UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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| (Mark One) | |
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| X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the Fiscal Year Ended December 31, 20112014 |
| | OR |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the transition period from ____________ to ____________ |
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Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | | Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. |
| 1-11299 | ENTERGY CORPORATION (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 72-1229752 | | 1-31508 | ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830 |
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| 1-10764 | ENTERGY ARKANSAS, INC. (an Arkansas corporation) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 71-0005900 | | 0-05807 | ENTERGY NEW ORLEANS, INC. (a Louisiana corporation) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 72-0273040 |
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| 0-20371 | ENTERGY GULF STATES LOUISIANA, L.L.C. (a Louisiana limited liability company) 446 North Boulevard4809 Jefferson Highway
Baton Rouge,Jefferson, Louisiana 7080270121
Telephone (800) 368-3749(504) 576-4000 74-0662730 | | 1-34360 | ENTERGY TEXAS, INC. (a Texas corporation) 350 Pine Street9425 Pinecroft
Beaumont, Texas 77701The Woodlands, TX 77380
Telephone (409) 981-2000 61-1435798 |
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| 1-32718 | ENTERGY LOUISIANA, LLC (a Texas limited liability company) 446 North Boulevard4809 Jefferson Highway
Baton Rouge,Jefferson, Louisiana 7080270121
Telephone (800) 368-3749(504) 576-4000 75-3206126 | | 1-09067 | SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777 |
Securities registered pursuant to Section 12(b) of the Act:
Registrant
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| Registrant | Title of Class | Name of Each Exchange on Which Registered |
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| Entergy Corporation | Common Stock, $0.01 Par Value – 176,620,417179,697,449 shares outstanding at January 31, 201230, 2015 | New York Stock Exchange, Inc. Chicago Stock Exchange, Inc. |
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| Entergy Arkansas, Inc. | Mortgage Bonds, 5.75% Series due November 2040 | New York Stock Exchange, Inc. |
| Mortgage Bonds, 4.90% Series due December 2052 | New York Stock Exchange, Inc. |
| Mortgage Bonds, 4.75% Series due June 2063 | New York Stock Exchange, Inc. |
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| Entergy Louisiana, LLC | Mortgage Bonds, 6.0% Series due March 2040 | New York Stock Exchange, Inc. |
| | Mortgage Bonds, 5.875% Series due June 2041 | New York Stock Exchange, Inc. |
| Mortgage Bonds, 5.25% Series due July 2052 | New York Stock Exchange, Inc. |
| Mortgage Bonds, 4.70% Series due June 2063 | New York Stock Exchange, Inc. |
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| Entergy Mississippi, Inc. | Mortgage Bonds, 6.0% Series due November 2032 | New York Stock Exchange, Inc. |
| | Mortgage Bonds, 6.20% Series due April 2040 | New York Stock Exchange, Inc. |
| | Mortgage Bonds, 6.0% Series due May 2051 | New York Stock Exchange, Inc. |
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| Entergy New Orleans, Inc. | Mortgage Bonds, 5.0% Series due December 2052 | New York Stock Exchange, Inc. |
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| Entergy Texas, Inc. | Mortgage Bonds, 7.875%5.625% Series due June 20392064 | New York Stock Exchange, Inc. |
Securities registered pursuant to Section 12(g) of the Act:
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| Registrant | Title of Class |
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| Entergy Arkansas, Inc. | Preferred Stock, Cumulative, $100 Par Value Preferred Stock, Cumulative, $0.01 Par Value |
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| Entergy Gulf States Louisiana, L.L.C. | Common Membership Interests |
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| Entergy Mississippi, Inc. | Preferred Stock, Cumulative, $100 Par Value |
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| Entergy New Orleans, Inc. | Preferred Stock, Cumulative, $100 Par Value |
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| Entergy Texas, Inc. | Common Stock, no par value |
Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.
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| | Yes | | No |
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| Entergy Corporation | Öü | | |
| Entergy Arkansas, Inc. | | | Öü |
| Entergy Gulf States Louisiana, L.L.C. | | | Öü |
| Entergy Louisiana, LLC | Öü | | |
| Entergy Mississippi, Inc. | | | Öü |
| Entergy New Orleans, Inc. | | | Öü |
| Entergy Texas, Inc. | | | Öü |
| System Energy Resources, Inc. | | | Öü |
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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| | Yes | | No |
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| Entergy Corporation | | | Öü |
| Entergy Arkansas, Inc. | | | Öü |
| Entergy Gulf States Louisiana, L.L.C. | | | Öü |
| Entergy Louisiana, LLC | | | Öü |
| Entergy Mississippi, Inc. | | | Öü |
| Entergy New Orleans, Inc. | | | Öü |
| Entergy Texas, Inc. | | | Öü |
| System Energy Resources, Inc. | | | Öü |
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 þNo o
Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þNo o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ü]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.
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| | Large accelerated filer | | Accelerated filer | | Non-accelerated filer | | Smaller reporting company |
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| Entergy Corporation | Öü | | | | | | |
| Entergy Arkansas, Inc. | | | | | Öü | | |
| Entergy Gulf States Louisiana, L.L.C. | | | | | Öü | | |
| Entergy Louisiana, LLC | | | | | Öü | | |
| Entergy Mississippi, Inc. | | | | | Öü | | |
| Entergy New Orleans, Inc. | | | | | Öü | | |
| Entergy Texas, Inc. | | | | | Öü | | |
| System Energy Resources, Inc. | | | | | Öü | | |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Act.) Yes o No þ
System Energy Resources meets the requirements set forth in General Instruction I(1) of Form 10-K and is therefore filing this Form 10-K with reduced disclosure as allowed in General Instruction I(2). System Energy Resources is reducing its disclosure by not including Part III, Items 10 through 13 in its Form 10-K.
The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non-affiliates as of the end of the second quarter of 2011,2014, was $12.1$14.7 billion based on the reported last sale price of $68.28$82.09 per share for such stock on the New York Stock Exchange on June 30, 2011.2014. Entergy Corporation is the sole holder of the common stock of Entergy Arkansas, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. Entergy Corporation is the sole holder of the common stock of Entergy Louisiana Holdings, Inc., which is the sole holder of the common membership interests in Entergy Louisiana, LLC. Entergy Corporation is the sole holder of the common stock of EGS Holdings, Inc., which is the sole holder of the common membership interests in Entergy Gulf States Louisiana, L.L.C.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be held May 4, 2012,8, 2015, are incorporated by reference into Part III hereof.
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TABLE OF CONTENTS
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| | SEC Form 10-K Reference Number | Page Number |
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| | vii |
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| Part II. Item 7. | |
| Part II. Item 6. | 44 |
| | 45 |
| Part II. Item 8. | 46 |
| Part II. Item 8. | 47 |
| Part II. Item 8. | 48 |
| Part II. Item 8. | 50 |
| Part II. Item 8. | 52 |
| Part II. Item 8. | 53 |
| Part I. Item 1. | |
| Part I. Item 1. | 195 |
| Part I. Item 1. | 214 |
| Part I. Item 1. | 218 |
| Part I. Item 1. | 218 |
| | 234 |
| | 236 |
| | 237 |
| Part I. Item 1A. | 238 |
Unresolved Staff Comments | Part I. Item 1B. | None |
| Entergy Arkansas, Inc. and Subsidiaries | | |
| Part II. Item 7. | 259 |
| | 273 |
| Part II. Item 8. | 274 |
| Part II. Item 8. | 275 |
| Part II. Item 8. | 276 |
| Part II. Item 8. | 278 |
| Part II. Item 6. | 279 |
| Entergy Gulf States Louisiana, L.L.C. | | |
| Part II. Item 7. | 280 |
| | 294 |
| Part II. Item 8. | 295 |
| Part II. Item 8. | 296 |
| Part II. Item 8. | 297 |
| Part II. Item 8. | 298 |
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| Part II. Item 8. | 300 |
| Part II. Item 6. | 301 |
| Entergy Louisiana, LLC and Subsidiaries | | |
| Part II. Item 7. | 302 |
| | 318 |
| Part II. Item 8. | 319 |
| Part II. Item 8. | 320 |
| Part II. Item 8. | 321 |
| Part II. Item 8. | 322 |
| Part II. Item 8. | 324 |
| Part II. Item 6. | 325 |
| Entergy Mississippi, Inc. | | |
| Part II. Item 7. | 326 |
| | 337 |
| Part II. Item 8. | 338 |
| Part II. Item 8. | 339 |
| Part II. Item 8. | 340 |
| Part II. Item 8. | 342 |
| Part II. Item 6. | 343 |
| Entergy New Orleans, Inc. | | |
| Part II. Item 7. | 344 |
| | 355 |
| Part II. Item 8. | 356 |
| Part II. Item 8. | 357 |
| Part II. Item 8. | 358 |
| Part II. Item 8. | 360 |
| Part II. Item 6. | 361 |
Entergy Texas, Inc. and Subsidiaries | | |
| Part II. Item 7. | 362 |
| | 373 |
| Part II. Item 8. | 374 |
| Part II. Item 8. | 375 |
| Part II. Item 8. | 376 |
| Part II. Item 8. | 378 |
| Part II. Item 6. | 379 |
System Energy Resources, Inc. | | |
| Part II. Item 7. | 380 |
| | 387 |
| Part II. Item 8. | 388 |
| Part II. Item 8. | 389 |
| Part II. Item 8. | 390 |
| Part II. Item 8. | 392 |
| Part II. Item 6. | 393 |
| Entergy Texas, Inc. and Subsidiaries | | |
| Part II. Item 7. | |
| | |
| Part II. Item 8. | |
| Part II. Item 8. | |
| Part II. Item 8. | |
| Part II. Item 8. | |
| Part II. Item 6. | |
| System Energy Resources, Inc. | | |
| Part II. Item 7. | |
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| Part II. Item 8. | |
| Part II. Item 8. | |
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| Part II. Item 8. | |
| Part II. Item 8. | |
| Part II. Item 6. | |
| Part I. Item 2. | 394 |
| Part I. Item 3. | 394 |
| Part I. Item 4. | 394 |
| Part II. and Part III. Item 10. | 394 |
| Part II. Item 5. | 396 |
| Part II. Item 6. | 397 |
| Part II. Item 7. | 398 |
| Part II. Item 7A. | 398 |
| Part II. Item 8. | 398 |
| Part II. Item 9. | 398 |
| Part II. Item 9A. | 398 |
| Part II. Item 9A. | 400 |
| Part III. Item 10. | 408 |
| Part III. Item 11. | 413 |
| Part III. Item 12. | 475 |
| Part III. Item 13. | 478 |
| Part III. Item 14. | 480 |
| Part IV. Item 15. | 483 |
| | 484 |
| | 492 |
| | 494 |
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This combined Form 10-K is separately filed by Entergy Corporation and its seven “Registrant Subsidiaries”: Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representations whatsoever as to any other company.
The report should be read in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Item 6, 7, and 8 sections are provided for each reporting company, except for the Notes to the financial statements. The Notes to the financial statements for all of the reporting companies are combined. All Items other than 6, 7, and 8 are combined for the reporting companies.
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"“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,"“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 (a) those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors, (b) Management'sthose factors discussed or incorporated by reference in Management’s Financial Discussion and Analysis, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
· | resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy'sresolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs; |
· | the termination of Entergy Arkansas’s and Entergy Mississippi’s participation in the System Agreement in December 2013 and November 2015, respectively; |
the termination of Entergy Arkansas’s participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement in November 2015, the termination of Entergy Texas’s, Entergy Gulf States Louisiana’s, and Entergy Louisiana’s participation in the System Agreement after expiration of the proposed 60-month notice period or such other period as approved by the FERC;· | regulatory and operating challenges and uncertainties associated with the Utility operating companies’ proposal to move to the MISO RTO and the scheduled expiration of the current independent coordinator of transmission arrangement in November 2012; |
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ move to MISO, which occurred in December 2013, including the effect of current or projected MISO market rules and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;· | changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, the operations of the independent coordinator of transmission for Entergy's utility service territory, and the application of more stringent transmission reliability requirements or market power criteria by the FERC; |
· | changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possiblechanges in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or potential shutdown of nuclear generating facilities particularly those owned or operated by the Entergy Wholesale Commodities, business, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel; |
· | resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities; |
· | the performance of and deliverability of power from Entergy'sthe performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities; |
· | Entergy'sEntergy’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'sprices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants; |
· | the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy'sthe prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts; |
· | volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities; |
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; |
FORWARD-LOOKING INFORMATION (Concluded)
· | changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances, and changes in costs of compliance with environmental and other laws and regulations; |
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;· | uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal; |
changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, and other regulated air and water emissions, and changes in costs of compliance with environmental and other laws and regulations;· | risks associated with the proposed spin-off and subsequent merger of Entergy’s electric transmission business into a subsidiary of ITC Holdings Corp., including the risk that Entergy and the Utility operating companies may not be able to timely satisfy the conditions or obtain the approvals required to complete such transaction or such approvals may contain material restrictions or conditions, and the risk that if completed, the transaction may not be achieve its anticipated results; |
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel disposal fees charged by the U.S. government related to such sites;· | variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance; |
· | effects of climate change; |
· | Entergy's ability to manage its capital projects and operation and maintenance costs; |
changes in the quality and availability of water supplies and the related regulation of water use and diversion;· | Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms; |
Entergy’s ability to manage its capital projects and operation and maintenance costs;· | the economic climate, and particularly economic conditions in Entergy's Utility service territory and the Northeast United States and events that could influence economic conditions in those areas; |
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;· | the effects of Entergy's strategies to reduce tax payments; |
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events and circumstances that could influence economic conditions in those areas, and the risk that anticipated load growth may not materialize;· | changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions; |
the effects of Entergy’s strategies to reduce tax payments;· | actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria; |
changes in the financial markets, particularly those affecting the availability of capital and Entergy’s ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions;· | changes in inflation and interest rates; |
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;· | the effect of litigation and government investigations or proceedings; |
changes in inflation and interest rates;· | advances in technology; |
the effect of litigation and government investigations or proceedings;· | the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion; |
changes in technology, including with respect to new, developing, or alternative sources of generation;· | Entergy's ability to attract and retain talented management and directors; |
the potential effects of threatened or actual terrorism, cyber-attacks or data security breaches, including increased security costs, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;· | changes in accounting standards and corporate governance; |
Entergy’s ability to attract and retain talented management and directors;· | declines in the market prices of marketable securities and resulting funding requirements for Entergy's defined benefit pension and other postretirement benefit plans; |
changes in accounting standards and corporate governance;· | changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites; |
declines in the market prices of marketable securities and resulting funding requirements for Entergy’s defined benefit pension and other postretirement benefit plans;· | factors that could lead to impairment of long-livedfuture wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets; and |
· | the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture. |
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites;the implementation of the shutdown of Vermont Yankee and the related decommissioning of Vermont Yankee;
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
factors that could lead to impairment of long-lived assets; and
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture.
DEFINITIONS
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Certain abbreviations or acronyms used in the text and notes are defined below:
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| Abbreviation or Acronym | Term | |
| | |
| AFUDC | Allowance for Funds Used During Construction | |
| ALJ | Administrative Law Judge | |
| ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas | |
| APSC | Arkansas Public Service Commission |
| ASLB | Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes |
| ASU | Accounting Standards Update issued by the FASB | |
| Board | Board of Directors of Entergy Corporation | |
| Cajun | Cajun Electric Power Cooperative, Inc. | |
bundled energy and
capacity contract
| A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold | |
capacity contract | A contract for the sale of the installed capacity product in regional markets managed by ISO New England and the New York Independent System Operator | |
| capacity factor | Actual plant output divided by maximum potential plant output for the period | |
| City Council or Council | Council of the City of New Orleans, Louisiana | |
DOE | United States Department of Energy | |
| D. C. Circuit | U.S. Court of Appeals for the District of Columbia Circuit |
| DOE | United States Department of Energy |
| Entergy | Entergy Corporation and its direct and indirect subsidiaries | |
| Entergy Corporation | Entergy Corporation, a Delaware corporation | |
| Entergy Gulf States, Inc. | Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas | |
| Entergy Gulf States Louisiana | Entergy Gulf States Louisiana, L.L.C., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. | |
Entergy-Koch | A joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc. Entergy-Koch’s pipeline and trading businesses were sold in 2004. | |
| Entergy Texas | Entergy Texas, Inc., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. | |
Entergy Wholesale Commodities (EWC) | Entergy’s non-utility business segment primarily comprised of the ownership, operation, and operationdecommissioning of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by thoseits operating power plants to wholesale customers | |
| EPA | United States Environmental Protection Agency | |
| ERCOT | Electric Reliability Council of Texas | |
| FASB | Financial Accounting Standards Board | |
| FERC | Federal Energy Regulatory Commission | |
firm LD | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract | |
| FitzPatrick | James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| FTR | Financial transmission right |
| Grand Gulf | Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy | |
| GWh | Gigawatt-hour(s), which equals one million kilowatt-hours | |
DEFINITIONS (Continued)
Abbreviation or Acronym | Term |
| |
| Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC |
| Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
DEFINITIONS (Continued)
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| Abbreviation or Acronym | Term |
| |
| Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| IRS | Internal Revenue Service |
| ISO | Independent System Operator |
| kV | Kilovolt |
| kW | Kilowatt, which equals one thousand watts |
| kWh | Kilowatt-hour(s) |
| LDEQ | Louisiana Department of Environmental Quality |
| LPSC | Louisiana Public Service Commission |
| Mcf | 1,000 cubic feet of gas |
| MISO | MidwestMidcontinent Independent Transmission 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 kilowatt(s) |
| MWh | Megawatt-hour(s) |
| Nelson Unit 6 | Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Gulf States Louisiana (57.5%) and Entergy Texas (42.5%), and 10.9% of which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| 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 |
| OASIS | Open Access Same Time Information Systems |
Offsetting positions | Transactions for the purchase of energy, generally to offset a firm LD transaction |
| Palisades | Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
percent of capacity sold
forward
| Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions |
percent of planned
generation sold forward
| Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts or options that mitigate price uncertainty that may or may not require regulatory approval |
| Pilgrim | Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
planned net MW in operation | Amount of capacity to be available to generate power and/or sell capacity considering uprates planned to be completed during the year |
| PPA | Purchased power agreement or power purchase agreement |
| PRP | Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination) |
| PUCT | Public Utility Commission of Texas |
| Registrant Subsidiaries | Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. |
DEFINITIONS (Concluded)
Abbreviation or Acronym | Term |
| |
| Ritchie Unit 2 | Unit 2 of the R.E. Ritchie Steam Electric Generating Station (gas/oil) |
| River Bend | River Bend Station (nuclear), owned by Entergy Gulf States Louisiana |
| RTO | Regional transmission organization |
| SEC | Securities and Exchange Commission |
| SMEPA | South Mississippi Electric Power Association, which owns a 10% interest in Grand Gulf |
DEFINITIONS (Concluded)
|
| |
| Abbreviation or Acronym | Term |
| |
| System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resourcesresources. Entergy Arkansas terminated its participation in the System Agreement effective December 18, 2013. |
| System Energy | System Energy Resources, Inc. |
| System Fuels | System Fuels, Inc. |
| TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
UKU.K. | United Kingdom of Great Britain and Northern Ireland |
unit-contingent | 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 |
| Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf |
| Utility | Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
| Utility operating companies | Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
| Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 |
| Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana |
| weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather |
| White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
· | The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business. As discussed in more detail in “Plan to Spin Off the Utility’s Transmission Business,” in December 2011, Entergy entered into an agreement to spin off its transmission business and merge it with a newly-formed subsidiary of ITC Holdings Corp. |
· | The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers. This business also provides services to other nuclear power plant owners.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. In August 2013, Entergy announced plans to close and decommission Vermont Yankee. On December 29, 2014 the Vermont Yankee plant ceased power production and has entered its decommissioning phase. 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. |
Following are the percentages of Entergy’s consolidated revenues and net income generated by its operating segments and the percentage of total assets held by them:them.
|
| | | | | | | | | | | | | | | | | | | | |
| | % of Revenue | | % of Net Income | | % of Total Assets |
| Segment | 2014 | 2013 | 2012 | | 2014 | 2013 | 2012 | | 2014 | 2013 | 2012 |
| Utility | 78 |
| 80 |
| 78 |
| | 88 |
| 116 |
| 110 |
| | 82 |
| 82 |
| 82 |
|
| Entergy Wholesale Commodities | 22 |
| 20 |
| 22 |
| | 31 |
| 6 |
| 5 |
| | 22 |
| 22 |
| 22 |
|
| Parent & Other | — |
| — |
| — |
| | (19 | ) | (22 | ) | (15 | ) | | (4 | ) | (4 | ) | (4 | ) |
| | | % of Revenue | | % of Net Income | | % of Total Assets |
| Segment | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 | | 2011 | | 2010 | | 2009 |
| | | | | | | | | | | | | | | | | | | |
| Utility | | 79 | | 78 | | 75 | | 82 | | 65 | | 57 | | 80 | | 80 | | 80 |
| Entergy Wholesale Commodities | | 21 | | 22 | | 25 | | 36 | | 39 | | 51 | | 26 | | 26 | | 30 |
| Parent & Other | | - | | - | | - | | (18) | | (4) | | (8) | | (6) | | (6) | | (10) |
See Note 13 to the financial statements for further financial information regarding Entergy’s business segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Results of Operations
20112014 Compared to 20102013
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 20112014 to 20102013 showing how much the line item increased or (decreased) in comparison to the prior period:period.
| | | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | | (In Thousands) |
| | | | | | | | | |
| 2010 Consolidated Net Income (Loss) | | $829,719 | | $489,422 | | ($48,836) | | $1,270,305 |
| | | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | (146,947) | | (155,898) | | 3,620 | | (299,225) |
| Other operation and maintenance expenses | | 1,674 | | (141,588) | | 38,270 | | (101,644) |
| Taxes other than income taxes | | 248 | | 1,083 | | 396 | | 1,727 |
| Depreciation and amortization | | 16,326 | | 16,008 | | (26) | | 32,308 |
| Gain on sale of business | | - | | (44,173) | | - | | (44,173) |
| Other income | | (3,388) | | (39,717) | | 1,799 | | (41,306) |
| Interest expense | | (37,502) | | (51,183) | | 27,145 | | (61,540) |
| Other | | 1,688 | | (23,334) | | - | | (21,646) |
| Income taxes (benefit) | | (426,916) | | (43,193) | | 139,133 | | (330,976) |
| | | | | | | | | |
| 2011 Consolidated Net Income (Loss) | | $1,123,866 | | $491,841 | | ($248,335) | | $1,367,372 |
|
| | | | | | | | | | | | | | | |
| | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | (In Thousands) |
| 2013 Consolidated Net Income (Loss) |
| $846,215 |
| |
| $42,976 |
| |
| ($158,619 | ) | |
| $730,572 |
|
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | 210,893 |
| | 422,147 |
| | (17,519 | ) | | 615,521 |
|
| Other operation and maintenance | 12,369 |
| | (25,043 | ) | | (8,724 | ) | | (21,398 | ) |
| Asset write-off, impairments, and related charges | 62,814 |
| | (221,809 | ) | | (2,790 | ) | | (161,785 | ) |
| Taxes other than income taxes | 2,760 |
| | 1,709 |
| | (213 | ) | | 4,256 |
|
| Depreciation and amortization | (2,019 | ) | | 60,053 |
| | (440 | ) | | 57,594 |
|
| Gain on sale of business | — |
| | (43,569 | ) | | — |
| | (43,569 | ) |
| Other income | 1,795 |
| | (23,642 | ) | | (13,272 | ) | | (35,119 | ) |
| Interest expense | 22,556 |
| | 323 |
| | 591 |
| | 23,470 |
|
| Other expenses | 7,696 |
| | 33,699 |
| | — |
| | 41,395 |
|
| Income taxes | 106,231 |
| | 254,459 |
| | 2,926 |
| | 363,616 |
|
| 2014 Consolidated Net Income (Loss) |
| $846,496 |
|
|
| $294,521 |
|
|
| ($180,760 | ) |
|
| $960,257 |
|
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.
Net incomeResults of operations for Utility in 2011 was significantly affected by a settlement with the IRS2014 include $154 million ($100 million after-tax) of charges related to Vermont Yankee primarily resulting from the mark-to-market income tax treatmenteffects of power purchase contracts, which resultedan updated decommissioning cost study completed in a reduction in income tax expense. The net income effect was partially offset by a regulatory charge, which reduced net revenue, because a portionthe third quarter 2014 along with reassessment of the benefits will be shared with customers.assumptions regarding the timing of decommissioning cash flows and severance and employee retention costs. See Notes 3 and 8Note 1 to the financial statements for additionalfurther discussion of the settlementcharges. Results of operations for 2014 also include the $56.2 million ($36.7 million after-tax) write-off in 2014 of Entergy Mississippi’s regulatory asset associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff, subsequently approved by the MPSC, in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements for further discussion of the new nuclear generation development costs and benefit sharing.the joint stipulation.
As discussed in more detail in Note 1 to the financial statements, results of operations for 2013 include $322 million ($202 million after-tax) of impairment and other related charges to write down the carrying value of Vermont Yankee and related assets to their fair values. Also, earnings were negatively affected in 2013 by expenses, including other operation and maintenance expenses and taxes other than income taxes, of approximately $110 million ($70 million after-tax), including approximately $85 million ($55 million after-tax) for Utility and $25 million ($15 million after-tax) for Entergy Wholesale Commodities, recorded in connection with a strategic imperative intended to optimize the organization through a process known as human capital management. In December 2013, Entergy deferred for future collection approximately $45 million ($30 million after-tax) of these costs in the Arkansas and Louisiana
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
jurisdictions at the Utility, as approved by the APSC and the LPSC, respectively. See “Human Capital Management Strategic Imperative” below for further discussion.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing 2014 to 2013.
|
| | | |
| Amount |
| (In Millions) |
| |
| 2013 net revenue |
| $5,524 |
|
| Retail electric price | 135 |
|
| Asset retirement obligation | 56 |
|
| Volume/weather | 36 |
|
| MISO deferral | 16 |
|
| Net wholesale revenue | (29 | ) |
| Other | (3 | ) |
| 2014 net revenue |
| $5,735 |
|
The retail electric price variance is primarily due to:
increases in the energy efficiency rider at Entergy Arkansas, as approved by the APSC, effective July 2013 and July 2014. Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have minimal effect on net income;
the effect of the APSC’s order in Entergy Arkansas’s 2013 rate case, including an annual base rate increase effective January 2014 offset by a MISO rider to provide customers credits in rates for transmission revenue received through MISO;
a formula rate plan increase at Entergy Mississippi, as approved by the MSPC, effective September 2013;
an increase in Entergy Mississippi’s storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has no effect on net income;
an annual base rate increase at Entergy Texas, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case; and
a formula rate plan increase at Entergy Louisiana, as approved by the LPSC, effective December 2014.
See Note 2 to the financial statements for a discussion of rate proceedings.
The asset retirement obligation affects net revenue because Entergy records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by increases in regulatory credits because of decreases in decommissioning trust earnings and increases in depreciation and accretion expenses and increases in regulatory credits to realign the asset retirement obligation regulatory assets with regulatory treatment.
The volume/weather variance is primarily due to an increase of 3,129 GWh, or 3%, in billed electricity usage primarily due to an increase in sales to industrial customers and the effect of more favorable weather on residential sales. The increase in industrial sales was primarily due to expansions, recovery of a major refining customer from an unplanned outage in 2013, and continued moderate growth in the manufacturing sector.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net RevenueThe MISO deferral variance is primarily due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC and the MPSC, partially offset by the deferral in April 2013, as approved by the APSC, of costs incurred from March 2010 through December 2012 related to the transition and implementation of joining the MISO RTO. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the recovery of non-fuel MISO-related charges.
UtilityThe net wholesale variance is primarily due to a wholesale customer contract termination in December 2013 and lower margins on co-owner contracts due to contract changes.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20102013 net revenue |
| $5,051 1,802 |
|
| Nuclear realized price changes | 264 |
|
Mark-to-market tax settlement sharing | 129 | (196)
|
Purchased power capacityNuclear volume | 37 | (21) |
Net wholesale revenue | | (14) |
Volume/weather | | 13 |
ANO decommissioning trust | | 24 |
Retail electric price | | 49
|
| Other | (8 | (2)) |
20112014 net revenue |
| $4,904 |
The mark-to-market tax settlement sharing variance results from a regulatory charge because a portion of the benefits of a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts will be shared with customers, slightly offset by the amortization of a portion of that charge beginning in October 2011. See Notes 3 and 8 to the financial statements for additional discussion of the settlement and benefit sharing.
The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.
The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.
The volume/weather variance is primarily due to an increase of 2,061 GWh in weather-adjusted usage across all sectors. Weather-adjusted residential retail sales growth reflected an increase in the number of customers. Industrial sales growth has continued since the beginning of 2010. Entergy’s service territory has benefited from the national manufacturing economy and exports, as well as industrial facility expansions. Increases have been offset to some extent by declines in the paper, wood products, and pipeline segments. The increase was also partially offset by the effect of less favorable weather on residential sales.
The ANO decommissioning trust variance is primarily related to the deferral of investment gains from the ANO 1 and 2 decommissioning trust in 2010 in accordance with regulatory treatment. The gains resulted in an increase in interest and investment income in 2010 and a corresponding increase in regulatory charges with no effect on net income.
The retail electric price variance is primarily due to:
· 2,224 | rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; |
· | a formula rate plan increase at Entergy Louisiana effective May 2011; and |
· | a base rate increase at Entergy Arkansas effective July 2010. |
These were partially offset by formula rate plan decreases at Entergy New Orleans effective October 2010 and October 2011. See Note 2 to the financial statements for further discussion of these proceedings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 2011 to 2010.
| | Amount |
| | (In Millions) |
| | |
2010 net revenue | | $2,200 |
Realized price changes | | (159) |
Fuel expenses | | (30) |
Harrison County | | (27) |
Volume | | 60 |
2011 net revenue | | $2,044 |
As shown in the table above, net revenue for Entergy Wholesale Commodities decreasedincreased by $156approximately $422 million or 7%, in 2011 compared to 20102014 primarily due to:
· | lower pricing in its contracts to sell power; |
higher realized wholesale energy prices primarily due to increases in Northeast market power prices and higher capacity prices. Entergy Wholesale Commodities’ hedging strategies routinely include financial instruments that manage operational and liquidity risk. These positions, in addition to a larger-than-normal unhedged position in 2014 due to Vermont Yankee being in its final year of operation, allowed Entergy Wholesale Commodities to benefit from increases in Northeast market power prices;· | higher fuel expenses, primarily at the nuclear plants;the effect of lower forward power prices on electricity derivative instruments that are not designated as hedges, including additional financial power sales conducted in the fourth quarter 2014 to lock in margins on some in-the-money purchased call options. These additional sales did not qualify for hedge accounting treatment, and decreases in forward prices after those sales were made accounted for the majority of the positive mark-to-market variance. In fourth quarter 2013, Entergy Wholesale Commodities also entered into similar transactions, but the price movements after the forward sales were in the opposite direction and resulted in negative mark-to-market activity in 2013. When these positions settled in the first quarter 2014, the turnaround of the negative 2013 mark also contributed to the positive 2014 mark-to-market variance. See Note 16 to the financial statements for discussion of derivative instruments; and |
· | the absence of the Harrison County plant, which was sold in December 2010. |
These factors were partially offset by higher volume in its nuclear fleet resulting from approximately 90 fewer planned and unplanned outage days in 20112014 compared to 2013, partially offset by a larger exercise of resupply options in 2013 compared to 2014 provided for in purchase power agreements where Entergy Wholesale Commodities may elect to supply power from another source when the same periodplant is not running. Amounts related to the exercise of resupply options are included in 2010.the GWh billed in the table below.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Following are key performance measures for Entergy Wholesale Commodities for 20112014 and 2010:2013.
| | | 2011 | | 2010 | |
| | | | | | | | |
| Owned capacity | | 6,599 | | 6,351 | |
| | | 2014 | | 2013 |
| Owned capacity (MW) | | 6,068 | | 6,068 |
| GWh billed | | 43,520 | | 42,682 | 44,424 | | 45,127 |
| Average realized price per MWh | | $54.48 | | $59.04 | $60.84 | | $50.86 |
| | | | | |
| |
| Entergy Wholesale Commodities Nuclear Fleet | Entergy Wholesale Commodities Nuclear Fleet |
| |
| Capacity factor | | 93% | | 90% | 91% | | 89% |
| GWh billed | | 40,918 | | 39,655 | 40,253 | | 40,167 |
| Average realized revenue per MWh | | $54.73 | | $59.16 | $60.35 | | $50.15 |
| Refueling Outage Days: | | | | | | | |
FitzPatrick | | - | | 35 | 44 | | — |
Indian Point 2 | | - | | 33 | 24 | | — |
Indian Point 3 | | 30 | | - | — | | 28 |
Palisades | | - | | 26 | 56 | | — |
Pilgrim | | 25 | | - | — | | 45 |
Vermont Yankee | | 25 | | 29 | — | | 27 |
Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants
The recent economic downturn and negative trends in the energy commodity markets have resulted in lowereffects of sustained low natural gas prices and thereforepower market structure challenges have resulted in lower market prices for electricity in the New York and New England power regions, which is where fivefour of the sixfive operating Entergy Wholesale Commodities nuclear power plants are located. A sixth plant, Vermont Yankee, ceased operations in December 2014. The Entergy Wholesale Commodities’Commodities nuclear business experienced a decrease inan annual realized price per MWh of $60.35 in 2014, $50.15 in 2013, and $50.29 in 2012. The increase in realized price in 2014 is primarily attributable to $54.73a significant increase in 2011 from $59.16first quarter 2014 prices due to cold winter weather and northeastern U.S. gas pipeline infrastructure limitations. Prior to 2009 the annual realized price per MWh for Entergy Wholesale Commodities generally increased each year, reaching a peak of $61.07 in 2010, and is likely to experience a decrease again in 2012 because, as2009. As shown in the contracted sale of energy table in “Market“Market and Credit Risk Sensitive Instruments,” Entergy Wholesale Commodities has sold forward 88%86% of its planned nuclear energy output for 20122015 for an expected average contracted energy price of $49$48 per MWh.MWh based on market prices at December 31, 2014. In addition, Entergy Wholesale Commodities has sold forward 81%74% of its planned nuclear energy output for 20132016 for an expected average contracted energy price range of $45-50$49 per MWh.MWh based on market prices at December 31, 2014. The market price trend presents a challenging economic situation for the Entergy Wholesale Commodities plants. The challenge is greater for some of these plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs. If, in the future, economic conditions or regulatory activity no longer support the continued operation or recovery of the costs of a plant it could adversely affect Entergy’s results of operations through loss of revenue, impairment charges, increased depreciation rates, transitional costs, or accelerated decommissioning costs.
