 
Pension and Other
Postretirement Liabilities
 
 
2019
 
2018
 
 
(In Thousands)
Beginning balance, January 1,
 

($6,153
)
 

($46,400
)
Amounts reclassified from accumulated other
comprehensive income (loss)
 
(969
)
 
(501
)
Net other comprehensive income (loss) for the period
 
(969
)
 
(501
)
 
 
 
 
 
Reclassification pursuant to ASU 2018-02
 

 
(10,049
)
 
 
 
 
 
Ending balance, March 31,
 

($7,122
)
 

($56,950
)
 
 
 
 
 
 
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2019 and 2018 are as follows:
 
Amounts reclassified
from AOCI
 
Income Statement Location
 
2019
 
2018
 
 
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
 
 
   Power contracts

$51,615

 

($30,082
)
 
Competitive business operating revenues
   Interest rate swaps
(48
)
 
(122
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
51,567

 
(30,204
)
 
 
 
(10,829
)
 
6,343

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

$40,738

 

($23,861
)
 
 
 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
 
 
   Amortization of prior-service credit

$5,326

 

$5,426

 
(a)
   Amortization of loss
(18,988
)
 
(24,952
)
 
(a)
   Settlement loss
(1,137
)
 
(1,616
)
 
(a)
Total amortization
(14,799
)
 
(21,142
)
 
 
 
3,249

 
4,568

 
Income taxes
Total amortization (net of tax)

($11,550
)
 

($16,574
)
 
 
 
 
 
 
 
 
Net unrealized investment gain (loss)
 
 
 
 
 
Realized gain (loss)

($259
)
 

$53,314

 
Interest and investment income
 
95

 
(19,620
)
 
Income taxes
Total realized investment gain (loss) (net of tax)

($164
)
 

$33,694

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

$29,024

 

($6,741
)
 
 

(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.


29

Entergy Corporation and Subsidiaries
Notes to Financial Statements

 
 
 
 
 
 
 
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2019 and 2018 are as follows:
 
 
Amounts reclassified
from AOCI
 
Income Statement Location
 
 
2019
 
2018
 
 
 
 
(In Thousands)
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
   Amortization of prior-service credit
 

$1,838

 

$1,934

 
(a)
   Amortization of loss
 
(527
)
 
(1,257
)
 
(a)
Total amortization
 
1,311

 
677

 
 
 
 
(342
)
 
(176
)
 
Income taxes
Total amortization (net of tax)
 
969

 
501

 
 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)
 

$969

 

$501

 
 

(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 September 2023.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2019 was 4.03% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2019 .
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500
 
$320
 
$6
 
$3,174

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 $2 billion .  At March 31, 2019 , Entergy Corporation had approximately $1,942 million of commercial paper outstanding.  The weighted-average interest rate for the three months ended March 31, 2019 was 3.03% .


30

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 2019 as follows:
Company
 
Expiration
Date
 
Amount of
Facility
 
Interest Rate (a)
 
Amount Drawn
as of
March 31, 2019
 
Letters of Credit
Outstanding as of March 31, 2019
Entergy Arkansas
 
April 2020
 
$20 million (b)
 
3.75%
 
$—
 
$—
Entergy Arkansas
 
September 2023
 
$150 million (c)
 
3.75%
 
$—
 
$—
Entergy Louisiana
 
September 2023
 
$350 million (c)
 
3.75%
 
$—
 
$—
Entergy Mississippi
 
May 2019
 
$37.5 million (d)
 
4.00%
 
$—
 
$—
Entergy Mississippi
 
May 2019
 
$35 million (d)
 
4.00%
 
$—
 
$—
Entergy Mississippi
 
May 2019
 
$10 million (d)
 
4.00%
 
$—
 
$—
Entergy New Orleans
 
November 2021
 
$25 million (c)
 
3.77%
 
$—
 
$0.8 million
Entergy Texas
 
September 2023
 
$150 million (c)
 
4.00%
 
$—
 
$1.3 million

(a)
The interest rate is the estimated interest rate as of March 31, 2019 that would have been applied 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 includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Entergy Mississippi expects to renew its credit facilities prior to expiration.

The commitment fees on the credit facilities range from 0.075% to 0.225% 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 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 March 31, 2019 :
Company
 
Amount of
Uncommitted Facility
 
Letter of Credit Fee
 
Letters of Credit
Issued as of
March 31, 2019 (a)
Entergy Arkansas
 
$25 million
 
0.70%
 
$1 million
Entergy Louisiana
 
$125 million
 
0.70%
 
$43 million
Entergy Mississippi
 
$40 million
 
0.70%
 
$12.1 million
Entergy New Orleans
 
$15 million
 
1.00%
 
$1 million
Entergy Texas
 
$50 million
 
0.70%
 
$11.7 million

(a)
As of March 31, 2019 , letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi, and $1.5 million for Entergy Texas. See Note 8 to the financial statements herein 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 for Entergy New Orleans are effective through October 31, 2019. The current FERC-

31

Entergy Corporation and Subsidiaries
Notes to Financial Statements

authorized limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy are effective through November 8, 2020. 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 March 31, 2019 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 
Authorized
 
Borrowings
 
(In Millions)
Entergy Arkansas
$250
 
$—
Entergy Louisiana
$450
 
$—
Entergy Mississippi
$175
 
$11
Entergy New Orleans
$150
 
$2
Entergy Texas
$200
 
$—
System Energy
$200
 
$—

Vermont Yankee Asset Retirement Management, LLC Credit Facility

In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in November 2020. The commitment fee is currently 0.20% of the undrawn commitment amount.  As of March 31, 2019 , $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the three months ended March 31, 2019 was 4.28% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.

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 have commercial paper programs in place. Following is a summary as of March 31, 2019 as follows:
Company
 
Expiration
Date
 
Amount
of
Facility
 
Weighted Average Interest Rate on Borrowings (a)
 
Amount
Outstanding as of
March 31, 2019
 
 

 
(Dollars in Millions)
Entergy Arkansas VIE
 
September 2021
 
$80
 
3.50%
 
$42.6
Entergy Louisiana River Bend VIE
 
September 2021
 
$105
 
3.46%
 
$95.4
Entergy Louisiana Waterford VIE
 
September 2021
 
$105
 
3.48%
 
$79.5
System Energy VIE
 
September 2021
 
$120
 
3.45%
 
$94.1

(a)
Includes letter of credit fees and bank fronting fees on commercial paper issuances, if any, 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.


32

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.

The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of March 31, 2019 as follows:
Company
 
Description
 
Amount
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
 
3.38% Series R due August 2020
 
$70 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
 
3.42% Series J due April 2021
 
$100 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 March 2019, Entergy Arkansas issued $350 million of 4.20% Series first mortgage bonds due April 2049. Entergy Arkansas expects to use the proceeds for general corporate purposes.

(Entergy Louisiana)

In March 2019, Entergy Louisiana issued $525 million of 4.20% Series collateral trust mortgage bonds due April 2050. Entergy Louisiana expects to use the proceeds, together with other funds, to finance the construction of the Lake Charles Power Station and the St. Charles Power Station, and for general corporate purposes.

(Entergy Texas)

In January 2019, Entergy Texas issued $300 million of 4.0% Series first mortgage bonds due March 2029 and $400 million of 4.5% Series first mortgage bonds due March 2039. Entergy Texas used the proceeds to repay, at maturity, its $500 million of 7.125% Series first mortgage bonds due February 2019, and for general corporate purposes.

(System Energy)

In March 2019, System Energy issued $134 million of 2.50% Series 2019 revenue refunding bonds due April 2022. The proceeds were used to redeem, prior to maturity, $134 million of 5.875% Series 1998 pollution control revenue refunding bonds due April 2022.



33

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 March 31, 2019 are as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$17,317,896

 

$17,613,263

Entergy Arkansas

$3,555,152

 

$3,471,105

Entergy Louisiana

$7,377,912

 

$7,665,243

Entergy Mississippi

$1,325,915

 

$1,332,283

Entergy New Orleans

$483,844

 

$510,959

Entergy Texas

$1,680,966

 

$1,755,754

System Energy

$610,798

 

$586,518


(a)
The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $188 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.

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2018 were as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$16,168,312

 

$15,880,239

Entergy Arkansas

$3,225,759

 

$3,002,627

Entergy Louisiana

$6,805,768

 

$6,834,134

Entergy Mississippi

$1,325,750

 

$1,276,452

Entergy New Orleans

$483,704

 

$491,569

Entergy Texas

$1,513,735

 

$1,528,828

System Energy

$630,750

 

$596,123


(a)
The values exclude the lease obligations of $34 million at System Energy and long-term DOE obligations of $187 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.


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.


34

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Stock Options

Entergy granted options on 693,161 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 2019 with a fair value of $8.32 per option.  As of March 31, 2019 , there were options on 3,210,237 shares of common stock outstanding with a weighted-average exercise price of $78.25 .  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 March 31, 2019 .  The aggregate intrinsic value of the stock options outstanding as of March 31, 2019 was $55.8 million .    
 
 
 
 
The following table includes financial information for outstanding stock options for the three months ended March 31, 2019 and 2018 :
 
2019
 
2018
 
(In Millions)
Compensation expense included in Entergy’s net income

$1.0

 

$1.1

Tax benefit recognized in Entergy’s net income

$0.2

 

$0.3

Compensation cost capitalized as part of fixed assets and inventory

$0.3

 

$0.2


Other Equity Awards

In January 2019 the Board approved and Entergy granted 355,537 restricted stock awards and 180,824 long-term incentive awards under the 2015 Equity Ownership Plan.  The restricted stock awards were made effective as of January 31, 2019 and were valued at $89.19 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.  Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three -year vesting period.

In addition, long-term incentive awards were also 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. For the 2019-2021 performance period, performance will be measured based eighty percent on relative total shareholder return and twenty percent on a cumulative adjusted earnings per share metric.  The performance units were granted as of January 31, 2019 and eighty percent were valued at $102.07 per share based on various factors, primarily market conditions; and twenty percent were valued at $89.19 per share, the closing price of Entergy’s common stock on that date.  Performance units have the same dividend rights as shares of Entergy common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance units are expensed ratably over the three -year vesting period and compensation cost for the portion of the award based on cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.
 
 
 
 
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 2019 and 2018 :
 
2019
 
2018
 
(In Millions)
Compensation expense included in Entergy’s net income

$8.8

 

$8.8

Tax benefit recognized in Entergy’s net income

$2.2

 

$2.2

Compensation cost capitalized as part of fixed assets and inventory

$2.9

 

$2.3




35

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 first quarters of 2019 and 2018, included the following components:
 
2019
 
2018
 
(In Thousands)
Service cost - benefits earned during the period

$33,607

 

$38,752

Interest cost on projected benefit obligation
73,941

 
66,854

Expected return on assets
(103,884
)
 
(110,535
)
Amortization of prior service cost

 
99

Amortization of loss
58,418

 
68,526

Settlement charges
1,137

 

Net pension costs

$63,219

 

$63,696

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2019 and 2018, included the following components:
2019
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$5,261

 

$7,284

 

$1,629

 

$569

 

$1,350

 

$1,550

Interest cost on projected benefit obligation
 
14,175

 
15,882

 
4,068

 
1,874

 
3,613

 
3,364

Expected return on assets
 
(20,176
)
 
(22,652
)
 
(5,968
)
 
(2,696
)
 
(5,862
)
 
(4,678
)
Amortization of loss
 
11,840

 
11,643

 
3,104

 
1,529

 
2,334

 
2,850

Net pension cost
 

$11,100

 

$12,157

 

$2,833

 

$1,276

 

$1,435

 

$3,086

2018
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$6,189

 

$8,446

 

$1,822

 

$673

 

$1,589

 

$1,776

Interest cost on projected benefit obligation
 
13,004

 
14,940

 
3,769

 
1,813

 
3,348

 
3,227

Expected return on assets
 
(21,851
)
 
(24,809
)
 
(6,502
)
 
(2,993
)
 
(6,523
)
 
(4,991
)
Amortization of loss
 
13,412

 
14,450

 
3,610

 
1,954

 
2,626

 
3,715

Net pension cost
 

$10,754

 

$13,027

 

$2,699

 

$1,447

 

$1,040

 

$3,727


Non-Qualified Net Pension Cost

Entergy recognized $4 million and $8.9 million in pension cost for its non-qualified pension plans in the first quarters of 2019 and 2018 , respectively. Reflected in the pension cost for non-qualified pension plans in the first quarter of 2018 were settlement charges of $4.4 million related to the payment of lump sum benefits out of the plan.
 
 
 
 
 
 
 
 
 
 


36

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the first quarters of 2019 and 2018:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
2019

$73

 

$43

 

$75

 

$5

 

$124

2018

$132

 

$50

 

$80

 

$21

 

$137


Reflected in Entergy Arkansas’s non-qualified pension costs in the first quarter of 2018 were settlement charges of $12 thousand 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 first quarters of 2019 and 2018, included the following components:
 
2019
 
2018
 
(In Thousands)
Service cost - benefits earned during the period

$4,675

 

$6,782

Interest cost on accumulated postretirement benefit obligation (APBO)
11,975

 
12,681

Expected return on assets
(9,562
)
 
(10,373
)
Amortization of prior service credit
(8,844
)
 
(9,251
)
Amortization of loss
358

 
3,432

Net other postretirement benefit cost

($1,398
)
 

$3,271

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for first quarters of 2019 and 2018, included the following components:
2019
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$591

 

$1,160

 

$262

 

$92

 

$236

 

$243

Interest cost on APBO
 
1,807

 
2,666

 
670

 
395

 
854

 
476

Expected return on assets
 
(3,991
)
 

 
(1,199
)
 
(1,237
)
 
(2,276
)
 
(697
)
Amortization of prior service credit
 
(1,238
)
 
(1,837
)
 
(439
)
 
(171
)
 
(561
)
 
(363
)
Amortization of (gain) loss
 
144

 
(174
)
 
181

 
58

 
121

 
89

Net other postretirement benefit cost
 

($2,687
)
 

$1,815

 

($525
)
 

($863
)
 

($1,626
)
 

($252
)


37

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2018
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned during the period
 

$793

 

$1,556

 

$321

 

$129

 

$330

 

$306

Interest cost on APBO
 
1,997

 
2,789

 
683

 
417

 
939

 
500

Expected return on assets
 
(4,342
)
 

 
(1,303
)
 
(1,313
)
 
(2,446
)
 
(783
)
Amortization of prior service credit
 
(1,278
)
 
(1,934
)
 
(456
)
 
(186
)
 
(579
)
 
(378
)
Amortization of loss
 
289

 
388

 
377

 
34

 
206

 
233

Net other postretirement benefit cost
 

($2,541
)
 

$2,799

 

($378
)
 

($919
)
 

($1,550
)
 

($122
)

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 first quarters of 2019 and 2018:
2019

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service (cost) credit


$—



$5,375



($49
)


$5,326

Amortization of loss

(18,735
)

308


(561
)

(18,988
)
Settlement loss

(1,137
)





(1,137
)



($19,872
)


$5,683



($610
)


($14,799
)
Entergy Louisiana








Amortization of prior service credit


$—



$1,838



$—



$1,838

Amortization of loss

(699
)

174


(2
)

(527
)



($699
)


$2,012



($2
)


$1,311

2018
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service (cost) credit
 

($99
)
 

$5,595

 

($70
)
 

$5,426

Amortization of loss
 
(21,957
)
 
(1,932
)
 
(1,063
)
 
(24,952
)
Settlement loss
 

 

 
(1,616
)
 
(1,616
)
 
 

($22,056
)
 

$3,663

 

($2,749
)
 

($21,142
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service credit
 

$—

 

$1,934

 

$—

 

$1,934

Amortization of loss
 
(867
)
 
(388
)
 
(2
)
 
(1,257
)
 
 

($867
)
 

$1,546

 

($2
)
 

$677



38

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Employer Contributions

Based on current assumptions, Entergy expects to contribute $176.9 million to its qualified pension plans in 2019.  As of March 31, 2019 , Entergy had contributed $11.7 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 2019 :
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
(In Thousands)
Expected 2019 pension contributions

$27,112

 

$26,451

 

$7,701

 

$1,800

 

$1,645

 

$8,285

Pension contributions made through March 2019

$454

 

$1,914

 

$156

 

$111

 

$286

 

$290

Remaining estimated pension contributions to be made in 2019

$26,658

 

$24,537

 

$7,545

 

$1,689

 

$1,359

 

$7,995



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 March 31, 2019 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, 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 includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity.

Entergy’s segment financial information for the first quarters of 2019 and 2018 is as follows:
 
 
Utility
 
Entergy
Wholesale
Commodities
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2019
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,175,982

 

$433,612

 

$—

 

($10
)
 

$2,609,584

Income taxes
 

($11,564
)
 

$65,908

 

($11,573
)
 

$—

 

$42,771

Consolidated net income (loss)
 

$234,147

 

$97,079

 

($40,682
)
 

($31,898
)
 

$258,646

Total assets as of March 31, 2019
 

$46,502,826

 

$5,065,643

 

$719,602

 

($2,682,690
)
 

$49,605,381

2018
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,304,990

 

$418,924

 

$—

 

($33
)
 

$2,723,881

Income taxes
 

$52,224

 

($1,078
)
 

($7,483
)
 

$—

 

$43,663

Consolidated net income (loss)
 

$217,940

 

($17,779
)
 

($32,063
)
 

($31,898
)
 

$136,200

Total assets as of December 31, 2018
 

$44,777,167

 

$5,459,275

 

$733,366

 

($2,694,742
)
 

$48,275,066


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.


39

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 shut down and sell all of the remaining plants in the merchant nuclear fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions.

Total restructuring charges for the first quarters of 2019 and 2018 were comprised of the following:
 
2019
 
2018
 
Employee retention and severance
expenses and other benefits-related costs
 
Contracted economic development costs
 
Total
 
Employee retention and severance
expenses and other benefits-related costs
 
Contracted economic development costs
 
Total
 
(In Millions)
Balance as of January 1,

$179

 

$14

 

$193

 

$83

 

$14

 

$97

Restructuring costs accrued
34

 

 
34

 
26

 

 
26

Balance as of March 31,

$213

 

$14

 

$227

 

$109

 

$14

 

$123


In addition, Entergy Wholesale Commodities incurred $74 million in the first quarter 2019 and $73 million in the first quarter 2018 of impairment and other related charges associated with these strategic decisions and transactions.

Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to exit the merchant power business of approximately $130 million in 2019, of which $34 million has been incurred as of March 31, 2019, and a total of approximately $110 million from 2020 through mid-2022.

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.


40

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 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 Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at March 31, 2019 is approximately 2 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 98% for the remainder of 2019 , of which approximately 72% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2019 is 18.6 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 guarantee, 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.


41

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide 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 March 31, 2019 , derivative contracts with seven counterparties were in a liability position (approximately $49 million total). In addition to the corporate guarantee, $19 million in cash collateral were required to be posted by the Entergy subsidiary to its counterparties and $1 million in cash and $4 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2018 , derivative contracts with six counterparties were in a liability position (approximately $34 million total). In addition to the corporate guarantee, $19 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, 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 natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of March 31, 2019 is 5 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of March 31, 2019 is 7 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of March 31, 2019 is 45,740,000 MMBtu for Entergy, including 36,540,000 MMBtu for Entergy Louisiana and 9,200,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2018, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2018 through May 31, 2019. 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 March 31, 2019 is 18,928 GWh for Entergy, including 4,099 GWh for Entergy Arkansas, 8,235 GWh for Entergy Louisiana, 2,520 GWh for Entergy Mississippi, 948 GWh for Entergy New Orleans, and 3,047 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 March 31, 2019 and December 31, 2018. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy Texas as of March 31, 2019 and December 31, 2018.

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2019 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.

42

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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)
 
$6
 
($6)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$3
 
($3)
 
$—
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$45
 
($9)
 
$36
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$16
 
($3)
 
$13
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$9
 
($6)
 
$3
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$1
 
$—
 
$1
 
Utility
Financial transmission rights
 
Prepayments and other
 
$6
 
($1)
 
$5
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps and options
 
Other current liabilities
 
$1
 
$—
 
$1
 
Utility

43

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, 2018 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)
 
$32
 
($32)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$7
 
($7)
 
$—
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$54
 
($33)
 
$21
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$20
 
($7)
 
$13
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$4
 
($2)
 
$2
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$1
 
$—
 
$1
 
Entergy Wholesale Commodities
Natural gas swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$2
 
$—
 
$2
 
Utility
Financial transmission rights
 
Prepayments and other
 
$16
 
($1)
 
$15
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$1
 
($1)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps and options
 
Other current liabilities
 
$1
 
$—
 
$1
 
Utility

(a)
Represents the gross amounts of recognized assets/liabilities
(b)
Represents the netting of fair value balances with the same counterparty
(c)
Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)
Excludes cash collateral in the amount of $1 million held and $19 million posted as of March 31, 2019 and $19 million posted as of December 31, 2018. Also excludes letters of credit in the amount of $4 million held and $2 million posted as of March 31, 2019 and $4 million posted as of December 31, 2018.

44

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 March 31, 2019 and 2018 are as follows:
Instrument
 
Amount of gain recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain (loss)
reclassified from
accumulated other comprehensive income into income (a)

 
(In Millions)
 
 
 
(In Millions)
2019
 
 
 
 
 
 
Electricity swaps and options
 
$26
 
Competitive businesses operating revenues
 
$52
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Electricity swaps and options
 
$91
 
Competitive businesses operating revenues
 
($30)
    
(a)
Before taxes of $11 million and ($6) million for the three months ended March 31, 2019 and 2018, respectively

Prior to the adoption of ASU 2017-12, Entergy measured its hedges for ineffectiveness. Any ineffectiveness was recognized in earnings during the period. The ineffective portion of cash flow hedges was recorded in competitive businesses operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended March 31, 2018 was $13.3 million .

Based on market prices as of March 31, 2019 , unrealized gains (losses) recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled ($53) million of net unrealized losses.  Approximately ($39) million is expected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months.  The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices.    

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.

 
 
 
 
 
 
 


45

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 three months ended March 31, 2019 and 2018 are as follows:
Instrument

Amount of gain (loss) recognized in accumulated other comprehensive income

Income Statement
location

Amount of gain (loss)
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2019
 

 
 
 
 
Natural gas swaps and options
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($1)
Financial transmission rights

$—

Purchased power expense
(b)
$21
Electricity swaps and options
 
$—
(c)
Competitive business operating revenues
 
$5
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
$—
Financial transmission rights
 
$—
 
Purchased power expense
(b)
$32
Electricity swaps and options
 
$—
(c)
Competitive business operating revenues
 
$1

(a)
Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)
Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)
Amount of gain recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items.


46

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 March 31, 2019 are shown in the table below. Certain investments are subject to master netting agreements and are presented on the balance sheets 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)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Natural gas swaps and options
 
Prepayments and other
 
$0.2
 
$—
 
$0.2
 
Entergy Louisiana
Natural gas swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$1.3
 
$—
 
$1.3
 
Entergy Louisiana
 
 
 
 
 
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$1.2
 
($0.1)
 
$1.1
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$2.8
 
$—
 
$2.8
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$0.7
 
$—
 
$0.7
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$0.5
 
$—
 
$0.5
 
Entergy New Orleans
Financial transmission rights
 
Prepayments and other
 
$0.3
 
($0.6)
 
($0.3)
 
Entergy Texas
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Natural gas swaps and options
 
Other current liabilities
 

$0.3

 

$—

 

$0.3

 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 

$0.8

 

$—

 

$0.8

 
Entergy Mississippi


47

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 December 31, 2018 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Natural gas swaps and options
 
Prepayments and other
 
$0.3
 
$—
 
$0.3
 
Entergy Louisiana
Natural gas swaps and options
 
Other deferred debits and other assets
 
$1.6
 
$—
 
$1.6
 
Entergy Louisiana
 
 
 
 
 
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$3.6
 
($0.2)
 
$3.4
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$8.4
 
($0.1)
 
$8.3
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$2.2
 
$—
 
$2.2
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$1.3
 
$—
 
$1.3
 
Entergy New Orleans
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Financial transmission rights
 
Other current liabilities
 
$0.9
 
($1.4)
 
($0.5)
 
Entergy Texas
 
 
 
 
 
 
 
 
 
 
 
Natural gas swaps and options
 
Other current liabilities
 
$1.1
 
$—
 
$1.1
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$0.1
 
$—
 
$0.1
 
Entergy New Orleans

(a)
Represents the gross amounts of recognized assets/liabilities
(b)
Represents the netting of fair value balances with the same counterparty
(c)
Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)
As of March 31, 2019, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Mississippi and $1.5 million for Entergy Texas. As of December 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi, and $4.1 million for Entergy Texas.

 
 
 
 
 
 
 


48

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 March 31, 2019 and 2018 are as follows:
Instrument

Income Statement Location

Amount of gain
(loss) recorded
in the income statement

Registrant
 
 
 
 
(In Millions)
 
 
2019
 
 
 

 
 
Natural gas swaps and options
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.8
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.8)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.2
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power expense
 
$8.4
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power expense
 
$8.8
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power expense
 
$1.1
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power expense
 
$1.9
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power expense
 
$0.3
(b)
Entergy Texas
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.2)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.1)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power expense
 
$8.0
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power expense
 
$17.6
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power expense
 
$7.8
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power expense
 
$3.3
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power expense
 
($3.5)
(b)
Entergy Texas

(a)
Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)
Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.

Fair Values

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

49

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

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

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

Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs.

Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources.  These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability.  Level 3 consists primarily of financial transmission rights 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

50

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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 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 groups review 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 groups report to the Chief Accounting Officer.



51

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 .  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.
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$865

 

$—

 

$—

 

$865

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
1,357

 

 

 
1,357

Debt securities
 
1,320

 
1,672

 

 
2,992

Common trusts (b)
 
 
 
 
 
 
 
2,529

Power contracts
 

 

 
3

 
3

Securitization recovery trust account
 
52

 

 

 
52

Escrow accounts
 
405

 

 

 
405

Gas hedge contracts
 
1

 

 

 
1

Financial transmission rights
 

 

 
5

 
5

 
 

$4,000

 

$1,672

 

$8

 

$8,209

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$49

 

$49

Gas hedge contracts
 
1

 

 

 
1

 
 

$1

 

$—

 

$49

 

$50


2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$424

 

$—

 

$—

 

$424

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
1,686

 

 

 
1,686

Debt securities
 
1,259

 
1,625

 

 
2,884

Common trusts (b)
 
 
 
 
 
 
 
2,350

Power contracts
 

 

 
3

 
3

Securitization recovery trust account
 
51

 

 

 
51

Escrow accounts
 
403

 

 

 
403

Gas hedge contracts
 

 
2

 

 
2

Financial transmission rights
 

 

 
15

 
15

 
 

$3,823

 

$1,627

 

$18

 

$7,818

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$34

 

$34

Gas hedge contracts
 
1

 

 

 
1

 
 

$1

 

$—

 

$34

 

$35


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

52

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 March 31, 2019 and 2018 :
 
2019
 
2018
 
Power Contracts
 
Financial transmission rights
 
Power Contracts
 
Financial transmission rights

(In Millions)
Balance as of January 1,

($31
)
 

$15

 

($65
)
 

$21

Total gains (losses) for the period (a)
 
 
 
 
 
 
 
Included in earnings
5

 

 
14

 
(1
)
Included in other comprehensive income
26

 

 
91

 

Included as a regulatory liability/asset

 
11

 

 
20

Settlements
(46
)
 
(21
)
 
35

 
(32
)
Balance as of March 31,

($46
)
 

$5

 

$75

 

$8


(a)
Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($4.9) million for the three months ended March 31, 2019 and $0.2 million for the three months ended March 31, 2018.

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 March 31, 2019 :
Transaction Type
 
Fair Value
as of
March 31, 2019
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
 
 
(In Millions)
 
 
 
 
 
 
(In Millions)
Power contracts - electricity swaps
 
($46)
 
Unit contingent discount
 
+/-
4% - 4.75%
 
($5) - ($6)

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 and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 .  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.


53

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Arkansas
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$189.5

 

$—

 

$—

 

$189.5

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
5.5

 

 

 
5.5

Debt securities
 
99.2

 
291.8

 

 
391.0

Common trusts (b)
 
 
 
 
 
 
 
600.8

Securitization recovery trust account
 
8.2

 

 

 
8.2

Financial transmission rights
 

 

 
1.1

 
1.1

 
 

$302.4

 

$291.8

 

$1.1

 

$1,196.1


2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$4.0

 

$—

 

$—

 

$4.0

Debt securities
 
94.8

 
286.5

 

 
381.3

Common trusts (b)
 
 
 
 
 
 
 
526.7

Securitization recovery trust account
 
4.7

 

 

 
4.7

Financial transmission rights
 

 

 
3.4

 
3.4

 
 

$103.5

 

$286.5

 

$3.4

 

$920.1


Entergy Louisiana
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$237.0

 

$—

 

$—

 

$237.0

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
10.4

 

 

 
10.4

Debt securities
 
184.6

 
371.1

 

 
555.7

Common trusts (b)
 
 
 
 
 
 
 
841.9

Escrow accounts
 
291.2

 

 

 
291.2

Securitization recovery trust account
 
9.0

 

 

 
9.0

Gas hedge contracts
 
1.5

 

 

 
1.5

Financial transmission rights
 

 

 
2.8

 
2.8

 
 

$733.7

 

$371.1

 

$2.8

 

$1,949.5

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.3

 

$—

 

$—

 

$0.3



54

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$43.1

 

$—

 

$—

 

$43.1

Decommissioning trust funds (a):
 
 

 
 

 
 

 
 

Equity securities
 
13.3

 

 

 
13.3

Debt securities
 
162.0

 
370.9

 

 
532.9

Common trusts (b)
 
 
 
 
 
 
 
738.8

Escrow accounts
 
289.5

 

 

 
289.5

Securitization recovery trust account
 
3.6

 

 

 
3.6

Gas hedge contracts
 

 
1.9

 

 
1.9

Financial transmission rights
 

 

 
8.3

 
8.3

 
 

$511.5

 

$372.8

 

$8.3

 

$1,631.4

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.7

 

$0.4

 

$—

 

$1.1


Entergy Mississippi
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Escrow accounts
 
$32.6
 

$—

 

$—

 
$32.6
Financial transmission rights
 

 

 
0.7

 
0.7

 
 

$32.6

 

$—

 

$0.7

 

$33.3

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.8

 

$—

 

$—

 

$0.8


2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$36.9

 

$—

 

$—

 

$36.9

Escrow accounts
 
32.4

 

 

 
32.4

Financial transmission rights
 

 

 
2.2

 
2.2

 
 

$69.3

 

$—

 

$2.2

 

$71.5


Entergy New Orleans
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Securitization recovery trust account
 

$5.1

 

$—

 

$—

 

$5.1

Escrow accounts
 
81.3

 

 

 
81.3

Financial transmission rights
 

 

 
0.5

 
0.5

 
 

$86.4

 

$—

 

$0.5

 

$86.9



55

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$19.7

 

$—

 

$—

 

$19.7

Securitization recovery trust account
 
2.2

 

 

 
2.2

Escrow accounts
 
80.9

 

 

 
80.9

Financial transmission rights
 

 

 
1.3

 
1.3

 
 

$102.8

 

$—

 

$1.3

 

$104.1

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.1

 

$—

 

$—

 

$0.1


Entergy Texas
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$22.2

 

$—

 

$—

 

$22.2

Securitization recovery trust account
 
29.5

 

 

 
29.5

 
 

$51.7

 

$—

 

$—

 

$51.7

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Financial transmission rights
 

$—

 

$—

 

$0.3

 

$0.3


2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Securitization recovery trust account
 

$40.2

 

$—

 

$—

 

$40.2

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Financial transmission rights
 

$—

 

$—

 

$0.5

 

$0.5


System Energy
2019
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$158.2

 

$—

 

$—

 

$158.2

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
4.7

 

 

 
4.7

Debt securities
 
226.8

 
148.4

 

 
375.2

Common trusts (b)
 
 
 
 
 
 
 
571.4

 
 

$389.7

 

$148.4

 

$—

 

$1,109.5



56

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$95.6

 

$—

 

$—

 

$95.6

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
4.4

 

 

 
4.4

Debt securities
 
224.5

 
139.7

 

 
364.2

Common trusts (b)
 
 
 
 
 
 
 
500.9

 
 

$324.5

 

$139.7

 

$—

 

$965.1


(a)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)
Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 March 31, 2019 .
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$3.4

 

$8.3

 

$2.2

 

$1.3

 

($0.5
)
Gains (losses) included as a regulatory liability/asset
6.1

 
3.3

 
(0.4
)
 
1.1

 
0.5

Settlements
(8.4
)
 
(8.8
)
 
(1.1
)
 
(1.9
)
 
(0.3
)
Balance as of March 31,

$1.1

 

$2.8

 

$0.7

 

$0.5

 

($0.3
)

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 March 31, 2018 .
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$3.0

 

$10.2

 

$2.1

 

$2.2

 

$3.4

Gains (losses) included as a regulatory liability/asset
6.8

 
10.8

 
6.6

 
1.8

 
(5.5
)
Settlements
(8.0
)
 
(17.6
)
 
(7.8
)
 
(3.3
)
 
3.5

Balance as of March 31,

$1.8

 

$3.4

 

$0.9

 

$0.7

 

$1.4




57

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

The NRC requires Entergy subsidiaries to maintain nuclear decommissioning 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, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.

As discussed in Note 16 to the financial statements herein and Note 14 to the financial statements in the Form 10-K, in January 2019, Entergy completed the transfer of the Vermont Yankee plant to NorthStar. As part of the transaction, Entergy transferred the Vermont Yankee decommissioning trust fund to NorthStar. As of December 31, 2018, the value of the decommissioning trust fund was $532 million .

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 records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity.  Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the 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. A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The unrealized gains/(losses) recognized during the three months ended March 31, 2019 on equity securities still held as of March 31, 2019 were $340 million . The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.

The available-for-sale securities held as of March 31, 2019 and December 31, 2018 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2019
 
 
 
 
 
 
Debt Securities (a)
 

$2,562

 

$51

 

$9

 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Debt Securities (a)
 

$2,495

 

$19

 

$35


(a)
Debt securities presented herein do not include the $430 million and $389 million of debt securities held in the wholly-owned registered investment company as of March 31, 2019 and December 31, 2018 , respectively, which are not accounted for as available-for-sale.