On August 27, 2013, Entergy announced its plan to close and decommission Vermont Yankee. This decision was approved by the Board in August 2013. The decision to shut down the plant was primarily due to sustained low natural gas and wholesale energy prices, the high cost structure of the plant, and lack of a market structure that adequately compensates merchant nuclear plants for their environmental and fuel diversity benefits in the region in which the plant operated. On December 29, 2014 the Vermont Yankee plant ceased power production. See Note 1 to the financial statements for discussion of impairment of long-lived assets.
Impairment of long-lived assets and nuclear decommissioning costs, and the factors that influence these items, are both discussed below in “Critical Accounting Estimates.” See also the discussion below in “Entergy Wholesale
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Commodities Authorizations to Operate Its Nuclear Power Plants” regarding Entergy Wholesale Commodities nuclear plant operating license and related activity.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,949 million for 2010 to $1,951 million for 2011 primarily due to:
· | an increase of $17 million in nuclear expenses primarily due to higher labor costs, including higher contract labor; |
· | an increase of $15 million in contract costs due to the transition and implementation of joining the MISO RTO; |
· | an increase of $9 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services; |
· | an increase of $8 million in fossil-fueled generation expenses primarily due to the addition of Acadia Unit 2 in April 2011; and |
· | several individually insignificant items. |
These increases were substantially offset by:
· | a decrease of $29 million in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010 and a decrease in stock option expense. The decrease in stock option expense is offset by credits recorded by the parent company, Entergy Corporation; |
· | the deferral in 2011 of $13.4 million of 2010 Michoud plant maintenance costs pursuant to the settlement of Entergy New Orleans’ 2010 test year formula rate plan filing approved by the City Council in September 2011. See Note 2 to the financial statements for further discussion of the 2010 test year formula rate plan filing and settlement; |
· | the amortization of $11 million of Entergy Texas rate case expenses in 2010. See Note 2 to the financial statements for further discussion of the Entergy Texas rate case settlement; and |
· | a decrease of $10 million in operating expenses due to the sale of surplus oil inventory in 2011. |
Depreciation and amortization expense increased primarily due to an increase in plant in service, partially offset by a decrease in depreciation rates at Entergy Arkansas as a result of the rate case settlement agreement approved by the APSC in June 2010.
Interest expense decreased primarily due to:
· | the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies; |
· | a revision caused by FERC’s acceptance of a change in the treatment of funds received from independent power producers for transmission interconnection projects; and |
· | interest expense accrued in 2010 related to the expected result of the LPSC Staff audit of Entergy Gulf States Louisiana’s fuel adjustment clause for the period 1995 through 2004. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $1,047 million for 2010 to $905 million for 2011 primarily due to:
· | the write-off of $64 million of capital costs in 2010, primarily for software that would not be utilized, and $16 million of additional costs incurred in 2010 in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; |
· | a decrease of $30 million due to the absence of expenses from the Harrison County plant, which was sold in December 2010; |
· | a decrease in compensation and benefits costs resulting from an increase of $19 million in the accrual for incentive-based compensation in 2010; |
· | a decrease of $12 million in spending on tritium remediation work; and |
· | the write-off of $10 million of capitalized engineering costs in 2010 associated with a potential uprate project. |
The gain on sale resulted from the sale in 2010 of Entergy’s ownership interest in the Harrison County Power Project 550 MW combined-cycle plant to two Texas electric cooperatives that owned a minority share of the plant. Entergy sold its 61 percent share of the plant for $219 million and realized a pre-tax gain of $44.2 million on the sale.
Depreciation and amortization expense increased primarily due to an increase in plant in service and declining useful life of nuclear assets.
Other income decreased primarily due to a decrease in interest income earned on loans to the parent company, Entergy Corporation, and a decrease of $13 million in realized earnings on decommissioning trust fund investments.
Interest expense decreased primarily due to the write-off of $39 million of debt financing costs in 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.
Other expenses decreased primarily due to a credit to decommissioning expense of $34.1 million in 2011 resulting from a reduction in the decommissioning liability for a plant as a result of a revised decommissioning cost study obtained to comply with a state regulatory requirement. See “Critical Accounting Estimates – Nuclear Decommissioning Costs” below for further discussion of accounting for asset retirement obligations.
Parent & Other
Other operation and maintenance expenses increased primarily due to lower intercompany stock option credits recorded by the parent company, Entergy Corporation, and an increase of $13 million related to the planned spin-off and merger of Entergy’s transmission business. See “Plan to Spin Off the Utility’s Transmission Business” below for further discussion.
Interest expense increased primarily due to $1 billion of Entergy Corporation senior notes issued in September 2010, with the proceeds used to pay down borrowings outstanding on Entergy Corporation’s revolving credit facility that were at a lower interest rate.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate for 2011 was 17.3%. The difference in the effective income tax rate versus the statutory rate of 35% in 2011 was primarily due to a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts, which resulted in a reduction in income tax expense of $422 million. See Note 3 to the financial statements herein for further discussion of the settlement.
The effective income tax rate for 2010 was 32.7%. The difference in the effective income tax rate versus the statutory rate of 35% in 2010 was primarily due to:
· | a favorable Tax Court decision holding that the U.K. Windfall Tax may be used as a credit for purposes of computing the U.S. foreign tax credit, which allowed Entergy to reverse a provision for uncertain tax positions of $43 million, included in Parent and Other, on the issue. See Note 3 to the financial statements for further discussion of this tax litigation; |
· | a $19 million tax benefit recorded in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and |
· | the recognition of a $14 million Louisiana state income tax benefit related to storm cost financing. |
Partially offsetting the decreased effective income tax rate was a charge of $16 million resulting from a change in tax law associated with the recently enacted federal healthcare legislation, as discussed below in “Critical Accounting Estimates” and state income taxes and certain book and tax differences for Utility plant items.
See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rates, and for additional discussion regarding income taxes.
2010 Compared to 2009
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2010 to 2009 showing how much the line item increased or (decreased) in comparison to the prior period:
| | | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | | (In Thousands) |
| | | | | | | | | |
| 2009 Consolidated Net Income (Loss) | | $708,905 | | $641,094 | | ($98,949) | | $1,251,050 |
| | | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 357,211 | | (163,518) | | 8,622 | | 202,315 |
| Other operation and maintenance expenses | | 112,384 | | 124,758 | | (18,550) | | 218,592 |
| Taxes other than income taxes | | 28,872 | | 2,717 | | (1,149) | | 30,440 |
| Depreciation and amortization | | (24,112) | | 11,413 | | (182) | | (12,881) |
| Gain on sale of business | | - | | 44,173 | | - | | 44,173 |
| Other income | | (14,915) | | 66,222 | | (25,681) | | 25,626 |
| Interest expense | | 31,035 | | (6,461) | | (19,851) | | 4,723 |
| Other | | 7,758 | | 19,728 | | - | | 27,486 |
| Income taxes | | 65,545 | | (53,606) | | (27,440) | | (15,501) |
| | | | | | | | | |
| 2010 Consolidated Net Income (Loss) | | $829,719 | | $489,422 | | ($48,836) | | $1,270,305 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.
In November 2007 the Board approved a plan to pursue a separation of Entergy’s non-utility nuclear business from Entergy through a spin-off of the business to Entergy shareholders. In April 2010, Entergy announced that it planned to unwind the business infrastructure associated with the proposed spin-off transaction. As a result of the plan to unwind the business infrastructure, Entergy recorded expenses in 2010 for the write-off of certain capitalized costs incurred in connection with the planned spin-off transaction. These costs are discussed in more detail below and throughout this section.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $4,694 |
Volume/weather | | 231 |
Retail electric price | | 137 |
Provision for regulatory proceedings | | 26 |
Rough production cost equalization | | 19 |
ANO decommissioning trust | | (24) |
Fuel recovery | | (44) |
Other | | 12 |
2010 net revenue | | $5,051 |
The volume/weather variance is primarily due to an increase of 8,362 GWh, or 8%, in billed electricity usage in all retail sectors, including the effect on the residential sector of colder weather in the first quarter 2010 compared to 2009 and warmer weather in the second and third quarters 2010 compared to 2009. The industrial sector reflected strong sales growth on continuing signs of economic recovery. The improvement in this sector was primarily driven by inventory restocking and strong exports with the chemicals, refining, and miscellaneous manufacturing sectors leading the improvement.
The retail electric price variance is primarily due to:
· | increases in the formula rate plan riders at Entergy Gulf States Louisiana effective November 2009, January 2010, and September 2010, at Entergy Louisiana effective November 2009, and at Entergy Mississippi effective July 2009; |
· | a base rate increase at Entergy Arkansas effective July 2010; |
· | rate actions at Entergy Texas, including base rate increases effective in May and August 2010; |
· | a formula rate plan provision of $16.6 million recorded in the third quarter 2009 for refunds that were made to customers in accordance with settlements approved by the LPSC; and |
· | the recovery in 2009 by Entergy Arkansas of 2008 extraordinary storm costs, as approved by the APSC, which ceased in January 2010. The recovery of storm costs is offset in other operation and maintenance expenses. |
See Note 2 to the financial statements for further discussion of the proceedings referred to above.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The provision for regulatory proceedings variance is primarily due to provisions recorded in 2009 at Entergy Arkansas. See Note 2 to the financial statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
The rough production cost equalization variance is due to an additional $18.6 million allocation recorded in the second quarter of 2009 for 2007 rough production cost equalization receipts ordered by the PUCT to Texas retail customers over what was originally allocated to Entergy Texas prior to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 2007, as discussed in Note 2 to the financial statements.
The ANO decommissioning trust variance is primarily related to the deferral of investment gains from the ANO 1 and 2 decommissioning trust in 2010 in accordance with regulatory treatment. The gains resulted in an increase in interest and investment income in 2010 and a corresponding increase in regulatory charges with no effect on net income.
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $2,364 |
Nuclear realized price changes | | (96) |
Nuclear volume | | (60) |
Other | | (8) |
2010 net revenue | | $2,200 |
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $164 million, or 7%, in 2010 compared to 2009 primarily due to results from its nuclear operations. The net revenue decrease was primarily due to lower pricing in its contracts to sell nuclear power and lower nuclear volume resulting from more planned and unplanned outage days in 2010. Included in net revenue is $46 million and $53 million of amortization of the Palisades purchased power agreement in 2010 and 2009, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements. Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for 2010 and 2009:
| | | 2010 | | 2009 |
| | | | | |
| Net MW in operation at December 31 | | 4,998 | | 4,998 |
| Average realized revenue per MWh | | $59.16 | | $61.07 |
| GWh billed | | 39,655 | | 40,981 |
| Capacity factor | | 90% | | 93% |
| Refueling Outage Days: | | | | |
FitzPatrick | | 35 | | - |
Indian Point 2 | | 33 | | - |
Indian Point 3 | | - | | 36 |
Palisades | | 26 | | 41 |
Pilgrim | | - | | 31 |
Vermont Yankee | | 29 | | - |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 42,682 GWh in 2010 and 43,969 GWh in 2009, with average realized revenue per MWh of $59.04 in 2010 and $60.46 in 2009.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,837$2,264 million for 20092013 to $1,949$2,276 million for 20102014 primarily due to:
· | an increase of $70 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of benefits costs;
|
an increase of $53 million in nuclear generation expenses primarily due to higher material costs, higher contract labor costs, and higher NRC fees;· | an increase of $25 million in fossil-fueled generation expenses resulting from higher outage costs in 2010 primarily because the scope of the outages was greater than in 2009; |
an increase of $38 million in administration fees related to participation in the MISO RTO beginning December 2013. The net income effect is partially offset due to deferrals of these fees in certain jurisdictions. See Note 2 to the financial statements for further information on the deferrals;· | an increase of $17 million in transmission and distribution expenses resulting from increased vegetation contract work; |
an increase of $29 million in energy efficiency costs. These costs are recovered through energy efficiency riders and have a minimal effect on net income;· | an increase of $13 million in nuclear expenses primarily due to higher nuclear labor and contract costs; |
an increase of $24 million in storm damage accruals primarily at Entergy Arkansas effective January 2014, as approved by the APSC, and at Entergy Mississippi effective October 2013, as approved by the MPSC;· | an increase of $12.5 million due to the capitalization in 2009 of Ouachita Plant service charges previously expensed; and |
an increase of $20 million in regulatory, consulting, and legal fees;· | an increase of $11 million due to the amortization of Entergy Texas rate case expenses. See Note 2 to the financial statements for further discussion of the Entergy Texas rate case settlement. |
an increase of $19 million in contract labor primarily due to higher infrastructure and application services and call center outsourcing;an increase of $11 million primarily due to higher vegetation maintenance;
an increase of $7 million due to higher write-offs of uncollectible customer accounts in 2014 as compared to 2013;
an increase of $7 million due to the amortization in 2014 of costs deferred in 2013 related to the transition and implementation of joining the MISO RTO; and
several individually insignificant items.
The increase was partially offset by:
· | a decrease of $19.4 million due to 2008 storm costs at Entergy Arkansas which were deferred per an APSC order and were recovered through revenues in 2009; |
a decrease of $146 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
· | a decrease of $16 million due to higher write-offs of uncollectible customer accounts in 2009; and |
a decrease of $36 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business;· | charges of $14 million in 2009 due to the Hurricane Ike and Hurricane Gustav storm cost recovery settlement agreement, as discussed further in Note 2 to the financial statements. |
a decrease of $9 million resulting from costs incurred in 2013 related to the generator stator incident at ANO, including an offset for insurance proceeds. See “ANO Damage, Outage, and NRC Reviews” below for further discussion of the incident;
a net decrease of $8 million related to the human capital management strategic imperative in 2014 as compared to the same period in 2013 including a decrease of $60 million in implementation costs, severance costs, and curtailment and special termination benefits, the deferral in 2013 of $44 million of costs incurred, as approved by the APSC and LPSC, and partial amortization in 2014 of $8 million of costs that were deferred in 2013. See “Human Capital Management Strategic Imperative” below for further discussion; and
a net decrease of $4 million related to Baxter Wilson (Unit 1) repairs. The increase in repair costs incurred in 2014 compared to the prior year were offset by expected insurance proceeds and the deferral of repair costs, as approved by the MPSC. See “Baxter Wilson Plant Event” in Note 8 to the financial statements for further discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The asset write-off, impairment, and related charges variance is due to the $56.2 million ($36.7 million after-tax) write-off in 2014 of Entergy Mississippi’s regulatory asset associated with new nuclear generation development costs and a $16 million ($10.5 million after-tax) write-off recorded in 2014 because of the uncertainty associated with the resolution of the Waterford 3 replacement steam generator project prudence review. See Note 2 to the financial statements for further discussion of new nuclear generation development costs and the prudence review.
Interest expense increased primarily due to the lease renewal in December 2013 of the Grand Gulf sale leaseback and net debt issuances of first mortgage bonds in the first quarter 2014 and the second quarter 2013 by certain Utility operating companies. See Note 5 to the financial statements for more details of long-term debt. The increase was partially offset by an increase in the allowance for borrowed funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 self-build project.
Other incomeexpenses increased primarily due to increases in decommissioning expenses resulting from revisions to the estimated decommissioning cost liabilities as a result of revised decommissioning cost studies in the fourth quarter 2013 and the first quarter 2014, partially offset by a decrease in nuclear refueling outage costs that are being amortized over the estimated period to the next outage. See Note 9 to the financial statements for further discussion of the decommissioning cost revisions.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $1,048 million for 2013 to $1,023 million for 2014 primarily due to:
· | a decrease of $50 million in carrying charges on storm restoration costs because of the completion of financing or securitization of the costs, as discussed further in Note 2 to the financial statements; and |
a decrease of $63 million in compensation and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
· | a gain of $16 million recorded in 2009 on the sale of undeveloped real estate by Entergy Louisiana Properties, LLC. |
a decrease of $15 million due to the absence of expenses from Entergy Solutions District Energy, which was sold in November 2013; anda decrease of $13 million in implementation costs, severance costs, and curtailment and special termination benefits related to the human capital management strategic imperative in 2014 as compared to the same period in 2013. See “Human Capital Management Strategic Imperative” below for further discussion.
The decrease was partially offset by:
· | an increase of $24 million due to investment gains from the ANO 1 and 2 decommissioning trust, as discussed above; |
an increase of $22 million incurred in 2014 as compared to 2013 related to the shutdown of Vermont Yankee including severance and retention costs. See “Impairment of Long-Lived Assets” in Note 1 to the financial statements for discussion regarding the shutdown of the Vermont Yankee plant in December 2014;
· | an increase of $14 million resulting from higher earnings on decommissioning trust funds;an increase of $18 million primarily due to higher contract costs and higher NRC fees; and |
· | an increase of distributions of $13 million earned by Entergy Louisiana and $7 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on net income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements for discussion of these investments in preferred membership interests. |
$18 million in transmission imbalance sales in 2013.
The asset write-off, impairments, and related charges variance is primarily due to $321.5 million ($202.2 million after-tax) in 2013 of impairment and other related charges primarily to write down the carrying value of Vermont Yankee and related assets to their fair values and $107.5 million ($69.8 million after-tax) in 2014 of impairment charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014. See Note 1 to the financial statements for further discussion of these impairment charges.
Depreciation and amortization expenses increased primarily due to a change effective in 2014 in the estimated average useful lives of plant in service as a result of a new depreciation study and an increase to depreciable plant balances.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The gain on sale of business resulted from the sale in November 2013 of Entergy Solutions District Energy, a business wholly-owned by Entergy in the Entergy Wholesale Commodities segment that owned and operated district energy assets servicing the business districts in Houston and New Orleans. Entergy sold Entergy Solutions District Energy for $140 million and realized a pre-tax gain of $44 million on the sale.
Other income decreased primarily due to lower realized gains on nuclear decommissioning trust fund investments.
Interest expense
Other expenses increased primarily due to an increase in long-term debt outstanding resulting from net debt issuances by certain ofnuclear refueling outage costs that are being amortized over the Utility operating companies in the second half of 2009 and in 2010. See Notes 4 and 5estimated period to the financial statements for details of long-term debt outstanding.
Depreciationnext outage and amortizationan increase in decommissioning expenses decreased primarily due to a decrease in depreciation rates at Entergy Arkansas as a result ofrevisions to the rate case settlement agreement approved by the APSC in June 2010.
Entergy Wholesale Commodities
Other operation and maintenance expenses increased from $922 millionestimated decommissioning cost liability for 2009 to $1,047 million for 2010 primarily due to:
· | the write-off of $64 million of capital costs, primarily for software that will not be utilized, and $16 million of additional costs incurred in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; |
· | an increase of $36 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of benefits costs;
|
· | spending of $15 million related to tritium remediation work at the Vermont Yankee site; and |
· | the write-off of $10 million of capitalized engineering costs associated with a potential uprate project. |
The gain on sale resulted from the sale of Entergy’s ownership interestVermont Yankee recorded in the Harrison County Power Project 550 MW combined-cycle plant to two Texas electric cooperatives that owned a minority sharethird and fourth quarters of the plant. Entergy sold its 61 percent share2013. See “Critical Accounting Estimates - Nuclear Decommissioning Costs” below for further discussion of the plant for $219 million and realized a pre-tax gain of $44.2 million on the sale.
Other income increased primarily due to $86 million in charges in 2009 resulting from the recognition of impairments that are not considered temporary of certain equity securities held in Entergy Wholesale Commodities’nuclear decommissioning trust funds, partially offset by a decrease of $28 million in realized earnings on the decommissioning trust funds.
Interest expense decreased primarily due to a decrease in fees paid to Entergy Corporation for providing collateral in the form of guarantees in connection with some of the Entergy Wholesale Commodities agreements to sell power. The guarantee fees paid are intercompany transactions and are eliminated in consolidation. The decrease was substantially offset by the write-off of $39 million of debt financing costs, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.costs.
Parent & Other
Other income decreased primarily due to increases in the distributions paidelimination of $13 million to Entergy Louisiana and $7 million to Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company, as discussed above.intersegment activity.
Interest expense decreased primarily due to lower borrowings, including the redemption of $267 million of notes payable in December 2009, as well as lower interest rates on borrowings under Entergy Corporation’s revolving credit facility.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate for 2010 was 32.7%. The difference in the effective income tax rate versus the statutory rate of 35% in 2010 was primarily due to:
· | a favorable Tax Court decision holding that the U.K. Windfall Tax may be used as a credit for purposes of computing the U.S. foreign tax credit, which allowed Entergy to reverse a provision for uncertain tax positions of $43 million, included in Parent and Other, on the issue. See Note 3 to the financial statements for further discussion of this tax litigation; |
· | a $19 million tax benefit recorded in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and |
· | the recognition of a $14 million Louisiana state income tax benefit related to storm cost financing. |
Partially offsetting the decreased effective income tax rate was a charge of $16 million resulting from a change in tax law associated with the recently enacted federal healthcare legislation, as discussed below in “Critical Accounting Estimates” and state income taxes and certain book and tax differences for Utility plant items.
The effective income tax rate for 2009 was 33.6%. The difference in the effective income tax rate versus the federal statutory rate of 35% in 2009 was primarily due to:
· | recognition of a capital loss of $73.1 million resulting from the sale of preferred stock of an Entergy Wholesale Commodities subsidiary to a third party; |
· | reduction of a valuation allowance of $24.3 million on state loss carryovers; |
· | reduction of a valuation allowance of $16.2 million on a federal capital loss carryover; |
· | reduction of the provision for uncertain tax positions of $15.2 million resulting from settlements and agreements with taxing authorities; |
· | adjustment to state income taxes of $13.8 million for Entergy Wholesale Commodities to reflect the effect of a change in the methodology of computing Massachusetts state income taxes as required by that state’s taxing authority; and |
· | additional deferred tax benefit of approximately $8 million associated with writedowns on nuclear decommissioning qualified trust securities. |
These reductions were partially offset by increases related to book and tax differences for utility plant items and state income taxes at the Utility operating companies.
See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0%35% to the effective income tax rates, and for additional discussion regarding income taxes.
PlanThe effective income tax rate for 2014 was 38%. The difference in the effective income tax rate versus the statutory rate of 35% for 2014 was primarily due to Spin Offstate income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions, partially offset by a deferred state income tax reduction related to a New York tax law change and book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate for 2013 was 23.6%. The difference in the effective income tax rate versus the statutory rate of 35% for 2013 was primarily related to (1) IRS settlements as discussed further in Note 3 to the financial statements; and (2) a tax benefit associated with the now-terminated plan to spin off and merge the Utility’s Transmission Businesstransmission business, because certain associated costs became deductible with the termination of the transaction.
On December 5, 2011, Entergy announced that it would spin off its transmission business and merge it with a newly formed subsidiary of ITC Holdings Corp. (ITC). In order to effect the spin-off and merger, Entergy entered into (i) a Merger Agreement with Mid South TransCo LLC, a newly formed, wholly owned subsidiary of Entergy (TransCo); ITC; and Ibis Transaction Subsidiary LLC (Merger Sub), a newly formed, wholly-owned subsidiary of ITC; and (ii) a Separation Agreement with TransCo, ITC, each of the Utility operating companies, and Entergy Services, Inc. These agreements, which have been approved by the Boards of Directors of Entergy and ITC, provide for the separation of Entergy’s transmission business (the “Transmission Business”), the distribution to Entergy’s stockholders of all of the common units of TransCo, a holding company subsidiary formed to hold the Transmission Business, and the merger of Merger Sub with and into TransCo, with TransCo continuing as the surviving entity in the Merger (the Merger), following which each common unit of TransCo will be converted into the right to receive one fully paid and nonassessable share of ITC common stock. Both the Distribution (as defined below) and the Merger are expected to qualify as tax-free transactions.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2013 Compared to 2012
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2013 to 2012 showing how much the line item increased or (decreased) in comparison to the prior period.
|
| | | | | | | | | | | | | | | |
| | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | (In Thousands) |
| 2012 Consolidated Net Income (Loss) |
| $960,322 |
| |
| $40,427 |
| |
| ($132,386 | ) | |
| $868,363 |
|
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | 555,233 |
| | (51,509 | ) | | 7,136 |
| | 510,860 |
|
| Other operation and maintenance | 184,374 |
| | 90,222 |
| | 11,946 |
| | 286,542 |
|
| Asset write-off, impairments, and related charges | 9,411 |
| | (26,188 | ) | | 2,790 |
| | (13,987 | ) |
| Taxes other than income taxes | 37,547 |
| | 5,380 |
| | 125 |
| | 43,052 |
|
| Depreciation and amortization | 76,850 |
| | 39,824 |
| | (215 | ) | | 116,459 |
|
| Gain on sale of business | — |
| | 43,569 |
| | — |
| | 43,569 |
|
| Other income | 6,378 |
| | 29,624 |
| | 2,268 |
| | 38,270 |
|
| Interest expense | 32,688 |
| | (1,577 | ) | | 3,642 |
| | 34,753 |
|
| Other expenses | 18,271 |
| | 50,274 |
| | — |
| | 68,545 |
|
| Income taxes | 316,577 |
| | (138,800 | ) | | 17,349 |
| | 195,126 |
|
| 2013 Consolidated Net Income (Loss) |
| $846,215 |
| |
| $42,976 |
| |
| ($158,619 | ) | |
| $730,572 |
|
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.
As discussed in more detail in Note 1 to the financial statements, results of operations include $322 million ($202 million after-tax) in 2013 and $356 million ($224 million after-tax) in 2012 of impairment and other related charges to write down the carrying value of Vermont Yankee and related assets to their fair values. Also, net income for Utility in 2012 was significantly affected by a settlement with the IRS related to the income tax treatment of the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs, which resulted in a reduction in income tax expense. The net income effect was partially offset by a regulatory charge, which reduced net revenue in 2012, associated with the storm costs settlement to reflect the obligation to customers with respect to the settlement. See Note 3 to the financial statements for additional discussion of the tax settlement.
Also, earnings were negatively affected in 2013 by expenses, including other operation and maintenance expenses and taxes other than income taxes, of approximately $110 million ($70 million after-tax), including approximately $85 million ($55 million after-tax) for Utility and $25 million ($15 million after-tax) for Entergy Wholesale Commodities, recorded in connection with a strategic imperative intended to optimize the organization through a process known as human capital management. In December 2013, Entergy deferred for future collection approximately $45 million ($30 million after-tax) of these costs in the Arkansas and Louisiana jurisdictions at the Utility, as approved by the APSC and the LPSC, respectively. See “Human Capital Management Strategic Imperative” below for further discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net Revenue
PursuantUtility
Following is an analysis of the change in net revenue comparing 2013 to 2012.
|
| | | |
| Amount |
| (In Millions) |
| |
| 2012 net revenue |
| $4,969 |
|
| Retail electric price | 236 |
|
| Louisiana Act 55 financing savings obligation | 165 |
|
| Grand Gulf recovery | 75 |
|
| Volume/weather | 40 |
|
| Fuel recovery | 35 |
|
| MISO deferral | 12 |
|
| Asset retirement obligation | (23 | ) |
| Other | 15 |
|
| 2013 net revenue |
| $5,524 |
|
The retail electric price variance is primarily due to:
a formula rate plan increase at Entergy Louisiana, effective January 2013, which includes an increase relating to the Merger Agreement,Waterford 3 steam generator replacement project, which was placed in service in December 2012. The net income effect of the formula rate plan increase is limited to a portion representing an allowed return on equity with the remainder offset by costs included in other operation and subjectmaintenance expenses, depreciation expenses, and taxes other than income taxes;
the recovery of Hinds plant costs through the power management rider at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of 2013. The net income effect of the Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
an increase in the capacity acquisition rider at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of December 2012, relating to the terms and conditions set forth therein, Entergy will distributeHot Spring plant acquisition. The net income effect of the TransCo common unitsHot Spring plant cost recovery is limited to its shareholders. At Entergy’s election, it may distributea portion representing an allowed return on equity on the TransCo common units by means of a pro rata dividend in a spin-off or pursuant to an exchange offer in a split-off, or a combination of a spin-off and a split-off (the Distribution). In connectionnet plant investment with the Merger, ITC expects to effectuate a $700 million recapitalization, currently anticipated to take the form of a one-time special dividend to its shareholders of record as of a record date prior to the Merger, which will be determinedremainder offset by the board of directors of ITCHot Spring plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;
increases in the energy efficiency rider, as approved by the APSC, effective July 2013 and July 2012. Energy efficiency revenues are offset by costs included in other operation and maintenance expenses and have minimal effect on net income;
an annual base rate increase at a later date (the Special Dividend). Entergy’s shareholders who become shareholders of ITCEntergy Texas, effective July 2012, as a result of the Merger will not receivePUCT’s order that was issued in September 2012 in the Special Dividend. PursuantNovember 2011 rate case; and
a formula rate plan increase at Entergy Mississippi, effective September 2013.
See Note 2 to the Merger Agreement,financial statements for a discussion of rate proceedings.
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana and subjectEntergy Louisiana were required to share with customers the savings from the tax treatment related to the termsHurricane Katrina and conditions set forth therein, immediately afterHurricane Rita Louisiana Act 55 financing. See Note 3 to the consummationfinancial statements for additional discussion of the Separation (as defined below),tax treatment.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The Grand Gulf recovery variance is primarily due to increased recovery of higher costs resulting from the consummation of the Financings (as defined below), the payment of the Special Dividend and the consummation of the Distribution, Merger Sub will merge with and into TransCo, with TransCo continuing as the surviving entity, and Entergy shareholders who hold common units of TransCo will have those units exchanged for ITC common stock on a one-for-one basis. Consummation of the transactions contemplated by the Separation Agreement and the Merger Agreement is expected to result in Entergy’s shareholders holding at least 50.1% of ITC’s common stock and existing ITC shareholders holding no more than 49.9% of ITC’s common stock immediately after the Merger.Grand Gulf uprate.
The Merger Agreement contains certain customary representationsvolume/weather variance is primarily due to the effects of more favorable weather on residential sales and warranties. The Merger Agreement may be terminated: (i) by mutual consent of Entergy and ITC, (ii) by either Entergy or ITC if the Merger has not been completed by June 30, 2013, subjectan increase in industrial sales primarily due to an up to six month extension by either Entergy or ITC in certain circumstances, (iii) by either Entergy or ITC if the transactions are enjoined or otherwise prohibited by applicable law, (iv) by Entergy, on the one hand, or ITC, on the other hand, upon a material breach of the Merger Agreement by the other party that has not been cured by the cure period specifiedgrowth in the Merger Agreement, (v) by either Entergy or ITC if ITC’s shareholders fail to approve the ITC shareholder proposals, (vi) by Entergy if the ITC Board of Directors withdraws or changes its recommendation of the ITC shareholder proposals in a manner adverse to Entergy, (vii) by Entergy if ITC willfully breaches in any material respect its non-solicitation covenant and the breach has not been cured by the cure period specified in the Merger Agreement, (viii) by Entergy if there is a law or order that enjoins the transactions or imposes a burdensome condition on Entergy, (ix) by either Entergy or ITC if there is a law or order that enjoins the transactions or imposes a burdensome condition on ITC, (x) by ITC, prior to ITC shareholder approval, to enter into a transaction for a superior proposal, provided that ITC complies with its notice and other obligations in the non-solicitation provision and pays Entergy the termination fee concurrently with termination or (xi) by ITC if Entergy takes certain actions with respect to the migration of the Transmission Business to a regional transmission organization if such actions could reasonably be expected to have certain adverse effects on TransCo or ITC after the Merger. In the event that (i) ITC terminates the Merger Agreement to accept a superior acquisition proposal, (ii) Entergy terminates the Merger Agreement because the ITC Board of Directors has withdrawn its recommendation of the ITC shareholder proposals, approves or recommends another acquisition proposal, fails to reaffirm its recommendation or materially breaches the non-solicitation provisions, (iii) either of the parties terminates the Merger Agreement because the approval of ITC’s shareholders is not obtained or (iv) Entergy terminates because of ITC’s uncured willful breach of the Merger Agreement, and in the case of clauses (iii) and (iv) an ITC takeover transaction was publicly announced and not withdrawn prior to termination and within 12 months of termination ITC agrees to or consummates a takeover transaction, then ITC must pay Entergy a $113,570,800 termination fee.refining segment.
ConsummationThe fuel recovery variance is primarily due to:
the deferral of the Merger is subject to the satisfaction of customary closing conditions for a transaction such as the Merger, including, among others, (i) consummation of the Separation, the Distribution, the Financings and the Special Dividend, (ii) the approval of the ITC shareholder proposals by the shareholders of ITC, (iii) the authorization for listing on the New York Stock Exchange of ITC common stock toincreased capacity costs that will be issued in the Merger, (iv) the receipt by Entergy of regulatory approvals necessary to become a member of an acceptable regional transmission organization, (v) the receipt of regulatory approvals necessary to consummate the transaction and recovered through fuel adjustment clauses;
the expiration of the applicable waiting period underEvangeline gas contract on January 1, 2013; and
an adjustment to deferred fuel costs recorded in the Hart-Scott-Rodino Act, and no such regulatory approvals imposethird quarter 2012 in accordance with a burdensome condition on ITC or Entergy, (vi) the absence of a material adverse effect on the Transmission Business or ITC, (vii) the receipt by Entergy of a solvency opinion and (viii) the receipt of a private letter rulingrate order from the IRS substantiallyPUCT issued in September 2012. See Note 2 to the effect that certain requirementsfinancial statements for further discussion of this PUCT order issued in Entergy Texas’s 2011 rate case.
The MISO deferral variance is primarily due to the deferral in April 2013, as approved by the APSC, of costs incurred from March 2010 through December 2012 related to the transition and implementation of joining the MISO RTO.
The asset retirement obligation affects net revenue because Entergy records a regulatory debit or credit for the tax-free treatmentdifference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits resulting from higher realized income on decommissioning trust fund investments.
Entergy Wholesale Commodities
Following is an analysis of the distributionchange in net revenue comparing 2013 to 2012.
|
| | | |
| Amount |
| (In Millions) |
| |
| 2012 net revenue |
| $1,854 |
|
| Mark-to-market | (58 | ) |
| Nuclear volume | (24 | ) |
| Nuclear fuel expenses | (20 | ) |
| Nuclear realized price changes | 58 |
|
| Other | (8 | ) |
| 2013 net revenue |
| $1,802 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by approximately $52 million in 2013 primarily due to:
the effect of TransCorising forward power prices on electricity derivative instruments that are metnot designated as hedges, including additional financial power sales conducted in the fourth quarter 2013 to offset the planned exercise of in-the-money protective call options and an opinionto lock in margins. These additional sales did not qualify for hedge accounting treatment, and increases in forward prices after those sales were made accounted for the majority of the negative mark-to-market variance. The underlying transactions resulted in earnings in first quarter 2014 as these positions settled. See Note 16 to the financial statements for discussion of derivative instruments;
the decrease in net revenue compared to prior year resulting from the exercise of resupply options provided for in purchase power agreements where Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running. Amounts related to the exercise of resupply options are included in the GWh billed in the table below; and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
thathigher nuclear fuel expenses primarily resulting from the Distributioneffect of the write-down in March 2012 of the carrying value of Vermont Yankee’s nuclear fuel, which resulted in a lower level of nuclear fuel amortization in 2012, and the Merger will be treated as tax-free reorganizationssubsequent purchase of additional nuclear fuel in early-2013.
These decreases were partially offset by higher capacity prices.
Following are key performance measures for U.S. federal income tax purposes. The MergerEntergy Wholesale Commodities for 2013 and 2012.
|
| | | |
| | 2013 | | 2012 |
| Owned capacity (MW) (a) | 6,068 | | 6,612 |
| GWh billed | 45,127 | | 46,178 |
| Average realized price per MWh | $50.86 | | $50.02 |
| | | | |
| Entergy Wholesale Commodities Nuclear Fleet | | | |
| Capacity factor | 89% | | 89% |
| GWh billed | 40,167 | | 41,042 |
| Average realized revenue per MWh | $50.15 | | $50.29 |
| Refueling Outage Days: | | | |
| FitzPatrick | — | | 34 |
| Indian Point 2 | — | | 28 |
| Indian Point 3 | 28 | | — |
| Palisades | — | | 34 |
| Pilgrim | 45 | | — |
| Vermont Yankee | 27 | | — |
| |
| (a) | The reduction in owned capacity is due to the retirement of the 544 MW Ritchie Unit 2 in November 2013. |
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $2,080 million for 2012 to $2,264 million for 2013 primarily due to:
an increase of $83 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
an increase of $46 million in fossil-fueled generation expenses primarily due to the acquisitions of the Hot Spring plant by Entergy Arkansas and the other transactions contemplatedHinds plant by Entergy Mississippi in November 2012. Costs related to the Hot Spring and Hinds plants are recovered through the capacity acquisition rider and power management rider, respectively, as previously discussed. Also contributing to the increases is an overall higher scope of work done during plant outages as compared to the prior year;
an increase of $72 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative, partially offset by the Merger Agreementdeferral of approximately $44 million of these costs. See the “Human Capital Management Strategic Imperative” below for further discussion;
an increase of $16 million in energy efficiency costs at Entergy Arkansas. These costs are recovered through an energy efficiency rider and have minimal effect on net income;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $13 million in nuclear expenses, primarily due to higher labor costs, including higher contract labor;
the deferral in 2012, as approved by the LPSC and the Separation Agreement are planned for completion in 2013.
PursuantFERC, of costs related to the Separation Agreement,transition and subjectimplementation of joining the MISO RTO, which reduced 2012 expenses by $10 million; and
an increase of $9 million resulting from costs related to the termsgenerator stator incident at ANO, including an offset for expected insurance proceeds. See “ANO Damage, Outage, and conditions set forth therein, Entergy will engage in a series of preliminary restructuring transactions that result in the transfer to TransCo’s subsidiariesNRC Reviews” below for further discussion of the assets relatingincident.
Also, other operation and maintenance expenses include $36 million in 2013 and $38 million in 2012 of costs incurred related to the Transmission Business (the Separation). TransConow-terminated plan to spin off and its subsidiaries will consummate certain financing transactions (the TransCo Financing) totaling approximately $1.775 billion pursuantmerge the Utility’s transmission business.
Taxes other than income taxes increased primarily due to which (i) TransCo’s subsidiaries will borrow throughan increase in ad valorem taxes, primarily due to the Hot Spring and Hinds plant acquisitions in 2012, as well as an increase in local franchise taxes resulting from higher residential and commercial revenues as compared with prior year.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Hot Spring and Hinds plant acquisitions in 2012 and the completion of the Waterford 3 steam generator replacement project and the Grand Gulf uprate project in 2012. Also contributing to the increase is an increase in depreciation rates as a one-year term funded bridge facility and (ii) TransCo will issue senior securitiesresult of TransCothe 2011 rate case order issued by the PUCT in September 2012.
Interest expense increased primarily due to Entergy (the TransCo Securities). Neither Entergy nornet debt issuances in 2013 of $520 million by the Utility operating companies will guarantee or otherwise be liableand System Energy and lower allowance for borrowed funds used during construction due to the completion of several major projects in 2012.
Entergy Wholesale Commodities
Other operation and maintenance expenses increased from $958 million for 2012 to $1,048 million for 2013 primarily due to:
an increase of $43 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of lump sum benefits out of the TransCo Securities. non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
an increase of $23 million primarily due to the effect of the final court decisions in the Vermont Yankee and Indian Point 2 lawsuits against the U.S. Department of Energy related to spent nuclear fuel disposal recorded in 2012. The damages awarded included the reimbursement of approximately $25 million of spent nuclear fuel storage costs previously recorded as operation and maintenance expenses;
an increase of $16 million resulting from implementation and severance costs in 2013 related to the human capital management strategic imperative. See “Human Capital Management Strategic Imperative” below for further discussion; and
approximately $15 million in commitments recorded in connection with the settlement agreement with parties in Vermont regarding the operation and decommissioning of Vermont Yankee. See “Impairment of Long-Lived Assets” in Note 1 to the financial statements for further discussion of the settlement agreement.
The asset impairment variance is primarily due to $321.5 million ($202.2 million after-tax) in 2013 and $355.5 million ($223.5 million after-tax) in 2012 of impairment and other related charges primarily to write down the carrying value of Vermont Yankee and related assets to their fair values. See Note 1 to the financial statements for further discussion of these charges.
Depreciation and amortization expenses increased primarily due to an adjustment in 2012 resulting from final court decisions in the Indian Point 2 and Vermont Yankee lawsuits against the U.S. Department of Energy related to
Entergy will issue new debt or enter into agreements under which certain unrelated creditors will agreeCorporation and Subsidiaries
Management's Financial Discussion and Analysis
spent nuclear fuel disposal. The effects of recording the proceeds from the judgment reduced the plant in service balances and included a $25 million reduction to purchase existing corporate debtpreviously-recorded depreciation expense.
The gain on sale of business resulted from the sale in November 2013 of Entergy which will be exchangeable into the TransCo Securities at closing (the Exchangeable Debt Financing). In addition, prior to the closing TransCo may obtainSolutions District Energy, a working capital revolving credit facility in a principal amount agreed tobusiness wholly-owned by Entergy in the Entergy Wholesale Commodities segment that owned and ITC (such financing, together withoperated district energy assets serving the TransCo Financingbusiness districts in Houston and New Orleans. Entergy sold Entergy Solutions District Energy for $140 million and realized a pre-tax gain of $44 million on the Exchangeable Debt Financing,sale.
Other income increased primarily due to realized decommissioning trust gains that resulted from portfolio reallocations for the Financings).Indian Point 2 and Palisades decommissioning trust funds.
Other expenses increased primarily due to a credit to decommissioning expense of $49 million in the second quarter 2012 resulting from a reduction in the decommissioning cost liability for a plant as a result of a revised decommissioning cost study. See “Critical Accounting Estimates - Nuclear Decommissioning Costs” for further discussion of nuclear decommissioning costs.
UnderParent & Other
Other operation and maintenance expenses increased primarily due to the termselimination of intersegment activity.
Income Taxes
See Note 3 to the financial statements for a reconciliation of the Separation Agreement, concurrentlyfederal statutory rate of 35% to the effective income tax rates, and for additional discussion regarding income taxes.
The effective income tax rate for 2013 was 23.6%. The difference in the effective income tax rate versus the statutory rate of 35% for 2013 was primarily related to (1) IRS settlements as discussed further in Note 3 to the financial statements; and (2) a tax benefit associated with the TransCo Financing, each Utility operating company will contribute its respectivenow-terminated plan to spin off and merge the Utility’s transmission assets to a subsidiary that will become a TransCo subsidiarybusiness, because certain associated costs became deductible with the termination of the transaction.
The effective income tax rate for 2012 was 3.4%. The difference in the Separationeffective income tax rate versus the statutory rate of 35% for 2012 was primarily related to (1) IRS settlements as discussed further in exchangeNote 3 to the financial statements; and (2) a unanimous court decision from the U.S. Court of Appeals for the equity interest in that subsidiary and the net proceeds received by that subsidiary from the one-year funded bridge facility described above. Each Utility operating company will distribute the equity interests in the subsidiaries holding the transmission assets to Entergy, which will then contribute such interests to TransCo. The Utility operating companies intend to apply all or a portionFifth Circuit affirming an earlier decision of the amounts received by them from the subsidiariesU.S. Tax Court holding that Entergy was entitled to the prepayment or redemption of outstanding preferred and debt securities, with the goal, following completion of the Separation, of maintaining their capitalization balanced between equity and debt generally consistent with the balance of their capitalization prior to the Separation. Although the aggregate amount and particular series of preferred and debt securities of each Utility operating company to be redeemed as well as the redemption dates are uncertain at this time and are expected to remain subject to change, each Utility operating company currently anticipates that all ofclaim a credit against its outstanding preferred securities, if any, will be redeemed or otherwise retired prior to the Separation and that debt securities in the following approximate aggregate amounts will be redeemed prior to or following the Separation: $.51 billion for Entergy Arkansas, $.27 billion for Entergy Gulf States Louisiana, $.38 billion for Entergy Louisiana, $.29 billion for Entergy Mississippi, $.01 billion for Entergy New Orleans, and $.30 billion for Entergy Texas. Entergy and the Utility operating companies may, subject to certain conditions, modify or supplement the manner in which the Separation is consummated. As of December 31, 2011, net transmission plant in service, which does not include transmission-related construction work in progress or general or intangible plant,U.S. tax liability for the Utility operating companies was $.94 billionU.K. windfall tax that it paid. The decision necessitated that Entergy reverse the provision for Entergy Arkansas, $.50 billion for Entergy Gulf States Louisiana, $.71 billion for Entergy Louisiana, $.51 billion for Entergy Mississippi, $.02 billion for Entergy New Orleans, and $.62 billion for Entergy Texas. Consummation of the Separation is subjectuncertain tax position related to the satisfaction of the conditions applicable to Entergy and ITC contained in the Separation Agreement and the Merger Agreement, including that the sum of the principal amount of TransCo Securities issued to Entergy and the principal amount of the bridge facility entered into by TransCo’s subsidiaries is at least $1.775 billion.item.
Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants
The NRC operating license for Palisades expires in 2031, for Pilgrim expires in 2032, and for FitzPatrick expires in 2034. The NRC operating license for Vermont Yankee was to expire in March 2012. In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032. For additional discussion regarding the continued operationshutdown of the Vermont Yankee plant in December 2014, see “Impairment of Long-Lived Assets” in Note 1 to the financial statements.
In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian Point 2 and Indian Point 3 for an additional 20 years. The original expiration date of the NRC operating license for Pilgrim expiresIndian Point 2 was in June 2012,September 2013 and the original expiration date of the NRC operating license for Indian Point 3 is in December 2015. Authorization to operate Indian Point 2 expires in September 2013,rests, and for Indian Point 3 expireswill rest, on Entergy’s having timely filed a license renewal application that remains pending before the NRC. Indian Point 2 has now entered its “period of extended operation” after expiration of the plant’s initial license term under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been timely filed with the licensing agency. Indian Point 3 is expected to reach the same milestone, and to become subject to the same statutorily prescribed extension of its license expiration date, in December 2015, and NRC2015. The license renewal applications are in process for these plants. Under federal law, nuclear power plants may continue to operate beyond their license expiration dates while their renewal applications are pending NRC approval. Various parties have expressed opposition to renewal of the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
licenses. With respect to the Pilgrim license renewal the Atomic Safety and Licensing Board (ASLB) of the NRC, after issuing an order denying a new hearing request, terminated its proceeding on Pilgrim’s license renewal application. With the ASLB process concluded the proceeding, including appeals of certain ASLB decisions, is now before the NRC.
In April 2007, Entergy submitted an application to the NRC to renew the operating licenses for Indian Point 2 and Indian Point 3 qualifies for timely renewal protection because it met NRC regulatory standards for timely filing.
The scope of NRC license renewal applications is focused primarily on whether the licensee has in place aging management programs (detailed diagnostic analyses performed when and as prescribed) to ensure that passive systems, structures, and components (such as pipes and concrete and metal structures) can continue to perform their intended safety functions. Other aspects of nuclear plant operations (maintenance of active components like pumps and control systems, security, and emergency preparedness) are regulated by the NRC on an additional 20 years.ongoing basis and, as such, are outside the scope of license renewal proceedings. The NRC also determines whether there are any environmental impacts that would affect license renewal.
Every application for renewal of a reactor operating license undergoes comprehensive NRC staff review to ensure the adequacy of the application and the aging management programs detailed in it. NRC staff’s conclusions following such review are set forth in a Final Safety Evaluation Report (FSER). Issuance of a renewed operating license is a “major federal action” under the National Environmental Policy Act, so NRC staff also are required to prepare an Environmental Impact Statement (EIS) regarding the proposed licensing action. The NRC has elected to address certain EIS issues on a generic basis via the rulemaking process. As a result, the EIS for a particular license renewal proceeding has two components: the Generic Environmental Impact Statement and a Final Supplemental Environmental Impact Statement (FSEIS) addressing site-specific EIS issues. Both the FSER and the FSEIS are subject to updating by NRC staff in an individual license renewal proceeding.
Where, as in the case of Indian Point, one or more intervenors proposes for admission contentions alleging errors and omissions in the applicant’s license renewal application or the NRC staff’s review of related safety and environmental issues, the NRC appoints an ASLB to determine whether the contentions satisfy threshold standards and, if so, to adjudicate such “admitted” contentions. Safety-related contentions address issues that will be or have been described in the FSER; environmental-related contentions address issues that will be or have been described in the FSEIS. Contentions may be proposed at any time before license issuance based on new and material information, subject to timeliness and admissibility standards. Final ASLB orders on admissibility or resolving contentions, whether after hearing or on summary disposition, are appealable to the NRC.
Various governmental and private intervenors have sought and obtained party status to express opposition to renewal of the Indian Point 2 and Indian Point 3 licenses. The ASLB has admitted 16 consolidated contentions based on 21 contentions raisedoriginally proposed by the State of New York or other parties, which were combined into 16 discrete issues. Twoparties.
Four of the issues16 admitted contentions have been resolved leaving 14 issues that are currently subjectby the ASLB without hearing, two by means of ASLB-approved settlements, a third by summary disposition as described below, and a fourth by motion to ASLB hearings.dismiss as moot as described in the second paragraph below. In July 2011 the ASLB granted the State of New York’s motion for summary disposition of an admitted contention challenging the adequacy of a section of Indian Point’s environmental analysis as incorporated in the FSEISFinal Supplemental Environmental Impact Statement (FSEIS) (discussed below). That section provided cost estimates for Severe Accident Mitigation Alternatives (SAMAs), which are hardware and procedural changes that could be implemented to mitigate estimated impacts of off-site radiological releases in case of a hypothesized severe accident. In addition to finding that the SAMA cost analysis was insufficient, the ASLB directed the NRC staff to explain why cost-beneficial SAMAs should not be required to be implemented. Entergy appealed the ASLB’s decision to the NRC and the NRC staff supported Entergy’s appeal, while the State of New York opposed it. In December 2011 the NRC denied Entergy’s appeal as premature, statingpremature. Entergy renewed its appeal in February 2014 in conjunction with the filing of Track 1 appeals, as discussed further below. In May 2013, Entergy filed an updated SAMA cost analysis with the NRC, and in July 2013 the ASLB granted Entergy’s motion for clarification that a future NRC staff filing would be the appeal could be renewed attrigger for potential new or amended contentions on the conclusionSAMA update.
Nine of the remaining admitted contentions were designated by the ASLB proceedings.
as “Track 1” and were subject to hearings over 12 days in October, November, and December 2012. In November 20112013 the ASLB issued an order establishing deadlinesa decision on the nine Track 1 contentions. The ASLB resolved eight Track 1 contentions favorably to Entergy. No appeal was
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
taken from the ASLB's decision on six of those eight contentions, so they have been conclusively resolved in Entergy's favor. The ASLB resolved one Track 1 contention favorably to New York State. That contention was based on a dispute over the characterization of certain electrical equipment as “active” or “passive.” The ASLB found in favor of the State of New York despite precedent supporting the characterization advocated by Entergy and NRC staff.
Following the ASLB's November 2013 decision on Track 1 contentions, the State of New York and Clearwater each appealed the decision on a single contention (SAMA decontamination cost estimates for the submissionState of several roundsNew York and environmental justice for Clearwater), while Riverkeeper filed no appeals. Entergy and NRC staff both appealed the same three issues: (1) the ASLB’s decision on electrical transformers; (2) certain intermediate determinations in the ASLB’s overall favorable decision on environmental justice; and (3) the ASLB’s earlier decisions on SAMA cost estimates, thus renewing their appeals of testimony on mostthat issue previously denied by the NRC as premature. Appeal (3) addressed a contention that was one of the four decided without hearing. The remaining appeals addressed contentions pending beforethat were tried in Track 1 hearings.
In February 2015, the ASLB andNRC granted petitions for review of two appeals for the filingpurpose of motionsobtaining additional information prior to limit or exclude testimony. Initial hearings before the ASLB on the contentionsmaking final disposition. The appeals for which testimonythe NRC requested answers to specified questions were New York State’s appeal on SAMA decontamination cost estimates and the appeal of Entergy and NRC staff on SAMA cost estimates. The NRC stated that the remaining appeals filed after the ASLB’s Track 1 decision would be resolved in the future. There is submitted are expected to begin byno deadline for the endNRC action on either group of 2012. Filing deadlines for testimony on certain admitted contentions remain to be set byappeals from the ASLB.
The remaining four admitted consolidated contentions were designated by the ASLB as “Track 2.” In April 2014 the ASLB granted Entergy’s motion to dismiss as moot a contention by Riverkeeper alleging that the FSEIS failed to adequately address endangered species issues. At the same time, the ASLB denied a motion filed by Riverkeeper in August 2013 to amend its endangered species contention. These ASLB decisions were not appealed and are now final, making a total of nine of the original 16 admitted consolidated contentions that have been resolved favorably (or in the case of settlement, acceptably) to Entergy. Seven of the original 16 admitted consolidated contentions are on appeal (four total) or pending hearing on Track 2 (three total).
While Track 2 hearings have not been scheduled, the procedural steps leading to such hearings have begun. Pursuant to ASLB procedural orders, New York State filed in February 2015 proposed revisions to two of the three admitted contentions designated as Track 2. Entergy and NRC staff currently is also performingwill have an opportunity to oppose or to seek limitations on those contention revisions, after which the ASLB will decide whether to accept New York State’s proposed revisions to previously-admitted contentions. In addition, before Track 2 hearings are convened, the parties will have the opportunity to update and complete their testimony.
Independent of the ASLB process, the NRC staff has performed its technical and environmental reviews of the Indian Point 2 and Indian Point 3 license renewal application. The NRC staff issued a Final Safety Evaluation Report (FSER)an FSER in August 2009, a supplement to the FSER in August 2011, an FSEIS in December 2010, a supplement to the FSEIS in June 2013, and, as noted above, a Final Supplementalfurther supplement to the FSER in November 2014. In November 2014 the NRC staff advised of its proposed schedule for issuance of a further FSEIS supplement to address new information received by NRC staff since preparation and publication of the previous FSEIS supplement in June 2013. The proposed schedule identifies several milestones leading to the issuance of a new final FSEIS supplement in March 2016. The matters to be addressed in the new supplement include Entergy’s May 2013 submittal of updated cost information for SAMAs; Entergy’s February 2014 submittal of new aquatic impact information; the June 2013 revision by the NRC of its Generic Environmental Impact Statement (FSEIS)relied upon in December 2010. The NRC staff has stated its intent to file a supplemental FSEIS in May 2012. The New York State Department of Environmental Conservation has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. In addition,proceedings; and the consistency of Indian Point’s operations with New York State’s coastal management policies must be resolved as required byNRC’s Continued Storage Of Spent Nuclear Fuel rule, which was published in the Coastal Zone Management Act. Entergy Wholesale Commodities’ efforts to obtain these certifications and determinations continueFederal Register in 2012.September 2014.
The hearing process is an integral component of the NRC’s regulatory framework, and evidentiary hearings on license renewal applications are not uncommon. Entergy intends to participateis participating fully in the hearing processand appeals processes as permittedauthorized by the NRC’s hearing rules.NRC regulations. As noted in Entergy’s responses toEntergy filings at the various intervenor filings,ASLB and the appellate levels, Entergy believes the contentions proposed by the intervenors are unsupported and without merit. Entergy will continue to work with the NRC staff as it completes its technical and environmental reviews of the Indian Point 2 and 3 license renewal application.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
applications. See “Nuclear Matters” below for discussion of spent nuclear fuel storage issues and their potential effect on the timing of license renewals.
The New York State Department of Environmental Conservation (NYSDEC) has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. Entergy submitted its application for a water quality certification to NYSDEC in April 2009, with a reservation of rights regarding the applicability of Section 401 in this case. After Entergy submitted certain additional information in response to NYSDEC requests for additional information, in February 2010 the NYSDEC staff determined that Entergy’s water quality certification application was complete. In April 2010 the NYSDEC staff issued a proposed notice of denial of Entergy’s water quality certification application (the Notice). NYSDEC staff’s Notice triggered an administrative adjudicatory hearing before NYSDEC ALJs on the proposed Notice. The NYSDEC staff decision does not restrict Indian Point operations, but the issuance of a certification is potentially required prior to NRC issuance of renewed unit licenses. In June 2011, Entergy filed notice with the NRC that NYSDEC, the agency that would issue or deny a water quality certification for the Indian Point license renewal process, had taken longer than one year to take final action on Entergy’s application for a water quality certification and, therefore, had waived its opportunity to require a certification under the provisions of Section 401 of the Clean Water Act. The NYSDEC has notified the NRC that it disagrees with Entergy’s position and does not believe that it has waived the right to require a certification. The NYSDEC ALJs overseeing the agency’s certification adjudicatory process stated in a ruling issued in July 2011 that while the waiver issue is pending before the NRC, the NYSDEC hearing process will continue on selected issues. The ALJs held a Legislative Hearing (agency public comment session) and an Issues Conference (pre-trial conference) in July 2010 and set certain issues for trial in October 2011. In 2014, hearings were held on NYSDEC’s proposed best technology available, closed cycle cooling. The NYSDEC staff also has proposed annual fish protection outages of 42, 62, or 92 days at both units or at one unit with closed cycle cooling at the other. The ALJs held a further legislative hearing and issues conference on this NYSDEC staff proposal in July 2014. In January 2015, Entergy wrote NYSDEC leadership requesting an explanation of the delay in release of the ruling following an ALJ’s on-record statement that the ALJ’s draft ruling was under “executive review.” In February 2015, the ALJs issued a ruling scheduling hearings on the outage proposals and other pending issues in September and October 2015, with post-hearing briefing to follow in December 2015.
The ALJs have issued no partial decisions on the several issues that have been the subject of hearing during the past three years and have not announced a schedule for doing so. After the completion of hearings on the merits, the ALJs will issue a recommended decision to the NYSDEC Commissioner’s designated delegate who will then issue the final agency decision. A party to the proceeding can appeal the final agency decision to state court.
In addition, before the NRC may issue renewed operating licenses it must resolve its obligation to address the requirements of the Coastal Zone Management Act (CZMA). Most commonly, those requirements are met by the applicant’s demonstration that the activity authorized by the federal permit being sought is consistent with the host state’s federally-approved coastal management policies. Entergy has undertaken three independent initiatives to resolve CZMA issues: “grandfathering;” “previous review;” and a “consistency certification.”
First, Entergy filed with the New York State Department of State (NYSDOS) in November 2012 a petition for declaratory order that Indian Point is grandfathered under either of two criteria prescribed by the New York Coastal Management Program (NYCMP), which sets forth the state coastal policies applied in a CZMA consistency review. NYSDOS denied the motion by order dated January 2013. Entergy filed a petition for judicial review of NYSDOS’s decision with the New York State Supreme Court for Albany County in March 2013. The court denied Entergy’s appeal in December 2013. Entergy initiated an appeal to the Appellate Division of the New York State Supreme Court in January 2014. In December 2014 a five-judge panel of that court unanimously held that Indian Point is exempt from CZMA consistency review by NYSDOS because it meets one of the two criteria for grandfathering established in the NYCMP. The court did not address the second criterion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Appeal to New York State’s highest court, the State Court of Appeals, is discretionary in this case. In January 2015, NYSDOS filed with the same court a motion for reargument or, alternatively, leave to appeal to the State Court of Appeals. Entergy timely filed opposing papers. If the Appellate Division denies NYSDOS’s motion, NYSDOS may then file a separate motion for leave to appeal directly with the State Court of Appeals.
Second, in July 2012, Entergy filed a supplement to the Indian Point license renewal applications currently pending before the NRC. The supplement states that, based on applicable federal law and in light of prior reviews by the State of New York, the NRC may issue the requested renewed operating licenses for Indian Point without the need for an additional consistency review by the State of New York under the CZMA. In July 2012, Entergy filed a motion for declaratory order with the ASLB seeking confirmation of its position that no further CZMA consistency determination is required before the NRC may issue renewed licenses. In April 2013 the State of New York and Riverkeeper filed answers opposing Entergy’s motion. The State of New York also filed a cross-motion for declaratory order seeking confirmation that Indian Point had not been previously reviewed, and that only NYSDOS could conduct a CZMA review for NRC license renewal purposes. In April 2013 the NRC Staff filed answers recommending the ASLB deny both Entergy’s and the State of New York’s motions for declaratory order. In June 2013 the ASLB denied Entergy’s and the State of New York’s motions, without prejudice, on the ground that consultation on the matter of previous review among the NRC, Entergy (as applicant), and the State of New York had not taken place, as the ASLB determined to be required. In December 2013, NRC staff initiated consultation under federal CZMA regulations by serving on NYSDOS written questions related to whether Indian Point had been previously reviewed. In May 2014 the NYSDOS responded to questions the NRC staff submitted in December 2013. In July 2014, Entergy submitted comments on NYSDOS’s responses and NYSDOS filed a reply to those comments. Further submissions to the NRC staff with respect to the previous review issue were made by Entergy in November 2014 and by NYSDOS in December 2014. The NRC staff advised the ASLB in February 2015 that it is reviewing the information it has received regarding previous review and will provide further information when available.
Third, in December 2012, Entergy filed with NYSDOS a consistency determination explaining why Indian Point satisfies all applicable NYCMP policies while noting that Entergy did not concede NYSDOS’s right to conduct a new CZMA review for Indian Point. In January 2013, NYSDOS notified Entergy that it deemed the consistency determination incomplete because it did not include the final version of a further supplement to the FSEIS that was targeted for subsequent issuance by NRC staff. In June 2013, NYSDOS notified Entergy that NYSDOS had received a copy of the final version of the FSEIS on June 20, 2013, and that NYSDOS’s review of the Indian Point consistency determination had begun that date. By a series of agreements, Entergy and NYSDOS agreed to extend NYSDOS’s deadline for concurring with or objecting to the Indian Point consistency certification to December 31, 2014. In November 2014, Entergy filed with the NRC and with NYSDOS a notice withdrawing the consistency certification. Entergy cited the NRC staff’s announcement two days earlier of its intent to issue in March 2016 a new FSEIS supplement addressing, among other things, new information concerning aquatic impacts. Entergy stated that unless the previous review or grandfathering issues were first and finally resolved in Entergy’s favor, Entergy intended to file a new consistency certification after the NRC issues the FSEIS supplement. That new consistency certification would initiate NYSDOS’s review process, would allow the FSEIS supplement to also be part of the record before NYSDOS, and, were NYSDOS to object to the new certification, would also be part of the record before the U.S. Secretary of Commerce on appeal.
NYSDOS disputed the effectiveness of Entergy’s November 2014 notice withdrawing the consistency certification. In December 2014, Entergy and NYSDOS executed an agreement intended to preserve the parties’ respective positions on withdrawal. The agreement provides, among other things, that if NYSDOS is correct about withdrawal not being effective, the parties will be deemed to have agreed to a stay of NYSDOS’s deadline for decision on the 2012 consistency certification to June 30, 2015.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
ANO Damage, Outage, and NRC Reviews
On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant. ANO 2 reconnected to the grid on April 28, 2013 and ANO 1 reconnected to the grid on August 7, 2013. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.
Entergy Arkansas is pursuing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO. NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO. Entergy has responded that it disagrees with NEIL’s position and is evaluating its options for enforcing its rights under the policy. During 2014, Entergy Arkansas collected $50 million from NEIL and is pursuing additional recoveries due under the policy. On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop.
Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant’s response. In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.
In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy’s response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.
In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issues that led to the finding have been addressed at ANO, NRC processes still required that the NRC assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
substantial safety significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings. The NRC indicated that these preliminary findings may warrant additional regulatory oversight. Entergy requested a public regulatory conference regarding the inspection, and the conference was held in October 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” In January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.”
The NRC’s January 2015 letter did not advise ANO of the additional level of oversight that will result from the yellow finding related to the flood barrier issue, and it stated that the NRC would inform ANO of this decision by separate correspondence. The yellow finding may result in ANO being placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs.
Human Capital Management Strategic Imperative
Entergy engaged in a strategic imperative intended to optimize the organization through a process known as human capital management. In July 2013 management completed a comprehensive review of Entergy’s organization design and processes. This effort resulted in a new internal organization structure, which resulted in the elimination of approximately 800 employee positions. Entergy incurred approximately $110 million and approximately $20 million in costs in 2013 and 2014, respectively, associated with this phase of human capital management, primarily implementation costs, severance expenses, pension curtailment losses, special termination benefits expense, and corporate property, plant, and equipment impairments. In December 2013, Entergy deferred for future recovery approximately $45 million of these costs, as approved by the APSC and the LPSC. See Note 2 to the financial statements for details of the deferrals and Note 13 to the financial statements for details of the restructuring charges.
Liquidity and Capital Resources
This section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement.
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
|
| | | | | |
| | 2014 | | 2013 |
| Debt to capital | 57.6 | % | | 57.9 | % |
| Effect of excluding securitization bonds | (1.4 | %) | | (1.6 | %) |
| Debt to capital, excluding securitization bonds (a) | 56.2 | % |
| 56.3 | % |
| Effect of subtracting cash | (2.8 | %) | | (1.5 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 53.4 | % |
| 54.8 | % |
| | | 2011 | | 2010 |
| | | | | |
| Debt to capital | | 57.3% | | 57.3% |
| Effect of excluding securitization bonds | | (2.3)% | | (2.0)% |
| Debt to capital, excluding securitization bonds (1) | | 55.0% | | 55.3% |
| Effect of subtracting cash | | (1.5)% | | (3.2)% |
| Net debt to net capital, excluding securitization bonds (1) | | 53.5% | | 52.1% |
(1) | |
| (a) | Calculation excludes the Arkansas, Louisiana, and Texas securitization bonds, which are non-recourse to Entergy Arkansas, Entergy Louisiana, and Entergy Texas, respectively. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
and cash equivalents. Entergy uses the net debt to net capital ratio and the 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.condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements. 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.
Long-term debt, including the currently maturing portion, makes up substantially allmost of Entergy’s total debt outstanding. Following are Entergy’s long-term debt principal maturities and estimated interest payments as of December 31, 2011.2014. To estimate future interest payments for variable rate debt, Entergy used the rate as of December 31, 2011.2014. The amounts below include payments on the Entergy Louisiana and System Energy sale-leaseback transactions, which are included in long-term debt on the balance sheet.
Long-term debt maturities and estimated interest payments | | 2012 | | 2013 | | 2014 | | 2015-2016 | | after 2016 |
| | | (In Millions) |
| | | | | | | | | | | |
| Utility | | $721 | | $1,197 | | $614 | | $1,524 | | $10,872 |
| Entergy Wholesale Commodities | | 24 | | 15 | | 16 | | 21 | | 59 |
| Parent and Other | | 1,972 | | 43 | | 43 | | 610 | | 535 |
| Total | | $2,717 | | $1,255 | | $673 | | $2,155 | | $11,466 |
|
| | | | | | | | | | | | | | | | | | | | |
Long-term debt maturities and estimated interest payments | | 2015 | | 2016 | | 2017 | | 2018-2019 | | after 2019 |
| | | (In Millions) |
| Utility | |
| $882 |
| |
| $746 |
| |
| $886 |
| |
| $2,070 |
| |
| $13,997 |
|
| Entergy Wholesale Commodities | | 19 |
| | 2 |
| | 2 |
| | 4 |
| | 53 |
|
| Parent and Other | | 624 |
| | 60 |
| | 537 |
| | 757 |
| | 466 |
|
| Total | |
| $1,525 |
| |
| $808 |
| |
| $1,425 |
| |
| $2,831 |
| |
| $14,516 |
|
Note 5 to the financial statements provides more detail concerning long-term debt outstanding.