58

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The unrealized gains/(losses) above are reported before deferred taxes of $7 million as of March 31, 2019 and ($1) million as of December 31, 2018 for debt securities. The amortized cost of available-for-sale debt securities was $2,520 million as of March 31, 2019 and $2,511 million as of December 31, 2018 .  As of March 31, 2019 , available-for-sale debt securities have an average coupon rate of approximately 3.28% , an average duration of approximately 5.42 years, and an average maturity of approximately 9.13 years.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2019 :
 
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
(In Millions)
Less than 12 months
 

$197

 

$1

More than 12 months
 
588

 
8

Total
 

$785

 

$9


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018 :
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$652

 

$9

More than 12 months
782

 
26

Total

$1,434

 

$35


The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2019 and December 31, 2018 are as follows:
 
2019
 
2018
 
(In Millions)
Less than 1 year

$185

 

$199

1 year - 5 years
1,100

 
1,066

5 years - 10 years
609

 
544

10 years - 15 years
67

 
77

15 years - 20 years
95

 
78

20 years+
506

 
531

Total

$2,562

 

$2,495


During the three months ended March 31, 2019 and 2018 , proceeds from the dispositions of available-for-sale securities amounted to $365 million and $1,091 million , respectively.  During the three months ended March 31, 2019 and 2018 , gross gains of $2 million and $1 million , respectively, and gross losses of $2 million and $7 million , respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2019 are $510 million for Indian Point 1, $645 million for Indian Point 2, $845 million for Indian Point 3, $481 million for Palisades, and $1,040 million for Pilgrim. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2018 are $471 million

59

Entergy Corporation and Subsidiaries
Notes to Financial Statements

for Indian Point 1, $598 million for Indian Point 2, $781 million for Indian Point 3, $444 million for Palisades, $1,028 million for Pilgrim, and $532 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

Entergy Arkansas

Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2019 and December 31, 2018 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2019
 
 
 
 
 
 
Debt Securities
 

$391.0

 

$2.9

 

$2.3

 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Debt Securities
 

$381.3

 

$0.6

 

$8.2


The amortized cost of available-for-sale debt securities was $390.4 million as of March 31, 2019 and $389 million as of December 31, 2018 .  As of March 31, 2019 , available-for-sale debt securities have an average coupon rate of approximately 2.85% , an average duration of approximately 4.81 years, and an average maturity of approximately 7.34 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2019 on equity securities still held as of March 31, 2019 were $70.7 million . The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2019 :
 
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
(In Millions)
Less than 12 months
 

$3.6

 

$—

More than 12 months
 
182.7

 
2.3

Total
 

$186.3

 

$2.3


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018 :
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$65.8

 

$0.5

More than 12 months
231.1

 
7.7

Total

$296.9

 

$8.2



60

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2019 and December 31, 2018 are as follows:
 
2019
 
2018
 
(In Millions)
Less than 1 year

$35.6

 

$32.5

1 year - 5 years
163.7

 
170.3

5 years - 10 years
123.7

 
114.0

10 years - 15 years
10.2

 
10.3

15 years - 20 years
9.4

 
8.1

20 years+
48.4

 
46.1

Total

$391.0

 

$381.3


During the three months ended March 31, 2019 and 2018 , proceeds from the dispositions of available-for-sale securities amounted to $10.9 million and $34.9 million , respectively.  During the three months ended March 31, 2019 and 2018 , gross gains of $0.02 million and $0.1 million , respectively, and gross losses of $0.1 million and $0.1 million , respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2019 and December 31, 2018 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2019
 
 
 
 
 
 
Debt Securities
 

$555.7

 

$17.1

 

$1.4

 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Debt Securities
 

$532.9

 

$4.1

 

$6.0


The amortized cost of available-for-sale debt securities was $539.9 million as of March 31, 2019 and $534.8 million as of December 31, 2018 .  As of March 31, 2019 , the available-for-sale debt securities have an average coupon rate of approximately 3.92% , an average duration of approximately 6.62 years, and an average maturity of approximately 13.26 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2019 on equity securities still held as of March 31, 2019 were $98.5 million . 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.


61

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2019 :
 
 
Fair
Value
 
Gross
Unrealized
Losses
 
 
(In Millions)
Less than 12 months
 

$26.5

 

$0.2

More than 12 months
 
87.4

 
1.2

Total
 

$113.9

 

$1.4


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018 :
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$170.1

 

$2.1

More than 12 months
145.8

 
3.9

Total

$315.9

 

$6.0


The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2019 and December 31, 2018 are as follows:
 
2019
 
2018
 
(In Millions)
Less than 1 year

$42.4

 

$31.1

1 year - 5 years
119.3

 
130.5

5 years - 10 years
135.7

 
111.0

10 years - 15 years
26.8

 
29.0

15 years - 20 years
44.5

 
37.1

20 years+
187.0

 
194.2

Total

$555.7

 

$532.9


During the three months ended March 31, 2019 and 2018 , proceeds from the dispositions of available-for-sale securities amounted to $56.2 million and $125.5 million , respectively.  During the three months ended March 31, 2019 and 2018 , gross gains of $0.3 million and $0.5 million , respectively, and gross losses of $0.2 million and $0.8 million , respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.


62

Entergy Corporation and Subsidiaries
Notes to Financial Statements

System Energy

System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2019 and December 31, 2018 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2019
 
 
 
 
 
 
Debt Securities
 

$375.2

 

$6.9

 

$1.2

 
 
 
 
 
 
 
2018
 
 
 
 
 
 
Debt Securities
 

$364.2

 

$2.9

 

$5.8


The amortized cost of available-for-sale debt securities was $369.5 million as of March 31, 2019 and $367.1 million as of December 31, 2018 .  As of March 31, 2019 , available-for-sale debt securities have an average coupon rate of approximately 3.08% , an average duration of approximately 6.34 years, and an average maturity of approximately 9.06 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2019 on equity securities still held as of March 31, 2019 were $67.3 million . The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2019 :
 
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months
 

$44.2

 

$—

More than 12 months
 
77.4

 
1.2

Total
 

$121.6

 

$1.2


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018 :
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$89.7

 

$2.4

More than 12 months
79.8

 
3.4

Total

$169.5

 

$5.8



63

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2019 and December 31, 2018 are as follows:
 
2019
 
2018
 
(In Millions)
Less than 1 year

$14.5

 

$22.8

1 year - 5 years
195.0

 
188.0

5 years - 10 years
80.1

 
73.4

10 years - 15 years
4.1

 
5.2

15 years - 20 years
10.2

 
10.2

20 years+
71.3

 
64.6

Total

$375.2

 

$364.2


During the three months ended March 31, 2019 and 2018 , proceeds from the dispositions of available-for-sale securities amounted to $42.1 million and $54.2 million , respectively.  During the three months ended March 31, 2019 and 2018 , gross gains of $0.4 million and $0.1 million , respectively, and gross losses of $0.1 million and $0.6 million , respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Other-than-temporary impairments and unrealized gains and losses

Entergy evaluates the available-for-sale debt 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 months ended March 31, 2019 and 2018 .  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. 


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

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

Tax Cuts and Jobs Act

During the three months ended March 31, 2019, Entergy Arkansas, Entergy Louisiana, and Entergy Texas returned unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. For the three months ended March 31, 2019 the return of unprotected excess accumulated deferred income taxes reduced the Registrant Subsidiaries’ regulatory liability for income taxes as follows: Entergy Arkansas, $32 million ; Entergy Louisiana, $7 million ; and Entergy Texas, $22 million .


64

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Other Tax Matters     

In April 2019 the state of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from 6.5% to 5.9% by the year 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by 0.4% once fully adopted.  The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.  The adoption of these tax law changes throughout the phase-in period is not expected to have a significant effect on the financial position, results of operations, or cash flows of Entergy Arkansas, the Utility, or Entergy.

Vermont Yankee

The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter of 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 16 to the financial statements herein for discussion of the Vermont Yankee transaction.


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 March 31, 2019 are $324 million for Entergy, $29.9 million for Entergy Arkansas, $118 million for Entergy Louisiana, $13.8 million for Entergy Mississippi, $8.2 million for Entergy New Orleans, $72.3 million for Entergy Texas, and $20.2 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2018 are $311 million for Entergy, $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 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.

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 three months ended March 31, 2019 and in the three months ended March 31, 2018 .



65

Entergy Corporation and Subsidiaries
Notes to Financial Statements

NOTE 13.  REVENUE RECOGNITION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition.  Entergy’s total revenues for the three months ended March 31, 2019 and 2018 are as follows:
 
 
2019
 
2018
 
 
(In Thousands)
Utility:
 
 
 
 
Residential
 

$802,539

 

$892,085

Commercial
 
554,058

 
595,720

Industrial
 
601,000

 
597,186

Governmental
 
52,960

 
56,478

    Total billed retail
 
2,010,557

 
2,141,469

 
 
 
 
 
Sales for resale (a)
 
84,435

 
69,526

Other electric revenues (b)
 
15,470

 
27,433

Non-customer revenues (c)
 
10,562

 
9,834

    Total electric revenues
 
2,121,024

 
2,248,262

 
 
 
 
 
Natural gas
 
54,948

 
56,695

 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
Competitive businesses sales (a)
 
360,471

 
409,135

Non-customer revenues (c)
 
73,141

 
9,789

    Total competitive businesses
 
433,612

 
418,924

 
 
 
 
 
    Total operating revenues
 

$2,609,584

 

$2,723,881



66

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ total revenues for the three months ended March 31, 2019 were as follows:
2019
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Residential
 

$209,867

 

$264,065

 

$128,809

 

$52,076

 

$147,722

Commercial
 
124,578

 
206,779

 
97,914

 
45,741

 
79,046

Industrial
 
121,577

 
346,678

 
37,697

 
7,250

 
87,798

Governmental
 
4,899

 
16,891

 
10,036

 
15,901

 
5,233

    Total billed retail
 
460,921


834,413


274,456


120,968


319,799

 
 
 
 
 
 
 
 
 
 
 
Sales for resale (a)
 
79,584

 
83,955

 
4,814

 
10,224

 
16,775

Other electric revenues (b)
 
2,304

 
12,441

 
405

 
(1,706
)
 
3,496

Non-customer revenues (c)
 
3,003

 
5,884

 
2,569

 
1,397

 
404

    Total electric revenues
 
545,812


936,693


282,244


130,883


340,474

 
 
 
 
 
 
 
 
 
 
 
Natural gas
 

 
22,637

 

 
32,311

 

 
 
 
 
 
 
 
 
 
 
 
    Total operating revenues
 

$545,812



$959,330



$282,244



$163,194



$340,474


The Registrant Subsidiaries’ total revenues for the three months ended March 31, 2018 were as follows:
2018
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Residential
 

$235,524

 

$295,517

 

$148,342

 

$64,575

 

$148,126

Commercial
 
120,634

 
224,928

 
110,460

 
54,272

 
85,427

Industrial
 
111,477

 
352,336

 
42,501

 
7,570

 
83,302

Governmental
 
4,648

 
17,310

 
10,848

 
17,691

 
5,981

    Total billed retail
 
472,283

 
890,091

 
312,151

 
144,108

 
322,836

 
 
 
 
 
 
 
 
 
 
 
Sales for resale (a)
 
66,103

 
89,255

 
1,993

 
13,337

 
23,361

Other electric revenues (b)
 
10,024

 
20,503

 
(719
)
 
(3,111
)
 
2,264

Non-customer revenues (c)
 
2,614

 
5,257

 
2,318

 
1,484

 
479

    Total electric revenues
 
551,024

 
1,005,106

 
315,743

 
155,818

 
348,940

 
 
 
 
 
 
 
 
 
 
 
Natural gas
 

 
24,238

 

 
32,457

 

 
 
 
 
 
 
 
 
 
 
 
    Total operating revenues
 

$551,024

 

$1,029,344

 

$315,743

 

$188,275

 

$348,940


(a)
Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short

67

Entergy Corporation and Subsidiaries
Notes to Financial Statements

duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments, and includes them as part of customer revenues.
(b)
Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue.
(c)
Non-customer revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.


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. The following is an update to that discussion.

In the first quarter 2019, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $126.2 million increase in its decommissioning cost liabilities, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.


NOTE 15. LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million , including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.

General

As of March 31, 2019, Entergy and the Registrant Subsidiaries held operating and financing leases for fleet vehicles used in operations, real estate, fuel storage facilities, and power purchase agreements. Excluded from this are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases.

Leases have remaining terms of one year to 30 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications which would hinder its ability to easily move. In

68

Entergy Corporation and Subsidiaries
Notes to Financial Statements

certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor; however, due to the nature of the agreements and Entergy’s continuing relationship with the lessor, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.

Entergy incurred the following total lease costs for the three months ended March 31, 2019:
 
 
(In Thousands)
Operating lease cost
 

$15,720

Financing lease cost:
 
 
Amortization of right-of-use assets
 

$2,912

Interest on lease liabilities
 

$753


The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the financing lease costs which are included in financing activities.

The Registrant Subsidiaries incurred the following lease costs for the three months ended March 31, 2019:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy
New Orleans
 
Entergy Texas
 
(In Thousands)
Operating lease cost

$3,295

 

$3,026

 

$1,753

 

$357

 

$1,085

Financing lease cost:
 
 
 
 
 
 
 
 
 
Amortization of right-of-use assets

$629

 

$1,025

 

$348

 

$176

 

$306

Interest on lease liabilities

$105

 

$152

 

$59

 

$30

 

$46


The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the financing lease costs which are included in financing activities.
 
 
 
 
 
 
 
 
 
 
 
 
Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.

Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at March 31, 2019 are $241 million related to operating leases and $60 million related to financing leases.

Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at March 31, 2019 are the following amounts:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Thousands)
Operating leases

$52,916

 

$36,066

 

$18,926

 

$4,961

 

$9,991

Financing leases

$11,317

 

$16,978

 

$6,358

 

$2,974

 

$5,076


69

Entergy Corporation and Subsidiaries
Notes to Financial Statements


The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of March 31, 2019:
 
 
(In Thousands)
Current liabilities:
 
 
Operating leases
 

$53,121

Financing leases
 

$11,590

Non-current liabilities:
 
 
Operating leases
 

$173,456

Financing leases
 

$53,065


The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at March 31, 2019:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Thousands)
Current liabilities:
 
 
 
 
 
 
 
 
 
Operating leases

$11,321

 

$10,958

 

$6,461

 

$1,748

 

$3,071

Financing leases

$2,465

 

$4,052

 

$1,382

 

$678

 

$1,281

Non-current liabilities:
 
 
 
 
 
 
 
 
 
Operating leases

$41,597

 

$25,144

 

$12,565

 

$3,218

 

$7,007

Financing leases

$8,851

 

$13,039

 

$4,975

 

$2,296

 

$3,708


The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and financing leases of Entergy at March 31, 2019:
Weighted average remaining lease terms:
 
 
Operating leases
 
5.51

Financing leases
 
7.06

Weighted average discount rate:
 
 
Operating leases
 
3.75
%
Financing leases
 
4.64
%


70

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and financing leases of the Registrant Subsidiaries at March 31, 2019:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
Weighted average remaining lease terms:
 
 
 
 
 
 
 
 
 
Operating leases
6.38

 
4.32

 
5.09

 
5.64

 
4.15

Financing leases
5.64

 
5.29

 
5.39

 
5.81

 
5.09

Weighted average discount rate:
 
 
 
 
 
 
 
 
 
Operating leases
3.29
%
 
3.54
%
 
3.67
%
 
3.55
%
 
3.80
%
Financing leases
3.71
%
 
3.56
%
 
3.70
%
 
3.97
%
 
3.72
%

Maturity of the lease liabilities for Entergy as of March 31, 2019 are as follows:
Year
 
Operating Leases
 
Financing Leases
 
 
(In Thousands)
 
 
 
 
 
Remainder for 2019
 

$44,143

 

$10,375

2020
 
52,905

 
12,489

2021
 
43,482

 
10,941

2022
 
34,768

 
9,743

2023
 
27,974

 
8,680

Years thereafter
 
45,259

 
26,744

Minimum lease payments
 
248,531

 
78,972

Less: amount representing interest
 
21,954

 
14,318

Present value of net minimum lease payments
 

$226,577

 

$64,654



71

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Maturity of the lease liabilities for the Registrant Subsidiaries as of March 31, 2019 are as follows:

Operating Leases
Year
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Remainder of 2019
 

$9,285

 

$8,316

 

$5,231

 

$1,036

 

$2,631

2020
 
11,085

 
9,795

 
5,845

 
1,216

 
2,961

2021
 
9,137

 
8,009

 
3,886

 
945

 
2,186

2022
 
6,763

 
5,137

 
2,505

 
622

 
1,196

2023
 
5,600

 
3,262

 
1,228

 
460

 
839

Years thereafter
 
15,713

 
3,346

 
2,313

 
999

 
1,104

Minimum lease payments
 
57,583

 
37,865

 
21,008

 
5,278

 
10,917

Less: amount representing interest
 
4,664

 
1,764

 
1,982

 
312

 
839

Present value of net minimum lease payments
 

$52,919

 

$36,101

 

$19,026

 

$4,966

 

$10,078


Financing Leases
Year
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Remainder of 2019
 

$2,071

 

$3,302

 

$1,159

 

$592

 

$1,010

2020
 
2,464

 
3,843

 
1,431

 
616

 
1,165

2021
 
2,067

 
3,189

 
1,266

 
505

 
973

2022
 
1,778

 
2,749

 
1,073

 
454

 
766

2023
 
1,551

 
2,301

 
867

 
407

 
633

Years thereafter
 
2,476

 
5,414

 
1,154

 
748

 
796

Minimum lease payments
 
12,407

 
20,798

 
6,950

 
3,322

 
5,343

Less: amount representing interest
 
1,091

 
3,707

 
592

 
349

 
354

Present value of net minimum lease payments
 

$11,316

 

$17,091

 

$6,358

 

$2,973

 

$4,989


In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.