Entergy Corporation has in place a credit facility that has a borrowing capacity of approximately $3.5 billion and expires in August 2012, whichMarch 2019. Entergy intends to renew before expiration. Because the facility is now within one year of its expiration date, borrowings outstanding on the facility are classified as currently maturing long-term debt on the balance sheet. Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility. The facilitycommitment fee is currently 0.125%0.275% of the undrawn commitment amount. FacilityCommitment 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 year ended December 31, 20112014 was 0.745%1.93% on the drawn portion of the facility.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of December 31, 2011,2014, amounts outstanding and capacity available under the $3.5 billion credit facility are:
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
| (In Millions) |
| | | | | | | |
| $3,451 | | $1,920 | | $28 | | $1,503 |
|
| | | | | | |
Capacity (a) | | Borrowings | | Letters of Credit | | Capacity Available |
| (In Millions) |
| $3,500 | | $695 | | $9 | | $2,796 |
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility’s maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to$1.5 billion. At December 31, 2014, Entergy Corporation had $484 million of commercial paper outstanding. The weighted-average interest rate for the year ended December 31, 2014 was 0.88%.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital lease obligations are a minimal part of Entergy’s overall capital structure, andstructure. Following are Entergy’s payment obligations under those leases.
|
| | | | | | | | | |
| | 2015 | | 2016 | | 2017 | | 2018-2019 | | after 2019 |
| | (In Millions) |
| Capital lease payments | $5 | | $4 | | $4 | | $7 | | $28 |
The capital leases are discussed in Note 10 to the financial statements. Following are Entergy’s payment obligations under those leases:
| | 2012 | | 2013 | | 2014 | | 2015-2016 | | after 2016 | |
| | (In Millions) |
| | | | | | | | | | | |
| Capital lease payments | $7 | | $6 | | $5 | | $9 | | $38 | |
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of December 31, 20112014 as follows:
|
| | | | | | | | |
Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of Dec.December 31, 20112014 |
| | | | | | | | |
| Entergy Arkansas | | April 20122015 | | $7820 million (b) | | 3.25%1.67% | | -— |
| Entergy Arkansas | | March 2019 | | $150 million (c) | | 1.67% | | — |
| Entergy Gulf States Louisiana | | August 2012March 2019 | | $100150 million (c)(d) | | 0.71%1.42% | | -— |
| Entergy Louisiana | | August 2012March 2019 | | $200 million (d)(e) | | 0.67%1.42% | | $50 million— |
| Entergy Mississippi | | May 20122015 | | $3510 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 20122015 | | $2520 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 20122015 | | $1035 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 2015 | | $37.5 million (f) | | 1.67% | | — |
| Entergy New Orleans | | November 2015 | | $25 million | | 1.92% | | — |
| Entergy Texas | | August 2012March 2019 | | $100150 million (f)(g) | | 0.77%1.67% | | -— |
| |
(a) | The interest rate is the weighted average interest rate as of December 31, 2011 applied, or2014 that would be applied to outstanding borrowings under the facility. |
(b) | The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization. |
(b) | Borrowings under thethis Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable.receivable at Entergy Arkansas’s option. |
| |
(c) | The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2014, no letters of credit were outstanding. |
| |
(d) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011,2014, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
| |
(d)(e) | The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011,2014, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
| |
(e)(f) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.receivable at Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization.Mississippi’s option. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
(f) | |
| (g) | The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011, no2014, $1.3 million in letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement, securitization bonds are excluded from debt and capitalization in calculating the debt ratio. |
Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In addition, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations related to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2014:
|
| | | | | | | | | |
| | | | Amount of | | | | Letters of Credit Issued as of |
| Company | | | Uncommitted Facility | | Letter of Credit Fee | | December 31, 2014 |
| Entergy Arkansas | | | $25 million | | 0.70% | |
| $2.0 | million |
| Entergy Gulf States Louisiana | | | $75 million | | 0.70% | |
| $27.9 | million |
| Entergy Louisiana | | | $50 million | | 0.70% | |
| $4.7 | million |
| Entergy Mississippi | | | $40 million | | 0.70% | |
| $14.4 | million |
| Entergy Mississippi | | | $40 million | | 1.50% | |
| $— |
|
| Entergy New Orleans | | | $15 million | | 0.75% | |
| $8.1 | million |
| Entergy Texas | | | $50 million | | 0.70% | |
| $24.5 | million |
In January 2015, Entergy Nuclear Vermont Yankee entered into a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $60 million which expires in January 2018. Also in January 2015, Entergy Nuclear Vermont Yankee entered into an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. See Note 4 to the financial statements for additional discussion of the Vermont Yankee facilities.
Operating Lease Obligations and Guarantees of Unconsolidated Obligations
Entergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated obligations. Entergy’s guarantees in support of unconsolidated obligations are not likely to have a material effect on Entergy’s financial condition, results of operations, or cash flows. Following are Entergy’s payment obligations as of December 31, 20112014 on non-cancelable operating leases with a term over one year:
| | 2012 | | 2013 | | 2014 | | 2015-2016 | | after 2016 | |
| | (In Millions) |
| | | | | | | | | | | |
| Operating lease payments | $85 | | $78 | | $79 | | $100 | | $166 | |
|
| | | | | | | | | |
| | 2015 | | 2016 | | 2017 | | 2018-2019 | | after 2019 |
| | (In Millions) |
| Operating lease payments | $90 | | $77 | | $62 | | $97 | | $96 |
The operating leases are discussed in Note 10 to the financial statements.
Summary of Contractual Obligations of Consolidated Entities
| Contractual Obligations | | 2012 | | 2013-2014 | | 2015-2016 | | after 2016 | | Total |
| | | (In Millions) |
| | | | | | | | | | | |
| Long-term debt (1) | | $2,717 | | $1,928 | | $2,155 | | $11,466 | | $18,266 |
| Capital lease payments (2) | | $7 | | $11 | | $9 | | $38 | | $65 |
| Operating leases (2) | | $85 | | $157 | | $100 | | $166 | | $508 |
| Purchase obligations (3) | | $1,803 | | $2,604 | | $1,654 | | $5,199 | | $11,260 |
|
| | | | | | | | | | | | | | | | | | | | |
| Contractual Obligations | | 2015 | | 2016-2017 | | 2018-2019 | | after 2019 | | Total |
| | | (In Millions) |
| Long-term debt (a) | |
| $1,525 |
| |
| $2,233 |
| |
| $2,831 |
| |
| $14,516 |
| |
| $21,105 |
|
| Capital lease payments (b) | |
| $5 |
| |
| $8 |
| |
| $7 |
| |
| $28 |
| |
| $48 |
|
| Operating leases (b) (c) | |
| $90 |
| |
| $139 |
| |
| $97 |
| |
| $96 |
| |
| $422 |
|
| Purchase obligations (d) | |
| $1,898 |
| |
| $2,738 |
| |
| $2,405 |
| |
| $5,821 |
| |
| $12,862 |
|
(1) | |
| (a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(2) | |
| (b) | Lease obligations are discussed in Note 10 to the financial statements. |
(3) | |
| (c) | Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| |
| (d) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. Almost all of the total are fuel and purchased power obligations. |
In addition to the contractual obligations given above, Entergy currently expects to contribute approximately $162.9$396.2 million to its pension plans and approximately $80.4$66.9 million to other postretirement plans in 2012,2015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012. Entergy’s preliminary estimates2015. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of 2012 funding requirements indicate that the contributions will not exceed historical levels ofqualified pension contributions.and other postretirement benefits funding.
Also in addition to the contractual obligations, Entergy has $812$441 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt);
permit the continued commercial operation of Grand Gulf;
pay in full all System Energy indebtedness for borrowed money when due; and
enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt.
· | maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
· | pay in full all System Energy indebtedness for borrowed money when due; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital Expenditure Plans and Other Uses of Capital
Following are the amounts of Entergy’s planned construction and other capital investments by operating segment for 20122015 through 2014:2017.
|
| | | | | | | | | | | | |
| Planned construction and capital investments | | 2015 | | 2016 | | 2017 |
| | | (In Millions) |
| Utility: | | | | | | |
| Generation | |
| $1,585 |
| |
| $635 |
| |
| $1,040 |
|
| Transmission | | 805 |
| | 670 |
| | 665 |
|
| Distribution | | 715 |
| | 700 |
| | 650 |
|
| Other | | 230 |
| | 190 |
| | 155 |
|
| Total | | 3,335 |
| | 2,195 |
| | 2,510 |
|
| Entergy Wholesale Commodities | | 425 |
| | 265 |
| | 275 |
|
| Total | |
| $3,760 |
| |
| $2,460 |
| |
| $2,785 |
|
| Planned construction and capital investments | | 2012 | | 2013 | | 2014 |
| | | | (In Millions) |
| | | | | | | | |
| Maintenance Capital: | | | | | | |
| | Utility: | | | | | | |
| | Generation | | $128 | | $129 | | $131 |
| | Transmission | | 282 | | 273 | | 255 |
| | Distribution | | 433 | | 485 | | 496 |
| | Other | | 91 | | 89 | | 103 |
| | Total | | 934 | | 976 | | 985 |
| | Entergy Wholesale Commodities | | 90 | | 120 | | 107 |
| | | | 1,024 | | 1,096 | | 1,092 |
| Capital Commitments: | | | | | | |
| | Utility: | | | | | | |
| | Generation | | $1,428 | | $583 | | $358 |
| | Transmission | | 170 | | 128 | | 264 |
| | Distribution | | 17 | | 11 | | 11 |
| | Other | | 45 | | 47 | | 35 |
| | Total | | 1,660 | | 769 | | 668 |
| | Entergy Wholesale Commodities | | 259 | | 241 | | 291 |
| | | | 1,919 | | 1,010 | | 959 |
| Total | | $2,943 | | $2,106 | | $2,051 |
Maintenance Capital refersPlanned construction and capital investments refer to amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth.
Capital Commitments refersgrowth, and includes spending for the nuclear and non-nuclear plants at Entergy Wholesale Commodities. In addition to routine capital projects, they also refer to amounts Entergy plans to spend on non-routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise expects to make to satisfy regulatory or legal requirements. Amounts reflected in this category include the following:
· | The currently planned construction or purchase of additional generation supply sources within the Utility’s service territory through the Utility’s portfolio transformation strategy, including three resources identified in the Summer 2009 Request for Proposal that are discussed below. |
Potential resource planning investments, including the Union Power Station acquisition discussed below, and potential construction of additional generation.· | Entergy Louisiana’s Waterford 3 steam generators replacement project, which is discussed below. |
· | System Energy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant. On November 30, 2009, the MPSC issued a Certificate of Public Convenience and Necessity for implementation of the uprate. A license amendment application was submitted to the NRC in September 2010. After performing more detailed project design, engineering, analysis and major materials purchases, System Energy’s current estimate of the total capital investment to be made in the course of the implementation of the Grand Gulf uprate project is approximately $754 million, including SMEPA’s share. The estimate includes spending on certain major equipment refurbishment and replacement that would have been required over the normal course of the plant’s life even if the uprate were not done. The purpose of performing this major equipment refurbishment and replacement in connection with the uprate is to avoid additional plant outages and construction costs in the future while improving plant reliability. The investment estimate may be revised in the future as System Energy evaluates the progress of the project, including the costs required to install instrumentation in the steam dryer in response to recent guidance from the NRC staff obtained during the review process for certain Requests for Additional Information (RAIs) issued by the NRC in December 2011. The NRC’s review of the project is ongoing. System Energy is responding to the recent RAIs and will seek to minimize potential cost effects or delay, if any, to the Grand Gulf uprate implementation schedule.
|
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities investments associated with specific investments such as component replacements, software and security, NYPA value sharing in January 2015, dry cask storage, and nuclear license renewal.
· | Transmission upgrades and spending to support the Utility’s plan to join the MISO RTO by December 2013. |
Environmental compliance spending, including potential scrubbers at White Bluff to meet pending Arkansas state requirements under the Clean Air Visibility Rule. Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates could change based on the results of this continuing analysis and the implementation of new environmental laws and regulations.· | Spending to comply with current and anticipated North American Electric Reliability Corporation transmission planning requirements. |
NRC post-Fukushima requirements for the Utility and Entergy Wholesale Commodities nuclear fleets.· | Entergy Wholesale Commodities investments associated with specific investments such as dry cask storage, nuclear license renewal, component replacement and identified repairs, spending in response to the Indian Point Safety Evaluation, NYPA value sharing, and wedgewire screens at Indian Point. |
· | A minimal amount of environmental compliance spending, although Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates could change based on the results of this continuing analysis and the implementation of new environmental laws and regulations. |
Transmission spending to enhance reliability, reduce congestion, and enable economic growth.
TheFor the next several years, the Utility’s owned generating capacity remains short of customer demand,is projected to be adequate to meet MISO reserve requirements; however, in the longer-term additional supply resources will be needed, and its supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. Estimated capital expenditures are also subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.
Summer 2009 Long-Term Request for ProposalUnion Power Station Purchase Agreement
In December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The 2012-2014 capital expenditure estimate includesUnion Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Pursuant to the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal: a self-build option atagreement, Entergy Louisiana’s Ninemile site and agreements byGulf States Louisiana will acquire two of the Utility operating companiespower blocks and a 50% undivided ownership interest in certain assets related to the facility, and Entergy Arkansas and Entergy Texas will each acquire one power block and a 25% undivided ownership interest in such related assets. If Entergy Arkansas or Entergy Texas do not obtain approval for the 620 MW Hot Spring Energy Facilitypurchase of their power blocks, Entergy Gulf States Louisiana will seek to purchase the power blocks not approved. The base purchase price is expected to be approximately $948 million (approximately $237 million for each power block) subject to adjustments. In addition, Entergy Gulf States Louisiana anticipates selling 20% of the capacity and energy associated with its two power blocks to Entergy New Orleans through a cost-based, life-of-unit power purchase agreement. The purchase is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the 450 MW Hinds Energy Facility.APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In December 2014, Entergy Texas filed its application with the PUCT for approval of the acquisition. The PUCT has indicated that it will convene the hearing on the merits of this case in June 2015. Entergy Texas intends to file a rate application to seek cost recovery later in 2015. In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery. Closing is targeted to occur in late-2015.
Ninemile Point Unit 6 Self-Build Project
In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station. Ninemile 6 will beis a nominally-sized 550560 MW unit that is estimatedexpected to cost approximately $721$655 million to construct when spending is complete, excluding interconnection and transmission upgrades. Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35%25% of the capacity and energy generated by Ninemile 6. The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans. In February 2012 the City Council passed a resolution
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
authorizing Entergy New Orleans to purchase 20% of the Ninemile 6 energy and capacity. If approvals are obtained fromIn March 2012 the LPSC unanimously voted to grant the certifications requested by Entergy Gulf States Louisiana and other permitting agencies, Ninemile 6 construction is expected to begin in 2012, and the unit is expected to commence commercial operationEntergy Louisiana. Following approval by mid-2015. The ALJ has established a schedule for the LPSC, proceeding that includes February 27 - March 7, 2012, hearing dates.Entergy Louisiana issued full notice to proceed to the project’s engineering, procurement, and construction contractor.
Hot Spring Energy Facility Purchase Agreement
In April 2011, Entergy Arkansas announced that it signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation. The purchase price is expected to be approximately $253 million. Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition, including plant upgrades, transaction costs, and contingencies, to be approximately $277 million. A new transmission service request has been submitted to the ICT to determine if investments for
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
supplemental upgrades in the Entergy transmission system are needed to make energy from the Hot Spring Energy Facility deliverable to Entergy Arkansas for the period after Entergy Arkansas exits the System Agreement. The initial results of the service request were received in January 2012 and indicate that available transfer capability does not exist with existing transmission facilities and that upgrades are required. The studies do not provide a final and definitive indication of what those upgrades would be. Entergy Arkansas has submitted transmission service requests for facilities studies which, when performedUnder terms approved by the ICT, will provide more detailed estimates of the transmission upgrades and the associated costs required to obtain network service for the Hot Spring plant. Accordingly there are still uncertainties that must be resolved. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC and the FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In February 2012 the FERC issued an order approving the acquisition. Closing is expected to occur in mid-2012.
In July 2011, Entergy Arkansas filed its application with the APSC requesting approval of the acquisition and full cost recovery. In January 2012, Entergy Arkansas, the APSC General Staff, and the Arkansas Attorney General filed a Motion to Suspend the Procedural Schedule and Joint Stipulation and Settlement for consideration by the APSC. Under the settlement, the parties agreed that the acquisitionLPSC, non-fuel costs may be recovered through a capacity acquisition riderEntergy Louisiana’s and agreed that the level of the return on equity reflectedEntergy Gulf States Louisiana’s formula rate plans beginning in the rider would be submitted tomonth after the APSC for resolution. Because the transmission upgrade costs remain uncertain, the parties requested that the APSC suspend the procedural schedule and cancel the hearing scheduled for January 24, 2012, pending resolution of the transmission costs. The APSC issued an order accepting the settlement as part of the record and directing Entergy Arkansas to file the transmission studies when available and directing the parties to propose a procedural schedule to address the results of those studies.
Hinds Energy Facility Purchase Agreement
In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant locatedunit is placed in Jackson, Mississippi, from a subsidiary of KGen Power Corporation. The purchase price is expected to be approximately $206 million. Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million. A new transmission service request has been submitted to determine if investments for supplemental upgrades in the Entergy transmission system are needed to make the Hinds Energy Facility deliverable to Entergy Mississippi for the period after Entergy Mississippi exits the System Agreement. Facilities studies are ongoing to determine transmission upgrades costs associated with the plant, with results expected by early March 2012. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In February 2012 the FERC issued an order approving the acquisition. Closing is expected to occur in mid-2012.service. In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery. A hearing on the request for a certificate of public convenience and necessity is scheduled for February 28, 2012. A hearing on Entergy Mississippi’s proposed cost recovery has not been scheduled.
Waterford 3 Steam Generator Replacement Project
2014, Entergy Louisiana planned to replace the Waterford 3 steam generators, alongand Entergy Gulf States Louisiana filed an unopposed stipulation with the reactor vessel closure head and control element drive mechanisms, in the spring 2011. Replacement of these components is common to pressurized water reactors throughout the nuclear industry. In December 2010, Entergy Louisiana advised the LPSC that the replacement generators would not be completed and delivered by the manufacturer in time to install them during the spring 2011 refueling outage. During the final steps in the manufacturing process, the manufacturer discovered separation of stainless steel cladding from the carbon steel base metal in the channel head of both
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
replacement steam generators (RSGs), in areas beneath and adjacent to the divider plate. Asestimates a result of this damage, the manufacturer was unable to meet the contractual delivery deadlines, and the RSGs were not installed in the spring 2011. Entergy Louisiana worked with the manufacturer to fully develop and evaluate repair options, and expects the replacement steam generators to be delivered in time for the Fall 2012 refueling outage. Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011. The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators. Entergy Louisiana has formally reported its findings to the NRC. At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated. Entergy Louisiana currently expects the cost of the project, including carrying costs, to be approximately $687 million, assuming the replacement occurs during the Fall 2012 refueling outage.
In June 2008, Entergy Louisiana filed with the LPSC for approval of the replacement project, including full cost recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008. The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the then-estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project at the target installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs determined to be prudent in a future prudence review are eligible for cost recovery, either in an extension or renewal of the formula rate plan or in a full base rate case including necessary pro forma adjustments. Upon completion of the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.
In November 2011 the LPSC approved a one-year extension of Entergy Louisiana’s current formula rate plan. The next formula rate plan filing, for the 2011 testfirst year will be made in May 2012 and will include a separate identification of any operating and maintenance expense savings that are expected to occur once the Waterford 3 steam generator replacement project is complete. Pursuant to the LPSC decision, from September 2012 through December 2012 earnings above an 11.05% return on common equity (based on the 2011 test year) would be accrued and used to offset the Waterford 3 replacement steam generator revenue requirement for the first twelve months that the unit is in rates. If the project is not in service by January 1, 2013, earnings above a 10.25% return on common equity (based on the 2011 test year) for the period January 1, 2013 through the date that the project is placed in service will be accrued and used to offset the incremental revenue requirement for the first twelve months that the unit is in rates. Upon the in-service date of the replacement steam generators, rates will increase, subject to refund following any prudence review, by the full revenue requirement associated with Ninemile 6 and provides a mechanism to update the replacement steam generators, less (i) the previously accrued excess earnings from September 2012 untilrevenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In late December 2014, roughly contemporaneous with the unit’s placement in service, a final updated estimated revenue requirement of $51.1 million for Entergy Louisiana and (ii) any earnings above$26.8 million for Entergy Gulf States Louisiana was filed. The December 2014 estimate forms the basis of rates implemented effective with the first billing cycle of January 2015. Under terms approved by the City Council, Entergy New Orleans’s non-fuel costs associated with Ninemile 6 may be recovered through a 10.25% return on common equity (based on the 2011 test year)special rider for the period following the in-service date, provided that the excess earnings accrued priorpurpose. The unit was placed in service in December 2014. Entergy Louisiana will submit project and cost information to the in-service date shall only offsetLPSC in mid-2015 to enable the revenue requirement forLPSC to review the first yearprudence of operationEntergy Louisiana’s management of the replacement steam generators. These rates are anticipated to remain in effect until Entergy Louisiana’s next full rate case is resolved. Entergy Louisiana currently anticipates filing a full rate case by January 2013.project.
Dividends and Stock Repurchases
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities. At its January 20122015 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since the second quarter 2010. The prior quarterly dividend per share was $0.75. Entergy paid $590$596 million in 2011, $6042014, $593 million in 2010,2013, and $577$589 million in 20092012 in cash dividends on its common stock.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In accordance with Entergy’s stock-based compensation plan,plans, Entergy periodically grants stock options, restricted stock, performance units, and restricted unit awards to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plan,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 plan.plans.
In addition to the authority to fund grant exercises, in January 2007 the Board approved a program under which Entergy washas authorized to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase programprograms to enable Entergy to consider opportunistic purchases in response to equity market conditions. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009 the Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additionala $500 million share repurchase program. As of December 31, 2011,2014, $350 million of authority remains under the $500 million share repurchase program. The amount of repurchases may vary as a result of material changes in business results or capital spending or new investment opportunities, or if limitations in the credit markets continue for a prolonged period.
Sources of Capital
Entergy’s sources to meet its capital requirements and to fund potential investments include:
· | internally generated funds; |
· | cash on hand ($694 million as of December 31, 2011)cash on hand ($1,422 million as of December 31, 2014); |
· | bank financing under new or existing facilities;bank financing under new or existing facilities or commercial paper; and |
Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Provisions within the Articles of Incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock. As of December 31, 2011,2014, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $394.9 million and $68.5 million, respectively. All debt and common and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their preferred equity and debt issuances are also subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs.
The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy (except securities with maturities longer than one year issued by Entergy Arkansas and Entergy New Orleans, which are subject to the jurisdiction of the APSC and the City Council, respectively). No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits are effective through October 31, 2013.2015. Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through July 2013.October 2015. Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2012.2015. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2012.2016. Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have obtained long-term financing authorizations from the FERC that extend through October 2015 for issuances by its nuclear fuel company variable interest entity. In addition to borrowings from commercial banks, the FERC short-term borrowing orders authorize the Registrant Subsidiaries to continue as participants in the Entergy System money pool. The money pool is an
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
intercompany borrowing arrangement designed to reduce Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the FERC-authorized short-term borrowing limits. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowing limits, authorizations, and amounts outstanding.
In January 2012, Entergy Corporation issued $500 million of 4.70% senior notes due January 2017. Entergy Corporation used the proceeds to repay borrowings under its $3.5 billion credit facility.Hurricane Isaac
In JanuaryAugust 2012, Entergy Louisiana issued $250 million of 1.875% Series first mortgage bonds due December 2014. Entergy Louisiana used the proceeds to repay short-term borrowings under the Entergy System money pool.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane IkeIsaac caused catastrophicextensive damage to portions of Entergy'sEntergy’s service territoriesarea in Louisiana, and Texas, and to a lesser extent in ArkansasMississippi and Mississippi.Arkansas. The stormsstorm resulted in widespread power outages, significant damage primarily to distribution transmission, and generation infrastructure, and the loss of sales during the power outages. In September 2009,January 2013, Entergy Gulf States Louisiana and Entergy Louisiana drew $65 million and $187 million, respectively, from their funded storm reserve escrow accounts. In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs. Specifically, Entergy Gulf States Louisiana and Entergy Louisiana requested that the LPSC determine the amount of such costs that were prudently incurred and are, thus, eligible for recovery from customers. Including carrying costs and additional storm escrow funds for prior storms, Entergy Gulf States Louisiana requested an LPSC determination that $73.8 million in system restoration costs were prudently incurred and Entergy Louisiana requested an LPSC determination that $247.7 million in system restoration costs were prudently incurred. In May 2013, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’sLouisiana's and Entergy Louisiana’sLouisiana's storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act(Louisiana Act 55). The LPSC Staff filed direct testimony in September 2013 concluding that Hurricane Isaac system restoration costs incurred by Entergy Gulf States Louisiana and Entergy Louisiana were reasonable and prudent, subject to proposed minor adjustments which totaled approximately 1% of each company’s costs. Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ($90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financings). financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Isaac system restoration costs. Entergy Gulf States Louisiana committed to pass on to customers a minimum of $6.9 million of customer benefits through annual customer credits of approximately $1.4 million for five years. Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.
In July 20102014, Entergy Gulf States Louisiana issued $110 million of 3.78% Series first mortgage bonds due April 2025 and used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes. In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025 and used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.
In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9$71 million in bonds under Act 55.55 of the Louisiana Legislature. From the $462.4$69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90$3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3$66 million directly to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana used the $66 million received from the LURC to acquire 662,426.80 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.
In August 2014 the LCDA issued another $243.85 million in bonds under Act 55 of the Louisiana Legislature. From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana. Entergy Louisiana used the $227 million received from the LURC to acquire 2,272,725.89 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA and there is no recourse against Entergy, Entergy Gulf States Louisiana, or Entergy Louisiana in the event of a bond default. See Note 2To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the financial statements for additional discussion of the Act 55 financings.
In November 2009,bond indenture trustee. Entergy, Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds) to finance Entergy Texas Hurricane Ike and Hurricane Gustav restoration costs. See Note 2 to the financial statements for a discussion of the proceeding approving the issuance of the securitization bonds and see Note 5 to the financial statements for a discussion of the terms of the securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claimGulf States Louisiana, and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
Entergy Arkansas January 2009 Ice Storm
In January 2009, a severe ice storm caused significant damage to Entergy Arkansas’s transmissionLouisiana do not report the collections as revenue because they are merely acting as the billing and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010,collection agents for the APSC issued a financing order authorizing the issuance of storm cost recovery bonds, including carrying costs of $11.5 million and $4.6 million of up-front financing costs. In August 2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds. See Note 5 to the financial statements for additional discussion of the issuance of the storm cost recovery bonds.state.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana Securitization Bonds – Little Gypsy
In August 2011, the LPSC issued a financing order authorizing the issuance of bonds to recover Entergy Louisiana’s investment recovery costs associated with the cancelled Little Gypsy repowering project. In September 2011, Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, issued $207.2 million of senior secured investment recovery bonds. The bonds have an interest rate of 2.04% and an expected maturity date of June 2021. See Note 5 to the financial statements for additional discussion of the issuance of the investment recovery bonds.
Cash Flow Activity
As shown in Entergy’s Statements of Cash Flows, cash flows for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 were as follows:
| | | | | 2011 | | 2010 | | 2009 | | | | | | | |
| | | | (In Millions) | 2014 | | 2013 | | 2012 |
| | | | | | | | | (In Millions) |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $1,295 | | $1,710 | | $1,920 |
| $739 |
| |
| $533 |
| |
| $694 |
|
| | | | | | | | |
|
| | | | |
| Cash flow provided by (used in): | | | | | | | |
| | Operating activities | | 3,128 | | 3,926 | | 2,933 | |
| | Investing activities | | (3,447) | | (2,574) | | (2,094) | |
| | Financing activities | | (282) | | (1,767) | | (1,048) | |
| Effect of exchange rates on cash and cash equivalents | | - | | - | | (1) | |
| | Net decrease in cash and cash equivalents | | (601) | | (415) | | (210) | |
| Net cash provided by (used in): | | |
| | |
| | |
|
| Operating activities | | 3,890 |
| | 3,189 |
| | 2,940 |
|
| Investing activities | | (2,955 | ) | | (2,602 | ) | | (3,639 | ) |
| Financing activities | | (252 | ) | | (381 | ) | | 538 |
|
| Net increase (decrease) in cash and cash equivalents | | 683 |
| | 206 |
| | (161 | ) |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $694 | | $1,295 | | $1,710 |
| $1,422 |
| |
| $739 |
| |
| $533 |
|
Operating Cash Flow ActivityActivities
20112014 Compared to 20102013
Entergy'sNet cash flow provided by operating activities decreasedincreased by $797$701 million in 20112014 primarily due to:
higher Entergy Wholesale Commodities and Utility net revenues in 2014 as compared to 2010 primarily due to the receiptsame period in July 20102013, as discussed previously;
proceeds of $703$310 million received from the Louisiana Utilities Restoration CorporationLURC in August 2014 as a result of the Louisiana Act 55 storm cost financings for Hurricane Gustav and Hurricane Ike. The Act 55 storm cost financings are discussed infinancings. See Note 2 to the financial statements. The decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed tostatements for a discussion of the decrease in operating cash flow.Act 55 storm cost financings;
2010 Compared to 2009
Entergy’s cash flow provided by operating activities increased $993an increase of $60 million in 20102014 as compared to 2009 primarily due to the receipt in July 2010 of $703 million from the Louisiana Utilities Restoration Corporation2013 as a result of the Louisiana Act 55 storm cost financings, as noted$58 million margin deposits made by Entergy Wholesale Commodities in the preceding paragraph. In addition, the absence2013;
a decrease in income tax payments of $50 million in 2014 compared to 2013 primarily due to state income tax effects of the Hurricane Gustav, Hurricane Ike,settlement of the 2004-2005 IRS audit paid in 2013; and Arkansas ice storm restoration
approximately $25 million in spending that occurred in 2009 also contributed2013 related to the increase. These factors weregenerator stator incident at ANO, as discussed previously.
The increase was partially offset by by:
an increase of $323$236 million in pension contributions at Utility and Entergy Wholesale Commodities andin 2014, partially offset by a decrease of $38 million in net revenue at Entergy Wholesale Commodities.lump sum retirement payments out of the non-qualified pension plan in 2014 as compared to 2013. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” ” below and also Note 11 to the financial statements for furthera discussion of qualified pension funding.and other postretirement benefits funding;
proceeds of $72 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel;
an increase of $44 million in spending on nuclear refueling outages in 2014 as compared to 2013; and
an increase of $25 million in storm restoration spending in 2014.
2013 Compared to 2012
Net cash provided by operating activities increased by $249 million in 2013 primarily due to:
increased recovery of deferred fuel costs;
higher Utility net revenues in 2013 resulting from additional generation investments made in 2012;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
proceeds of $72 million associated with the payments received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel;
a decrease of approximately $84 million in storm restoration spending in 2013 due to Hurricane Isaac in August 2012, partially offset by an increase of approximately $23 million in storm restoration spending in 2013 due to the Arkansas December 2012 winter storm;
a refund of $30.6 million, including interest, paid to AmerenUE in June 2012. The FERC ordered Entergy Arkansas to refund to AmerenUE the rough production cost equalization payments previously collected. See Note 2 to the financial statements for further discussion of the FERC order; and
a decrease of $14 million in spending on nuclear refueling outages in 2013 as compared to the same period in prior year.
The increase was partially offset by:
an increase of $79 million in income tax payments primarily due to the 2013 state income tax effects of the settlement of the 2004-2005 IRS audit in the fourth quarter 2012;
an increase of $52 million in lump sum retirement payments out of the non-qualified pension plan, partially offset by a decrease of $7 million in pension contributions. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding;
the decrease in Entergy Wholesale Commodities net revenue that was discussed previously; and
approximately $25 million in spending related to the generator stator incident at ANO, as discussed previously.
Investing Activities
20112014 Compared to 20102013
Net cash used in investing activities increased $873by $353 million in 2011 compared to 20102014 primarily due to the following activity:to:
· | the purchase of the Acadia Power Plant by Entergy Louisiana for approximately $300 million in April 2011, the purchase of the Rhode Island State Energy Center for approximately $346 million by an Entergy Wholesale Commodities subsidiary in December 2011, and the sale of an Entergy Wholesale Commodities subsidiary’s ownership interest in the Harrison County Power Project for proceeds of $219 million in 2010. These transactions are described in more detail in Note 15 to the financial statements; |
· | an increase in nuclear fuel purchases because of variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and |
· | a slight increase in construction expenditures, including spending resulting from April 2011 storms that caused damage to transmission and distribution lines, equipment, poles, and other facilities, primarily in Arkansas. The capital cost of repairing that damage was approximately $55 million. Entergy’s construction spending plans for 2012 through 2014 are discussed in “Management’s Financial Discussion and Analysis - Capital Expenditure Plans and Other Uses of Capital.”
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These increases were offset by the investment in 2010deposit of a total of $290$276 million in Entergy Gulf States Louisiana’s and Entergy Louisiana’sinto storm reserve escrow accounts in 2014, primarily by Entergy Gulf States Louisiana and Entergy Louisiana. See “Hurricane Isaac” above for a discussion of storm reserve escrow account replenishments in 2014;
the withdrawal of a total of $260 million from storm reserve escrow accounts in 2013, primarily by Entergy Gulf States Louisiana and Entergy Louisiana, after Hurricane Isaac. See “Hurricane Isaac” above for discussion of storm reserve escrow account withdrawals;
proceeds of $140 million from the sale in November 2013 of Entergy Solutions District Energy. See Note 15 to the financial statements for further discussion of the sale;
proceeds of $21 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel; and
an increase 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.
The increase was partially offset by:
a decrease in construction expenditures, primarily in the Utility business, including a decrease in spending on the Ninemile 6 self-build project and spending in 2013 on the generator stator incident at ANO, partially offset by an increase in storm restoration spending. Entergy’s construction spending plans for 2015 through 2017 are discussed further in “Capital Expenditure Plans and Other Uses of Capital” above;
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as a resultEntergy received net deposits of their Act 55 storm cost financings, which$47 million in 2014 and returned net deposits of $88 million in 2013. Entergy Wholesale Commodities’ forward sales contracts are discussed in Note 2the “Market and Credit Risk Sensitive Instruments” section below; and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
$37 million in insurance proceeds received in 2014 for property damages related to the financial statements.generator stator incident at ANO, as discussed above.
20102013 Compared to 20092012
Net cash used in investing activities increased $480decreased by $1,038 million in 20102013 primarily due to:
the acquisitions of the Hot Spring plant by Entergy Arkansas and the Hinds plant by Entergy Mississippi in November 2012. See Note 15 to the financial statements for further discussion of these plant acquisitions;
the withdrawal of a total of $260 million from storm reserve escrow accounts in 2013, primarily by Entergy Gulf States Louisiana and Entergy Louisiana, after Hurricane Isaac. See Note 2 to the financial statements for a discussion of Hurricane Isaac;
a decrease in construction expenditures, primarily in the Utility business, resulting from spending in 2012 on the uprate project at Grand Gulf and storm restoration spending in 2012 resulting from the Arkansas December 2012 winter storm and Hurricane Isaac, substantially offset by spending in 2013 on the Ninemile 6 self-build project and spending in 2013 related to the generator stator incident at ANO, as discussed previously; and
proceeds of $140 million from the sale in November 2013 of Entergy Solutions District Energy. See Note 15 to the financial statements for further discussion of the sale.
The decrease was partially offset by:
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as Entergy returned $50 million more net deposits in 2013 than 2012. Entergy Wholesale Commodities’ forward sales contracts are discussed in the “Market and Credit Risk Sensitive Instruments” section below; and
proceeds of $21 million in 2013 compared to 2009 primarily due toproceeds of $109 million in 2012 from the following activity:
· | an increase in net uses of cash for nuclear fuel purchases, which was caused by the consolidation of the nuclear fuel company variable interest entities that is discussed in Note 18 to the financial statements. With the consolidation of the nuclear fuel company variable interest entities, their purchases of nuclear fuel from Entergy are now eliminated in consolidation, whereas before 2010 they were a source of investing cash flows; |
· | the investment of a total of $290 million in Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm reserve escrow accounts as a result of their Act 55 storm cost financings, which are discussed in Note 2 to the financial statements; |
· | an increase in construction expenditures, primarily in the Entergy Wholesale Commodities business, as decreases for the Utility resulting from Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending in 2009 were offset by spending on various projects; and |
· | the sale of an Entergy Wholesale Commodities subsidiary’s ownership interest in the Harrison County Power Project for proceeds of $219 million in 2010. The sale is described in more detail in Note 15 to the financial statements. |
U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel.
Financing Activities
20112014 Compared to 20102013
Net cash flow used in financing activities decreased $1,485by $129 million in 2011 compared to 20102014 primarily because due to:
long-term debt activity providedproviding approximately $554$777 million of cash in 2011 and used approximately $3072014 compared to using $69 million of cash in 2010.2013. The most significant long-term debt activity in 20112014 included the net issuance of $207approximately $385 million of securitization bondslong-term debt at the Utility operating companies and System Energy and Entergy Corporation increasing borrowings outstanding on its long-term credit facility by $440 million in 2014;
Entergy Corporation repaid $561 million of commercial paper in 2014 and issued $380 million in 2013;
an increase of $112 million in 2014 compared to a subsidiarydecrease of $129 million in 2013 in short-term borrowings by the nuclear fuel company variable interest entities;
the repurchase of $183 million of Entergy Louisiana,common stock in 2014; and
an increase of $170 million in treasury stock issuances in 2014 primarily due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2014 to satisfy stock option exercises.
2013 Compared to 2012
Financing activities used $381 million in net cash in 2013 compared to providing $538 million in net cash in 2012 primarily due to:
long-term debt activity using approximately $69 million of cash in 2013 compared to providing $348 million of cash in 2012. The most significant long-term debt activity in 2013 included the net issuance of $200 million of first mortgage bonds by Entergyapproximately
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Louisiana,$520 million of long-term debt at the Utility operating companies and System Energy and Entergy Corporation increasing thedecreasing borrowings outstanding on its 5-yearlong-term credit facility by $288 million. $540 million;
Entergy Corporation issued $380 million of commercial paper in 2013 and $665 million in 2012, in part, to repay borrowings on its long-term credit facility;
a net decrease of $136 million in short-term borrowings by the nuclear fuel company variable interest entities; and
$51 million in proceeds from the sale to a third party in 2012 of a portion of Entergy Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests.
For the details of Entergy’s long-term debt outstanding on December 31, 2011commercial paper program and 2010the nuclear fuel company variable interest entities’ short-term borrowings, see Note 4 to the financial statements. See Note 5 to the financial statements herein. In addition to thefor details of long-term debt activity, Entergy Corporation repurchased $236 million of its common stock in 2011 and repurchased $879 million of its common stock in 2010. Entergy’s stock repurchases are discussed further in the “Capital Expenditure Plans and Other Uses of Capital - Dividends and Stock Repurchases” section above.debt.
2010 Compared to 2009
Net cash used in financing activities increased $719 million in 2010 compared to 2009 primarily because long-term debt activity used approximately $307 million of cash in 2010 and provided approximately $160 million of cash in 2009. The most significant net use for long-term debt activity was by Entergy Corporation, which reduced its 5-year credit facility balance by $934 million and repaid a total of $275 million of notes and bank term loans, while issuing $1 billion of notes in 2010. For the details of Entergy’s long-term debt outstanding see Note 5 to the financial statements herein. In addition, Entergy Corporation repurchased $879 million of its common stock in 2010 and repurchased $613 million of its common stock in 2009. Entergy’s stock repurchases are discussed further in the “Capital Expenditure Plans and Other Uses of Capital - Dividends and Stock Repurchases” section above.
Rate, Cost-recovery, and Other Regulation
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the City Council, the LPSC, the MPSC, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies’ authorized returns on common equity and current retail base rates. equity:
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| | |
| Company | | Authorized Return on Common Equity |
| | |
| Entergy Arkansas | | 9.5% |
| Entergy Gulf States Louisiana | | 9.15%-10.75% Electric; 9.45%-10.45% Gas |
| Entergy Louisiana | | 9.15% - 10.75% |
| Entergy Mississippi | | 10.07% |
| Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas |
| Entergy Texas | | 9.8% |
The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements.
Federal Regulation
Entergy’s Integration Into the MISO Regional Transmission Organization
In April 2011, Entergy announced that each of the Utility operating companies proposed to join the MISO RTO, an RTO operating in several U.S. states and also in Canada. On December 19, 2013, the Utility operating companies completed their planned integration into the MISO RTO. Becoming a member of MISO does not affect the ownership by the Utility operating companies of their transmission facilities or the responsibility for maintaining those facilities. With the Utility operating companies fully integrated as members, however, MISO assumed control of transmission planning and congestion management and, through its Day 2 market, MISO provides schedules and pricing for the commitment and dispatch of generation that is offered into MISO’s markets, as well as pricing for load that bids into the market.
Company
| | Authorized
Return on
Common
Equity
| | |
| | | | |
Entergy Arkansas
| | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC.
|
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented based on Entergy Gulf States Louisiana's 2010 test year formula rate plan filing approved by the LPSC.
-Current retail gas base rates reflect the rate stabilization plan filing for the 2010 test year ended September 2010.
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| | | | |
Entergy Louisiana
| | 9.45%-
11.05%
| | -Current retail base rates based on Entergy Louisiana's 2010 test year formula rate plan filing approved by the LPSC.
|
| | | | |
Entergy Mississippi | | 10.54%-
12.72%
| | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2010 test year, and a stipulation approved by the MPSC.
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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The Utility operating companies obtained from each of their retail regulators the public interest findings sought by the Utility operating companies in order to move forward with their plan to join MISO. Each of the retail regulators’ orders includes conditions, some of which entail compliance prospectively. See also “System Agreement - Utility Operating Company Notices of Termination of System Agreement Participation” below.
Beginning in 2011 the Utility operating companies and the MISO RTO began submitting various filings with the FERC that contained many of the rates, terms and conditions that would govern the Utility operating companies’ integration into the MISO RTO. The Utility operating companies and the MISO RTO received the FERC orders necessary for those companies to integrate into the MISO RTO consistent with the approvals obtained from the Utility operating companies’ retail regulators, although some proceedings remain pending at the FERC.
In January 2013, Occidental Chemical Corporation filed with the FERC a petition for declaratory judgment and complaint against MISO alleging that MISO’s proposed treatment of Qualifying Facilities (QFs) in the Entergy region is unduly discriminatory in violation of sections 205 and 206 of the Federal Power Act and violates the Public Utility Regulatory Policies Act (PURPA) and the FERC’s implementing regulations. In February 2014, Occidental also filed a petition for enforcement with the FERC against the LPSC. Occidental’s petition for enforcement alleges that the LPSC’s January 2014 order, which approved Entergy Gulf States Louisiana’s and Entergy Louisiana’s application for modification of Entergy’s methodology for calculating avoided cost rates paid to QFs, is inconsistent with the requirements of PURPA and the FERC’s regulations implementing PURPA. In April 2014 the FERC issued a “Notice Of Intent Not To Act At This Time” with respect to Occidental’s petition for enforcement against the LPSC. The FERC concluded that Occidental’s petition for enforcement largely raises the same issues as those raised in the January 2013 complaint and petition for declaratory order that Occidental filed against MISO, and that the two proceedings should be addressed at the same time. The FERC reserved its ability to issue a further order or to take further action at a future date should it find that doing so is appropriate.
In April 2014, Occidental filed a complaint in federal district court for the Middle District of Louisiana against the LPSC and Entergy Louisiana that challenges the January 2014 order issued by the LPSC on grounds similar to those raised in the 2013 complaint and 2014 petition for enforcement that Occidental previously filed at the FERC. The district court complaint also seeks damages from Entergy Louisiana and a declaration from the district court that in pursuing the January 2014 order Entergy Louisiana breached an existing agreement with Occidental and an implied covenant of good faith and fair dealing. In January 2015 the district court granted Entergy Louisiana’s motion to stay the district court proceeding, pending a decision from the FERC relating to the MISO tariff and market rules that are underlying Occidental’s district court complaint. In January 2015, Occidental filed a motion for reconsideration in the district court and also filed a notice of appeal to the U.S. Fifth Circuit Court of Appeals. In February 2015 the district court denied the motion for reconsideration as moot, finding it lacked jurisdiction to consider the motion because Occidental had sought an appeal to the U.S. Fifth Circuit Court of Appeals.
In February 2013, Entergy Services, on behalf of the Utility operating companies, made a filing with the FERC requesting to adopt the standard Attachment O formula rate template used by transmission owners to establish transmission rates within MISO. The filing proposed four transmission pricing zones for the Utility operating companies, one for Entergy Arkansas, one for Entergy Mississippi, one for Entergy Texas, and one for Entergy Louisiana, Entergy Gulf States Louisiana, and Entergy New Orleans. In June 2013 the FERC issued an order accepting the use of four transmission pricing zones and set for hearing and settlement judge procedures those issues of material fact that FERC decided could not be resolved based on the existing record. Several parties, including the City Council, filed requests for rehearing of the June 2013 order. In February 2014 the FERC issued an order addressing the rehearing requests. Among other things, the FERC denied rehearing and affirmed its prior decision allowing the four transmission pricing zones for the Utility operating companies in MISO. The FERC granted rehearing and set for hearing and settlement judge proceedings certain challenges of MISO’s regional through and out rates. In March 2014 certain parties filed a request for rehearing of the FERC’s February 2014 order on issues related to MISO’s regional through and out rates. In February 2014 and April 2014 various parties appealed the FERC’s June 2013 and February 2014 orders to the U.S. Court of Appeals for the D.C. Circuit where the appeals have been consolidated for further proceedings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Company
| | Authorized
Return on
Common
Equity
| | |
Entergy New Orleans
| | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas
| | -Current retail base rates reflect Entergy New Orleans's 2010 test year formula rate plan filing and a settlement approved by the City Council.
|
| | | | |
Entergy Texas
| | 10.125% | | -Current retail base rates reflect Entergy Texas's 2009 base rate case filing and a settlement approved by the PUCT.
|
Federal Regulation
Independent Coordinator of Transmission
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of independent RTOs (regional transmission organizations). Delays in implementing the FERC RTO order occurred due to a variety of reasons, including the fact that utility companies, other stakeholders, and federal and state regulators have had to work to resolve various issues related to the establishment of such RTOs. In November 2006, the Utility operating companies installed the Southwest Power Pool (SPP), a regional transmission organization, as their Independent Coordinator of Transmission (ICT). The installation does not transfer control of Entergy’s transmission system to the ICT, but rather vests with the ICT responsibility for:
· | granting or denying transmission service on the Utility operating companies’ transmission system. |
· | administering the Utility operating companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies’ obligation to post transmission-related information. |
· | developing a base plan for the Utility operating companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies’ retail native load customers are required to pay for only those upgrades necessary to reliably and economically serve their needs. |
· | serving as the reliability coordinator for the Entergy transmission system. |
· | overseeing the operation of the weekly procurement process (WPP). |
· | evaluating interconnection-related investments already made on the Entergy System for purposes of determining the future allocation of the uncredited portion of these investments, pursuant to a detailed methodology. The ICT agreement also clarifies the rights that customers receive when they fund a supplemental upgrade. |
The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies’ capital investment in the transmission system, the Utility operating companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies’ transmission
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC conducted a cost/benefit analysis comparing the ICT arrangement to other transmission proposals, including participation in a regional transmission organization.
In September 2010, as modified in October 2010, the Utility operating companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. In November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures. In addition, in December 2010 the FERC issued an order that granted the E-RSC additional authority over transmission upgrades and cost allocation.
System Agreement
The FERC regulates wholesale rates (including Entergy Utility intrasystem energy allocations pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement. See Note 2 to the financial statements for discussions of this litigation.
Entergy Arkansas and Entergy MississippiUtility Operating Company Notices of Termination of System Agreement Participation
Citing its concerns that the benefitsConsistent with their written notices of its continued participation in the current form of the System Agreement have been seriously eroded,termination delivered in December 2005 Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in light of the recent developments involving the System Agreement. Inand November 2007, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
On February 2, 2009,respectively, Entergy Arkansas and Entergy Mississippi filed with the FERC in February 2009 their notices of cancellation to terminate their participation in the Entergy System Agreement, effective December 18, 2013 and November 7, 2015, respectively. While the FERC had indicated previously that the notices should be filed 18 months prior to Entergy Arkansas’s termination (approximately mid-2012), the filing explains that resolving this issue now, rather than later, is important to ensure that informed long-term resource planning decisions can be made during the years leading up to Entergy Arkansas’s withdrawal and that all of the Utility operating companies are properly positioned to continue to operate reliably following Entergy Arkansas’s and, eventually, Entergy Mississippi’s, departure from the System Agreement.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month96-month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal. In December 2009 the LPSC and the City Council filed with the FERC a request for rehearing of the FERC's November 2009 order. In February 2011 the FERC denied the LPSC’s and the City Council’s rehearing requests. The LPSC has appealed the FERC’s decision toIn September and October 2012 the U.S. Court of Appeals for the DistrictD.C. Circuit denied the LPSC’s and the City Council’s appeals of Columbiathe FERC decisions. In January 2013 the LPSC and oral argument was held January 13, 2012.the City Council filed a petition for a writ of certiorari with the U.S. Supreme Court. In May 2013 the U.S. Supreme Court denied the petition for a writ of certiorari. Effective December 18, 2013, Entergy Arkansas ceased participating in the System Agreement.
Arkansas Public Service CommissionIn October 2012 the PUCT issued an order approving the transfer of operational control of Entergy Texas’s transmission facilities to MISO as in the public interest, subject to the terms and conditions in a non-unanimous settlement filed with the PUCT in August 2012, with several additional terms and conditions requested by the PUCT and agreed to by the settling parties. In particular, the settlement and the PUCT order required Entergy Texas, unless otherwise directed by the PUCT, to provide by October 31, 2013 its notice to exit the System Agreement, Investigationsubject to certain conditions. In addition, the PUCT order requires Entergy Texas, as well as Entergy Corporation and Entergy Services, Inc., to exercise reasonable best efforts to engage the Utility operating companies and their retail regulators in searching for a consensual means, subject to FERC approval, of allowing Entergy Texas to exit the System Agreement prior to the end of the mandatory 96-month notice period.
In December 2012 the PUCT Staff filed a memo in the proceeding established by the PUCT to track compliance with its October 2012 order. In the memo, the PUCT Staff expressed concerns about the effect of Entergy Texas’s exit from the System Agreement on PPAs for gas and oil-fired generation units owned by Entergy Texas and Entergy Gulf States Louisiana that were entered into upon the December 2007 jurisdictional separation of Entergy Gulf States, Inc. and, further, expressed concerns about the implications of these issues as they relate to the continuing validity of the PUCT’s October 2012 order regarding MISO. Entergy Texas subsequently filed a position statement relating that Entergy Texas’s exit from the System Agreement would trigger the termination of the PPAs of concern to the PUCT Staff. Entergy Texas expressed its continuing commitment to work collaboratively with the PUCT Staff and other parties to address ongoing issues and challenges in implementing the PUCT order including any potential effect from termination of the PPAs. In January 2013, Entergy Texas filed an updated analysis assessing the effect on the benefits of MISO membership of terminating the particular PPAs addressed in Entergy Texas’s Statement of Position upon Entergy Texas’s exit from the System Agreement, and determined that termination of these PPAs did not adversely affect the benefits of the move to MISO once Entergy Texas exits the System Agreement. An independent consultant
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
was retained to assist the PUCT Staff in its assessment of the analysis. In April 2013 the PUCT staff filed a study performed by its independent consultant assessing Entergy Texas’s January 2013 updated analysis of the effect of termination of certain PPAs on Entergy Texas’s costs upon Entergy Texas’s exit from the System Agreement. While the independent consultant study concluded that the adjustments made in Entergy Texas’s updated analysis were analytically correct, the consultant also recommended further study regarding the effect of the termination of the PPAs on the benefits associated with Entergy Texas joining MISO. Entergy Texas filed a response to the consultant study, noting a number of errors in the analysis and recommending against any further study of this matter. Entergy Texas subsequently agreed to fund further analysis, to be performed by a different independent consultant for the PUCT, regarding the effects of termination of these PPAs. In August 2013 the report of the PUCT’s second independent consultant regarding the effects of termination of these PPAs was filed with the PUCT as part of a larger report addressing the results of the consultant’s comprehensive analysis of Entergy Texas’s transition to operations post-exit from the System Agreement. The APSC had previously commenced an investigation,report concluded, consistent with Entergy Texas’s updated analysis, that under both the “Foundation Case” capacity price forecast and the high capacity price sensitivity that were performed, Entergy Texas and its customers would be better off on a present-value basis if these PPAs terminate. Under the low capacity price sensitivity, there was a net cost to Entergy Texas customers if these PPAs terminate. Consistent with the requirements of the PUCT conditional order approving the change in 2004, into whethercontrol to MISO, on October 18, 2013, Entergy Texas gave notice of cancellation to terminate its participation in the System Agreement.
In November 2012 the Utility operating companies filed amendments to the System Agreement with the FERC pursuant to section 205 of the Federal Power Act. The amendments consist primarily of the technical revisions needed to the System Agreement to (i) allocate certain charges and credits from the MISO settlement statements to the participating Utility operating companies; and (ii) address Entergy Arkansas’s withdrawal from the System Agreement. As noted in the filing, the Utility operating companies’ integration into MISO and the revisions to the System Agreement are the main feature of the Utility operating companies’ future operating arrangements, including the successor arrangements with respect to the departure of Entergy Arkansas from the System Agreement. The LPSC, MPSC, PUCT, and City Council filed protests at the FERC regarding the amendments filed in November 2012 and other aspects of the Utility operating companies’ future operating arrangements, including requests that the continued viability of the System Agreement in MISO (among other issues) be set for hearing by the FERC. On March 12, 2013, the Utility operating companies filed an answer to the protests. The answer proposed, among other things, that: (1) the FERC allow the System Agreement revisions to go into effect as of December 19, 2013, without a hearing and for an initial two-year transition period; (2) no later than October 18, 2013, Entergy Services submit a filing pursuant to section 205 of the Federal Power Act that provides Entergy Texas’s notice of cancellation to terminate participation in the System Agreement is inand responds to the best interestsPUCT’s position that Entergy Texas be allowed to terminate its participation prior to the end of its customers. In February 2010 the APSC issued a show cause order openingmandatory 96-month notice period; and (3) at least six months prior to the end of the two-year transition period, Entergy Services submits an investigation regardingadditional filing under section 205 of the prudenceFederal Power Act that addresses the allocation of Entergy Arkansas’s entering a successor pooling agreement withMISO charges and credits among the other Entergy Utility operating companies as opposedthat remain in the System Agreement. On December 18, 2013, the FERC issued an order accepting the revisions filed in November 2012, subject to becoming a standalone entity upon exit fromfurther compliance filing and other conditions. The FERC set one issue for hearing involving a settlement with Union Pacific regarding certain coal delivery issues. Consistent with the decisions described above, Entergy Arkansas’s participation in the System Agreement interminated effective December 2013, and whether18, 2013. In December 2014 a FERC ALJ issued an initial decision finding that Entergy Arkansas as a standalone utility, should joinwould realize benefits after December 18, 2013 from the SPP RTO. The APSC subsequently added evaluation of2008 settlement agreement between Entergy Arkansas joining the Midwest Independent Transmission System Operator (MISO) RTO on a standalone basis as an alternative to be considered. In August 2010, the APSC directedServices, Entergy Arkansas, and all partiesUnion Pacific, related to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of the MISO RTO.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a successor arrangement.certain coal delivery issues. The New Orleans City Council opened a docket to gather information on progress towards a successor arrangement. The LPSC subsequently passed a resolution statingALJ further found that it cannot evaluate successor arrangements without having certainty about System Agreement exit obligations.
Entergy’s Proposal to Join the MISO RTO
On April 25, 2011, Entergy announced that eachall of the Utility operating companies propose joiningshould share in those benefits pursuant to the MISO RTO, which is expected to provide long-term benefits formethodology proposed by the customers of each of the Utility operating companies. MISO is a regional transmission organization that operates in 12 U.S. states (Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, Ohio, South Dakota, and Wisconsin) and also in Canada.MPSC. The Utility operating companies provided analysis in May 2011 to their retail regulators supporting this decision. The APSC received additional information from Entergy, MISO, and other parties to the proceeding have filed briefs on exceptions and/or briefs opposing exceptions with the FERC challenging various aspects of the December 2014 initial decision and heldthe matter is pending before the FERC.
In keeping with the commitments made in their March 2013 answer to the protests and after a careful evaluation of the basis for and continued reasonableness of the 96-month System Agreement termination notice period, the Utility operating companies filed with the FERC on October 11, 2013 to amend the System Agreement changing the notice period for an evidentiary hearing in September 2011. The APSC issued an orderoperating company to terminate its participation in the proceeding in October 2011 findingSystem Agreement from 96 months to 60 months. The proposed amendment also clarifies that it is prudent for Entergy Arkansasthe revised notice period will apply to join an RTO but deferred a decision on Entergy Arkansas’s plan to join the MISO RTO until Entergy Arkansas files an application to transfer controlany written notice of its transmission assets to the MISO RTO.termination
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
provided by an operating company on or after October 12, 2013. On October 18, 2013, Entergy Texas provided notice to terminate its participation in the System Agreement effective after expiration of the proposed 60-month notice period or such other period as approved by FERC. The proposed amendment and Entergy Texas’s termination notice are without prejudice to continuing efforts among affected operating companies and their retail regulators to search for a consensual means of allowing Entergy Texas an early exit from the System Agreement, which could be different from that proposed in the October 11, 2013 FERC filing. Comments on both filings were filed in November 2013.
Entergy’s May 2011 filings estimateThe LPSC, the City Council, and the PUCT protested the proposed amendment to shorten the notice period for an operating company to terminate its participation in the System Agreement from 96 months to 60 months. The City Council argued that Entergy has not adequately supported its proposal to shorten the notice period from 96 months to 60 months and asked the FERC to either reject the amendment or set it for hearing. The PUCT supported shortening of the notice period, but argued that 60 months is not short enough and that the transition and implementation costs of joiningFERC should instead order Entergy to shorten the notice period to correspond to the time required for a Utility operating company to become operationally ready to participate in the MISO RTO could be upmarkets (but no longer than 36 months). The LPSC argued that the 60-month proposal was not justified and failed to $105 million ifmake provision for the consequences that would flow from a company’s withdrawal from the System Agreement. The LPSC and the City Council both separately protested Entergy Texas’s termination notice.
In January 2014 the LPSC issued a directive that no later than February 15, 2014, Entergy Louisiana and Entergy Gulf States Louisiana each shall provide notice of their intention to terminate their participation in the System Agreement and shall make the necessary filings at the FERC of such notice. The LPSC further directed that Entergy Louisiana and Entergy Gulf States Louisiana and LPSC Staff continue utilizing their reasonable best efforts to achieve a consensual resolution permitting early termination of the System Agreement. On February 14, 2014, Entergy Louisiana and Entergy Gulf States Louisiana provided notice of their respective decisions to terminate their participation in the System Agreement and made a filing with the FERC seeking acceptance of the notice. In the FERC filing, Entergy Louisiana and Entergy Gulf States Louisiana requested an effective date of February 14, 2019 or such other effective date approved by the FERC for the termination. In March 2014 the City Council submitted comments to the FERC regarding the notices of termination. The City Council requested the FERC either to condition its acceptance of the notices on compliance with the prior 96-month notice termination period, or in the alternative, to consolidate the notice filings with the proceeding related to the Utility operating companies’ proposal to shorten the System Agreement’s termination notice period from 96 months to 60 months, and to set all of the proceedings for hearing. Also in March 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a response to the City Council’s comments requesting that the FERC accept the notices without hearing and with an effective date subject to and consistent with the notice period established by the FERC in the proceeding related to the Utility operating companies joincompanies’ proposal to shorten the MISO RTO, most of which will be spent in late 2012 and 2013. Maintaining the viability of the alternatives of Entergy Arkansas joining the MISO RTO alone or standing alone within an ICT arrangement is expected to result in an additional cost of approximately $35 million, for a total estimated cost of up to $140 million. This amount could increase with extended litigation in various regulatory proceedings. It is expected that costs will be incurred to obtain regulatory approvals, to revise or implement commercial and legal agreements, to integrate transmission and generation facilities, to develop back-office accounting and settlement systems, and to build out communications infrastructure.System Agreement’s termination notice period.
In December 2014 the fourth quarter 2011,FERC issued an order setting the proposed amendment changing the notice period from 96 months to 60 months for settlement judge and hearing procedures. The FERC’s order also conditionally accepted the notices of termination filed by Entergy Arkansas,Texas, Entergy Louisiana, and Entergy Gulf States Louisiana, to be effective as of the dates requested in those filings, subject to the outcome of the settlement judge procedures and hearing on the proposed amendment. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi,New Orleans, and Entergy New Orleans filed applicationsTexas continue to explore with their local regulators concerning their proposal to join the MISO RTOLPSC staff, City Council advisors, and transfer control of each company’s transmission assets to the MISO RTO. Entergy Texas expects to submit its filing in 2012. The applications to joinPUCT staff the MISO RTO seek a finding that membership in the MISO RTO is in the public interest. Becoming a memberearly termination of the MISO RTO will not affect the ownership by the Utility operating companies of their generation and transmission facilities or the responsibility for maintaining those facilities. Once the Utility operating companies are fully integrated as members, however, the MISO RTO will assume control of transmission planning and congestion management and, through its Day 2 market, the commitment and dispatch of generation that is bid into the MISO RTO’s markets. The APSC, the LPSC, and the MPSC have established procedural schedules with hearings scheduled in May/June 2012. The FERC filings related to integrating the Utility operating companies into the MISO RTO are planned for late 2012 or early 2013. The target implementation date for joining the MISO RTO is December 2013.System Agreement on a consensual basis.
Entergy believes that the decision to join the MISO RTO should be evaluated separately from and independent of the decision regarding the ownership of Entergy’s transmission system, and Entergy plans to pursue the MISO RTO proposal and the planned spin-off and merger of the transmission business on parallel regulatory paths. In December 2011, however, the LPSC ALJ in the MISO RTO proceeding ordered Entergy Gulf States Louisiana and Entergy Louisiana to file testimony regarding the impact of the proposed spin-off and merger of Entergy’s transmission business on the application to join the MISO RTO. Entergy Gulf States Louisiana and Entergy Louisiana complied with this order, but also filed a notice of objection and reservation of rights in response to the order, stating that the testimony, as well as related discovery and other proceedings, are not relevant to the decision to join the MISO RTO. In the APSC proceeding regarding the MISO RTO proposal, in February 2012 the APSC ordered the parties to consider to what extent, if any, the proposed spin-off and merger of Entergy’s transmission business might affect Entergy Arkansas’s membership in an RTO or otherwise affect the proceeding. The next round of testimony in the APSC proceeding is scheduled for March 2012.
In June 2011, MISO filed with the FERC a request for a transitional waiver of provisions of its open access transmission, energy, and operating reserve markets tariff regarding allocation of transmission network upgrade costs, in order to establish a transition for the integration of the Utility operating companies. Several parties intervened in the proceeding, including Entergy, the APSC, the LPSC, and the City Council, and some of the parties also filed comments or protests. In September 2011 the FERC issued an order denying on procedural grounds MISO’s request, further advising MISO that submitting modified tariff sheets is the appropriate method for implementing the transition that MISO seeks for the Utility operating companies. The FERC did not address the merits of any transition arrangements that may be appropriate to integrate the Utility operating companies into the MISO RTO. MISO worked with its stakeholders to prepare the appropriate changes to its tariff and filed the proposed tariff changes with the FERC in November 2011. Numerous entities filed interventions and protests to MISO’s filing. On January 25, 2012, the FERC sent a letter to MISO requesting additional information relating to MISO’s proposed tariff changes.
Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation
Entergy has notified the SERC Reliability Corporation (SERC) of potential violations of certain North American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facilities Design, Connection and Maintenance, and System Protection and Control standards. Entergy is working with the SERC to provide information concerning these potential violations. In addition, FERC’s Division of Investigations is conducting an investigation of certain issues relating to the Utility operating companies compliance with certain Reliability Standards related to protective system maintenance, facility ratings and modeling, training, and communications. The Energy Policy Act of 2005 provides authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
U.S. Department of Justice Investigation
In September 2010, Entergy was notified that the U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies. In November 2012 the U.S. Department of Justice issued a press release in which the U.S. Department of Justice stated, among other things, that the civil investigation concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies would remain open. The investigation is ongoing.release noted, however, the intention of each of the Utility operating companies
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
to join MISO and Entergy’s agreement with ITC to undertake the spin-off and merger of Entergy’s transmission business. The release stated that if Entergy follows through on these matters, the U.S. Department of Justice’s concerns will be resolved. The release further stated that the U.S. Department of Justice will monitor developments, and in the event that Entergy does not make meaningful progress, the U.S. Department of Justice can and will take appropriate enforcement action, if warranted. On December 13, 2013, Entergy and ITC mutually agreed to terminate the transaction following denial by the MPSC of the joint application related to the transaction. On December 19, 2013, the Utility operating companies successfully completed their planned integration into the MISO RTO.
Market and Credit Risk Sensitive Instruments
Market risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks:risks.
· | The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business. |
· | The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. |
· | The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy’s decommissioning trust funds. |
· | The interest rate risk associated with changes in interest rates as a result of Entergy’s issuances of debt.The interest rate risk associated with changes in interest rates as a result of Entergy’s outstanding indebtedness. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding. |
The Utility business 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 rate regulators, the Utility operating companies use commodity and financial instruments to hedge the exposure to natural gas price volatility ofinherent in their purchased power, fuel, and gas purchased for resale costs whichthat are recovered from customers.