In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K.


72

Entergy Corporation and Subsidiaries
Notes to Financial Statements

General

As of December 31, 2018 , Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):
 
Year
 
Operating
Leases
 
Capital
Leases
 
 
(In Thousands)
2019
 

$94,043

 

$2,887

2020
 
82,191

 
2,887

2021
 
75,147

 
2,887

2022
 
60,808

 
2,887

2023
 
47,391

 
2,887

Years thereafter
 
88,004

 
16,117

Minimum lease payments
 
447,584

 
30,552

Less:  Amount representing interest
 

 
8,555

Present value of net minimum lease payments
 

$447,584

 

$21,997


Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018 , $53.1 million in 2017 , and $44.4 million in 2016 .

As of December 31, 2018 the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
(In Thousands)
2019
 

$20,421

 

$25,970

 

$9,344

 

$2,493

 

$5,744

2020
 
13,918

 
21,681

 
8,763

 
2,349

 
4,431

2021
 
11,931

 
19,514

 
7,186

 
1,901

 
3,625

2022
 
9,458

 
15,756

 
5,675

 
1,314

 
2,218

2023
 
7,782

 
12,092

 
2,946

 
1,043

 
1,561

Years thereafter
 
23,297

 
22,003

 
4,417

 
2,323

 
2,726

Minimum lease payments
 

$86,807

 

$117,016

 

$38,331

 

$11,423

 

$20,305



73

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Rental Expenses
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
 
 
(In Millions)
2018
 

$6.2

 

$20.2

 

$4.6

 

$2.5

 

$3.1

 

$1.9

2017
 

$7.5

 

$23.0

 

$5.6

 

$2.5

 

$3.4

 

$2.2

2016
 

$8.0

 

$17.8

 

$4.0

 

$0.9

 

$2.8

 

$1.6


In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment.  Railcar operating lease payments were $2.8 million in 2018 , $4 million in 2017 , and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018 , $0.3 million in 2017 , and $0.3 million in 2016 for Entergy Louisiana.  Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018 , $1.6 million in 2017 , and $1.6 million in 2016 .

On January 1, 2019, Entergy implemented ASU No. 2016-02, “Leases (Topic 842)” along with the practical expedients provided by ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.”  See Note 1 to the financial statements in the Form 10-K for further discussion of ASU No. 2016-02.

Power Purchase Agreements

As of December 31, 2018 , Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:
Year
 
Entergy Texas (a)
 
Entergy
 
 
(In Thousands)
2019
 

$31,159

 

$31,159

2020
 
31,876

 
31,876

2021
 
32,609

 
32,609

2022
 
10,180

 
10,180

Minimum lease payments
 

$105,824

 

$105,824


(a)
Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million .  The leases were scheduled to expire in July 2017.  Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.


74

Entergy Corporation and Subsidiaries
Notes to Financial Statements

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million . Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million , and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09% ) of $57.5 million , including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million .  The initial term of the leases expired in July 2015.  System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value.  In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements.  For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation.  However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes.  Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term.  The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.


75

Entergy Corporation and Subsidiaries
Notes to Financial Statements

As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:
 
Amount
 
(In Thousands)
 
 
2019

$17,188

2020
17,188

2021
17,188

2022
17,188

2023
17,188

Years thereafter
223,437

Total
309,377

Less: Amount representing interest
275,025

Present value of net minimum lease payments

$34,352



NOTE 16.  DISPOSITIONS (Entergy Corporation)

Vermont Yankee

As discussed in Note 14 to the financial statements in the Form 10-K, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.

Entergy Nuclear Vermont Yankee had an outstanding credit facility that was used to pay for dry fuel storage costs. This credit facility was guaranteed by Entergy Corporation. Vermont Yankee Asset Retirement Management, LLC, a subsidiary of Entergy, assumed the obligations under the credit facility. At the closing of the transaction, NorthStar caused Entergy Nuclear Vermont Yankee, renamed NorthStar Vermont Yankee, to issue a $139 million promissory note to Vermont Yankee Asset Retirement Management. The amount of the note included the balance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection with the credit facility.

Upon closing of the transaction in January 2019, the Vermont Yankee decommissioning trust, along with the decommissioning obligation for the plant, was transferred to NorthStar. The Vermont Yankee spent fuel disposal contract was assigned to NorthStar as part of the transaction. The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter of 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. The transaction also resulted in other charges of $5.4 million ( $4.2 million after-tax) in the first quarter 2019.
________________

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.


76


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 March 31, 2019 , 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 March 31, 2019 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


77



ENTERGY ARKANSAS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $2.9 million primarily due to lower nuclear refueling outage expenses, higher net revenue, after excluding the effect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes, and lower other operation and maintenance expenses, partially offset by higher interest expense and higher depreciation and amortization expenses.

Net Revenue

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 first quarter 2019 to the first quarter 2018:

 
Amount
 
(In Millions)
2018 net revenue

$374.1

Return of unprotected excess accumulated deferred income taxes to customers
(31.8
)
Formula rate plan regulatory provision
(10.5
)
Retail electric price
10.6

Other
3.8

2019 net revenue

$346.2


The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. There is no effect on net income as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The formula rate plan regulatory provision is due to an additional provision recorded in the first quarter 2019 to reflect the current estimate of the historical year netting adjustment to be included in the 2019 formula rate plan filing that will be made in July 2019. See Note 2 to the financial statements herein for a discussion of the upcoming formula rate plan filing.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2019 as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

Other Income Statement Variances

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


78

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

Other operation and maintenance expenses decreased primarily due to a decrease of $8.9 million in nuclear generation expenses primarily due to a lower scope of work performed in the first quarter 2019 as compared to the first quarter 2018 and lower nuclear labor costs, including contract labor.

The decrease was partially offset by:

an increase of $1.8 million in information technology costs primarily due to higher software maintenance costs and higher labor costs;
an increase of $1.1 million in outside legal costs primarily due to a settlement received in 2018 which reduced legal costs in the first quarter 2018;
an increase of $1 million in advanced metering costs, including customer education costs; and
several individually insignificant items.

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

Interest expense increased primarily due to the issuance of $250 million of 4.00% Series first mortgage bonds in May 2018 and the issuance of $350 million of 4.20% Series first mortgage bonds in March 2019.

Income Taxes

The effective income tax rate was (138.2%) for the first quarter 2019. The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of corporate income tax law changes that phase in an Arkansas tax rate reduction.

The effective income tax rate was 20.7% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes and a write-off of a stock-based compensation deferred tax asset.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


79

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

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$119

 

$6,216

 
 
 
 
Cash flow provided by (used in):


 
 

Operating activities
206,467

 
179,890

Investing activities
(160,961
)
 
(161,344
)
Financing activities
144,616

 
(23,839
)
Net increase (decrease) in cash and cash equivalents
190,122

 
(5,293
)
 
 
 
 
Cash and cash equivalents at end of period

$190,241

 

$923


Operating Activities

Net cash flow provided by operating activities increased $26.6 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to the timing of recovery of fuel and purchased power costs and a decrease of $16.9 million in pension contributions in 2019. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities decreased $0.4 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to a decrease of $18.8 million in nuclear construction expenditures primarily due to a lower scope of work performed on various nuclear projects in 2019 as compared to the same period in 2018 and a decrease of $11.1 million as a result of 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. The decrease was substantially offset by money pool activity.

Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased by $30.5 million for the three months ended March 31, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s financing activities provided $144.6 million of cash for the three months ended March 31, 2019 compared to using $23.8 million of cash for the three months ended March 31, 2018 primarily due to the following activity:

the issuance of $350 million of 4.20% Series first mortgage bonds in March 2019;
money pool activity; and
borrowings of $50 million in 2018 on the Entergy Arkansas long-term credit facility.



80

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

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 $182.7 million in 2019 compared to decreasing by $42.3 million in 2018.

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

Capital Structure

Entergy Arkansas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of $350 million of first mortgage bonds in March 2019.

 
March 31,
2019
 
December 31,
2018
Debt to capital
54.1
%
 
52.0
%
Effect of excluding the securitization bonds
(0.1
%)
 
(0.2
%)
Debt to capital, excluding securitization bonds (a)
54.0
%
 
51.8
%
Effect of subtracting cash
(1.4
%)
 
%
Net debt to net capital, excluding securitization bonds (a)
52.6
%
 
51.8
%

(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, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Arkansas uses the debt to capital 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:
March 31,
 2019
 
December 31,
2018
 
March 31,
 2018
 
December 31,
2017
(In Thousands)
$30,521
 
($182,738)
 
($123,858)
 
($166,137)

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


81

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

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in September 2023. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2020. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of March 31, 2019, no cash borrowings and no letters of credit were 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 March 31, 2019, 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.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in September 2021.  As of March 31, 2019, $42.6 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.

Searcy Solar Facility

                In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas.  The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies.  The project will be constructed by a subsidiary of NextEra Energy Resources.  Entergy Arkansas will purchase the facility upon completion and after the other purchase contingencies have been met.   Closing is expected to occur by the end of 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.

Retail Rates

As discussed in the Form 10-K, the formula rate plan filing that will be made in July 2019 to set the formula rates for the 2020 calendar year will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017 formula rate plan filing to actual 2018 costs and sales data. In the fourth quarter 2018 Entergy Arkansas recorded a provision of $35.1 million that reflected the estimate of the historical year netting adjustment that will be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 results when compared to the allowed rate of return on equity. In the first quarter 2019, Entergy Arkansas recorded an additional $10.5 million provision to reflect the current estimate of the historical year netting adjustment to be included in the 2019 filing.  

Energy Cost Recovery Rider

In March 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order.


82

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

Opportunity Sales Proceeding

As discussed in the Form 10-K, in December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order in the opportunity sales proceeding. The compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. No protests were filed in response to the December 2018 compliance filing. The December 2018 compliance filing is pending FERC action.

In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity sales proceeding, but that in its October 2018 order, the FERC held were outside the scope of the proceeding. In March 2019, Entergy Services filed an answer and motion to dismiss the new complaint.

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, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. The following is an update to that discussion.

In the first quarter 2019, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $126.2 million increase in its decommissioning cost liabilities, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


83


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$545,812

 

$551,024

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
152,159

 
108,306

Purchased power
 
47,058

 
71,972

Nuclear refueling outage expenses
 
17,248

 
23,402

Other operation and maintenance
 
166,460

 
169,358

Decommissioning
 
15,761

 
14,760

Taxes other than income taxes
 
28,363

 
27,905

Depreciation and amortization
 
75,847

 
71,981

Other regulatory charges (credits) - net
 
445

 
(3,307
)
TOTAL
 
503,341

 
484,377

 
 
 
 
 
OPERATING INCOME
 
42,471

 
66,647

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
3,428

 
4,008

Interest and investment income
 
6,183

 
6,814

Miscellaneous - net
 
(3,690
)
 
(3,871
)
TOTAL
 
5,921

 
6,951

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
33,383

 
29,766

Allowance for borrowed funds used during construction
 
(1,414
)
 
(1,890
)
TOTAL
 
31,969

 
27,876

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
16,423

 
45,722

 
 
 
 
 
Income taxes
 
(22,698
)
 
9,467

 
 
 
 
 
NET INCOME
 
39,121

 
36,255

 
 
 
 
 
Preferred dividend requirements
 

 
357

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$39,121

 

$35,898

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 





84


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$39,121

 

$36,255

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
117,255

 
115,976

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
30,756

 
11,877

Changes in assets and liabilities:
 
 
 
 
Receivables
 
22,194

 
31,033

Fuel inventory
 
260

 
(13,868
)
Accounts payable
 
(56,432
)
 
(26,924
)
Taxes accrued
 
(10,616
)
 
10,072

Interest accrued
 
12,661

 
9,748

Deferred fuel costs
 
44,926

 
1,971

Other working capital accounts
 
1,599

 
5,591

Provisions for estimated losses
 
9,930

 
6,520

Other regulatory assets
 
(56,263
)
 
13,835

Other regulatory liabilities
 
53,386

 
(13,546
)
Pension and other postretirement liabilities
 
(910
)
 
(19,277
)
Other assets and liabilities
 
(1,400
)
 
10,627

Net cash flow provided by operating activities
 
206,467

 
179,890

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(147,214
)
 
(167,485
)
Allowance for equity funds used during construction
 
3,506

 
4,143

Nuclear fuel purchases
 
(214
)
 
(19,391
)
Proceeds from sale of nuclear fuel
 
22,834

 
30,907

Proceeds from nuclear decommissioning trust fund sales
 
34,423

 
34,865

Investment in nuclear decommissioning trust funds
 
(40,223
)
 
(40,238
)
Change in money pool receivable - net
 
(30,521
)
 

Changes in securitization account
 
(3,553
)
 
(4,145
)
Other
 
1

 

Net cash flow used in investing activities
 
(160,961
)
 
(161,344
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
603,655

 
175,000

Retirement of long-term debt
 
(275,904
)
 
(149,904
)
Changes in short-term borrowings - net
 

 
(6,087
)
Changes in money pool payable - net
 
(182,738
)
 
(42,279
)
Dividends paid:
 
 
 
 
Preferred stock
 

 
(357
)
Other
 
(397
)
 
(212
)
Net cash flow provided by (used in) financing activities
 
144,616

 
(23,839
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
190,122

 
(5,293
)
Cash and cash equivalents at beginning of period
 
119

 
6,216

Cash and cash equivalents at end of period
 

$190,241

 

$923

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

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

$19,458

 

$18,761

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

85


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$746

 

$118

Temporary cash investments
 
189,495

 
1

Total cash and cash equivalents
 
190,241

 
119

Securitization recovery trust account
 
8,218

 
4,666

Accounts receivable:
 
 
 
 
Customer
 
130,054

 
94,348

Allowance for doubtful accounts
 
(1,455
)
 
(1,264
)
Associated companies
 
63,023

 
48,184

Other
 
43,548

 
64,393

Accrued unbilled revenues
 
86,910

 
108,092

Total accounts receivable
 
322,080

 
313,753

Deferred fuel costs
 

 
19,235

Fuel inventory - at average cost
 
22,888

 
23,148

Materials and supplies - at average cost
 
205,601

 
196,314

Deferred nuclear refueling outage costs
 
60,689

 
78,966

Prepayments and other
 
10,073

 
14,553

TOTAL
 
819,790

 
650,754

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
997,263

 
912,049

Other
 
5,478

 
5,480

TOTAL
 
1,002,741

 
917,529

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
11,744,151

 
11,611,041

Construction work in progress
 
304,981

 
243,731

Nuclear fuel
 
171,038

 
220,602

TOTAL UTILITY PLANT
 
12,220,170

 
12,075,374

Less - accumulated depreciation and amortization
 
4,865,283

 
4,864,818

UTILITY PLANT - NET
 
7,354,887

 
7,210,556

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Other regulatory assets (includes securitization property of $11,096 as of March 31, 2019 and $14,329 as of December 31, 2018)
 
1,591,240

 
1,534,977

Deferred fuel costs
 
67,393

 
67,294

Other
 
26,292

 
20,486

TOTAL
 
1,684,925

 
1,622,757

 
 
 
 
 
TOTAL ASSETS
 

$10,862,343

 

$10,401,596

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

86


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$47,717

 

$251,768

Other
 
140,708

 
187,387

Customer deposits
 
99,380

 
99,053

Taxes accrued
 
46,273

 
56,889

Interest accrued
 
31,554

 
18,893

Deferred fuel costs
 
25,790

 

Current portion of unprotected excess accumulated deferred income taxes
 
100,594

 
99,316

Other
 
39,020

 
23,943

TOTAL
 
531,036

 
737,249

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,131,314

 
1,085,545

Accumulated deferred investment tax credits
 
32,602

 
32,903

Regulatory liability for income taxes - net
 
467,198

 
505,748

Other regulatory liabilities
 
493,326

 
402,668

Decommissioning
 
1,190,346

 
1,048,428

Accumulated provisions
 
58,909

 
48,979

Pension and other postretirement liabilities
 
312,361

 
313,295

Long-term debt (includes securitization bonds of $20,975 as of March 31, 2019 and $20,898 as of December 31, 2018)
 
3,555,152

 
3,225,759

Other
 
67,875

 
17,919

TOTAL
 
7,309,083

 
6,681,244

 
 
 
 
 
EQUITY
 
 
 
 
Member's equity
 
3,022,224

 
2,983,103

TOTAL
 
3,022,224

 
2,983,103

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$10,862,343

 

$10,401,596

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


87


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
Member's Equity
 
 
(In Thousands)
 
 
 
Balance at December 31, 2017
 

$2,376,754

 
 
 
Net income
 
36,255

Preferred stock dividends
 
(357
)
 
 
 
Balance at March 31, 2018
 

$2,412,652

 
 
 
 
 
 
Balance at December 31, 2018
 

$2,983,103

 
 
 
Net income
 
39,121

 
 
 
Balance at March 31, 2019
 

$3,022,224

 
 
 
See Notes to Financial Statements.
 
 


88


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2019
 
2018
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$210

 

$236

 

($26
)
 
(11
)
Commercial
 
125

 
121

 
4

 
3

Industrial
 
122

 
111

 
11

 
10

Governmental
 
5

 
5

 

 

Total billed retail
 
462

 
473

 
(11
)
 
(2
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
29

 
30

 
(1
)
 
(3
)
Non-associated companies
 
50

 
36

 
14

 
39

Other
 
5

 
12

 
(7
)
 
(58
)
Total
 

$546

 

$551

 

($5
)
 
(1
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,205

 
2,329

 
(124
)
 
(5
)
Commercial
 
1,326

 
1,365

 
(39
)
 
(3
)
Industrial
 
1,845

 
1,828

 
17

 
1

Governmental
 
57

 
56

 
1

 
2

Total retail
 
5,433

 
5,578

 
(145
)
 
(3
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
597

 
487

 
110

 
23

Non-associated companies
 
2,519

 
1,717

 
802

 
47

Total
 
8,549

 
7,782

 
767

 
10


89



ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $16 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by higher depreciation and amortization expenses.

Net Revenue

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 first quarter 2019 to the first quarter 2018:

 
Amount
 
(In Millions)
2018 net revenue

$573.7

Retail electric price
46.0

Return of unprotected excess accumulated deferred income taxes to customers
(7.0
)
Volume/weather
(29.6
)
Other
(0.8
)
2019 net revenue

$582.3


The retail electric price variance is primarily due to regulatory charges of $27 million recorded in the first quarter 2018 to reflect the effects of a provision in the settlement reached in the formula rate plan extension proceeding to return the benefits of the lower federal income tax rate in 2018 to customers, an increase in formula rate plan revenues, as approved by the LPSC, implemented with the first billing cycle of September 2018, and the implementation of an advanced metering system customer charge, as approved by the LPSC, effective January 2019. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan proceedings and advanced metering system customer charge.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018. There is no effect on net income as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The volume/weather variance is primarily due to a decrease of 225 GWh, or 2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales. The decrease was partially offset by an increase in industrial usage primarily due to an increase in demand from existing customers.


90

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

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to:

a decrease of $9.7 million in nuclear generation expenses primarily due to a lower scope of work performed during non-refueling plant outages in the first quarter 2019 as compared to the first quarter 2018 and lower nuclear labor costs; and
a decrease of $4.1 million in energy efficiency costs due to the timing of recovery from customers.

The decrease was partially offset by:

an increase of $2.2 million in information technology costs primarily due to higher software maintenance costs and higher contract costs; and
an increase of $2.1 million in loss provisions primarily due to a litigation provision recorded in first quarter 2019.

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

Other income increased primarily due to an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2019, including the Lake Charles Power Station and St. Charles Power Station projects. The increase was substantially offset by a change in decommissioning trust fund investment activity.

Income Taxes

The effective income tax rate was 11.5% for the first quarter 2019. The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 16.3% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes and a write-off of a stock-based compensation deferred tax asset.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


91

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

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$43,364

 

$35,907

 
 
 
 
Cash flow provided by (used in):
 
 
 
    Operating activities
179,583

 
328,040

    Investing activities
(441,392
)
 
(613,950
)
    Financing activities
523,608

 
812,289

Net increase in cash and cash equivalents
261,799

 
526,379

 
 
 
 
Cash and cash equivalents at end of period

$305,163

 

$562,286


Operating Activities

Net cash flow provided by operating activities decreased $148.5 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

the timing of collection of receivables from customers;
an increase of $28.7 million in spending on nuclear refueling outages;
an increase of $20.3 million in interest payments in the first quarter 2019 as compared to the first quarter 2018; and
the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act.

The decrease was partially offset by a decrease of $17.6 million in pension contributions in 2019 as compared to 2018. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities decreased $172.6 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

money pool activity;
a decrease of $90.3 million in fossil-fueled generation construction expenditures primarily due to lower spending on the St. Charles Power Station and Lake Charles Power Station projects in 2019; and
a decrease of $22 million in transmission construction expenditures primarily due to a lower scope of work performed in 2019 as compared to the same period in 2018.

The decrease was partially offset by:

an increase of $85.7 million as a result of 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; and

92

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

an increase of $42.6 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2019.

Decreases in Entergy Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana’s receivable from the money pool decreased by $8.9 million for the three months ended March 31, 2019 compared to increasing by $170.2 million for the three months ended March 31, 2018 . 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 $288.7 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

the issuance of $750 million of 4.00% Series first mortgage bonds in March 2018;
net borrowings of $100 million on the Entergy Louisiana long-term credit facility in 2018;
$49 million in common equity distributions in the first quarter 2019 primarily to maintain Entergy Louisiana’s targeted capital structure; and
net short-term borrowings of $19.4 million in 2018 on the nuclear fuel company variable interest entities’ credit facilities.

The decrease was partially offset by the issuance of $525 million of 4.20% Series first mortgage bonds in March 2019 and net long-term borrowings of $54.3 million on the nuclear fuel company variable interest entities’ credit facilities in 2019 compared to net repayments of long-term borrowings of $49.7 million on the nuclear fuel company variable interest entities’ credit facilities in 2018.

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

Capital Structure

Entergy Louisiana’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of $525 million of first mortgage bonds in March 2019.

 
 
March 31,
2019
 
December 31,
2018
Debt to capital
55.3
%
 
53.6
%
Effect of excluding securitization bonds
(0.2
%)
 
(0.3
%)
Debt to capital, excluding securitization bonds (a)
55.1
%
 
53.3
%
Effect of subtracting cash
(1.1
%)
 
(0.1
%)
Net debt to net capital, excluding securitization bonds (a)
54.0
%
 
53.2
%
(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.

Debt consists of short-term borrowings, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital 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.

93

Entergy Louisiana, LLC and Subsidiaries
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 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:
March 31,
2019
 
December 31, 2018
 
March 31,
2018
 
December 31,
2017
(In Thousands)
$37,965
 
$46,845
 
$181,336
 
$11,173

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 September 2023.  The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As of March 31, 2019 , there were no cash borrowings and no letters of credit outstanding under the credit facility.  In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2019 , a $43 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, each in the amount of $105 million and scheduled to expire in September 2021.  As of March 31, 2019 , $95.4 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of March 31, 2019 , $79.5 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.

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 is an update to that discussion.

Fuel and purchased power recovery

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. In January 2019, the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in first quarter 2019 for the potential outcome of the audit.

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.


94

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

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 Louisiana’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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



95


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$936,693

 

$1,005,106

Natural gas
 
22,637

 
24,238

TOTAL
 
959,330

 
1,029,344

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
147,349

 
180,781

Purchased power
 
257,306

 
251,772

Nuclear refueling outage expenses
 
12,808

 
13,099

Other operation and maintenance
 
225,888

 
234,380

Decommissioning
 
13,879

 
12,772

Taxes other than income taxes
 
49,682

 
51,280

Depreciation and amortization
 
126,134

 
120,822

Other regulatory charges (credits) - net
 
(27,660
)
 
23,119

TOTAL
 
805,386

 
888,025

 
 
 
 
 
OPERATING INCOME
 
153,944

 
141,319

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
23,914

 
17,745

Interest and investment income
 
71,986

 
43,275

Miscellaneous - net
 
(42,344
)
 
(7,665
)
TOTAL
 
53,556

 
53,355

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
74,703

 
70,096

Allowance for borrowed funds used during construction
 
(11,367
)
 
(8,763
)
TOTAL
 
63,336

 
61,333

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
144,164

 
133,341

 
 
 
 
 
Income taxes
 
16,531

 
21,748

 
 
 
 
 
NET INCOME
 

$127,633

 

$111,593

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 



96


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
 
 
 
 
 
Net Income
 

$127,633

 

$111,593

Other comprehensive loss
 
 
 
 
Pension and other postretirement liabilities (net of tax benefit of $342 and $176)
 
(969
)
 
(501
)
Other comprehensive loss
 
(969
)
 
(501
)
Comprehensive Income
 

$126,664

 

$111,092

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

97






























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98


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$127,633

 

$111,593

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
153,368

 
157,887

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
49,041

 
86,443

Changes in working capital:
 
 
 
 
Receivables
 
(849
)
 
53,786

Fuel inventory
 
31

 
(1,402
)
Accounts payable
 
(26,475
)
 
(18,036
)
Prepaid taxes and taxes accrued
 
16,311

 
(24,705
)
Interest accrued
 
(9,300
)
 
6,365

Deferred fuel costs
 
(50,620
)
 
(52,090
)
Other working capital accounts
 
(41,481
)
 
(55
)
Changes in provisions for estimated losses
 
2,962

 
(481
)
Changes in other regulatory assets
 
(91,490
)
 
28,579

Changes in other regulatory liabilities
 
49,352

 
(6,088
)
Changes in pension and other postretirement liabilities
 
(1,954
)
 
(18,075
)
Other
 
3,054

 
4,319

Net cash flow provided by operating activities
 
179,583

 
328,040

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(401,573
)
 
(469,398
)
Allowance for equity funds used during construction
 
23,914

 
17,745

Nuclear fuel purchases
 
(59,422
)
 
(9,997
)
Proceeds from the sale of nuclear fuel
 

 
36,301

Payments to storm reserve escrow account
 
(1,651
)
 
(853
)
Changes to securitization account
 
(5,405
)
 
(7,523
)
Proceeds from nuclear decommissioning trust fund sales
 
101,555

 
125,453

Investment in nuclear decommissioning trust funds
 
(107,690
)
 
(137,097
)
Changes in money pool receivable - net
 
8,880

 
(170,163
)
Insurance proceeds
 

 
1,582

Net cash flow used in investing activities
 
(441,392
)
 
(613,950
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
1,212,989

 
947,038

Retirement of long-term debt
 
(642,307
)
 
(154,117
)
Changes in short-term borrowings - net
 

 
19,382

Distributions paid:
 
 
 
 
Common equity
 
(49,000
)
 

Other
 
1,926

 
(14
)
Net cash flow provided by financing activities
 
523,608

 
812,289

 
 
 
 
 
Net increase in cash and cash equivalents
 
261,799

 
526,379

Cash and cash equivalents at beginning of period
 
43,364

 
35,907

Cash and cash equivalents at end of period
 

$305,163

 

$562,286

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

$81,940

 

$61,613

Income taxes
 

$—

 

($2,973
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

99


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$68,144

 

$252

Temporary cash investments
 
237,019

 
43,112

Total cash and cash equivalents
 
305,163

 
43,364

Accounts receivable:
 
 
 
 
Customer
 
219,503

 
199,903

Allowance for doubtful accounts
 
(1,912
)
 
(1,813
)
Associated companies
 
106,149

 
123,363

Other
 
73,120

 
60,879

Accrued unbilled revenues
 
144,493

 
167,052

Total accounts receivable
 
541,353

 
549,384

Deferred fuel costs
 
19,209

 

Fuel inventory
 
34,387

 
34,418

Materials and supplies - at average cost
 
328,666

 
324,627

Deferred nuclear refueling outage costs
 
61,384

 
24,406

Prepayments and other
 
38,550

 
38,715

TOTAL
 
1,328,712

 
1,014,914

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

 
1,390,587

Decommissioning trust funds
 
1,408,045

 
1,284,996

Storm reserve escrow account
 
291,176

 
289,525

Non-utility property - at cost (less accumulated depreciation)
 
292,380

 
286,555

Other
 
15,085

 
14,927

TOTAL
 
3,397,273

 
3,266,590

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
20,614,483

 
20,532,312

Natural gas
 
218,502

 
211,421

Construction work in progress
 
1,997,965

 
1,864,582

Nuclear fuel
 
329,778

 
298,022

TOTAL UTILITY PLANT
 
23,160,728

 
22,906,337

Less - accumulated depreciation and amortization
 
8,827,954

 
8,837,596

UTILITY PLANT - NET
 
14,332,774

 
14,068,741

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Other regulatory assets (includes securitization property of $44,739 as of March 31, 2019 and $49,753 as of December 31, 2018)
 
1,196,567

 
1,105,077

Deferred fuel costs
 
168,122

 
168,122

Other
 
32,729

 
28,371

TOTAL
 
1,397,418

 
1,301,570

 
 
 
 
 
TOTAL ASSETS
 

$20,456,177

 

$19,651,815

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

100


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$2

 

$2

Accounts payable:
 
 
 
 
Associated companies
 
82,848

 
102,749

Other
 
380,874

 
390,367

Customer deposits
 
154,573

 
155,314

Taxes accrued
 
47,179

 
30,868

Interest accrued
 
74,150

 
83,450

Deferred fuel costs
 

 
31,411

Current portion of unprotected excess accumulated deferred income taxes
 
33,343

 
31,457

Other
 
59,002

 
49,202

TOTAL
 
831,971

 
874,820

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
2,280,532

 
2,226,721

Accumulated deferred investment tax credits
 
115,782

 
116,999

Regulatory liability for income taxes - net
 
561,864

 
581,001

Other regulatory liabilities
 
815,387

 
748,784

Decommissioning
 
1,296,647

 
1,280,272

Accumulated provisions
 
313,717

 
310,755

Pension and other postretirement liabilities
 
641,132

 
643,171

Long-term debt (includes securitization bonds of $55,747 as of March 31, 2019 and $55,682 as of December 31, 2018)
 
7,377,910

 
6,805,766

Other
 
240,664

 
160,608

TOTAL
 
13,643,635

 
12,874,077

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Member's equity
 
5,987,693

 
5,909,071

Accumulated other comprehensive loss
 
(7,122
)
 
(6,153
)
TOTAL
 
5,980,571

 
5,902,918

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$20,456,177

 

$19,651,815

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


101


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2017

$5,355,204

 

($46,400
)
 

$5,308,804

 
 
 
 
 
 
Net income
111,593

 

 
111,593

Other comprehensive loss

 
(501
)
 
(501
)
Reclassification pursuant to ASU 2018-02
6,262

 
(10,049
)
 
(3,787
)
Other
24

 

 
24

 
 
 
 
 
 
Balance at March 31, 2018

$5,473,083

 

($56,950
)
 

$5,416,133

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

$5,909,071

 

($6,153
)
 

$5,902,918

 
 
 
 
 
 
Net income
127,633

 

 
127,633

Other comprehensive loss

 
(969
)
 
(969
)
Distributions declared on common equity
(49,000
)
 

 
(49,000
)
Other
(11
)
 

 
(11
)
 
 
 
 
 
 
Balance at March 31, 2019

$5,987,693

 

($7,122
)
 

$5,980,571

 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 


102


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Increase/
 
 
Description
 
2019
 
2018
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$264

 

$296

 

($32
)
 
(11
)
Commercial
 
207

 
225

 
(18
)
 
(8
)
Industrial
 
347

 
352

 
(5
)
 
(1
)
Governmental
 
17

 
17

 

 

Total billed retail
 
835

 
890

 
(55
)
 
(6
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
68

 
74

 
(6
)
 
(8
)
Non-associated companies
 
16

 
15

 
1

 
7

Other
 
18

 
26

 
(8
)
 
(31
)
Total
 

$937

 

$1,005

 

($68
)
 
(7
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
3,080

 
3,459

 
(379
)
 
(11
)
Commercial
 
2,519

 
2,661

 
(142
)
 
(5
)
Industrial
 
7,343

 
7,049

 
294

 
4

Governmental
 
203

 
201

 
2

 
1

Total retail
 
13,145

 
13,370

 
(225
)
 
(2
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,080

 
1,014

 
66

 
7

Non-associated companies
 
505

 
513

 
(8
)
 
(2
)
Total
 
14,730

 
14,897

 
(167
)
 
(1
)
 
 
 
 
 
 
 
 
 

103



ENTERGY MISSISSIPPI, LLC

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income decreased $7.4 million primarily due to lower net revenue.

Net Revenue

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 first quarter 2019 to the first quarter 2018:
 
Amount
 
(In Millions)
2018 net revenue

$164.5

Volume/weather
(5.1
)
Retail electric price
(3.3
)
Other
(0.9
)
2019 net revenue

$155.2


The volume/weather variance is primarily due to a decrease of 226 GWh, or 7%, in billed electricity usage, including the effect of less favorable weather on residential sales.

The retail electric price variance is primarily due to lower storm damage rider revenues. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle and ceased billing the storm damage rider effective with the August 2018 billing cycle. The decrease was partially offset by higher ad valorem tax adjustment rider revenues resulting from a rate increase effective October 2018. See Note 2 to the financial statements in the Form 10-K for further discussion of the storm damage rider.

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to a decrease of $5.1 million in storm damage provisions, offset by several individually insignificant items. See Note 2 to the financial statements in the Form 10-K for a discussion of storm cost recovery.

Income Taxes

The effective income tax rate was 18.3% for the first quarter 2019 . The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes and the provision for uncertain tax positions.

The effective income tax rate was 23.3% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes and a write-off of a stock-based compensation deferred tax asset, partially offset by certain book and tax differences related to utility plant items.