Entergy’s commodity and financial instruments are also exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale CommoditiesCommodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward fixed pricephysical 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. The following is a summary as of December 31, 2011 of the amount of In addition to its forward physical power contracts, Entergy Wholesale Commodities’ nuclear power plants’ planned energy output that is soldCommodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward under physical or financial contracts:commodity price risk. Certain hedge volumes have price downside and upside relative to market price movement. The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations. The sensitivities may not reflect the total
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| Energy | | | | | | | | | | |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 |
| | | | | | | | | | | |
| Percent of planned generation sold forward: | | | | | | | | | | |
Unit-contingent | | 61% | | 38% | | 14% | | 12% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 16% | | 19% | | 15% | | 13% | | 13% |
Firm LD | | 24% | | 24% | | 10% | | -% | | -% |
Offsetting positions | | (13)% | | -% | | -% | | -% | | -% |
Total energy sold forward | | 88% | | 81% | | 39% | | 25% | | 25% |
| Planned generation (TWh) (2) (3) | | 41 | | 40 | | 41 | | 41 | | 40 |
| Average revenue under contract per MWh (4) | | $49 | | $45-50 | | $49-54 | | $49-57 | | $50-59 |
| Capacity | | | | | | | | | | |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 |
| | | | | | | | | | | |
| Percent of capacity sold forward: | | | | | | | | | | |
Bundled capacity and energy contracts | | 18% | | 16% | | 16% | | 16% | | 16% |
Capacity contracts | | 39% | | 26% | | 25% | | 11% | | -% |
Total capacity sold forward | | 57% | | 42% | | 41% | | 27% | | 16% |
| Planned net MW in operation (3) | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month (applies to capacity contracts only) | | $2.4 | | $3.2 | | $3.1 | | $2.9 | | $- |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
| % of planned generation and capacity sold forward | | 90% | | 80% | | 43% | | 27% | | 26% |
| Average revenue under contract per MWh (4) | | $51 | | $47 | | $51 | | $52 | | $52 |
|
| | | | | | | | | | |
| | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 |
| Energy | | | | | | | | | | |
| Percent of planned generation under contract (a): | | | | | | | | | | |
| Unit-contingent (b) | | 47% | | 23% | | 14% | | 14% | | 16% |
| Unit-contingent with availability guarantees (c) | | 18% | | 17% | | 18% | | 3% | | 3% |
| Firm LD (d) | | 40% | | 34% | | 7% | | —% | | —% |
| Offsetting positions (e) | | (19%) | | —% | | —% | | —% | | —% |
| Total | | 86% | | 74% | | 39% | | 17% | | 19% |
| Planned generation (TWh) (f) (g) | | 35 | | 36 | | 35 | | 35 | | 36 |
| Average revenue per MWh on contracted volumes: | | | | | | | | | | |
| Minimum | | $47 | | $47 | | $48 | | $56 | | $57 |
| Expected based on market prices as of December 31, 2014 | | $48 | | $49 | | $50 | | $56 | | $57 |
| Sensitivity: -/+ $10 per MWh market price change | | $47-$50 | | $47-$53 | | $49-$53 | | $56 | | $57 |
| | | | | | | | | | | |
| Capacity | | | | | | | | | | |
| Percent of capacity sold forward (h): | | | | | | | | | | |
| Bundled capacity and energy contracts (i) | | 18% | | 18% | | 18% | | 18% | | 18% |
| Capacity contracts (j) | | 30% | | 15% | | 16% | | 7% | | —% |
| Total | | 48% | | 33% | | 34% | | 25% | | 18% |
| Planned net MW in operation (g) | | 4,406 | | 4,406 | | 4,406 | | 4,406 | | 4,406 |
| Average revenue under contract per kW per month(applies to capacity contracts only) | | $3.9 | | $3.4 | | $5.6 | | $7.0 | | $— |
| | | | | | | | | | | |
| Total Nuclear Energy and Capacity Revenues | | | | | | | | | | |
| Expected sold and market total revenue per MWh | | $53 | | $50 | | $50 | | $51 | | $53 |
| Sensitivity: -/+ $10 per MWh market price change | | $51-$56 | | $46-$56 | | $44-$57 | | $43-$60 | | $45-$61 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Non-Nuclear Portfolio
|
| | | | | | | | | | |
| | | 2015 | | 2016 | | 2017 | | 2018 | | 2019 |
| Energy | | | | | | | | | | |
| Percent of planned generation under contract (a): | | | | | | | | | | |
| Cost-based contracts (k) | | 38% | | 36% | | 34% | | 34% | | 34% |
| Firm LD (d) | | 7% | | 7% | | 7% | | 7% | | 7% |
| Total | | 45% | | 43% | | 41% | | 41% | | 41% |
| Planned generation (TWh) (f) (l) | | 5 | | 6 | | 6 | | 6 | | 6 |
| | | | | | | | | | | |
| Capacity | | | | | | | | | | |
| Percent of capacity sold forward (h): | | | | | | | | | | |
| Cost-based contracts (k) | | 24% | | 24% | | 26% | | 26% | | 26% |
| Bundled capacity and energy contracts (i) | | 8% | | 8% | | 8% | | 8% | | 8% |
| Capacity contracts (j) | | 54% | | 53% | | 57% | | 24% | | —% |
| Total | | 86% | | 85% | | 91% | | 58% | | 34% |
| Planned net MW in operation (l) | | 1,052 | | 1,052 | | 977 | | 977 | | 977 |
(1) | |
| (a) | Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are not classified as hedges are netted in the planned generation under contract. |
| |
| (b) | Transaction under which power is supplied from a specific generation asset; if the asset is not operating, seller is generally not liable to buyer for any damages. |
| |
| (c) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. |
(2) | |
| (d) | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised. |
| |
| (e) | Transactions for the purchase of energy, generally to offset a Firm LD transaction. |
| |
| (f) | Amount of output expected to be generated by Entergy Wholesale Commodities nuclear unitsresources considering plant operating characteristics, outage schedules, and expected market conditions which impactthat affect dispatch. |
(3) | |
| (g) | Assumes NRC license renewalrenewals for plants whose current licenses expired or expire within five years, and the continueduninterrupted normal operation ofat all sixoperating plants. NRC license renewal applications are in process for threetwo units, as follows (with current license expirations in parentheses): Pilgrim (June 2012), Indian Point 2 (September 2013),2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015). For a discussion regarding the continued operation of the Vermont Yankee plant,license renewal application for Indian Point 2 and Indian Point 3, see “Impairment of Long-Lived AssetsEntergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” in Note 1 to the financial statements.above. |
(4) | Revenue on a per unit basis at which generation output, |
| (h) | Percent of planned qualified capacity or a combination of both is expected to be sold to third parties (including offsetting positions), given existingmitigate price uncertainty under physical or financial transactions. |
| |
| (i) | A contract or option exercise prices basedfor the sale of installed capacity and related energy, priced per megawatt-hour sold. |
| |
| (j) | A contract for the sale of an installed capacity product in a regional market. |
| |
| (k) | Contracts priced in accordance with cost-based rates, a ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the service; these contracts are on expected dispatch or capacity, excluding the revenue associated with the amortization of the below-market PPA for Palisades. Revenue may fluctuate due to factors including positive or negative basis differentials, option premiumsowned non-utility resources located within Entergy’s Utility service area and market prices at time of option expiration, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA.were executed |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
prior to receiving market-based rate authority under MISO. The percentage sold assumes completion of the necessary transmission upgrades required for the approved transmission rights.
| |
| (l) | Non-nuclear planned generation and net MW in operation include purchases from affiliated and non-affiliated counterparties under long-term contracts and exclude energy and capacity from Entergy Wholesale Commodities’ wind investment. The decrease in planned net MW in operation beginning in 2017 is due to the expiration of a non-affiliated 75 MW contact. |
Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on the respective year-end market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $48$107 million in 20122015 and would have had a corresponding effect on pre-tax net income of $17$240 million in 2011.2014. A negative $10 per MWh change in the annual average energy price in the markets based on the respective year-end market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($73) million in 2015 and would have had a corresponding effect on pre-tax income of ($91) million in 2014.
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, the Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will paypaid NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million. The annual payment for each year’s output is due by January 15 of the following year. Entergy will recordrecords the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2011, 2010,2014, 2013, and 2009,2012, Entergy Wholesale Commodities recorded a liability of approximately $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At December 31, 2011,2014, based on power prices at that time, Entergy had liquidity exposure of $133$159 million under the guarantees in place supporting Entergy Wholesale Commodities transactions $20 million of guarantees that support letters of credit, and $6$5 million of posted cash collateral to the ISOs. As of December 31, 2011, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $132 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2011,2014, Entergy would have been required to provide approximately $44$51 million of additional cash or letters of credit under some of the agreements.
As of December 31, 2011,2014, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $52 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.
As of December 31, 2014, substantially all of the counterparties or their guarantors for 100% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 20162018 have public investment grade credit ratings.
Nuclear Matters
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The task force issued a near termnear-term (90-day) report in July 2011 that has made initial recommendations, which are currently being evaluated by the NRC. It is anticipated that the NRC will issue certain orderswere subsequently
Entergy Corporation and requests for information to nuclear plant licensees by the end of the first quarter 2012 that will begin to implementSubsidiaries
Management's Financial Discussion and Analysis
refined and prioritized after input from stakeholders. The task force then issued a second report in September 2011. Based upon the task force’s recommendations. Theserecommendations, the NRC issued three orders mayeffective on March 12, 2012. The three orders require U.S. nuclear operators including Entergy, to undertake plant modifications orand perform additional analyses that could,will, among other things, result in increased costsoperating and capital requirementscosts associated with operating Entergy’s nuclear plants. The NRC, with input from the industry, is continuing to determine the specific actions required by the orders. Entergy’s estimated capital expenditures for 2015 through 2017 for complying with the NRC orders are included in the planned construction and other capital investments estimates given in “Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital” above.
In June 2012 the U.S. Court of Appeals for the D.C. Circuit vacated the NRC’s 2010 update to its Waste Confidence Decision, which had found generically that a permanent geologic repository to store spent nuclear fuel would be available when necessary and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that the NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Grand Gulf and Indian Point 2 and 3. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit’s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a new final Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. The final rule remains in effect while that challenge is pending unless the court orders otherwise.
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials within the reactor coolant system. The issue is applicable at all nuclear units to varying degrees and is managed in accordance with industry standard practices and guidelines that include in-service examinations, replacements, and mitigation strategies. Developments in the industry or identification of issues at the nuclear units could require unanticipated remediation efforts that cannot be quantified in advance.
Critical Accounting Estimates
The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
measurements that involve a high degree of uncertainty, and the potential for future changes in these assumptions and measurements could produce estimates that would have a material effect on the presentation of Entergy’s financial position, results of operations, or cash flows.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both itsthe Utility and Entergy Wholesale Commodities business units.operating segments. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and moneycash is collected and deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:estimates.
· | Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 2.5% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time.
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· | Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in SAFSTOR status for later decommissioning, as permitted by applicable regulations. SAFSTOR is decommissioning a facility by placing it in a safe stable condition that is maintained until it is subsequently decontaminated and dismantled to levels that permit license termination, normally within 60 years from permanent cessation of operations. While the effect of these assumptions cannot be determined with precision, a change of assumption of either the probability of license renewal or use of a SAFSTOR period can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the estimate of decommissioning costs will affect net income, only to the extent that the estimate of any reduction in the liability exceeds the amount of the undepreciated asset retirement cost at the date of the revision, for unregulated portions of Entergy’s business. Any increases in the liability recorded due to such changes are capitalized and depreciated over the asset’s remaining economic life.
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· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. However, funding for the Yucca Mountain repository was almost completely eliminated from the federal budget for the current and prior years, and hearings on the facility’s NRC license have been suspended indefinitely. The DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and maintaining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel.
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· | Technology and Regulation - Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated into Entergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable.
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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and the plant will operate for some time beyond the original license term has been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether all decommissioning activity will proceed immediately upon plant retirement, or whether the plant will be placed in SAFSTOR status. SAFSTOR is decommissioning a facility by placing it in a safe, stable condition that is maintained until it is subsequently decontaminated and dismantled to levels that permit license termination, normally within 60 years from permanent cessation of operations. A change of assumption regarding either the probability of license renewal, the period of continued operation, or the use of a SAFSTOR period can change the present value of the asset retirement obligations.
Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by factors ranging from approximately 2% to 3.25%. A 50 basis point change in this assumption could change the estimated present value of the decommissioning liabilities by approximately 9% to 15%. The timing assumption influences the significance of the effect of a change in the estimated inflation or cost escalation rate because the effect increases with the length of time assumed before decommissioning activity ends.
Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. The current Presidential administration, however, has defunded the Yucca Mountain project. The DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy’s nuclear plant owners are continuing to pursue damage claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and maintaining these facilities during the decommissioning period can have a significant effect (as much as an average of 20% to 30% of total estimated decommissioning costs). Entergy’s decommissioning studies include cost estimates for spent fuel storage, when applicable. These estimates could change in the future, however, based on the timing of when the DOE begins to fulfill its obligation to receive and store spent nuclear fuel.
Technology and Regulation - Over the past several years, more practical experience with the actual decommissioning of nuclear facilities has been gained and that experience has been incorporated into Entergy’s current decommissioning cost estimates. Given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur, however, and affect current cost estimates. In addition, if regulations regarding nuclear decommissioning were to change, this could significantly affect cost estimates.
Interest Rates - The estimated decommissioning costs that are the basis for the recorded decommissioning liability are discounted to present value using a credit-adjusted risk-free rate. When the decommissioning liability is revised, increases in cash flows are discounted using the current credit-adjusted risk-free rate. Decreases in estimated cash flows are discounted using the credit-adjusted risk-free rate used previously in estimating the decommissioning liability that is being revised. Therefore, to the extent that a revised cost study results in an increase in estimated cash flows, a change in interest rates from the time of the previous cost estimate will affect the calculation of the present value of the revised decommissioning liability.
Future revisions of estimated decommissioning costs that decrease the liability also result in a decrease in the asset retirement cost asset. For the non-rate-regulated portions of Entergy’s business, these reductions will immediately reduce operating expenses if the reduction of the liability exceeds the amount of the undepreciated asset retirement cost asset at the date of the revision. Future revisions of estimated decommissioning costs that increase the liability result in an increase in the asset retirement cost asset, which is then depreciated over the asset’s remaining economic life. For a plant for which the value is impaired, including a plant that is shutdown, or is nearing its shutdown date, however, for the non-rate-regulated portions of Entergy’s business the increase in the liability will immediately increase operating expense and not the asset retirement cost asset.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current interest rates will affect the calculation of the present value of the additional decommissioning liability.
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In 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $47.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.
See Note 1 to the financial statements for further discussion of the shutdown of Vermont Yankee and the December 2013 settlement agreement involving Entergy and Vermont parties. In accordance with the settlement agreement, Entergy Vermont Yankee provided to the Vermont parties, in 2014, a site assessment study of the costs and tasks of radiological decommissioning, spent nuclear fuel management, and site restoration for Vermont Yankee. Entergy Vermont Yankee also filed its Post-Shutdown Decommissioning Activities Report (PSDAR) for Vermont Yankee with the NRC in December 2014. As part of the development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014. The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge.
In the firstfourth quarter 2011,2014, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $20 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining useful life of the unit.
In the fourth quarter 2014, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $38.9$99.9 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the first quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for a nuclear site as a result of a revised decommissioning cost study. The revised estimate resulted in a $46.6 million reduction in itsthe decommissioning cost liability, along with a corresponding reduction in the related regulatoryasset retirement cost asset.
In the third quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Vermont Yankee as a result of a revised decommissioning cost study. The revised estimate resulted in a $58 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset. The increase in the estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to cease operations of the plant. The asset retirement cost asset was included in the carrying value used to write down Vermont Yankee and related assets to their fair values in third quarter 2013. See Note 1 to the financial statements for further discussion of the resulting impairment charge recorded in third quarter 2013.
In the fourth quarter 2011,2013, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $102.3 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the fourth quarter 2013, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Waterford 3 as a result of a revised decommissioning cost study. The revised estimate resulted in a $39.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the fourth quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Vermont Yankee. As a result of a settlement agreement regarding the remaining operation and decommissioning of Vermont Yankee, Entergy reassessed its assumptions regarding the timing of
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
decommissioning cash flows. The reassessment resulted in a $27.2 million increase in the decommissioning cost liability and a corresponding impairment charge. See Note 1 to the financial statements for further discussion of the Vermont Yankee plant.
In the second quarter 2012, Entergy Wholesale Commodities recorded a reduction of $34.1$60.6 million in itsthe estimated decommissioning cost liability for a plant as a result of a revised decommissioning cost study obtained to comply with a state regulatory requirement.study. The revised cost studyestimate resulted in a change in the undiscounted cash flows and a credit to decommissioning expense of $34.1$49 million, ($21 million net-of-tax) was recorded, reflecting the excess of the reduction in the liability over the amount of the undepreciated assets.asset retirement costs asset.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in allboth of its operating segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment wheneverwhen there are indications that impairmentsan impairment may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Utility business, portions of River Bend are not included in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market or regulatory conditions arise, particularly if it leads to a unit ceases operation,decision for Entergy to operate a plant for a shorter period than previously expected; if there is a significant adverse change in the physical condition of a plant; if investment in a plant significantly exceeds expected levels; or for certain unitsnuclear plants if their operating licenses are not renewed. Entergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise or if a unit ceases operation.
In order to determine ifIf an asset is considered held for use, and Entergy should recognizeconcludes that an impairment of a long-lived asset that is to be held and used,analysis has been triggered under the accounting standards, require that the sum of the expected undiscounted future cash flows from the asset beare compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the recording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if suchrecorded. If the expected undiscounted future cash flows are less than the carrying value and the carrying value exceeds the fair value, Entergy is required to record an impairment charge to write the asset down to its fair value. If an asset is considered held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
These estimates are based on a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue.Future power and fuel prices - Electricity and gas prices can be very volatile. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impactedMarket value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, these transactions are relatively infrequent, the market for such assets is volatile, and the value of individual assets is affected by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions.
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Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant effect on operations could cause a significant change in these assumptions.
· | Timing - Entergy currently assumes, for a numberEntergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Timing - Entergy currently assumes, for some of its nuclear units, that the plant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
For additional discussion regarding the continued operationshutdown of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 1 to the financial statements.
Effective January 1, 2009, Entergy adoptedevaluates investment securities with unrealized losses at the end of each period to determine whether an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities.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, ifIf 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). For debt securities held as of January 1, 2009 for which an other-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2011, 2010,2014, 2013, or 2009.2012. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to beis based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. As discussed in Note 1 to the financial statements, unrealized losses on equity securities that are not considered temporarilyother-than-temporarily impaired are recorded in earnings for Entergy Wholesale Commodities. Entergy Wholesale Commodities recordeddid not record material charges to other income of $0.1 million in 2011, $1 million in 2010, and $86 million in 20092014, 2013, or 2012 resulting from the recognition of impairmentsother-than-temporary impairment of certainequity securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 2012 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.funds.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans whichthat cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy.
In December 2013, Entergy announced that employees hired or rehired after June 30, 2014, will participate in a new cash balance defined benefit pension plan and will be eligible to receive an enhanced employer matching contribution under one of the Entergy defined contribution plans, rather than the current final average pay defined benefit pension plan and employer matching contribution. These changes are prospective and have no effect on the December 31, 2013 pension obligation. Additionally, at the same time, Entergy announced changes to its other postretirement benefits which include, among other things, elimination of other postretirement benefits for all non-bargaining employees hired or rehired after June 30, 2014 and for certain bargaining employees hired or rehired after June 30, 2014, or such later date provided for in their applicable collective bargaining agreement, and setting a dollar limit cap on Entergy’s contribution to retiree medical costs, effective 2019 for those non-bargaining employees who commence their Entergy retirement benefits on or after January 1, 2015 and for certain bargaining employees who commence their Entergy retirement benefits on or after January 1, 2015 or such later date as provided for in their applicable collective bargaining agreement. In accordance with accounting standards, certain of the other postretirement benefit changes have been reflected in the December 31, 2013 other postretirement obligation. The changes affecting active bargaining unit employees are being negotiated with their unions prior to implementation, where necessary, and to the extent required by law.
Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impactedaffected by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and Entergy Wholesale Commodities segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
· | Discount rates used in determining future benefit obligations; |
· | Projected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; |
· | Rate of increase in future compensation levels; |
Entergy reviews the first four assumptions listed above on an annual basis and adjusts them as necessary. The falling interest rate environment over the past few years and volatility in the financial equity markets have impactedaffected Entergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a number of adjustments to its assumptions.
The retirement and mortality rate assumptions are reviewed every three to fivethree-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 20112014 actuarial study reviewed plan experience from 20072010 through 2010.2013. As a result of the 20112014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect the expectation that participants havemodified demographic pattern expectations as well as longer life expectancies and different retirement patterns than previously assumed.expectancies. These changes are reflected in the December 31, 20112014 financial disclosures and are a significant factordisclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $504.4 million in the increasequalified pension benefit obligation and $94.4 million in 2012the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $77.4 million and other postretirement costs comparedcost by approximately $12.3 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the 2011 costs.October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy’s projected stream of benefit payments. Based on recent market trends, the discount rates used to calculate its 2014 qualified pension benefit obligation decreasedand 2015 qualified pension cost ranged from a range of 5.6%4.03% to 5.7%4.40% for its specific pension plans in 2010(4.27% combined rate for all pension plans). The discount rates used to a range of 5.1%calculate its 2013 qualified pension benefit obligation and 2014 qualified pension cost ranged from 5.04% to 5.2% in 2011.5.26% for its specific pension plans (5.14% combined rate for all pension plans). The discount rates used to calculate its 2012 qualified pension benefit obligation and 2013 qualified pension cost ranged from 4.31% to 4.50% for its specific pension plans (4.36% combined rate for all pension plans). The discount rate used to calculate its 2014 other postretirement benefit obligation also decreased from 5.5% in 2010and 2015 other postretirement benefit cost was 4.23%. The discount rate used to 5.1% in 2011.calculate its 2013 other postretirement benefit obligation and 2014 other postretirement benefit cost was 5.05%. The discount rate used to calculate its 2012 other postretirement benefit obligation and 2013 other postretirement benefit cost was 4.36%.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy’s health care cost trend rate assumption used in measuring the December 31, 2014 accumulated postretirement benefit obligation and 2015 postretirement cost was 7.10% for pre-65 retirees and 7.70% for post-65 retirees for 2014, gradually decreasing each successive year until it reaches 4.75% in 2023 and beyond for both pre-65 and post-65 retirees. Entergy’s assumed health care cost trend rate assumption used in measuring the December 31, 20112013 accumulated postretirement benefit obligation and 20122014 postretirement cost was 7.75%7.25% for pre-65 retirees and 7.5%7.00% for post-65 retirees for 2012,2013, gradually decreasing each successive year until it reaches 4.75% in 2022 and beyond for both pre-65 and post-65 retirees. Entergy’s assumed health care cost trend rate assumption used in measuring the December 31, 2010 accumulated postretirement benefit obligation and 20112013 postretirement cost was 8.5%7.50% for pre-65 retirees and 8.0%7.25% for post-65 retirees, for 2011, gradually decreasing each successive year until it reaches a 4.75% annual increase in 2022 and beyond for both pre-65 and post-65 retirees. Entergy’s assumed
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
health care costscost trend rate assumption used in 2019measuring 2012 postretirement cost was 7.75% for pre-65 retirees and 7.50% for post-65 retirees, gradually decreasing each successive year until it reaches 4.75% in 20182022 and beyond for both pre-65 and post-65 retirees.
The assumed rate of increase in future compensation levels used to calculate 20112014 and 20102013 benefit obligations was 4.23%.
In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviews past performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and investment managers.
Since 2003, Entergy has targeted an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. Entergy completed and adopted an optimization study in 2011 for the pension assets whichthat recommended that the target asset allocation adjust dynamically over time, based on the funded status of the plan, from its current allocation to itsan ultimate allocation of 45% equity and 55% fixed income.income securities. The ultimate asset allocation is expected to be attained when the plan is 105% funded.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The current target allocations for both Entergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets 35% equity securities and 65% fixed-income securities. Entergy also completed and adopted an optimization study in 2011 for the postretirement benefit trust assets that recommends both the taxable and the non-taxable assets move toare 65% equity securities and 35% fixed-income securities. Entergy plans to adjust the postretirementThis takes into account asset allocation adjustments that were made during 2012.
Entergy’s expected long term rate of return on qualified pension assets used to calculate 2011, 20102014, 2013, and 20092012 qualified pension costs was 8.5% and will be 8.5%8.25% for 2012.2015. Entergy’s expected long term rate of return on non-taxabletax deferred other postretirement assets used to calculate other postretirement costs was 7.75%8.3% for 20112014 and 2010, 8.5% for 20092013 and 2012. It will be 8.5%8.05% for 2012.2015. For Entergy’s taxable postretirement assets, the expected long term rate of return was 5.5%6.5% for 20112014, 2013, and 2010, 6% for 20092012, and will be 6.5%6.25% in 2012.2015.
Accounting standards allow for the deferral of prior service costs/credits arising from plan amendments that attribute an increase or decrease in benefits to employee service in prior periods and deferral of gains and losses arising from the difference between actuarial estimates and actual experience. Prior service costs/credits and deferred gains and losses are then amortized into expense over future periods. Certain decisions, including workforce reductions and plan amendments, may significantly reduce the expense amortization period and result in immediate recognition of certain previously-deferred costs and gains/losses in the form of curtailment losses or gains. Similarly, payments made to settle benefit obligations can also result in recognition in the form of settlement losses or gains.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified pension projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
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| Actuarial Assumption | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Qualified Projected Benefit Obligation |
| | | Increase/(Decrease) |
| Discount rate | | (0.25%) | | $18,707 | | $271,656 |
| Rate of return on plan assets | | (0.25%) | | $10,631 | | $— |
| Rate of increase in compensation | | 0.25% | | $7,561 | | $44,183 |
Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | | Increase/(Decrease) |
| | | | | | | |
| Discount rate | | (0.25%) | | $17,145 | | $188,246 |
| Rate of return on plan assets | | (0.25%) | | $8,863 | | - |
| Rate of increase in compensation | | 0.25% | | $7,503 | | $41,227 |
47
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $4,716 | | $63,342 |
| Health care cost trend | | 0.25% | | $8,900 | | $52,730 | | 0.25% | | $7,953 | | $55,954 |
| Discount rate | | (0.25%) | | $6,622 | | $62,316 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. Refer toSee Note 11 to the financial statements for a further discussion of Entergy’s funded status.
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2011,2014, Entergy’s total qualified pension cost was $154 million.$216.5 million, including a $0.7 million special termination charge related to workforce downsizing. Entergy anticipates 20122015 qualified pension cost to be $264$320.7 million. PensionEntergy’s pension funding was approximately $400$399 million for 2011.2014. Entergy’s contributions to the pension trust are currently estimated to be approximately $163$396.2 million in 2012,2015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012. Entergy’s preliminary estimates of 2012 funding requirements indicate that the contributions will not exceed historical levels of pension contributions.2015.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which,that, under the Pension Protection Act, must be funded over a seven-year rolling period. The Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Moving Ahead for Progress in the 21st Century Act (MAP-21) became federal law in July 2012. Under the law, the segment rates used to calculate funding liabilities must be within a corridor of the 25-year average of prior segment rates. The interest rate corridor applies to the determination of minimum funding requirements and benefit restrictions. The pension funding stabilization provisions will provide for a near-term reduction in minimum funding
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
requirements for single employer defined benefit plans in response to the historically low interest rates that existed when the law was enacted. The law did not reduce contribution requirements over the long term.
The Highway and Transportation Funding Act (HATFA) became federal law in August 2014. HATFA’s pension provisions provided a five-year extension of the MAP-21 pension funding stabilization.
Total postretirement health care and life insurance benefit costs for Entergy in 20112014 were $114.7 million, including $33 million in savings due to the estimated effect of future Medicare Part D subsidies.$50.1 million. Entergy expects 20122015 postretirement health care and life insurance benefit costs to be $138.4$66.2 million. This includes a projected $31.2 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $76.1$76.5 million to its postretirement plans in 2011.2014. Entergy’s current estimate of contributions to its other postretirement plans is approximately $80.4$66.9 million in 2012.2015.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws changeEntergy has implemented the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things,major provisions of the following significant provisions:law.
· | A 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in coverage limits for dependents; and |
· | Elimination of lifetime caps. |
The total impact of PPACAA 40% excise tax on per capita medical benefit costs that exceed certain thresholds is due to take effect beginning in 2018. There are still many technical issues, however, that have not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and discussions are in progress regarding the constitutionality of and the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known.been finalized. Entergy will continue to monitor these developments to determine the possible impacteffect on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which has provided for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.Entergy.
One provision of the new law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Medicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded in 2010 as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Contingencies
As a company with multi-state domestic utility operations, and a history of international investments, Entergy is subject to a number of federal state, and internationalstate laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Environmental
Entergy must comply with environmental laws and regulations applicable to the handlingair emissions, water discharges, solid and disposal of hazardous waste.waste, toxic substances, protected species, and other environmental matters. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent withcomply or address any impacts to the various standards.environment. Entergy conducts studies to determine the extent of any required remediation and has recorded reservesliabilities based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites or issues could be identified which require environmental remediation or corrective action for which Entergy could be liable. The amounts of environmental reservesliabilities recorded can be significantly affected by the following external events or conditions:conditions.
· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional impacts, sites, issues, or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
The resolution or progression of existing matters through the court system or resolution by the EPA or relevant state or local authority.
Litigation
Entergy is regularly named as a defendant in a number of lawsuits involving employment, customers, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable,possible, or remote and records reserves
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
liabilities for cases whichthat have a probable likelihood of loss and the loss can be estimated. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, the ultimate outcome of the litigation to which Entergy is exposed has the potential to materially affect the results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries.
Uncertain Tax Positions
Entergy’s operations, including acquisitions and divestitures, require Entergy to evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it has adequately assessed and provided for these types of risks, where applicable. Any provisions recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, or completion of reviews of the tax treatment of certain transactions or issues by taxing authorities.
New Accounting Pronouncements
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.projects. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income, financial position, or cash flows.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In May 2011April 2014 the FASB issued ASU No. 2011-4, “Fair Value Measurement2014-08, “Presentation of Financial Statements (Topic 820)205) and Property Plant, and Equipment (Topic 360): Amendments to Achieve Common Fair Value MeasurementReporting Discontinued Operations and Disclosure Requirements in U.S. GAAP and IFRSs,”Disclosures of Disposals of Components of an Entity” which states thatchanges the ASU explains how to measure fair value.requirements for reporting discontinued operations. The ASU states that: 1)that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results when the component of an entity or group of components of an entity meets the criteria to be classified as held for sale, is disposed of by sale, or is disposed of other than by sale. The amendments in thethis ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards; 2) consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing informationalso require additional disclosures about fair value measurements; 3) for many of the requirements, the FASB does not intend for thediscontinued operations. ASU to result in a change in the application of the requirements of current U.S. GAAP; 4) some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements; and 5) other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU No. 2011-42014-08 is effective for Entergy for the first quarter 2012.2015. Entergy does not currently expect ASU No. 2011-42014-08 to affect materially its results of operations, financial position, or cash flows.
In September 2011May 2014 the FASB issued ASU No. 2011-8, “Intangibles – Goodwill and Other2014-09, “Revenue from Contracts with Customers (Topic 350): Testing Goodwill for Impairment.606).” The amendments permitASU’s core principle is that “an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to first assess qualitative factorsbe entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to determine whether it is more likely than not thatachieve the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment assessment.core principle. ASU No. 2011-82014-09 is effective for Entergy for the first quarter 2012.2017. Entergy does not expect ASU No. 2011-8 will have no effect on Entergy’s2014-09 to affect materially its results of operations, financial position, or cash flows.
In November 2014 the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” The ASU states that for hybrid financial instruments issued in the form of a share, an entity should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. ASU 2014-16 is effective for Entergy for the first quarter 2016. Entergy does not expect ASU 2014-16 to affect materially its results of operations, financial position, or cash flows.
ENTERGY CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included in this document. To meet this responsibility, management establishes and maintains a system of internal controls over financial reporting designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel. This system is also tested by a comprehensive internal audit program.
Entergy management assesses the design and effectiveness of Entergy’s internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. The 2013 COSO Framework was utilized for management’s assessment. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.
Entergy Corporation and the Registrant Subsidiaries’Corporation’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of Entergy’sEntergy Corporation’s internal control over financial reporting as of December 31, 2011, which is included herein on pages 400 through 407.2014.
In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.
Based on management’s assessment of internal controls using the 2013 COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2011.2014. Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.
|
| |
J. WAYNE LEONARDLEO P. DENAULT
Chairman of the Board and Chief Executive Officer of Entergy Corporation | LEO P. DENAULTANDREW S. MARSH
Executive Vice President and Chief Financial Officer of Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. |
HUGH T. MCDONALD Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. | WILLIAM M. MOHLPHILLIP R. MAY, JR.
Chairman of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC |
HALEY R. FISACKERLY Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. | CHARLES L. RICE, JR. Chairman of the Board, President and Chief Executive Officer of Entergy New Orleans, Inc. |
SALLIE T. RAINER JOSEPH F. DOMINO
ChairmanChair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc.
| JOHN T. HERRONTHEODORE H. BUNTING, JR.
Chairman of the Board, President and Chief Executive Officer of System Energy Resources, Inc. |
THEODORE H. BUNTING, JR.