104

Entergy Mississippi, LLC
Management's Financial Discussion and Analysis


Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$36,954

 

$6,096

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
9,992

 
(8,841
)
Investing activities
(54,376
)
 
(76,268
)
Financing activities
8,315

 
79,316

Net decrease in cash and cash equivalents
(36,069
)
 
(5,793
)
 
 
 
 
Cash and cash equivalents at end of period

$885

 

$303


Operating Activities

Entergy Mississippi’s operating activities provided $10 million in cash for the three months ended March 31, 2019 compared to using $8.8 million in cash for the three months ended March 31, 2018 primarily due to:

the timing of collection of receivables from customers;
a decrease of $4.6 million in interest paid in 2019 as compared to 2018;
a decrease of $4 million in pension contributions in 2019 as compared to 2018. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding; and
the timing of recovery of fuel and purchased power costs in 2019 as compared to 2018.

Investing Activities

Net cash flow used in investing activities decreased $21.9 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to money pool activity. The decrease was partially offset by an increase of $9.6 million in fossil-fueled generation construction expenditures, an increase of $7.5 million in transmission construction expenditures, and an increase of $5.6 million in distribution construction expenditures, each primarily due to a higher scope of work performed in 2019 as compared to 2018.


105

Entergy Mississippi, LLC
Management's Financial Discussion and Analysis

Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $41.4 million for the three months ended March 31, 2019 compared to decreasing by $1.6 million for the three months ended March 31, 2018. 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 $71 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to money pool activity.

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 $10.9 million for the three months ended March 31, 2019 compared to increasing by $74.9 million for the three months ended March 31, 2018.

Capital Structure

Entergy Mississippi’s debt to capital ratio is shown in the following table.

 
March 31,
2019
 
December 31, 2018
Debt to capital
50.5
%
 
50.6
%
Effect of subtracting cash
%
 
(0.7
%)
Net debt to net capital
50.5
%
 
49.9
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition.  Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
March 31,
2019
 
December 31, 2018
 
March 31,
2018
 
December 31, 2017
(In Thousands)
($10,925)
 
$41,380
 
($74,892)
 
$1,633

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


106

Entergy Mississippi, LLC
Management's Financial Discussion and Analysis

Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in May 2019. Entergy Mississippi expects to renew its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of March 31, 2019.  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 March 31, 2019, $12.1 million of letters of credit were 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.

Choctaw Generating Station

In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi.  The purchase price is expected to be approximately $314 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred.  In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. Closing is expected to occur by the end of 2019. Due diligence performed on the plant indicates that there exists a potential mechanical issue that must be addressed prior to closing.  There is some possibility that closing may be delayed to allow time for this issue to be resolved.

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.

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 alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The defendants have denied the allegations. In December 2008 the Attorney General’s lawsuit was removed to U.S. District Court in Jackson, Mississippi. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trial to April 2019. In April 2019 the District Court remanded the Attorney General’s lawsuit to the Hinds County Chancery Court in Jackson, Mississippi.


107

Entergy Mississippi, LLC
Management's Financial Discussion and Analysis

Formula Rate Plan

In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base, within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the estimate of the difference between the 2018 expected earned rate of return on rate base and an established performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism. In the first quarter 2019, Entergy Mississippi recorded a $0.8 million increase in the provision to reflect the amount shown in the look-back filing. The filing is currently subject to MPSC review. A final order is expected in the second quarter 2019, with the resulting rates effective for the first billing cycle of July 2019.

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, 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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


108


ENTERGY MISSISSIPPI, LLC
INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$282,244

 

$315,743

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
53,229

 
63,528

Purchased power
 
71,455

 
87,456

Other operation and maintenance
 
59,183

 
59,458

Taxes other than income taxes
 
26,127

 
25,394

Depreciation and amortization
 
39,088

 
38,182

Other regulatory charges - net
 
2,370

 
293

TOTAL
 
251,452

 
274,311

 
 
 
 
 
OPERATING INCOME
 
30,792

 
41,432

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
1,913

 
1,978

Interest and investment income
 
152

 
25

Miscellaneous - net
 
(263
)
 
(571
)
TOTAL
 
1,802

 
1,432

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
14,540

 
13,905

Allowance for borrowed funds used during construction
 
(785
)
 
(828
)
TOTAL
 
13,755

 
13,077

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
18,839

 
29,787

 
 
 
 
 
Income taxes
 
3,441

 
6,944

 
 
 
 
 
NET INCOME
 
15,398

 
22,843

 
 
 
 
 
Preferred dividend requirements and other
 

 
238

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$15,398

 

$22,605

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 



109




























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110


ENTERGY MISSISSIPPI, LLC
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$15,398

 

$22,843

Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
39,088

 
38,182

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
12,072

 
7,787

Changes in assets and liabilities:
 
 
 
 
Receivables
 
18,364

 
1,018

Fuel inventory
 
(4,267
)
 
(767
)
Accounts payable
 
(5,722
)
 
(24,818
)
Taxes accrued
 
(66,445
)
 
(56,244
)
Interest accrued
 
(293
)
 
(5,548
)
Deferred fuel costs
 
17,635

 
13,817

Other working capital accounts
 
3,444

 
(4,856
)
Provisions for estimated losses
 
(846
)
 
4,754

Other regulatory assets
 
(3,478
)
 
4,586

Other regulatory liabilities
 
(9,301
)
 
766

Pension and other postretirement liabilities
 
269

 
(4,604
)
Other assets and liabilities
 
(5,926
)
 
(5,757
)
Net cash flow provided by (used in) operating activities
 
9,992

 
(8,841
)
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(97,487
)
 
(79,141
)
Allowance for equity funds used during construction
 
1,913

 
1,978

Changes in money pool receivable - net
 
41,380

 
1,633

Other
 
(182
)
 
(738
)
Net cash flow used in investing activities
 
(54,376
)
 
(76,268
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Changes in money pool payable - net
 
10,925

 
74,892

Distributions/dividends paid:
 
 
 
 
Preferred stock
 

 
(238
)
Other
 
(2,610
)
 
4,662

Net cash flow provided by financing activities
 
8,315

 
79,316

 
 
 
 
 
Net decrease in cash and cash equivalents
 
(36,069
)
 
(5,793
)
Cash and cash equivalents at beginning of period
 
36,954

 
6,096

Cash and cash equivalents at end of period
 

$885

 

$303

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

$14,193

 

$18,820

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


111


ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$878

 

$11

Temporary cash investments
 
7

 
36,943

Total cash and cash equivalents
 
885

 
36,954

Accounts receivable:
 
 

 
 

Customer
 
71,621

 
73,205

Allowance for doubtful accounts
 
(647
)
 
(563
)
Associated companies
 
3,641

 
51,065

Other
 
7,678

 
8,647

Accrued unbilled revenues
 
40,488

 
50,171

Total accounts receivable
 
122,781

 
182,525

Deferred fuel costs
 

 
8,016

Fuel inventory - at average cost
 
16,198

 
11,931

Materials and supplies - at average cost
 
49,576

 
47,255

Prepayments and other
 
4,043

 
9,365

TOTAL
 
193,483

 
296,046

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property - at cost (less accumulated depreciation)
 
4,572

 
4,576

Storm reserve escrow account
 
32,629

 
32,447

TOTAL
 
37,201

 
37,023

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
4,834,942

 
4,780,720

Construction work in progress
 
182,618

 
128,149

TOTAL UTILITY PLANT
 
5,017,560

 
4,908,869

Less - accumulated depreciation and amortization
 
1,667,543

 
1,641,821

UTILITY PLANT - NET
 
3,350,017

 
3,267,048

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Other regulatory assets
 
346,527

 
343,049

Other
 
9,878

 
3,638

TOTAL
 
356,405

 
346,687

 
 
 
 
 
TOTAL ASSETS
 

$3,937,106

 

$3,946,804

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


112


ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 

 
 

Currently maturing long-term debt
 

$150,000

 

$150,000

Accounts payable:
 
 

 
 

Associated companies
 
53,027

 
42,928

Other
 
74,694

 
79,117

Customer deposits
 
85,830

 
85,085

Taxes accrued
 
11,107

 
77,552

Interest accrued
 
19,938

 
20,231

Deferred fuel costs
 
9,619

 

Other
 
15,111

 
7,526

TOTAL
 
419,326

 
462,439

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
566,047

 
551,869

Accumulated deferred investment tax credits
 
10,146

 
10,186

Regulatory liability for income taxes - net
 
244,123

 
246,402

Other regulatory liabilities
 
26,600

 
33,622

Asset retirement cost liabilities
 
9,333

 
9,206

Accumulated provisions
 
50,296

 
51,142

Pension and other postretirement liabilities
 
93,324

 
93,100

Long-term debt
 
1,175,915

 
1,175,750

Other
 
34,372

 
20,862

TOTAL
 
2,210,156

 
2,192,139

 
 
 
 
 
Commitments and Contingencies
 
 

 
 

 
 
 
 
 
EQUITY
 
 

 
 

Member's equity
 
1,307,624

 
1,292,226

TOTAL
 
1,307,624

 
1,292,226

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,937,106

 

$3,946,804

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



113


ENTERGY MISSISSIPPI, LLC
STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
Member's Equity
 
 
(In Thousands)
 
 
 
Balance at December 31, 2017
 

$1,177,870

 
 
 
Net income
 
22,843

Preferred stock dividends
 
(238
)
 
 
 
Balance at March 31, 2018
 

$1,200,475

 
 
 
 
 
 
Balance at December 31, 2018
 

$1,292,226

 
 
 
Net income
 
15,398

 
 
 
Balance at March 31, 2019
 

$1,307,624

 
 
 
See Notes to Financial Statements.
 
 



114


ENTERGY MISSISSIPPI, LLC
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 

Description
 
2019
 
2018
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 

 
 

 
 

 
 

Residential
 

$129

 

$148

 

($19
)
 
(13
)
Commercial
 
98

 
110

 
(12
)
 
(11
)
Industrial
 
38

 
43

 
(5
)
 
(12
)
Governmental
 
10

 
11

 
(1
)
 
(9
)
Total billed retail
 
275

 
312

 
(37
)
 
(12
)
Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
5

 
2

 
3

 
150

Other
 
2

 
2

 

 

Total
 

$282

 

$316

 

($34
)
 
(11
)
 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,315

 
1,449

 
(134
)
 
(9
)
Commercial
 
1,040

 
1,100

 
(60
)
 
(5
)
Industrial
 
566

 
597

 
(31
)
 
(5
)
Governmental
 
98

 
99

 
(1
)
 
(1
)
Total retail
 
3,019

 
3,245

 
(226
)
 
(7
)
Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
166

 
193

 
(27
)
 
(14
)
Total
 
3,185

 
3,438

 
(253
)
 
(7
)


115



ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income decreased $1.9 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, and lower net revenue, partially offset by lower taxes other than income taxes.

Net Revenue

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 first quarter 2019 to the first quarter 2018:
 
Amount
 
(In Millions)
2018 net revenue

$75.0

Rough production cost equalization
(1.5
)
Volume/weather
(1.3
)
Amortization of income tax rate change liability
3.1

Other
(1.2
)
2019 net revenue

$74.1


The rough production cost equalization variance is due to the use in the first quarter of 2018 of prior rough production cost equalization proceeds to offset investments in Energy Smart energy efficiency programs. The rough production cost equalization variance is offset in other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements in the Form 10-K for discussion of Energy Smart program funding.

The volume/weather variance is primarily due to a decrease of 100 GWh, or 7%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.

The amortization of income tax rate change liability variance is primarily due to the amortization of the regulatory liability that Entergy New Orleans began recording in 2018 for the lower income tax rate. This portion of the benefits of the lower income tax rate are being given to customers through investments in Energy Smart energy efficiency programs. The amortization of income tax rate change liability is offset in other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

an increase of $1.5 million in information technology costs primarily due to higher software maintenance costs and higher contract costs ;
an increase of $0.9 million in energy efficiency costs; and
an increase of $0.9 million in costs related to customer initiatives to explore new technologies and services.


116

Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis

The increase was partially offset by:

a decrease of $1.2 million in distribution expenses primarily due to lower contract labor costs; and
a decrease of $1.1 million in fossil-fueled generation expenses primarily due to lower plant operating expenses in 2019 as compared to 2018.

Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes primarily due to lower electric retail revenues in 2019 as compared to the same period in 2018.

Income Taxes

The effective income tax rate was 25.3% for the first quarter 2019 . The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to permanent book and tax differences, state income taxes, and the provision for uncertain tax positions, partially offset by flow-through tax accounting, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 19.5% for the first quarter 2018 . The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to flow-through tax accounting and certain book and tax differences related to utility plant items, partially offset by state income taxes, the provision for uncertain tax positions, and a write-off of a stock-based compensation deferred tax asset.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017.  Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion.  Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$19,677

 

$32,741

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
16,522

 
7,049

Investing activities
(36,783
)
 
(31,573
)
Financing activities
1,378

 
(6,857
)
Net decrease in cash and cash equivalents
(18,883
)
 
(31,381
)
 
 
 
 
Cash and cash equivalents at end of period

$794

 

$1,360



117

Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis

Operating Activities

Net cash flow provided by operating activities increased $9.5 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

the timing of payments to vendors;
the timing of recovery of fuel and purchased power costs; and
a decrease of $2 million in pension contributions in 2019 as compared to 2018. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities increased $5.2 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

an increase of $9.5 million in fossil-fueled generation construction expenditures primarily due to higher spending on the New Orleans Power Station and New Orleans Solar projects in 2019 as compared to the same period in 2018; and
an increase of $5.8 million in transmission construction expenditures primarily due to a higher scope of work performed in 2019 as compared to the same period in 2018, including investment in Entergy New Orleans’s system reliability and infrastructure.

The increase was partially offset by money pool activity.

Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $22 million for the three months ended March 31, 2019 compared to decreasing $12.3 million for the three months ended March 31, 2018 . 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 provided $1.4 million of cash for the three months ended March 31, 2019 compared to using $6.9 million of cash for the three months ended March 31, 2018 primarily due to $6.3 million in common equity distributions in 2018. Common equity distributions were lower in 2019 primarily as a result of the increase in planned capital investments.

Capital Structure

Entergy New Orleans’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to an increase in member’s equity in 2019.
 
March 31,
2019
 
December 31,
2018
Debt to capital
51.7
%
 
52.1
%
Effect of excluding securitization bonds
(3.5
%)
 
(3.5
%)
Debt to capital, excluding securitization bonds (a)
48.2
%
 
48.6
%
Effect of subtracting cash
%
 
(1.2
%)
Net debt to net capital, excluding securitization bonds (a)
48.2
%
 
47.4
%

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

118

Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis


Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, financing lease obligations, long-term debt, including the currently maturing portion, and the long-term payable due to an associated company.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  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 or (payables to) the money pool were as follows:
March 31,
 2019
 
December 31,
2018
 
March 31,
 2018
 
December 31,
2017
(In Thousands)
($1,877)
 
$22,016
 
$432
 
$12,723

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 2021. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of March 31, 2019 , 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 March 31, 2019 , a $1 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.

Renewables

As discussed in the Form 10-K, in July 2018, Entergy New Orleans filed an application with the City Council requesting approval of three utility-scale solar projects totaling 90 MW. In December 2018 the City Council advisors requested that Entergy New Orleans pursue alternative deal structures for the Washington Parish project and attempt to reduce costs for the 20 MW Orleans Parish project. As a result of settlement discussions, in March 2019, Entergy New Orleans revised its application to convert the build-own transfer acquisition of the 50 MW facility in Washington Parish to a power purchase agreement. Also in March 2019 the City Council approved a motion to allow settlement discussions to continue until June 2019.

State and Local Rate Regulation

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation   in the Form 10-K for a discussion of state and local rate regulation. The following is an update to that discussion.


119

Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis

Reliability Investigation

In August 2017 the City Council established a docket to investigate the reliability of the Entergy New Orleans distribution system and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. The resolution also called for Entergy New Orleans to file a revised reliability plan addressing the current state of its distribution system and proposing remedial measures for increasing reliability. In June 2018, Entergy New Orleans filed its response to the City Council’s resolution regarding the prudence of its management and maintenance of the reliability of its distribution system.  In July 2018, Entergy New Orleans filed its revised reliability plan discussing the various reliability programs that it uses to improve distribution system reliability and discussing generally the positive effect that advanced meter deployment and grid modernization can have on future reliability.  Entergy New Orleans has retained a national consulting firm with expertise in distribution system reliability to conduct a review of Entergy New Orleans’s distribution system reliability-related practices and procedures and to provide recommendations for improving distribution system reliability. The report was filed with the City Council in October 2018. The City Council also approved a resolution that opens a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation and asserting that it had been prudent in managing system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed.  Entergy New Orleans disagrees with the recommendation and plans to submit rebuttal testimony in May 2019.

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, 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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


120


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$130,883

 

$155,818

Natural gas
 
32,311

 
32,457

TOTAL
 
163,194

 
188,275

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
30,760

 
23,739

Purchased power
 
60,649

 
83,156

Other operation and maintenance
 
30,298

 
28,299

Taxes other than income taxes
 
13,542

 
15,132

Depreciation and amortization
 
14,164

 
13,747

Other regulatory charges (credits) - net
 
(2,355
)
 
6,333

TOTAL
 
147,058

 
170,406

 
 
 
 
 
OPERATING INCOME
 
16,136

 
17,869

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
2,290

 
851

Interest and investment income
 
179

 
93

Miscellaneous - net
 
(1,506
)
 
(337
)
TOTAL
 
963

 
607

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
5,936

 
5,279

Allowance for borrowed funds used during construction
 
(914
)
 
(314
)
TOTAL
 
5,022

 
4,965

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
12,077

 
13,511

 
 
 
 
 
Income taxes
 
3,054

 
2,629

 
 
 
 
 
NET INCOME
 

$9,023

 

$10,882

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


121


























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122


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$9,023

 

$10,882

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
14,164

 
13,747

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
9,743

 
17,909

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(20
)
 
3,378

Fuel inventory
 
1,529

 
951

Accounts payable
 
8,298

 
(7,973
)
Prepaid taxes and taxes accrued
 
(4,443
)
 
(13,351
)
Interest accrued
 
650

 
(81
)
Deferred fuel costs
 
(71
)
 
(11,309
)
Other working capital accounts
 
(15,144
)
 
(12,082
)
Provisions for estimated losses
 
454

 
196

Other regulatory assets
 
(16,528
)
 
7,226

Other regulatory liabilities
 
(8,634
)
 
1,331

Pension and other postretirement liabilities
 
(1,706
)
 
(3,686
)
Other assets and liabilities
 
19,207

 
(89
)
Net cash flow provided by operating activities
 
16,522

 
7,049

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(57,788
)
 
(41,105
)
Allowance for equity funds used during construction
 
2,290

 
851

Changes in money pool receivable - net
 
22,016

 
12,291

Receipts from storm reserve escrow account
 

 
3

Payments to storm reserve escrow account
 
(451
)
 
(232
)
Changes in securitization account
 
(2,850
)
 
(3,381
)
Net cash flow used in investing activities
 
(36,783
)
 
(31,573
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Change in money pool payable - net
 
1,877

 

Distributions/dividends paid:
 
 
 
 
Common equity
 

 
(6,250
)
Other
 
(499
)
 
(607
)
Net cash flow provided by (used in) financing activities
 
1,378

 
(6,857
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(18,883
)
 
(31,381
)
Cash and cash equivalents at beginning of period
 
19,677

 
32,741

Cash and cash equivalents at end of period
 

$794

 

$1,360

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

$5,027

 

$5,098

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


123


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
 
 
 
Cash
 

$794

 

$26

Temporary cash investments
 

 
19,651

Total cash and cash equivalents
 
794

 
19,677

Securitization recovery trust account
 
5,075

 
2,224

Accounts receivable:
 
 
 
 

Customer
 
47,422

 
43,890

Allowance for doubtful accounts
 
(3,033
)
 
(3,222
)
Associated companies
 
2,054

 
27,938

Other
 
7,115

 
4,090

Accrued unbilled revenues
 
16,049

 
18,907

Total accounts receivable
 
69,607

 
91,603

Fuel inventory - at average cost
 
4

 
1,533

Materials and supplies - at average cost
 
11,989

 
12,133

Prepayments and other
 
17,250

 
6,905

TOTAL
 
104,719

 
134,075

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Non-utility property at cost (less accumulated depreciation)
 
1,016

 
1,016

Storm reserve escrow account
 
81,305

 
80,853

TOTAL
 
82,321

 
81,869

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
1,358,401

 
1,364,091

Natural gas
 
291,484

 
284,728

Construction work in progress
 
184,527

 
146,668

TOTAL UTILITY PLANT
 
1,834,412

 
1,795,487

Less - accumulated depreciation and amortization
 
675,943

 
670,135

UTILITY PLANT - NET
 
1,158,469

 
1,125,352

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Deferred fuel costs
 
4,080

 
4,080

Other regulatory assets (includes securitization property of $58,089 as of March 31, 2019 and $60,453 as of December 31, 2018)
 
246,324

 
229,796

Other
 
1,991

 
1,416

TOTAL
 
252,395

 
235,292

 
 
 
 
 
TOTAL ASSETS
 

$1,597,904

 

$1,576,588

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

124


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Payable due to associated company
 

$1,979

 

$1,979

Accounts payable:
 
 
 
 
Associated companies
 
44,433

 
43,416

Other
 
48,308

 
36,686

Customer deposits
 
28,683

 
28,667

Taxes accrued
 

 
4,068

Interest accrued
 
7,016

 
6,366

Deferred fuel costs
 
1,217

 
1,288

Current portion of unprotected excess accumulated deferred income taxes
 
25,220

 
25,301

Other
 
6,611

 
9,521

TOTAL CURRENT LIABILITIES
 
163,467

 
157,292

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
334,694

 
323,595

Accumulated deferred investment tax credits
 
2,197

 
2,219

Regulatory liability for income taxes - net
 
57,233

 
60,249

Asset retirement cost liabilities
 
3,347

 
3,291

Accumulated provisions
 
87,048

 
86,594

Pension and other postretirement liabilities
 
3,920

 
5,626

Long-term debt (includes securitization bonds of $63,681 as of March 31, 2019 and $63,620 as of December 31, 2018)
 
467,498

 
467,358

Long-term payable due to associated company
 
14,367

 
14,367

Other
 
10,160

 
11,047

TOTAL NON-CURRENT LIABILITIES
 
980,464

 
974,346

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Member's equity
 
453,973

 
444,950

TOTAL
 
453,973

 
444,950

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$1,597,904

 

$1,576,588

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


125


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
Member’s Equity
 
(In Thousands)
 
 
Balance at December 31, 2017

$415,548

 
 
Net income
10,882

Common equity distributions
(6,250
)
 
 
Balance at March 31, 2018

$420,180

 
 
 
 
Balance at December 31, 2018

$444,950

 
 
Net income
9,023

 
 
Balance at March 31, 2019

$453,973

 
 
See Notes to Financial Statements.
 



126


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 

Description
 
2019
 
2018
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 
 
 

 
 

 
 

Residential
 

$52

 

$65

 

($13
)
 
(20
)
Commercial
 
46

 
54

 
(8
)
 
(15
)
Industrial
 
7

 
8

 
(1
)
 
(13
)
Governmental
 
16

 
18

 
(2
)
 
(11
)
Total billed retail
 
121

 
145

 
(24
)
 
(17
)
Sales for resale:
 
 

 
 

 
 

 
 

  Non-associated companies
 
10

 
13

 
(3
)
 
(23
)
Other
 

 
(2
)
 
2

 
(100
)
Total
 

$131

 

$156

 

($25
)
 
(16
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
511

 
577

 
(66
)
 
(11
)
Commercial
 
492

 
524

 
(32
)
 
(6
)
Industrial
 
97

 
99

 
(2
)
 
(2
)
Governmental
 
181

 
181

 

 

Total retail
 
1,281

 
1,381

 
(100
)
 
(7
)
Sales for resale:
 
 

 
 

 
 

 
 

Non-associated companies
 
528

 
627

 
(99
)
 
(16
)
Total
 
1,809

 
2,008

 
(199
)
 
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

127



ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $4 million primarily due to higher net revenue, after excluding the effect of the return of unprotected excess accumulated deferred income taxes which is offset in income taxes, and higher other income, partially offset by higher other operation and maintenance expenses and higher depreciation and amortization expenses.

Net Revenue

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 first quarter 2019 to the first quarter 2018 :

 
Amount
 
(In Millions)
2018 net revenue

$144.9

Return of unprotected excess accumulated deferred income taxes to customers
(22.3
)
Volume/weather
(3.5
)
Retail electric price
10.6

Other
2.3

2019 net revenue

$132.0


The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018. There is no effect on net income as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The volume/weather variance is primarily due to a decrease of 160 GWh, or 4%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.

The retail electric price variance is primarily due to an annual base rate increase of $53.2 million effective October 2018 as approved by the PUCT. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case filing.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to an increase of $4.3 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2019 as compared to 2018 and an increase of $1 million in information technology costs primarily due to higher labor costs and higher software maintenance costs in 2019 as compared to 2018.

Depreciation and amortization expenses increased primarily as result of new rates established in the settlement of the 2018 base rate case and additions to plant in service.


128

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

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 2019 primarily due to the Montgomery County Power Station project.

Income Taxes

The effective income tax rate was (554.5%) for the first quarter 2019 . The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 22.2% for the first quarter 2018 . The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to a write-off of a stock-based
compensation deferred tax asset in 2018 and state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$56

 

$115,513

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
42,651

 
1,048

Investing activities
(163,922
)
 
(52,129
)
Financing activities
143,444

 
(25,456
)
Net increase (decrease) in cash and cash equivalents
22,173

 
(76,537
)
 
 
 
 
Cash and cash equivalents at end of period

$22,229

 

$38,976


Operating Activities

Net cash flow provided by operating activities increased $41.6 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to the timing of recovery of fuel and purchased power costs, partially offset by the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

129

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


Investing Activities

Net cash flow used in investing activities increased $111.8 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:

an increase of $43.1 million in fossil-fueled generation construction expenditures primarily due to increased spending on the Montgomery County Power Station;
an increase of $37 million in transmission construction expenditures primarily due to a higher scope of work performed in 2019 as compared to 2018; and
money pool activity.

Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from the money pool increased by $3.6 million for the three months ended March 31, 2019 compared to decreasing by $32.3 million for the three months ended March 31, 2018 . The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Texas’s financing activities provided $143.4 million of cash for the three months ended March 31, 2019 compared to using $25.5 million of cash for the three months ended March 31, 2018 primarily due to the issuance of $300 million of 4.0% Series first mortgage bonds and $400 million of 4.5% Series first mortgage bonds in January 2019, partially offset by the repayment, at maturity, of $500 million of 7.125% Series first mortgage bonds in February 2019 and money pool activity.

Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased by $22.4 million for the three months ended March 31, 2019.

Capital Structure

Entergy Texas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Texas is primarily due to the net issuance of $200 million of first mortgage bonds in 2019.
 
 
March 31,
2019
 
December 31, 2018
Debt to capital
53.9
%
 
51.6
%
Effect of excluding the securitization bonds
(4.2
%)
 
(5.2
%)
Debt to capital, excluding securitization bonds (a)
49.7
%
 
46.4
%
Effect of subtracting cash
(0.4
%)
 
%
Net debt to net capital, excluding securitization bonds (a)
49.3
%
 
46.4
%

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

Net debt consists of debt less cash and cash equivalents.  Debt consists of financing lease obligations 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 Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to

130

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

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:

March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2017
(In Thousands)
$3,571
 
($22,389)
 
$12,590
 
$44,903

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 September 2023.  The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of March 31, 2019 , there were no cash borrowings and $1.3 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 March 31, 2019 , an $11.7 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.

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.

2018 Base Rate Case

In January 2019, Entergy Texas filed for recovery of rate case expenses totaling $7.2 million. The amounts requested primarily include internal and external expenses related to litigating the 2018 base rate case. Parties filed testimony in April 2019 recommending a disallowance ranging from $3.2 million to $4.2 million of the $7.2 million requested. Entergy Texas is evaluating its response to the parties’ positions . A hearing is scheduled for June 2019.

Distribution Cost Recovery Factor (DCRF) Rider

In March 2019, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The proposed new DCRF rider is designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2018 and December 31, 2018. A procedural schedule has been established, with a hearing in June 2019.


131

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

Transmission Cost Recovery Factor (TCRF) Rider

In December 2018, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed new TCRF rider is designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed testimony proposing a load growth adjustment, which would fully offset Entergy Texas’s proposed TCRF revenue requirement. The PUCT has previously ruled that load growth adjustments should not be included in a TCRF. Entergy Texas filed a motion for interim rates to be effective April 2019. In April 2019 the hearing on Entergy Texas’s motion and the hearing on the merits were held, and the ALJ suspended the date on which the TCRF would be put into permanent effect until July 2019, unless an earlier decision is issued by the PUCT. This matter is currently awaiting the ALJ’s proposal for decision.

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 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 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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


132


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$340,474

 

$348,940

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
48,103

 
18,706

Purchased power
 
140,868

 
159,692

Other operation and maintenance
 
59,626

 
52,674

Taxes other than income taxes
 
18,640

 
20,403

Depreciation and amortization
 
37,037

 
30,766

Other regulatory charges - net
 
19,459

 
25,617

TOTAL
 
323,733

 
307,858

 
 
 
 
 
OPERATING INCOME
 
16,741

 
41,082

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
5,081

 
1,661

Interest and investment income
 
1,682

 
555

Miscellaneous - net
 
(363
)
 
113

TOTAL
 
6,400

 
2,329

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
22,460

 
22,051

Allowance for borrowed funds used during construction
 
(2,580
)
 
(938
)
TOTAL
 
19,880

 
21,113

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
3,261

 
22,298

 
 
 
 
 
Income taxes
 
(18,081
)
 
4,948

 
 
 
 
 
NET INCOME
 

$21,342

 

$17,350

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 





133































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134


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$21,342

 

$17,350

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
37,037

 
30,766

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(10,123
)
 
(21,607
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
65,394

 
9,190

Fuel inventory
 
(173
)
 
(134
)
Accounts payable
 
(57,447
)
 
(24,653
)
Taxes accrued
 
(9,465
)
 
3,981

Interest accrued
 
(4,638
)
 
(5,575
)
Deferred fuel costs
 
8,331

 
(28,626
)
Other working capital accounts
 
(913
)
 
4,788

Provisions for estimated losses
 
1,074

 
(208
)
Other regulatory assets
 
1,358

 
20,497

Other regulatory liabilities
 
(24,365
)
 
5,145

Pension and other postretirement liabilities
 
(1,120
)
 
(6,851
)
Other assets and liabilities
 
16,359

 
(3,015
)
Net cash flow provided by operating activities
 
42,651

 
1,048

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(176,186
)
 
(94,123
)
Allowance for equity funds used during construction
 
5,111

 
1,696

Changes in money pool receivable - net
 
(3,571
)
 
32,313

Changes in securitization account
 
10,724

 
7,985

Net cash flow used in investing activities
 
(163,922
)
 
(52,129
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
692,633

 

Retirement of long-term debt
 
(525,841
)
 
(24,977
)
Change in money pool payable - net
 
(22,389
)
 

Other
 
(959
)
 
(479
)
Net cash flow provided by (used in) financing activities
 
143,444

 
(25,456
)
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
22,173

 
(76,537
)
Cash and cash equivalents at beginning of period
 
56

 
115,513

Cash and cash equivalents at end of period
 

$22,229

 

$38,976

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

$26,002

 

$26,939

Income taxes
 

$—

 

($1,624
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


135


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$26

 

$26

Temporary cash investments
 
22,203

 
30

Total cash and cash equivalents
 
22,229

 
56

Securitization recovery trust account
 
29,461

 
40,185

Accounts receivable:
 
 
 
 
Customer
 
63,194

 
69,714

Allowance for doubtful accounts
 
(412
)
 
(461
)
Associated companies
 
16,273

 
64,441

Other
 
9,964

 
12,275

Accrued unbilled revenues
 
46,415

 
51,288

Total accounts receivable
 
135,434

 
197,257

Fuel inventory - at average cost
 
42,840

 
42,667

Materials and supplies - at average cost
 
43,560

 
41,883

Prepayments and other
 
11,231

 
15,903

TOTAL
 
284,755

 
337,951

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investments in affiliates - at equity
 
436

 
448

Non-utility property - at cost (less accumulated depreciation)
 
376

 
376

Other
 
19,433

 
19,218

TOTAL
 
20,245

 
20,042

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
4,804,948

 
4,773,984

Construction work in progress
 
450,207

 
325,193

TOTAL UTILITY PLANT
 
5,255,155

 
5,099,177

Less - accumulated depreciation and amortization
 
1,694,292

 
1,684,569

UTILITY PLANT - NET
 
3,560,863

 
3,414,608

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Other regulatory assets (includes securitization property of $219,904 as of March 31, 2019 and $236,336 as of December 31, 2018)
 
596,690

 
598,048

Other
 
31,171

 
29,371

TOTAL
 
627,861

 
627,419

 
 
 
 
 
TOTAL ASSETS
 

$4,493,724

 

$4,400,020

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


136


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$—

 

$500,000

Accounts payable:
 
 
 
 
Associated companies
 
48,588

 
119,371

Other
 
158,286

 
150,679

Customer deposits
 
40,967

 
43,387

Taxes accrued
 
44,048

 
53,513

Interest accrued
 
19,717

 
24,355

Current portion of unprotected excess accumulated deferred income taxes
 
73,112

 
87,627

Deferred fuel costs
 
28,028

 
19,697

Other
 
9,233

 
6,353

TOTAL
 
421,979

 
1,004,982

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
543,550

 
552,535

Accumulated deferred investment tax credits
 
11,021

 
11,176

Regulatory liability for income taxes - net
 
254,771

 
264,623

Other regulatory liabilities
 
47,886

 
47,884

Asset retirement cost liabilities
 
7,322

 
7,222

Accumulated provisions
 
14,930

 
13,856

Pension and other postretirement liabilities
 
3,699

 
4,834

Long-term debt (includes securitization bonds of $257,887 as of March 31, 2019 and $283,659 as of December 31, 2018)
 
1,680,966

 
1,013,735

Other
 
63,856

 
56,771

TOTAL
 
2,628,001

 
1,972,636

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2019 and 2018
 
49,452

 
49,452

Paid-in capital
 
596,994

 
596,994

Retained earnings
 
797,298

 
775,956

TOTAL
 
1,443,744

 
1,422,402

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$4,493,724

 

$4,400,020

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


137


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2017

$49,452

 

$596,994

 

$613,721

 

$1,260,167

 
 
 
 
 
 
 
 
Net income

 

 
17,350

 
17,350

 
 
 
 
 
 
 
 
Balance at March 31, 2018

$49,452

 

$596,994

 

$631,071

 

$1,277,517

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

$49,452

 

$596,994

 

$775,956

 

$1,422,402

 
 
 
 
 
 
 
 
Net income

 

 
21,342

 
21,342

 
 
 
 
 
 
 
 
Balance at March 31, 2019

$49,452

 

$596,994

 

$797,298

 

$1,443,744

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


138


ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2019
 
2018
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$148

 

$148

 

$—

 

Commercial
 
79

 
85

 
(6
)
 
(7
)
Industrial
 
88

 
83

 
5

 
6

Governmental
 
5

 
6

 
(1
)
 
(17
)
Total billed retail
 
320

 
322

 
(2
)
 
(1
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
14

 
13

 
1

 
8

Non-associated companies
 
3

 
10

 
(7
)
 
(70
)
Other
 
3

 
4

 
(1
)
 
(25
)
Total
 

$340

 

$349

 

($9
)
 
(3
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,360

 
1,474

 
(114
)
 
(8
)
Commercial
 
1,046

 
1,083

 
(37
)
 
(3
)
Industrial
 
1,831

 
1,832

 
(1
)
 

Governmental
 
62

 
70

 
(8
)
 
(11
)
Total retail
 
4,299

 
4,459

 
(160
)
 
(4
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
402

 
366

 
36

 
10

Non-associated companies
 
96

 
194

 
(98
)
 
(51
)
Total
 
4,797

 
5,019

 
(222
)
 
(4
)

139



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.