Senior Vice President and Chief Accounting Officer (and acting principal financial officer) of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and Entergy Texas, Inc.
| WANDA C. CURRY
Vice President and Chief Financial Officer of System Energy Resources, Inc.
|
51
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
|
|
|
|
|
|
|
|
|
|
| | 2014 |
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| | (In Thousands, Except Percentages and Per Share Amounts) |
| | | | | | | | | | |
| Operating revenues |
| $12,494,921 |
|
|
| $11,390,947 |
|
|
| $10,302,079 |
|
|
| $11,229,073 |
|
|
| $11,487,577 |
|
| Income from continuing operations |
| $960,257 |
|
|
| $730,572 |
|
|
| $868,363 |
|
|
| $1,367,372 |
|
|
| $1,270,305 |
|
| Earnings per share from continuing operations: | |
| |
| |
|
| |
|
| |
|
| Basic |
| $5.24 |
|
|
| $3.99 |
|
|
| $4.77 |
|
|
| $7.59 |
|
|
| $6.72 |
|
| Diluted |
| $5.22 |
|
|
| $3.99 |
|
|
| $4.76 |
|
|
| $7.55 |
|
|
| $6.66 |
|
| Dividends declared per share |
| $3.32 |
|
|
| $3.32 |
|
|
| $3.32 |
|
|
| $3.32 |
|
|
| $3.24 |
|
| Return on common equity | 9.58 | % |
| 7.56 | % |
| 9.33 | % |
| 15.43 | % |
| 14.61 | % |
| Book value per share, year-end |
| $55.83 |
|
|
| $54.00 |
|
|
| $51.72 |
|
|
| $50.81 |
|
|
| $47.53 |
|
| Total assets |
| $46,527,854 |
|
|
| $43,406,446 |
|
|
| $43,202,502 |
|
|
| $40,701,699 |
|
|
| $38,685,276 |
|
| Long-term obligations (a) |
| $12,740,579 |
|
|
| $12,382,127 |
|
|
| $12,141,370 |
|
|
| $10,268,645 |
|
|
| $11,575,973 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet. |
|
|
|
|
|
|
|
|
|
|
| | 2014 |
| 2013 |
| 2012 |
| 2011 |
| 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Utility Electric Operating Revenues: | |
|
| |
|
| |
|
| |
|
| |
|
| Residential |
| $3,555 |
|
|
| $3,396 |
|
|
| $3,022 |
|
|
| $3,369 |
|
|
| $3,375 |
|
| Commercial | 2,553 |
|
| 2,415 |
|
| 2,174 |
|
| 2,333 |
|
| 2,317 |
|
| Industrial | 2,623 |
|
| 2,405 |
|
| 2,034 |
|
| 2,307 |
|
| 2,207 |
|
| Governmental | 227 |
|
| 218 |
|
| 198 |
|
| 205 |
|
| 212 |
|
| Total retail | 8,958 |
|
| 8,434 |
|
| 7,428 |
|
| 8,214 |
|
| 8,111 |
|
| Sales for resale | 330 |
|
| 210 |
|
| 179 |
|
| 216 |
|
| 389 |
|
| Other | 304 |
|
| 298 |
|
| 264 |
|
| 244 |
|
| 241 |
|
| Total |
| $9,592 |
|
|
| $8,942 |
|
|
| $7,871 |
|
|
| $8,674 |
|
|
| $8,741 |
|
| | | | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): |
|
|
|
|
| |
|
| |
|
| |
|
| Residential | 35,932 |
|
| 35,169 |
|
| 34,664 |
|
| 36,684 |
|
| 37,465 |
|
| Commercial | 28,827 |
|
| 28,547 |
|
| 28,724 |
|
| 28,720 |
|
| 28,831 |
|
| Industrial | 43,723 |
|
| 41,653 |
|
| 41,181 |
|
| 40,810 |
|
| 38,751 |
|
| Governmental | 2,428 |
|
| 2,412 |
|
| 2,435 |
|
| 2,474 |
|
| 2,463 |
|
| Total retail | 110,910 |
|
| 107,781 |
|
| 107,004 |
|
| 108,688 |
|
| 107,510 |
|
| Sales for resale | 9,462 |
|
| 3,020 |
|
| 3,200 |
|
| 4,111 |
|
| 4,372 |
|
| Total | 120,372 |
|
| 110,801 |
|
| 110,204 |
|
| 112,799 |
|
| 111,882 |
|
| | | | | | | | | | |
| Entergy Wholesale Commodities: | |
|
| |
|
| |
|
| |
|
| |
|
| Operating Revenues |
| $2,719 |
| |
| $2,313 |
| |
| $2,326 |
| |
| $2,414 |
| |
| $2,566 |
|
| Billed Electric Energy Sales (GWh) | 44,424 |
| | 45,127 |
| | 46,178 |
| | 43,497 |
| | 42,934 |
|
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands, Except Percentages and Per Share Amounts) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 11,229,073 | | | $ | 11,487,577 | | | $ | 10,745,650 | | | $ | 13,093,756 | | | $ | 11,484,398 | |
| Income from continuing operations | | $ | 1,367,372 | | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | | | $ | 1,159,954 | |
| Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
| Basic | | $ | 7.59 | | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | |
| Diluted | | $ | 7.55 | | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | |
| Dividends declared per share | | $ | 3.32 | | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | |
| Return on common equity | | | 15.43 | % | | | 14.61 | % | | | 14.85 | % | | | 15.42 | % | | | 14.13 | % |
| Book value per share, year-end | | $ | 52.16 | | | $ | 47.53 | | | $ | 45.54 | | | $ | 42.07 | | | $ | 40.71 | |
| Total assets | | $ | 40,701,699 | | | $ | 38,685,276 | | | $ | 37,561,953 | | | $ | 36,616,818 | | | $ | 33,643,002 | |
| Long-term obligations (1) | | $ | 10,268,645 | | | $ | 11,575,973 | | | $ | 11,277,314 | | | $ | 11,734,411 | | | $ | 10,165,735 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet. | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Utility Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 3,369 | | | $ | 3,375 | | | $ | 2,999 | | | $ | 3,610 | | | $ | 3,228 | |
| Commercial | | | 2,333 | | | | 2,317 | | | | 2,184 | | | | 2,735 | | | | 2,413 | |
| Industrial | | | 2,307 | | | | 2,207 | | | | 1,997 | | | | 2,933 | | | | 2,545 | |
| Governmental | | | 205 | | | | 212 | | | | 204 | | | | 248 | | | | 221 | |
| Total retail | | | 8,214 | | | | 8,111 | | | | 7,384 | | | | 9,526 | | | | 8,407 | |
| Sales for resale | | | 216 | | | | 389 | | | | 206 | | | | 325 | | | | 393 | |
| Other | | | 244 | | | | 241 | | | | 290 | | | | 222 | | | | 246 | |
| Total | | $ | 8,674 | | | $ | 8,741 | | | $ | 7,880 | | | $ | 10,073 | | | $ | 9,046 | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | |
| Residential | | | 36,684 | | | | 37,465 | | | | 33,626 | | | | 33,047 | | | | 33,281 | |
| Commercial | | | 28,720 | | | | 28,831 | | | | 27,476 | | | | 27,340 | | | | 27,408 | |
| Industrial | | | 40,810 | | | | 38,751 | | | | 35,638 | | | | 37,843 | | | | 38,985 | |
| Governmental | | | 2,474 | | | | 2,463 | | | | 2,408 | | | | 2,379 | | | | 2,339 | |
| Total retail | | | 108,688 | | | | 107,510 | | | | 99,148 | | | | 100,609 | | | | 102,013 | |
| Sales for resale | | | 4,111 | | | | 4,372 | | | | 4,862 | | | | 5,401 | | | | 6,145 | |
| Total | | | 112,799 | | | | 111,882 | | | | 104,010 | | | | 106,010 | | | | 108,158 | |
| | | | | | | | | | | | | | | | | | | | | |
| Competitive Businesses: | | | | | | | | | | | | | | | | | | | | |
| Operating Revenues | | $ | 2,390 | | | $ | 2,549 | | | $ | 2,693 | | | $ | 2,779 | | | $ | 2,232 | |
| Billed Electric Energy Sales (GWh) | | | 43,520 | | | | 42,682 | | | | 43,969 | | | | 44,747 | | | | 40,916 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 20112014 and 2010,2013, and the related consolidated income statements, and consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated statements of changes in equity for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 20112014 and 2010,2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2011,2014, based on the criteria established in Internal Control —- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 201226, 2015 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
|
| | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | |
| Electric | |
| $9,591,902 |
| |
| $8,942,360 |
| |
| $7,870,649 |
|
| Natural gas | | 181,794 |
| | 154,353 |
| | 130,836 |
|
| Competitive businesses | | 2,721,225 |
| | 2,294,234 |
| | 2,300,594 |
|
| TOTAL | | 12,494,921 |
| | 11,390,947 |
| | 10,302,079 |
|
| | | | | | | |
| OPERATING EXPENSES | | |
| | |
| | |
|
| Operation and Maintenance: | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and gas purchased for resale | | 2,632,558 |
| | 2,445,818 |
| | 2,036,835 |
|
| Purchased power | | 1,915,414 |
| | 1,554,332 |
| | 1,255,800 |
|
| Nuclear refueling outage expenses | | 267,679 |
| | 256,801 |
| | 245,600 |
|
| Other operation and maintenance | | 3,310,536 |
| | 3,331,934 |
| | 3,045,392 |
|
| Asset write-offs, impairments, and related charges | | 179,752 |
| | 341,537 |
| | 355,524 |
|
| Decommissioning | | 272,621 |
| | 242,104 |
| | 184,760 |
|
| Taxes other than income taxes | | 604,606 |
| | 600,350 |
| | 557,298 |
|
| Depreciation and amortization | | 1,318,638 |
| | 1,261,044 |
| | 1,144,585 |
|
| Other regulatory charges (credits) - net | | (13,772 | ) | | 45,597 |
| | 175,104 |
|
| TOTAL | | 10,488,032 |
| | 10,079,517 |
| | 9,000,898 |
|
| | | | | | | |
| Gain on sale of business | | — |
| | 43,569 |
| | — |
|
| | | | | | | |
| OPERATING INCOME | | 2,006,889 |
| | 1,354,999 |
| | 1,301,181 |
|
| | | | | | | |
| OTHER INCOME | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | 64,802 |
| | 66,053 |
| | 92,759 |
|
| Interest and investment income | | 147,686 |
| | 199,300 |
| | 127,776 |
|
| Miscellaneous - net | | (42,016 | ) | | (59,762 | ) | | (53,214 | ) |
| TOTAL | | 170,472 |
| | 205,591 |
| | 167,321 |
|
| | | | | | | |
| INTEREST EXPENSE | | |
| | |
| | |
|
| Interest expense | | 661,083 |
| | 629,537 |
| | 606,596 |
|
| Allowance for borrowed funds used during construction | | (33,576 | ) | | (25,500 | ) | | (37,312 | ) |
| TOTAL | | 627,507 |
| | 604,037 |
| | 569,284 |
|
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 1,549,854 |
| | 956,553 |
| | 899,218 |
|
| | | | | | | |
| Income taxes | | 589,597 |
| | 225,981 |
| | 30,855 |
|
| | | | | | | |
| CONSOLIDATED NET INCOME | | 960,257 |
| | 730,572 |
| | 868,363 |
|
| | | | | | | |
| Preferred dividend requirements of subsidiaries | | 19,536 |
| | 18,670 |
| | 21,690 |
|
| | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | |
| $940,721 |
| |
| $711,902 |
| |
| $846,673 |
|
| | | | | | | |
| Earnings per average common share: | | |
| | |
| | |
|
| Basic | |
| $5.24 |
| |
| $3.99 |
| |
| $4.77 |
|
| Diluted | |
| $5.22 |
| |
| $3.99 |
| |
| $4.76 |
|
| | | | | | | |
| Basic average number of common shares outstanding | | 179,506,151 |
| | 178,211,192 |
| | 177,324,813 |
|
| Diluted average number of common shares outstanding | | 180,296,885 |
| | 178,570,400 |
| | 177,737,565 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands, Except Share Data) | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Electric | | $ | 8,673,517 | | | $ | 8,740,637 | | | $ | 7,880,016 | |
| Natural gas | | | 165,819 | | | | 197,658 | | | | 172,213 | |
| Competitive businesses | | | 2,389,737 | | | | 2,549,282 | | | | 2,693,421 | |
| TOTAL | | | 11,229,073 | | | | 11,487,577 | | | | 10,745,650 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operating and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and | | | | | | | | | | | | |
| gas purchased for resale | | | 2,492,714 | | | | 2,518,582 | | | | 2,309,831 | |
| Purchased power | | | 1,564,967 | | | | 1,659,416 | | | | 1,395,203 | |
| Nuclear refueling outage expenses | | | 255,618 | | | | 256,123 | | | | 241,310 | |
| Other operation and maintenance | | | 2,867,758 | | | | 2,969,402 | | | | 2,750,810 | |
| Decommissioning | | | 190,595 | | | | 211,736 | | | | 199,063 | |
| Taxes other than income taxes | | | 536,026 | | | | 534,299 | | | | 503,859 | |
| Depreciation and amortization | | | 1,102,202 | | | | 1,069,894 | | | | 1,082,775 | |
| Other regulatory charges (credits) - net | | | 205,959 | | | | 44,921 | | | | (21,727 | ) |
| TOTAL | | | 9,215,839 | | | | 9,264,373 | | | | 8,461,124 | |
| | | | | | | | | | | | | |
| Gain on sale of business | | | - | | | | 44,173 | | | | - | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 2,013,234 | | | | 2,267,377 | | | | 2,284,526 | |
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | | 84,305 | | | | 59,381 | | | | 59,545 | |
| Interest and investment income | | | 129,134 | | | | 185,455 | | | | 236,628 | |
| Other than temporary impairment losses | | | (140 | ) | | | (1,378 | ) | | | (86,069 | ) |
| Miscellaneous - net | | | (59,271 | ) | | | (48,124 | ) | | | (40,396 | ) |
| TOTAL | | | 154,028 | | | | 195,334 | | | | 169,708 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | | 551,521 | | | | 610,146 | | | | 603,679 | |
| Allowance for borrowed funds used during construction | | | (37,894 | ) | | | (34,979 | ) | | | (33,235 | ) |
| TOTAL | | | 513,627 | | | | 575,167 | | | | 570,444 | |
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 1,653,635 | | | | 1,887,544 | | | | 1,883,790 | |
| | | | | | | | | | | | | |
| Income taxes | | | 286,263 | | | | 617,239 | | | | 632,740 | |
| | | | | | | | | | | | | |
| CONSOLIDATED NET INCOME | | | 1,367,372 | | | | 1,270,305 | | | | 1,251,050 | |
| | | | | | | | | | | | | |
| Preferred dividend requirements of subsidiaries | | | 20,933 | | | | 20,063 | | | | 19,958 | |
| | | | | | | | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | $ | 1,346,439 | | | $ | 1,250,242 | | | $ | 1,231,092 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Earnings per average common share: | | | | | | | | | | | | |
| Basic | | $ | 7.59 | | | $ | 6.72 | | | $ | 6.39 | |
| Diluted | | $ | 7.55 | | | $ | 6.66 | | | $ | 6.30 | |
| Dividends declared per common share | | $ | 3.32 | | | $ | 3.24 | | | $ | 3.00 | |
| | | | | | | | | | | | | |
| Basic average number of common shares outstanding | | | 177,430,208 | | | | 186,010,452 | | | | 192,772,032 | |
| Diluted average number of common shares outstanding | | | 178,370,695 | | | | 187,814,235 | | | | 195,838,068 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
|
| | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| | |
| | For the Years Ended December 31, |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| | | | | | |
| Net Income |
| $960,257 |
| |
| $730,572 |
| |
| $868,363 |
|
| | | | | | |
| Other comprehensive income (loss) | |
| | |
| | |
|
| Cash flow hedges net unrealized gain (loss) | |
| | |
| | |
|
| (net of tax expense (benefit) of $96,141, ($87,940), and ($55,750)) | 179,895 |
| | (161,682 | ) | | (97,591 | ) |
| Pension and other postretirement liabilities | |
| | |
| | |
|
| (net of tax expense (benefit) of ($152,763), $220,899, and ($61,223)) | (281,566 | ) | | 302,489 |
| | (91,157 | ) |
| Net unrealized investment gains | |
| | |
| | |
|
| (net of tax expense of $66,594, $118,878, and $61,104) | 89,439 |
| | 122,709 |
| | 63,609 |
|
| Foreign currency translation | |
| | |
| | |
|
| (net of tax expense (benefit) of ($404), $131, and $275) | (751 | ) | | 243 |
| | 508 |
|
| Other comprehensive income (loss) | (12,983 | ) | | 263,759 |
| | (124,631 | ) |
| | | | | | |
| Comprehensive Income | 947,274 |
| | 994,331 |
| | 743,732 |
|
| Preferred dividend requirements of subsidiaries | 19,536 |
| | 18,670 |
| | 21,690 |
|
| Comprehensive Income Attributable to Entergy Corporation |
| $927,738 |
| |
| $975,661 |
| |
| $722,042 |
|
| | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| Net Income | | $ | 1,367,372 | | | $ | 1,270,305 | | | $ | 1,251,050 | |
| | | | | | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | | | | | | | | | | | |
| (net of tax expense (benefit) of $34,411, ($7,088), and $333) | | | 71,239 | | | | (11,685 | ) | | | (2,887 | ) |
| Pension and other postretirement liabilities | | | | | | | | | | | | |
| (net of tax benefit of $131,198, $14,387, and $34,415) | | | (223,090 | ) | | | (8,527 | ) | | | (35,707 | ) |
| Net unrealized investment gains | | | | | | | | | | | | |
| (net of tax expense of $19,368, $51,130, and $102,845) | | | 21,254 | | | | 57,523 | | | | 82,929 | |
| Foreign currency translation | | | | | | | | | | | | |
| (net of tax expense (benefit) of $192, ($182), and ($246)) | | | 357 | | | | (338 | ) | | | (457 | ) |
| Other comprehensive income (loss) | | | (130,240 | ) | | | 36,973 | | | | 43,878 | |
| | | | | | | | | | | | | |
| Comprehensive Income | | | 1,237,132 | | | | 1,307,278 | | | | 1,294,928 | |
| | | | | | | | | | | | | |
| Preferred dividend requirements of subsidiaries | | | 20,933 | | | | 20,063 | | | | 19,958 | |
| | | | | | | | | | | | | |
| Comprehensive Income Attributable to Entergy Corporation | | $ | 1,216,199 | | | $ | 1,287,215 | | | $ | 1,274,970 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING ACTIVITIES | | | | | | |
| Consolidated net income | |
| $960,257 |
| |
| $730,572 |
| |
| $868,363 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 2,127,892 |
| | 2,012,076 |
| | 1,771,649 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 596,935 |
| | 311,789 |
| | (26,479 | ) |
| Asset write-offs, impairments and related charges | | 123,527 |
| | 341,537 |
| | 355,524 |
|
| Gain on sale of business | | — |
| | (43,569 | ) | | — |
|
| Changes in working capital: | | |
| | |
| | |
|
| Receivables | | 98,493 |
| | (180,648 | ) | | (14,202 | ) |
| Fuel inventory | | 3,524 |
| | 4,873 |
| | (11,604 | ) |
| Accounts payable | | (12,996 | ) | | 94,436 |
| | (6,779 | ) |
| Prepaid taxes and taxes accrued | | (62,985 | ) | | (142,626 | ) | | 55,484 |
|
| Interest accrued | | 25,013 |
| | (3,667 | ) | | 1,152 |
|
| Deferred fuel costs | | (70,691 | ) | | (4,824 | ) | | (99,987 | ) |
| Other working capital accounts | | 112,390 |
| | (66,330 | ) | | (151,989 | ) |
| Changes in provisions for estimated losses | | 301,871 |
| | (248,205 | ) | | (24,808 | ) |
| Changes in other regulatory assets | | (1,061,537 | ) | | 1,105,622 |
| | (398,428 | ) |
| Changes in other regulatory liabilities | | 87,654 |
| | 397,341 |
| | 170,421 |
|
| Changes in pensions and other postretirement liabilities | | 1,308,166 |
| | (1,433,663 | ) | | 644,099 |
|
| Other | | (647,952 | ) | | 314,505 |
| | (192,131 | ) |
| Net cash flow provided by operating activities | | 3,889,561 |
| | 3,189,219 |
| | 2,940,285 |
|
| | | | | | | |
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction/capital expenditures | | (2,119,191 | ) | | (2,287,593 | ) | | (2,674,650 | ) |
| Allowance for equity funds used during construction | | 68,375 |
| | 69,689 |
| | 96,131 |
|
| Nuclear fuel purchases | | (537,548 | ) | | (517,825 | ) | | (557,960 | ) |
| Payment for purchase of plant | | — |
| | (17,300 | ) | | (456,356 | ) |
| Proceeds from sale of assets and businesses | | 10,100 |
| | 147,922 |
| | — |
|
| Insurance proceeds received for property damages | | 40,670 |
| | — |
| | — |
|
| Changes in securitization account | | 1,511 |
| | 155 |
| | 4,265 |
|
| NYPA value sharing payment | | (72,000 | ) | | (71,736 | ) | | (72,000 | ) |
| Payments to storm reserve escrow account | | (276,057 | ) | | (7,716 | ) | | (8,957 | ) |
| Receipts from storm reserve escrow account | | — |
| | 260,279 |
| | 27,884 |
|
| Decrease (increase) in other investments | | 46,983 |
| | (82,955 | ) | | 15,175 |
|
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — |
| | 21,034 |
| | 109,105 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 1,872,115 |
| | 2,031,552 |
| | 2,074,055 |
|
| Investment in nuclear decommissioning trust funds | | (1,989,446 | ) | | (2,147,099 | ) | | (2,196,489 | ) |
| Net cash flow used in investing activities | | (2,954,488 | ) | | (2,601,593 | ) | | (3,639,797 | ) |
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Consolidated net income | | $ | 1,367,372 | | | $ | 1,270,305 | | | $ | 1,251,050 | |
| Adjustments to reconcile consolidated net income to net cash flow | | | | | | | | | | | | |
| provided by operating activities: | | | | | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 1,745,455 | | | | 1,705,331 | | | | 1,458,861 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (280,029 | ) | | | 718,987 | | | | 864,684 | |
| Gain on sale of business | | | - | | | | (44,173 | ) | | | - | |
| Changes in working capital: | | | | | | | | | | | | |
| Receivables | | | 28,091 | | | | (99,640 | ) | | | 116,444 | |
| Fuel inventory | | | 5,393 | | | | (10,665 | ) | | | 19,291 | |
| Accounts payable | | | (131,970 | ) | | | 216,635 | | | | (14,251 | ) |
| Prepaid taxes and taxes accrued | | | 580,042 | | | | (116,988 | ) | | | (260,029 | ) |
| Interest accrued | | | (34,172 | ) | | | 17,651 | | | | 4,974 | |
| Deferred fuel | | | (55,686 | ) | | | 8,909 | | | | 72,314 | |
| Other working capital accounts | | | 41,875 | | | | (160,326 | ) | | | (43,391 | ) |
| Change in provisions for estimated losses | | | (11,086 | ) | | | 265,284 | | | | (12,030 | ) |
| Change in other regulatory assets | | | (673,244 | ) | | | 339,408 | | | | (415,157 | ) |
| Change in pension and other postretirement liabilities | | | 962,461 | | | | (80,844 | ) | | | 71,789 | |
| Other | | | (415,685 | ) | | | (103,793 | ) | | | (181,391 | ) |
| Net cash flow provided by operating activities | | | 3,128,817 | | | | 3,926,081 | | | | 2,933,158 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction/capital expenditures | | | (2,040,027 | ) | | | (1,974,286 | ) | | | (1,931,245 | ) |
| Allowance for equity funds used during construction | | | 86,252 | | | | 59,381 | | | | 59,545 | |
| Nuclear fuel purchases | | | (641,493 | ) | | | (407,711 | ) | | | (525,474 | ) |
| Proceeds from sale/leaseback of nuclear fuel | | | - | | | | - | | | | 284,997 | |
| Proceeds from sale of assets and businesses | | | 6,531 | | | | 228,171 | | | | 39,554 | |
| Payments for purchases of plants | | | (646,137 | ) | | | - | | | | - | |
| Insurance proceeds received for property damages | | | - | | | | 7,894 | | | | 53,760 | |
| Changes in transition charge account | | | (7,260 | ) | | | (29,945 | ) | | | (1,036 | ) |
| NYPA value sharing payment | | | (72,000 | ) | | | (72,000 | ) | | | (72,000 | ) |
| Payments to storm reserve escrow account | | | (6,425 | ) | | | (296,614 | ) | | | (6,802 | ) |
| Receipts from storm reserve escrow account | | | - | | | | 9,925 | | | | - | |
| Decrease (increase) in other investments | | | (11,623 | ) | | | 24,956 | | | | 100,956 | |
| Proceeds from nuclear decommissioning trust fund sales | | | 1,360,346 | | | | 2,606,383 | | | | 2,570,523 | |
| Investment in nuclear decommissioning trust funds | | | (1,475,017 | ) | | | (2,730,377 | ) | | | (2,667,172 | ) |
| Net cash flow used in investing activities | | | (3,446,853 | ) | | | (2,574,223 | ) | | | (2,094,394 | ) |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| FINANCING ACTIVITIES | | | | | | |
| Proceeds from the issuance of: | | | | | | |
| Long-term debt | | 3,100,069 |
| | 3,746,016 |
| | 3,478,361 |
|
| Preferred stock of subsidiary | | — |
| | 24,249 |
| | — |
|
| Mandatorily redeemable preferred membership units of subsidiary | | — |
| | — |
| | 51,000 |
|
| Treasury stock | | 194,866 |
| | 24,527 |
| | 62,886 |
|
| Retirement of long-term debt | | (2,323,313 | ) | | (3,814,666 | ) | | (3,130,233 | ) |
| Repurchase of common stock | | (183,271 | ) | | — |
| | — |
|
| Changes in credit borrowings and commercial paper - net | | (448,475 | ) | | 250,889 |
| | 687,675 |
|
| Other | | 23,579 |
| | — |
| | — |
|
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (596,117 | ) | | (593,037 | ) | | (589,209 | ) |
| Preferred stock | | (19,511 | ) | | (18,802 | ) | | (22,329 | ) |
| Net cash flow provided by (used in) financing activities | | (252,173 | ) | | (380,824 | ) | | 538,151 |
|
| | | | | | | |
| Effect of exchange rates on cash and cash equivalents | | — |
| | (245 | ) | | (508 | ) |
| | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 682,900 |
| | 206,557 |
| | (161,869 | ) |
| | | | | | | |
| Cash and cash equivalents at beginning of period | | 739,126 |
| | 532,569 |
| | 694,438 |
|
| | | | | | | |
| Cash and cash equivalents at end of period | |
| $1,422,026 |
| |
| $739,126 |
| |
| $532,569 |
|
| | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $611,376 |
| |
| $570,212 |
| |
| $546,125 |
|
| Income taxes | |
| $77,799 |
| |
| $127,735 |
| |
| $49,214 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| ENTERGY CORPORATION AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | |
| Proceeds from the issuance of: | | | | | | | | | |
| Long-term debt | | | 2,990,881 | | | | 3,870,694 | | | | 2,003,469 | |
| Common stock and treasury stock | | | 46,185 | | | | 51,163 | | | | 28,198 | |
| Retirement of long-term debt | | | (2,437,372 | ) | | | (4,178,127 | ) | | | (1,843,169 | ) |
| Repurchase of common stock | | | (234,632 | ) | | | (878,576 | ) | | | (613,125 | ) |
| Redemption of subsidiary common and preferred stock | | | (30,308 | ) | | | - | | | | (1,847 | ) |
| Changes in credit borrowings - net | | | (6,501 | ) | | | (8,512 | ) | | | (25,000 | ) |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (589,605 | ) | | | (603,854 | ) | | | (576,956 | ) |
| Preferred stock | | | (20,933 | ) | | | (20,063 | ) | | | (19,958 | ) |
| Net cash flow used in financing activities | | | (282,285 | ) | | | (1,767,275 | ) | | | (1,048,388 | ) |
| | | | | | | | | | | | | |
| Effect of exchange rates on cash and cash equivalents | | | 287 | | | | 338 | | | | (1,316 | ) |
| | | | | | | | | | | | | |
| Net decrease in cash and cash equivalents | | | (600,034 | ) | | | (415,079 | ) | | | (210,940 | ) |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 1,294,472 | | | | 1,709,551 | | | | 1,920,491 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 694,438 | | | $ | 1,294,472 | | | $ | 1,709,551 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 532,271 | | | $ | 534,004 | | | $ | 576,811 | |
| Income taxes | | $ | (2,042 | ) | | $ | 32,144 | | | $ | 43,057 | |
| | | | | | | | | | | | | |
| Noncash financing activities: | | | | | | | | | | | | |
| Long-term debt retired (equity unit notes) | | $ | - | | | $ | - | | | $ | (500,000 | ) |
| Common stock issued in settlement of equity unit purchase contracts | | $ | - | | | $ | - | | | $ | 500,000 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
57
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $131,327 |
| |
| $129,979 |
|
| Temporary cash investments | | 1,290,699 |
| | 609,147 |
|
| Total cash and cash equivalents | | 1,422,026 |
| | 739,126 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 596,917 |
| | 670,641 |
|
| Allowance for doubtful accounts | | (35,663 | ) | | (34,311 | ) |
| Other | | 220,342 |
| | 195,028 |
|
| Accrued unbilled revenues | | 321,659 |
| | 340,828 |
|
| Total accounts receivable | | 1,103,255 |
| | 1,172,186 |
|
| Deferred fuel costs | | 155,140 |
| | 116,379 |
|
| Accumulated deferred income taxes | | 27,783 |
| | 175,073 |
|
| Fuel inventory - at average cost | | 205,434 |
| | 208,958 |
|
| Materials and supplies - at average cost | | 918,584 |
| | 915,006 |
|
| Deferred nuclear refueling outage costs | | 214,188 |
| | 192,474 |
|
| Prepayments and other | | 343,223 |
| | 410,489 |
|
| TOTAL | | 4,389,633 |
| | 3,929,691 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Investment in affiliates - at equity | | 36,234 |
| | 40,350 |
|
| Decommissioning trust funds | | 5,370,932 |
| | 4,903,144 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 213,791 |
| | 199,375 |
|
| Other | | 405,169 |
| | 210,616 |
|
| TOTAL | | 6,026,126 |
| | 5,353,485 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | |
| | |
|
| Electric | | 44,881,419 |
| | 42,935,712 |
|
| Property under capital lease | | 945,784 |
| | 941,299 |
|
| Natural gas | | 377,565 |
| | 366,365 |
|
| Construction work in progress | | 1,425,981 |
| | 1,514,857 |
|
| Nuclear fuel | | 1,542,055 |
| | 1,566,904 |
|
| TOTAL PROPERTY, PLANT AND EQUIPMENT | | 49,172,804 |
| | 47,325,137 |
|
| Less - accumulated depreciation and amortization | | 20,449,858 |
| | 19,443,493 |
|
| PROPERTY, PLANT AND EQUIPMENT - NET | | 28,722,946 |
| | 27,881,644 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 836,064 |
| | 849,718 |
|
| Other regulatory assets (includes securitization property of $724,839 as of December 31, 2014 and $822,218 as of December 31, 2013) | | 4,968,553 |
| | 3,893,363 |
|
| Deferred fuel costs | | 238,102 |
| | 172,202 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 48,351 |
| | 62,011 |
|
| Other | | 920,907 |
| | 887,160 |
|
| TOTAL | | 7,389,149 |
| | 6,241,626 |
|
| | | | | |
| TOTAL ASSETS | |
| $46,527,854 |
| |
| $43,406,446 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| |
| CONSOLIDATED BALANCE SHEETS | |
| ASSETS | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents: | | | | | | |
| Cash | | $ | 81,468 | | | $ | 76,290 | |
| Temporary cash investments | | | 612,970 | | | | 1,218,182 | |
| Total cash and cash equivalents | | | 694,438 | | | | 1,294,472 | |
| Securitization recovery trust account | | | 50,304 | | | | 43,044 | |
| Accounts receivable: | | | | | | | | |
| Customer | | | 568,558 | | | | 602,796 | |
| Allowance for doubtful accounts | | | (31,159 | ) | | | (31,777 | ) |
| Other | | | 166,186 | | | | 161,662 | |
| Accrued unbilled revenues | | | 298,283 | | | | 302,901 | |
| Total accounts receivable | | | 1,001,868 | | | | 1,035,582 | |
| Deferred fuel costs | | | 209,776 | | | | 64,659 | |
| Accumulated deferred income taxes | | | 9,856 | | | | 8,472 | |
| Fuel inventory - at average cost | | | 202,132 | | | | 207,520 | |
| Materials and supplies - at average cost | | | 894,756 | | | | 866,908 | |
| Deferred nuclear refueling outage costs | | | 231,031 | | | | 218,423 | |
| System agreement cost equalization | | | 36,800 | | | | 52,160 | |
| Prepaid taxes | | | - | | | | 301,807 | |
| Prepayments and other | | | 291,742 | | | | 246,036 | |
| TOTAL | | | 3,622,703 | | | | 4,339,083 | |
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliates - at equity | | | 44,876 | | | | 40,697 | |
| Decommissioning trust funds | | | 3,788,031 | | | | 3,595,716 | |
| Non-utility property - at cost (less accumulated depreciation) | | | 260,436 | | | | 257,847 | |
| Other | | | 416,423 | | | | 405,946 | |
| TOTAL | | | 4,509,766 | | | | 4,300,206 | |
| | | | | | | | | |
| PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
| Electric | | | 39,385,524 | | | | 37,153,061 | |
| Property under capital lease | | | 809,449 | | | | 800,078 | |
| Natural gas | | | 343,550 | | | | 330,608 | |
| Construction work in progress | | | 1,779,723 | | | | 1,661,560 | |
| Nuclear fuel | | | 1,546,167 | | | | 1,377,962 | |
| TOTAL PROPERTY, PLANT AND EQUIPMENT | | | 43,864,413 | | | | 41,323,269 | |
| Less - accumulated depreciation and amortization | | | 18,255,128 | | | | 17,474,914 | |
| PROPERTY, PLANT AND EQUIPMENT - NET | | | 25,609,285 | | | | 23,848,355 | |
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | | 799,006 | | | | 845,725 | |
| Other regulatory assets (includes securitization property of | | | | | | | | |
| $1,009,103 as of December 31, 2011 and $882,346 as of | | | | | | | | |
| December 31, 2010) | | | 4,636,871 | | | | 3,838,237 | |
| Deferred fuel costs | | | 172,202 | | | | 172,202 | |
| Goodwill | | | 377,172 | | | | 377,172 | |
| Accumulated deferred income taxes | | | 19,003 | | | | 54,523 | |
| Other | | | 955,691 | | | | 909,773 | |
| TOTAL | | | 6,959,945 | | | | 6,197,632 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 40,701,699 | | | $ | 38,685,276 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $899,375 |
| |
| $457,095 |
|
| Notes payable and commercial paper | | 598,407 |
| | 1,046,887 |
|
| Accounts payable | | 1,166,431 |
| | 1,173,313 |
|
| Customer deposits | | 412,166 |
| | 370,997 |
|
| Taxes accrued | | 128,108 |
| | 191,093 |
|
| Accumulated deferred income taxes | | 38,039 |
| | 28,307 |
|
| Interest accrued | | 206,010 |
| | 180,997 |
|
| Deferred fuel costs | | 91,602 |
| | 57,631 |
|
| Obligations under capital leases | | 2,508 |
| | 2,323 |
|
| Pension and other postretirement liabilities | | 57,994 |
| | 67,419 |
|
| Other | | 248,251 |
| | 484,510 |
|
| TOTAL | | 3,848,891 |
| | 4,060,572 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 9,133,161 |
| | 8,724,635 |
|
| Accumulated deferred investment tax credits | | 247,521 |
| | 263,765 |
|
| Obligations under capital leases | | 29,710 |
| | 32,218 |
|
| Other regulatory liabilities | | 1,383,609 |
| | 1,295,955 |
|
| Decommissioning and asset retirement cost liabilities | | 4,458,296 |
| | 3,933,416 |
|
| Accumulated provisions | | 418,128 |
| | 115,139 |
|
| Pension and other postretirement liabilities | | 3,638,295 |
| | 2,320,704 |
|
| Long-term debt (includes securitization bonds of $784,862 as of December 31, 2014 and $883,013 as of December 31, 2013) | | 12,500,109 |
| | 12,139,149 |
|
| Other | | 557,649 |
| | 583,667 |
|
| TOTAL | | 32,366,478 |
| | 29,408,648 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| Subsidiaries’ preferred stock without sinking fund | | 210,760 |
| | 210,760 |
|
| | | | | |
| EQUITY | | |
| | |
|
| Common Shareholders’ Equity: | | |
| | |
|
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2014 and in 2013 | | 2,548 |
| | 2,548 |
|
| Paid-in capital | | 5,375,353 |
| | 5,368,131 |
|
| Retained earnings | | 10,169,657 |
| | 9,825,053 |
|
| Accumulated other comprehensive loss | | (42,307 | ) | | (29,324 | ) |
| Less - treasury stock, at cost (75,512,079 shares in 2014 and 76,381,936 shares in 2013) | | 5,497,526 |
| | 5,533,942 |
|
| Total common shareholders’ equity | | 10,007,725 |
| | 9,632,466 |
|
| Subsidiaries’ preferred stock without sinking fund | | 94,000 |
| | 94,000 |
|
| TOTAL | | 10,101,725 |
| | 9,726,466 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $46,527,854 |
| |
| $43,406,446 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY CORPORATION AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | 2,192,733 | | | $ | 299,548 | |
| Notes payable | | | 108,331 | | | | 154,135 | |
| Accounts payable | | | 1,069,096 | | | | 1,181,099 | |
| Customer deposits | | | 351,741 | | | | 335,058 | |
| Taxes accrued | | | 278,235 | | | | - | |
| Accumulated deferred income taxes | | | 99,929 | | | | 49,307 | |
| Interest accrued | | | 183,512 | | | | 217,685 | |
| Deferred fuel costs | | | 255,839 | | | | 166,409 | |
| Obligations under capital leases | | | 3,631 | | | | 3,388 | |
| Pension and other postretirement liabilities | | | 44,031 | | | | 39,862 | |
| System agreement cost equalization | | | 80,090 | | | | 52,160 | |
| Other | | | 283,531 | | | | 277,598 | |
| TOTAL | | | 4,950,699 | | | | 2,776,249 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 8,096,452 | | | | 8,573,646 | |
| Accumulated deferred investment tax credits | | | 284,747 | | | | 292,330 | |
| Obligations under capital leases | | | 38,421 | | | | 42,078 | |
| Other regulatory liabilities | | | 728,193 | | | | 539,026 | |
| Decommissioning and asset retirement cost liabilities | | | 3,296,570 | | | | 3,148,479 | |
| Accumulated provisions | | | 385,512 | | | | 395,250 | |
| Pension and other postretirement liabilities | | | 3,133,657 | | | | 2,175,364 | |
| Long-term debt (includes securitization bonds of $1,070,556 as of | | | | | |
| December 31, 2011 and $931,131 as of December 31, 2010) | | | 10,043,713 | | | | 11,317,157 | |
| Other | | | 501,954 | | | | 618,559 | |
| TOTAL | | | 26,509,219 | | | | 27,101,889 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Subsidiaries' preferred stock without sinking fund | | | 186,511 | | | | 216,738 | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Common Shareholders' Equity: | | | | | | | | |
| Common stock, $.01 par value, authorized 500,000,000 shares; | | | | | | | | |
| issued 254,752,788 shares in 2011 and in 2010 | | | 2,548 | | | | 2,548 | |
| Paid-in capital | | | 5,360,682 | | | | 5,367,474 | |
| Retained earnings | | | 9,446,960 | | | | 8,689,401 | |
| Accumulated other comprehensive loss | | | (168,452 | ) | | | (38,212 | ) |
| Less - treasury stock, at cost (78,396,988 shares in 2011 and | | | | | | | | |
| 76,006,920 shares in 2010) | | | 5,680,468 | | | | 5,524,811 | |
| Total common shareholders' equity | | | 8,961,270 | | | | 8,496,400 | |
| Subsidiaries' preferred stock without sinking fund | | | 94,000 | | | | 94,000 | |
| TOTAL | | | 9,055,270 | | | | 8,590,400 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 40,701,699 | | | $ | 38,685,276 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | | | |
| | |
| Common Shareholders’ Equity |
| |
| | Subsidiaries’
Preferred
Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2011 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,680,468 | ) | |
| $5,360,682 |
| |
| $9,446,960 |
| |
| ($168,452 | ) | |
| $9,055,270 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 21,690 |
| | — |
| | — |
| | — |
| | 846,673 |
| | — |
| | 868,363 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (124,631 | ) | | (124,631 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 105,649 |
| | (2,830 | ) | | — |
| | — |
| | 102,819 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (589,042 | ) | | — |
| | (589,042 | ) |
| Preferred dividend requirements of subsidiaries (a) | (21,690 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (21,690 | ) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2012 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,574,819 | ) | |
| $5,357,852 |
| |
| $9,704,591 |
| |
| ($293,083 | ) | |
| $9,291,089 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 18,670 |
| | — |
| | — |
| | — |
| | 711,902 |
| | — |
| | 730,572 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 263,759 |
| | 263,759 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 40,877 |
| | 10,279 |
| | — |
| | — |
| | 51,156 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (591,440 | ) | | — |
| | (591,440 | ) |
| Preferred dividend requirements of subsidiaries (a) | (18,670 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (18,670 | ) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2013 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,533,942 | ) | |
| $5,368,131 |
| |
| $9,825,053 |
| |
| ($29,324 | ) | |
| $9,726,466 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 19,536 |
| | — |
| | — |
| | — |
| | 940,721 |
| | — |
| | 960,257 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (12,983 | ) | | (12,983 | ) |
| Common stock repurchases | — |
| | — |
| | (183,271 | ) | | — |
| | — |
| | — |
| | (183,271 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 219,687 |
| | 7,222 |
| | — |
| | — |
| | 226,909 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (596,117 | ) | | — |
| | (596,117 | ) |
| Preferred dividend requirements of subsidiaries (a) | (19,536 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (19,536 | ) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2014 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,497,526 | ) | |
| $5,375,353 |
| |
| $10,169,657 |
| |
| ($42,307 | ) | |
| $10,101,725 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
| | |
| | |
|
| | | | | | | | | | | | | | |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2014, 2013, and 2012 include $12.9 million, $12 million, and $15 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
| |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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, 2008 | | $ | 94,000 | | | $ | 2,482 | | | $ | (4,175,214 | ) | | $ | 4,869,303 | | | $ | 7,382,719 | | | $ | (112,698 | ) | | $ | 8,060,592 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated net income (a) | | | 19,958 | | | | - | | | | - | | | | - | | | | 1,231,092 | | | | - | | | | 1,251,050 | |
| Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 43,878 | | | | 43,878 | |
| Common stock repurchases | | | - | | | | - | | | | (613,125 | ) | | | - | | | | - | | | | - | | | | (613,125 | ) |
Common stock issuances in settlement of equity unit purchase contracts | | | - | | | | 66 | | | | - | | | | 499,934 | | | | - | | | | - | | | | 500,000 | |
Common stock issuances related to stock plans | | | - | | | | - | | | | 61,172 | | | | 805 | | | | - | | | | - | | | | 61,977 | |
| Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (576,913 | ) | | | - | | | | (576,913 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,958 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,958 | ) |
| Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | (141 | ) | | | - | | | | (141 | ) |
Adjustment for implementation of new accounting pronouncement | | | - | | | | - | | | | - | | | | - | | | | 6,365 | | | | (6,365 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2009 | | $ | 94,000 | | | $ | 2,548 | | | $ | (4,727,167 | ) | | $ | 5,370,042 | | | $ | 8,043,122 | | | $ | (75,185 | ) | | $ | 8,707,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated net income (a) | | | 20,063 | | | | - | | | | - | | | | - | | | | 1,250,242 | | | | - | | | | 1,270,305 | |
| Other comprehensive income | | | - | | | | - | | | | - | | | | - | | | | - | | | | 36,973 | | | | 36,973 | |
| Common stock repurchases | | | - | | | | - | | | | (878,576 | ) | | | - | | | | - | | | | - | | | | (878,576 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 80,932 | | | | (2,568 | ) | | | - | | | | - | | | | 78,364 | |
| Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (603,963 | ) | | | - | | | | (603,963 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (20,063 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (20,063 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2010 | | $ | 94,000 | | | $ | 2,548 | | | $ | (5,524,811 | ) | | $ | 5,367,474 | | | $ | 8,689,401 | | | $ | (38,212 | ) | | $ | 8,590,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated net income (a) | | | 20,933 | | | | - | | | | - | | | | - | | | | 1,346,439 | | | | - | | | | 1,367,372 | |
| Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (130,240 | ) | | | (130,240 | ) |
| Common stock repurchases | | | - | | | | - | | | | (234,632 | ) | | | - | | | | - | | | | - | | | | (234,632 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 78,975 | | | | (6,792 | ) | | | - | | | | - | | | | 72,183 | |
| Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (588,880 | ) | | | - | | | | (588,880 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (20,933 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (20,933 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2011 | | $ | 94,000 | | | $ | 2,548 | | | $ | (5,680,468 | ) | | $ | 5,360,682 | | | $ | 9,446,960 | | | $ | (168,452 | ) | | $ | 9,055,270 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2011, 2010, and 2009 include $13.3 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries. As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K. The Registrant Subsidiaries and many other Entergy subsidiaries maintain accounts in accordance with FERC and other regulatory guidelines. Certain previously reported amounts have been reclassified to conform to current classifications, with no effect on net income or common shareholders’ (or members’) equity.