Net income increased $1.3 million primarily due to the increase in operating revenues resulting from changes in rate base as compared to the prior year and a lower effective income tax rate.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2019 and 2018 were as follows:
 
2019
 
2018
 
(In Thousands)
Cash and cash equivalents at beginning of period

$95,685

 

$287,187

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
57,717

 
65,371

Investing activities
70,709

 
(85,956
)
Financing activities
(65,810
)
 
12,097

Net increase (decrease) in cash and cash equivalents
62,616

 
(8,488
)
 
 
 
 
Cash and cash equivalents at end of period

$158,301

 

$278,699



140

System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Operating Activities

Net cash flow provided by operating activities decreased by $7.7 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to the timing of collection of receivables, offset by a decrease in spending of $3.7 million on nuclear refueling outages in 2019 as compared to the same period in 2018 and a decrease of $3.4 million in pension contributions in 2019. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

System Energy’s investing activities provided $70.7 million of cash for the three months ended March 31, 2019 compared to using $86 million of cash for the three months ended March 31, 2018 primarily due to:

an increase of $92.5 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
money pool activity.

Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable from the money pool decreased by $81.6 million for the three months ended March 31, 2019 compared to decreasing by $21.5 million for the three months ended March 31, 2018 .  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

System Energy’s financing activities used $65.8 million of cash for the three months ended March 31, 2019 compared to providing $12.1 million of cash for the three months ended March 31, 2018 primarily due to the following activity:

net short-term borrowings of $25.3 million in 2018 on the nuclear fuel company variable interest entity’s credit facility;
the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity;
net repayments of long-term borrowings of $19.8 million in 2019 on the nuclear fuel company variable interest entity’s credit facility compared to net repayments of long-term borrowings of $50 million in 2018 on the nuclear fuel company variable interest entity’s credit facility; and
a decrease of $17.7 million in common stock dividends and distributions in 2019.

In March 2019, System Energy issued $134 million of 2.50% Series 2019 revenue refunding bonds due April 2022. The proceeds were used to redeem, prior to maturity, $134 million of 5.875% Series 1998 pollution control revenue refunding bonds due April 2022. 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.


141

System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Capital Structure

System Energy’s debt to capital ratio is shown in the following table.
 
March 31, 2019
 
December 31, 2018
Debt to capital
46.1
%
 
46.1
%
Effect of subtracting cash
(7.4
%)
 
(4.0
%)
Net debt to net capital
38.7
%
 
42.1
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition.  System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

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:
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2017
(In Thousands)
$25,487
 
$107,122
 
$90,136
 
$111,667

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 September 2021 . As of March 31, 2019 , $94.1 million in letters of credit to support a like amount of commercial paper issued 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.


142

System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

See the Form 10-K for a discussion of the return on equity complaints filed by the APSC and the MPSC and by the LPSC against System Energy. The LPSC’s complaint also includes a challenge to System Energy’s capital structure. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of April 2018. The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearing has been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involving New England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy submitted a response in October 2018. In January 2019 the FERC set the amended capital structure complaint for settlement and hearing proceedings. Settlement procedures in the capital structure proceeding commenced in February 2019.

In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.24%. For the refund period April 27, 2018 through July 27, 2019, and for application on a prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.41%. In March 2019, System Energy submitted answering testimony in the return on equity proceeding. For the first refund period, System Energy’s testimony argues for a return on equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).

Grand Gulf Sale-leaseback Renewal Complaint

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.

In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC and City Council filed direct testimony. The LPSC testimony seeks refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions (claimed to be approximately $334.5 million as of December 2018), and the cost of capital additions associated with the sale-leaseback interest (claimed to be approximately $274.8 million), as well as interest on those amounts. The direct testimony of the City Council and the APSC and MPSC address various issues raised by the LPSC. System Energy disputes that any refunds are owed for billings under the Unit Power Sales Agreement. A hearing has been scheduled for November 2019.


143

System Energy Resources, Inc.
Management's Financial Discussion and Analysis

Nuclear Matters

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

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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.

144


SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$140,104

 

$148,443

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
21,561

 
28,425

Nuclear refueling outage expenses
 
8,186

 
3,972

Other operation and maintenance
 
45,282

 
45,339

Decommissioning
 
8,799

 
8,457

Taxes other than income taxes
 
7,539

 
7,097

Depreciation and amortization
 
26,574

 
33,321

Other regulatory credits - net
 
(9,205
)
 
(9,109
)
TOTAL
 
108,736

 
117,502

 
 
 
 
 
OPERATING INCOME
 
31,368

 
30,941

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
1,589

 
2,100

Interest and investment income
 
6,991

 
6,886

Miscellaneous - net
 
(1,228
)
 
(1,176
)
TOTAL
 
7,352

 
7,810

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
9,397

 
9,325

Allowance for borrowed funds used during construction
 
(389
)
 
(532
)
TOTAL
 
9,008

 
8,793

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
29,712

 
29,958

 
 
 
 
 
Income taxes
 
6,134

 
7,650

 
 
 
 
 
NET INCOME
 

$23,578

 

$22,308

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


145






























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146


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$23,578

 

$22,308

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
53,731

 
66,323

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
4,975

 
7,929

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(7,613
)
 
5,883

Accounts payable
 
(5,182
)
 
(9,632
)
Prepaid taxes and taxes accrued
 
(13,575
)
 
(15,033
)
Interest accrued
 
(3,150
)
 
736

Other working capital accounts
 
3,635

 
(5,874
)
Other regulatory assets
 
(3,730
)
 
(1,960
)
Other regulatory liabilities
 
70,486

 
(18,988
)
Pension and other postretirement liabilities
 
319

 
(3,537
)
Other assets and liabilities
 
(65,757
)
 
17,216

Net cash flow provided by operating activities
 
57,717

 
65,371

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(25,557
)
 
(30,707
)
Allowance for equity funds used during construction
 
1,589

 
2,100

Nuclear fuel purchases
 
(3
)
 
(74,257
)
Proceeds from the sale of nuclear fuel
 
18,280

 

Proceeds from nuclear decommissioning trust fund sales
 
56,988

 
54,210

Investment in nuclear decommissioning trust funds
 
(62,223
)
 
(58,833
)
Changes in money pool receivable - net
 
81,635

 
21,531

Net cash flow provided by (used in) investing activities
 
70,709

 
(85,956
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
529,493

 
100,000

Retirement of long-term debt
 
(549,803
)
 
(50,002
)
Changes in short-term borrowings - net
 

 
25,339

Common stock dividends and distributions
 
(45,500
)
 
(63,240
)
Net cash flow provided by (used in) financing activities
 
(65,810
)
 
12,097

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
62,616

 
(8,488
)
Cash and cash equivalents at beginning of period
 
95,685

 
287,187

Cash and cash equivalents at end of period
 

$158,301

 

$278,699

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

$12,461

 

$8,592

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


147


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$57

 

$68

Temporary cash investments
 
158,244

 
95,617

Total cash and cash equivalents
 
158,301

 
95,685

Accounts receivable:
 
 
 
 
Associated companies
 
74,667

 
148,571

Other
 
5,272

 
5,390

Total accounts receivable
 
79,939

 
153,961

Materials and supplies - at average cost
 
101,609

 
97,225

Deferred nuclear refueling outage costs
 
36,624

 
44,424

Prepaid taxes
 
18,990

 
5,415

Prepayments and other
 
2,764

 
2,985

TOTAL
 
398,227

 
399,695

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
951,334

 
869,543

TOTAL
 
951,334

 
869,543

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
5,027,651

 
5,036,116

Construction work in progress
 
82,554

 
70,156

Nuclear fuel
 
195,023

 
234,889

TOTAL UTILITY PLANT
 
5,305,228

 
5,341,161

Less - accumulated depreciation and amortization
 
3,226,329

 
3,212,080

UTILITY PLANT - NET
 
2,078,899

 
2,129,081

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Other regulatory assets
 
450,101

 
446,371

Other
 
3,992

 
4,124

TOTAL
 
454,093

 
450,495

 
 
 
 
 
TOTAL ASSETS
 

$3,882,553

 

$3,848,814

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

148


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
 
 
2019
 
2018
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$8

 

$6

Accounts payable:
 
 
 
 
Associated companies
 
7,596

 
11,031

Other
 
39,660

 
47,565

Interest accrued
 
10,145

 
13,295

Current portion of unprotected excess accumulated deferred income taxes
 
7,396

 
4,426

Other
 
2,830

 
2,832

TOTAL
 
67,635

 
79,155

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
813,026

 
805,296

Accumulated deferred investment tax credits
 
38,354

 
38,673

Regulatory liability for income taxes - net
 
152,289

 
158,998

Other regulatory liabilities
 
456,112

 
381,887

Decommissioning
 
904,800

 
896,000

Pension and other postretirement liabilities
 
98,958

 
98,639

Long-term debt
 
610,790

 
630,744

Other
 
25,313

 
22,224

TOTAL
 
3,099,642

 
3,032,461

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2019 and 2018
 
601,850

 
601,850

Retained earnings
 
113,426

 
135,348

TOTAL
 
715,276

 
737,198

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,882,553

 

$3,848,814

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


149


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2017

$658,350

 

$52,459

 

$710,809

 
 
 
 
 
 
Net income

 
22,308

 
22,308

Common stock dividends and distributions
(56,500
)
 
(6,740
)
 
(63,240
)
 
 
 
 
 
 
Balance at March 31, 2018

$601,850

 

$68,027

 

$669,877

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018

$601,850

 

$135,348

 

$737,198

 
 
 
 
 
 
Net income

 
23,578

 
23,578

Common stock dividends and distributions

 
(45,500
)
 
(45,500
)
 
 
 
 
 
 
Balance at March 31, 2019

$601,850

 

$113,426

 

$715,276

 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 



150


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)
 
 
 
 
 
 
 
 
 
1/01/2019-1/31/2019
 

 

$—

 

 

$350,052,918

2/01/2019-2/28/2019
 

 

$—

 

 

$350,052,918

3/01/2019-3/31/2019
 

 

$—

 

 

$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 2019, Entergy withheld 76,735 shares of its common stock at $86.03 per share, 82,550 shares of its common stock at $86.51 per share, 38,326 shares of its common stock at $87.10 per share, 932 shares of its common stock at $89.19 per share, and 2,280 shares of its common stock at $93.25 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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Table of Contents

Item 5.  Other Information

Regulation of the Nuclear Power Industry

Following is an update 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

In March 2019 filings with the NRC were made reporting on decommissioning funding for all of Entergy subsidiaries’ nuclear plants .  Those reports showed that decommissioning funding for each of the nuclear plants met the NRC’s financial assurance requirements.

Environmental Regulation

Following are updates to the “ Environmental Regulation ” section of Part I, Item 1 of the Form 10-K.

Clean Air Act and Subsequent Amendments

Potential Legislative, Regulatory, and Judicial Developments

As discussed in the Form 10-K, Entergy continues to support national legislation that would increase planning certainty for electric utilities while addressing carbon dioxide emissions in a responsible and flexible manner. Entergy voluntarily conducted a climate scenario analysis and published a comprehensive report in March 2019. The report follows the framework and recommendations of the Task Force on Climate-related Disclosures (TCFD), describing climate-related governance, strategy, risk management, and metrics and targets. Scenario analysis resulted in Entergy developing and publishing a new goal of reducing the Utility’s emission rate by 50 percent from 2000 levels by 2030.

Groundwater at Certain Nuclear Sites

As discussed in the Form 10-K, in February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells that are part of Indian Point’s groundwater monitoring program.  Investigation of the source of elevated tritium determined that the source was related to a temporary system to process water in preparation for the regularly scheduled refueling outage at Indian Point 2. The NRC had issued a green notice of violation related to the adequacy of Entergy’s controls to prevent the introduction of radioactivity into the site groundwater. Entergy completed corrective actions and, in February 2019, the NRC concluded that Entergy had achieved full compliance and closed the violation.


Item 6.  Exhibits
 
4(a) -
 
 
 
 
4(b) -
 
 
 
 
4(c) -
 
 
 
 
4(d) -
 
 
 

152

Table of Contents

 
4(e) -
 
 
 
 
4(f) -
 
 
 
 
*31(a) -
 
 
 
 
*31(b) -
 
 
 
 
*31(c) -
 
 
 
 
*31(d) -
 
 
 
 
*31(e) -
 
 
 
 
*31(f) -
 
 
 
 
*31(g) -
 
 
 
 
*31(h) -
 
 
 
 
*31(i) -
 
 
 
 
*31(j) -
 
 
 
 
*31(k) -
 
 
 
 
*31(l) -
 
 
 
 
*31(m) -
 
 
 
 
*31(n) -
 
 
 
 
*32(a) -
 
 
 
 
*32(b) -
 
 
 
 
*32(c) -
 
 
 
 
*32(d) -
 
 
 
 
*32(e) -
 
 
 
 
*32(f) -
 
 
 
 
*32(g) -
 
 
 
 
*32(h) -
 
 
 
 
*32(i) -
 
 
 
 
*32(j) -
 
 
 
 
*32(k) -
 
 
 
 
*32(l) -
 
 
 
 
*32(m) -
 
 
 
 
*32(n) -
 
 
 
 
*101 INS -
XBRL Instance Document.
 
 
 
 
*101 SCH -
XBRL Taxonomy Extension Schema Document.
 
 
 
 
*101 PRE -
XBRL Taxonomy Presentation Linkbase Document.
 
 
 

153

Table of Contents

 
*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.

154

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

ENTERGY CORPORATION
ENTERGY ARKANSAS, LLC
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, LLC
ENTERGY NEW ORLEANS, LLC
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:     May 3, 2019


155


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:   May 3, 2019





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:   May 3, 2019





Exhibit 31(c)
CERTIFICATIONS

I, Laura R. Landreaux, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, 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/ Laura R. Landreaux
Laura R. Landreaux
Chair of the Board, President, and
Chief Executive Officer of Entergy Arkansas, LLC

Date:   May 3, 2019




Exhibit 31(d)
CERTIFICATIONS

I, Andrew S. Marsh, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Arkansas, 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 Arkansas, LLC

Date:   May 3, 2019





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:   May 3, 2019





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:   May 3, 2019





Exhibit 31(g)
CERTIFICATIONS

I, Haley R. Fisackerly, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, 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/ Haley R. Fisackerly
Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive Officer
of Entergy Mississippi, LLC

Date:   May 3, 2019





Exhibit 31(h)
CERTIFICATIONS

I, Andrew S. Marsh, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy Mississippi, 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 Mississippi, LLC

Date:   May 3, 2019





Exhibit 31(i)
CERTIFICATIONS

I, David D. Ellis, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of Entergy New Orleans, 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/ David D. Ellis
David D. Ellis
Chairman of the Board, President, and Chief Executive Officer
of Entergy New Orleans, LLC

Date:   May 3, 2019





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, 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 New Orleans, LLC

Date:   May 3, 2019





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:   May 3, 2019





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:   May 3, 2019





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:   May 3, 2019





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:   May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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, Laura R. Landreaux, Chair of the Board, President, and Chief Executive Officer of Entergy Arkansas, 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 March 31, 2019 (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/ Laura R. Landreaux
Laura R. Landreaux
Chair of the Board, President, and Chief Executive
Officer of Entergy Arkansas, LLC


Date:  May 3, 2019





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, 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 March 31, 2019 (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, LLC


Date:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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, 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 March 31, 2019 (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, LLC


Date:  May 3, 2019





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, 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 March 31, 2019 (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, LLC


Date:  May 3, 2019





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, David D. Ellis, Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, 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 March 31, 2019 (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/ David D. Ellis
David D. Ellis
Chairman of the Board, President, and Chief Executive
Officer of Entergy New Orleans, LLC


Date:  May 3, 2019





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, 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 March 31, 2019 (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, LLC


Date:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019





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 March 31, 2019 (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:  May 3, 2019