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding as of the date the financial statements are prepared.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor),
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.Systemfiling. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Accounting for MISO transactions
In December 2013, Entergy joined MISO, a regional transmission organization that maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. In the MISO market, Entergy offers its generation and bids its load into the market on an hourly basis. MISO settles these hourly offers and bids based on locational marginal prices, which is pricing for energy at a given location based on a market clearing price that takes into account physical limitations on the transmission system, generation, and demand throughout the MISO region. MISO evaluates the market participants’ energy offers and demand bids to economically and reliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO market on an hourly basis and reports in operating revenues when in a net selling position and in operating expenses when in a net purchasing position.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 20112014 and 2010,2013, is shown below:
|
| | | | | | | | | | | | | | | | |
| 2014 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | | (In Millions) |
| Production | | |
| | |
| | |
| | |
|
| Nuclear | |
| $9,639 |
| |
| $6,586 |
| |
| $3,053 |
| |
| $— |
|
| Other | | 3,425 |
| | 3,067 |
| | 358 |
| | — |
|
| Transmission | | 4,197 |
| | 4,164 |
| | 33 |
| | — |
|
| Distribution | | 6,973 |
| | 6,973 |
| | — |
| | — |
|
| Other | | 1,521 |
| | 1,373 |
| | 145 |
| | 3 |
|
| Construction work in progress | | 1,426 |
| | 969 |
| | 456 |
| | 1 |
|
| Nuclear fuel | | 1,542 |
| | 840 |
| | 702 |
| | — |
|
| Property, plant, and equipment - net | |
| $28,723 |
| |
| $23,972 |
| |
| $4,747 |
| |
| $4 |
|
2011 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | | (In Millions) |
| Production | | | | | | | | |
Nuclear | | $8,635 | | $5,441 | | $3,194 | | $- |
Other | | 2,431 | | 2,032 | | 399 | | - |
| Transmission | | 3,344 | | 3,309 | | 35 | | - |
| Distribution | | 6,157 | | 6,157 | | - | | - |
| Other | | 1,716 | | 1,463 | | 250 | | 3 |
| Construction work in progress | | 1,780 | | 1,420 | | 359 | | 1 |
| Nuclear fuel | | 1,546 | | 802 | | 744 | | - |
| Property, plant, and equipment - net | | $25,609 | | $20,624 | | $4,981 | | $4 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2010 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other | |
| | | 2013 | | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | | (In Millions) | | (In Millions) |
| Production | | | | | | | | | | |
| | |
| | |
| | |
|
Nuclear | | $8,393 | | $5,378 | | $3,015 | | $- | |
| $9,667 |
| |
| $6,601 |
| |
| $3,066 |
| |
| $— |
|
Other | | 1,842 | | 1,797 | | 45 | | - | | 2,836 |
| | 2,465 |
| | 371 |
| | — |
|
| Transmission | | 2,986 | | 2,956 | | 30 | | - | | 3,929 |
| | 3,894 |
| | 35 |
| | — |
|
| Distribution | | 5,926 | | 5,926 | | - | | - | | 6,716 |
| | 6,716 |
| | — |
| | — |
|
| Other | | 1,661 | | 1,411 | | 248 | | 2 | | 1,652 |
| | 1,475 |
| | 174 |
| | 3 |
|
| Construction work in progress | | 1,662 | | 1,300 | | 361 | | 1 | | 1,515 |
| | 1,217 |
| | 298 |
| | — |
|
| Nuclear fuel | | 1,378 | | 760 | | 618 | | - | | 1,567 |
| | 855 |
| | 712 |
| | — |
|
| Property, plant, and equipment - net | | $23,848 | | $19,528 | | $4,317 | | $3 | |
| $27,882 |
| |
| $23,223 |
| |
| $4,656 |
| |
| $3 |
|
Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2014, 2.6% in 2011, 2.6%2013, and 2.5% in 2010, and 2.7% in 2009.2012. Included in these rates are the depreciation rates on average depreciable utilityUtility property of 2.5% in 2011,2014, 2.5% in 2010,2013, and 2.7% 2009,2.4% 2012, and the depreciation rates on average depreciable non-utilityEntergy Wholesale Commodities property of 3.9%5.5% in 2011, 3.7%2014, 4.1% in 2010,2013, and 3.8%3.5% in 2009.2012. The increase in 2014 for Entergy Wholesale Commodities resulted from implementation of a new depreciation study.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $214.3$185.5 million and $207.6$203 million as of December 31, 20112014 and 2010,2013, respectively.
Construction expenditures included in accounts payable is $209 million and $166 million at December 31, 2011 is $171 million.2014 and 2013, respectively.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 20112014 and 2010,2013, is shown below:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| Production | | | | | | | | | | | | | | |
| Nuclear | |
| $1,097 |
| |
| $1,403 |
| |
| $2,151 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $1,935 |
|
| Other | | 593 |
| | 282 |
| | 1,279 |
| | 526 |
| | (11 | ) | | 399 |
| | — |
|
| Transmission | | 1,166 |
| | 711 |
| | 859 |
| | 642 |
| | 44 |
| | 695 |
| | 48 |
|
| Distribution | | 1,928 |
| | 1,004 |
| | 1,443 |
| | 1,125 |
| | 357 |
| | 1,116 |
| | — |
|
| Other | | 164 |
| | 173 |
| | 287 |
| | 194 |
| | 181 |
| | 98 |
| | 17 |
|
| Construction work in progress | | 284 |
| | 127 |
| | 242 |
| | 68 |
| | 19 |
| | 125 |
| | 50 |
|
| Nuclear fuel | | 294 |
| | 132 |
| | 163 |
| | — |
| | — |
| | — |
| | 251 |
|
| Property, plant, and equipment - net | |
| $5,526 |
| |
| $3,832 |
| |
| $6,424 |
| |
| $2,555 |
| |
| $590 |
| |
| $2,433 |
| |
| $2,301 |
|
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| Production | | | | | | | | | | | | | | |
Nuclear | | $1,034 | | $1,458 | | $1,561 | | $- | | $- | | $- | | $1,388 |
Other | | 398 | | 286 | | 679 | | 350 | | (7) | | 325 | | - |
| Transmission | | 942 | | 500 | | 706 | | 510 | | 22 | | 624 | | 5 |
| Distribution | | 1,700 | | 856 | | 1,304 | | 1,009 | | 298 | | 990 | | - |
| Other | | 173 | | 192 | | 278 | | 206 | | 186 | | 110 | | 18 |
| Construction work in progress | | 120 | | 122 | | 559 | | 105 | | 14 | | 91 | | 358 |
| Nuclear fuel | | 273 | | 206 | | 165 | | - | | - | | - | | 158 |
| Property, plant, and equipment - net | | $4,640 | | $3,620 | | $5,252 | | $2,180 | | $513 | | $2,140 | | $1,927 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | 2013 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) | | (In Millions) |
| Production | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nuclear | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 | |
| $1,047 |
| |
| $1,422 |
| |
| $2,202 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $1,930 |
|
Other | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - | | 609 |
| | 271 |
| | 684 |
| | 537 |
| | (7 | ) | | 371 |
| | — |
|
| Transmission | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 | | 1,086 |
| | 646 |
| | 770 |
| | 638 |
| | 31 |
| | 673 |
| | 49 |
|
| Distribution | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - | | 1,831 |
| | 950 |
| | 1,420 |
| | 1,096 |
| | 340 |
| | 1,079 |
| | — |
|
| Other | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 | | 192 |
| | 184 |
| | 292 |
| | 197 |
| | 181 |
| | 106 |
| | 17 |
|
| Construction work in progress | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 | | 209 |
| | 105 |
| | 673 |
| | 37 |
| | 29 |
| | 95 |
| | 29 |
|
| Nuclear fuel | | 189 | | 203 | | 135 | | - | | - | | - | | 155 | | 322 |
| | 197 |
| | 147 |
| | — |
| | — |
| | — |
| | 189 |
|
| Property, plant, and equipment - net | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 | |
| $5,296 |
| |
| $3,775 |
| |
| $6,188 |
| |
| $2,505 |
| |
| $574 |
| |
| $2,324 |
| |
| $2,214 |
|
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | |
| 2011 | | 2.6% | | 1.8% | | 2.5% | | 2.6% | | 3.0% | | 2.2% | | 2.8% |
| 2010 | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
| 2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
|
| | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| 2014 | 2.4% | | 1.8% | | 2.5% | | 2.6% | | 3.1% | | 2.5% | | 3.0% |
| 2013 | 2.5% | | 1.8% | | 2.5% | | 2.6% | | 3.0% | | 2.5% | | 2.8% |
| 2012 | 2.5% | | 1.8% | | 2.4% | | 2.6% | | 3.0% | | 2.4% | | 2.8% |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $136$151 million and $134$146 million as of December 31, 20112014 and 2010,2013, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.7$3.2 million and $2.5$3 million as of December 31, 20112014 and 2010,2013, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $2.2 million and $2.1 million as of December 31, 2014 and 2013, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.8$10.4 million and $9.5$10.4 million as of December 31, 20112014 and 2010,2013, respectively.
As of December 31, 2011,2014, construction expenditures included in accounts payable are $14.1$37.3 million for Entergy Arkansas, $13.7$23.4 million for Entergy Gulf States Louisiana, $27$48 million for Entergy Louisiana, $4.3$7.8 million for Entergy Mississippi, $3.6$0.9 million for Entergy New Orleans, $4.3$24.1 million for Entergy Texas, and $32.9$7.7 million for System Energy. As of December 31, 2013, construction expenditures included in accounts payable are $61.9 million for Entergy Arkansas, $13.1 million for Entergy Gulf States Louisiana, $31.1 million for Entergy Louisiana, $2.8 million for Entergy Mississippi, $1.7 million for Entergy New Orleans, $10.9 million for Entergy Texas, and $6.7 million for System Energy.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2011,2014, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | |
| Generating Stations | | Fuel-Type | | Total Megawatt Capability (a) | | Ownership | | | Investment | | Accumulated Depreciation |
| | | | | | | | | | | | (In Millions) |
| Utility business: | | | | | | | | | | | | | |
| Entergy Arkansas - | | | | | | | | | | | | | |
| Independence | | Unit 1 | | Coal | | 839 |
| | 31.50 | % | | |
| $129 |
| |
| $98 |
|
| | | Common Facilities | | Coal | | | | 15.75 | % | | |
| $34 |
| |
| $26 |
|
| White Bluff | | Units 1 and 2 | | Coal | | 1,637 |
| | 57.00 | % | | |
| $503 |
| |
| $355 |
|
| Ouachita (b) | | Common
Facilities | | Gas | | | | 66.67 | % | | |
| $169 |
| |
| $145 |
|
Entergy Gulf States Louisiana - | | | | | | | | |
| | | | | |
| Roy S. Nelson | | Unit 6 | | Coal | | 537 |
| | 40.25 | % | | |
| $261 |
| |
| $181 |
|
| Roy S. Nelson | | Unit 6 Common
Facilities | | Coal | | | | 17.70 | % | | |
| $10 |
| |
| $4 |
|
| Big Cajun 2 | | Unit 3 | | Coal | | 594 |
| | 24.15 | % | | |
| $149 |
| |
| $105 |
|
| Ouachita (b) | | Common
Facilities | | Gas | | | | 33.33 | % | | |
| $87 |
| |
| $74 |
|
| Entergy Louisiana - | | | | | | | | | | | | | |
| Acadia | | Common
Facilities | | Gas | | | | 50.00 | % | | |
| $19 |
| |
| $— |
|
| Entergy Mississippi - | | | | | | | | |
| | | | | |
| Independence | | Units 1 and 2
and Common
Facilities | | Coal | | 1,681 |
| | 25.00 | % | | |
| $251 |
| |
| $149 |
|
| Entergy Texas - | | | | | | | | |
| | | | | |
| Roy S. Nelson | | Unit 6 | | Coal | | 537 |
| | 29.75 | % | | |
| $188 |
| |
| $115 |
|
| Roy S. Nelson | | Unit 6 Common
Facilities | | Coal | | | | 13.07 | % | | |
| $6 |
| |
| $2 |
|
| Big Cajun 2 | | Unit 3 | | Coal | | 594 |
| | 17.85 | % | | |
| $112 |
| |
| $72 |
|
| System Energy - | | | | | | | | |
| | | | | |
| Grand Gulf | | Unit 1 | | Nuclear | | 1,409 |
| | 90.00 | % | (c) | |
| $4,819 |
| |
| $2,820 |
|
Entergy Wholesale Commodities: | | | | | | | | |
| | | | | |
| Independence | | Unit 2 | | Coal | | 842 |
| | 14.37 | % | | |
| $69 |
| |
| $46 |
|
| Independence | | Common
Facilities | | Coal | | | | 7.18 | % | | |
| $16 |
| |
| $11 |
|
| Roy S. Nelson | | Unit 6 | | Coal | | 537 |
| | 10.9 | % | | |
| $107 |
| |
| $57 |
|
| Roy S. Nelson | | Unit 6 Common Facilities | | Coal | | | | 4.79 | % | | |
| $2 |
| |
| $1 |
|
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | | (In Millions) |
| Utility business: | | | | | | | | | | | |
| Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $128 | | $96 |
| | Common Facilities | | Coal | | | | | | | | |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $494 | | $337 |
Ouachita (2) | Common Facilities | | Gas | | | | | | | | |
| Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $244 | | $172 |
Roy S. Nelson | Unit 6 Common Facilities | | | | | | | | | | |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $97 |
Ouachita (2) | Common Facilities | | | | | | | | | | |
| Entergy Louisiana - | | | | | | | | | | | |
| Acadia | Common Facilities | | | | | | | | | | |
| Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | | | | | | | | | |
| Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $117 |
Roy S. Nelson | Unit 6 Common Facilities | | Coal | | | | | | | | |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $107 | | $68 |
| System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,190 | | 90.00%(3) | | $3,929 | | $2,518 |
| | | | | | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | | | | |
| Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $41 |
| Independence | Common Facilities | | | | | | | | | | |
| Roy S. Nelson | Unit 6 | | Coal | | 550 | | 10.9% | | $102 | | $53 |
| Roy S. Nelson | Unit 6 Common Facilities | | | | | | | | | | |
| | | | | | | | | | | | |
(1) | |
| (a) | “Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | |
| (b) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(3) | |
| (c) | Includes an 11.5%a leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
InvestmentThe benefits of investment tax credits are deferred and amortized based uponover the average useful life of the related property, as a reduction of income tax expense, for such credits associated with regulated operations in accordance with ratemaking treatment.
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, |
| | 2014 | | 2013 | | 2012 |
| | (In Millions, Except Per Share Data) |
| | | | $/share | | | | $/share | | | | $/share |
| Net income attributable to Entergy Corporation |
| $940.7 |
| | |
| |
| $711.9 |
| | |
| |
| $846.7 |
| | |
|
| Basic earnings per average common share | 179.5 |
| |
| $5.24 |
| | 178.2 |
| |
| $3.99 |
| | 177.3 |
| |
| $4.77 |
|
| Average dilutive effect of: | |
| | |
| | |
| | |
| | |
| | |
|
| Stock options | 0.3 |
| | (0.01 | ) | | 0.1 |
| | — |
| | 0.3 |
| | (0.01 | ) |
| Other equity plans | 0.5 |
| | (0.01 | ) | | 0.3 |
| | — |
| | 0.1 |
| | — |
|
| Diluted earnings per average common shares | 180.3 |
| |
| $5.22 |
| | 178.6 |
| |
| $3.99 |
| | 177.7 |
| |
| $4.76 |
|
| | For the Years Ended December 31, |
| | 2011 | 2010 | 2009 |
| | | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,346.4 | 177.4 | | $7.59 | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 |
| Average dilutive effect of: | | | | | | | | | | | | |
Stock options | - | 1.0 | | (0.04) | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) |
Equity units | - | - | | - | - | - | | - | 3.2 | 0.8 | | (0.02) |
Diluted earnings per average common share | $1,346.4 | 178.4 | | $7.55 | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 |
| | | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,712,6045,743,013 options outstanding at December 31, 2011, 5,380,2622014, 8,866,542 options outstanding at December 31, 2010,2013, and 4,368,6147,164,319 options outstanding at December 31, 20092012 that
Entergy Corporation and Subsidiaries
Notes to Financial Statements
could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year.
See Note 7 to the financial statements for a discussion of the equity units.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Stock-based Compensation Plans
Entergy grants stock options, restricted stock, performance units, and restricted liability awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which isare shareholder-approved stock-based compensation plans. These plans are described more fully in Note 12 to the financial statements. Entergy accounts for stock options usingThe cost of the fair value based method.stock-based compensation is charged to income over the vesting period. Awards under Entergy’s plans generally vest over three3 years.
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions of its regulator make it probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business.business, unless specific cost recovery is provided for in tariff rates. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayerscustomers and shareholders.
Regulatory Asset for Income Taxes
Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or reimbursed to customers through future rates. The primary source of Entergy’s regulatory asset for income taxes is related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
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 recordedrecord an offsetting amount ofin other regulatory liabilities/assets for the unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.securities. For the portion of30% interest in River Bend that is not rate-regulated,formerly owned by Cajun, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits.credits for the unrealized gains/(losses). Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of
Entergy Corporation and Subsidiaries
Notes to Financial Statements
shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. 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). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and other than temporary impairments recorded in 2011, 2010, and 2009.funds.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of the investee's comprehensive earnings and losses in income and as an increase or losses of the investee based on the change during the period in the estimated liquidation value ofdecrease to the investment assuming thataccount. Any cash distributions are charged against the investee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values.investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur. The ineffective portions of all hedges are recognized in current-period earnings. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as
Entergy Corporation and Subsidiaries
Notes to Financial Statements
derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices, market quotes, and market quotes.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 held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. 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. See Note 16 to the financial statements for further discussion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
ThreeTwo nuclear power plants in the Entergy Wholesale Commodities business segment (Pilgrim, Indian(Indian Point 2 and Indian Point 3) have applicationsan application pending for renewed NRC licenses. Various parties have expressed opposition to renewal of the licenses. Under federal law, nuclear power plants may continue to operate beyond their original license expiration dates while their timely filed renewal applications are pending NRC approval. On September 28, 2013, Indian Point 2 reached the expiration date of its original NRC operating license and entered into the period of extended operation under the timely renewal rule. In December 2015, Indian Point 3 will reach the expiration date of its original NRC operations license and, similarly, will enter the period of extended operation under the timely renewal rule if its license is not renewed before then. If the NRC does not renew the operating license for anyeither of these plants, the plant’s operating life could be shortened, reducing its projected net cash flows and potentially impairing its value as an asset.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years. The renewed operating license expires in March 2032. In May 2011, the Vermont Department of Public Service and the New England Coalition petitioned the United States Court of Appeals for the D.C. Circuit seeking judicial review of the NRC’s issuance of the renewed operating license, alleging that the license had been issued without a valid and effective water quality certification under Section 401 of the Clean Water Act. Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. intervened in the proceeding. Motions by the parties for summary disposition were denied by the court, and oral argument is scheduled for May 2012.
Vermont Yankee also is operatingoperated under a Certificate of Public Good from the State of Vermont that expireswas scheduled to expire in March 2012, but hashad an applicationamended petition pending before the Vermont Public Service Board (VPSB) for a newrenewed Certificate of Public Good for operationto operate until March 2032. As
In June 2013 the United States district court notedVPSB completed hearings on Entergy’s amended petition for a Certificate of Public Good to continuing operating Vermont Yankee. In August 2013, Entergy announced that it planned to close Vermont Yankee at the end of 2014 and that same day filed a second amended petition seeking authorization to operate the plant only until that date. In December 2013, Entergy and Vermont entered into a settlement agreement, with an accompanying memorandum of understanding that was filed with the VPSB, under which Vermont agreed to support Entergy’s request to operate Vermont Yankee until the end of 2014. The settlement agreement provided for Entergy to make $10 million in its decision discussed below (regarding Entergy’s challengeeconomic transition payments, $5 million in clean energy development support, and a transitional $5 million payment to certain conditions imposedVermont. The settlement agreement also provided for Entergy to set aside a new $25 million fund to ensure the Vermont Yankee site is restored after decommissioning. These terms were contingent upon the VPSB issuing by Vermont), title 3, section 814March 31, 2014 a Certificate of Public Good authorizing Vermont Yankee’s operation through 2014, and otherwise conforming to the terms of the Vermont Statutes provides thatsettlement agreement. The settlement agreement also provided for the dismissal or discontinuation of other litigation between Entergy and Vermont. On March 28, 2014, the VPSB approved the memorandum of understanding and issued a license subject to an agency’s notice and hearing requirements does not expire until a final determination on an application for renewal has been made.
In April 2011, Entergy NuclearCertificate of Public Good authorizing Vermont Yankee to operate until December 31, 2014. In May 2014 the VPSB denied a motion that had been filed by one of the intervenors to amend its approval order. Pursuant to its commitment in the settlement agreement, Entergy Vermont Yankee provided to the Vermont parties in October 2014, a site assessment study of the costs and tasks of radiological decommissioning, spent nuclear fuel management, and site restoration of Vermont Yankee. Entergy Nuclear Operations,Vermont Yankee also filed its Post-Shutdown Decommissioning Activities Report (PSDAR) for Vermont Yankee with the owner and operator respectivelyNRC in December 2014.
Because of the uncertainty regarding the continued operation of Vermont Yankee, filed suitEntergy tested the recoverability of the plant and related assets in each quarter since the first quarter 2010 after a bill to approve the continued operation of Vermont Yankee was defeated in the United States District Court for the DistrictVermont legislature. Vermont law at that time required legislative approval of Vermont. The suit challenged certain conditions imposed by Vermont upon Vermont Yankee’s continued operation although that law was later invalidated by the U.S. federal courts as preempted by the Atomic Energy Act. The determination of recoverability is based on the probability-weighted undiscounted net cash flows expected to be generated by the plant and storagerelated assets. Projected net cash flows primarily depend on the status of spent nuclear fuel, including the requirementpending legal and state regulatory matters, as well as projections of future revenues and expenses over the remaining life of the plant. Prior to obtain not only a new Certificate of Public Good, but also approval by Vermont’s General Assembly. In Januarythe first quarter 2012, the court entered judgmentprobability-weighted undiscounted net cash flows exceeded the carrying value of the Vermont Yankee plant and related assets. The decline, however, in the overall energy market and the projected forward prices of power as of March 31, 2012, which are significant inputs in the determination of net cash flows, resulted in the probability-weighted undiscounted future cash flows being less than the asset group’s carrying value. Entergy performed a fair value analysis based on the income approach, a discounted cash flow method, to determine the amount of impairment. The estimated fair value of the plant and related assets at March 31, 2012 was $162 million, while the carrying value was $517.5 million. Therefore, the assets were written down to their fair value and an impairment charge of $355.5 million ($223.5 million after-tax) was recognized. The impairment charge was recorded as a separate line item in Entergy’s favorconsolidated statement of income for 2012, and specifically:is included within the results of the Entergy Wholesale Commodities segment.
The estimate of fair value was based on the price that Entergy would expect to receive in a hypothetical sale of the Vermont Yankee plant and related assets to a market participant on March 31, 2012. In order to determine this price, Entergy used significant observable inputs, including quoted forward power and gas prices, where available. Significant unobservable inputs, such as projected long-term pre-tax operating margins (cash basis), and estimated weighted average costs of capital were also used in the estimation of fair value. In addition, Entergy made certain assumptions regarding future tax deductions associated with the plant and related assets. Based on the use of significant unobservable inputs, the fair value measurement for the entirety of the asset group, and for each type of asset within the asset group, is classified as Level 3 in the fair value hierarchy discussed in Note 16 to the financial statements.
· | Declared that Vermont’s laws requiring Vermont Yankee to cease operation in March 2012 and prohibiting the storage of spent nuclear fuel from operation after that date, absent approval by the General Assembly, were based on radiological safety concerns and are preempted by the Atomic Energy Act; |
· | Permanently enjoined Vermont from enforcing these preempted requirements of the state’s laws; and |
70
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a description of significant unobservable inputs used in the valuation of the Vermont Yankee plant and related assets as of March 31, 2012:
· |
| Permanently enjoined Vermont under the Commerce Clause | | | |
| Significant Unobservable Inputs | | Range | | Weighted Average |
| | | | |
Weighted average cost of the United States Constitution from conditioning the issuance of a new Certificate of Public Good upon the existence of a below wholesale market power sale agreement with Vermont utilities or Vermont Yankee’s selling power to Vermont utilities at rates below those available to wholesale customers in other states.capital | | 7.5%-8.0% | | 7.8% |
| Long-term pre-tax operating margin (cash basis) | | 6.1%-7.8% | | 7.2% |
In February 2012On August 27, 2013, Entergy announced its plan to close and decommission Vermont Yankee at the Vermont defendants filedend of its fuel cycle at the end of 2014. This decision was approved by the Board in August 2013, although the exact date of shutdown was not determined. The decision to shut down the plant was primarily due to sustained low natural gas and wholesale energy prices, the high cost structure of the plant, and lack of a notice of appealmarket structure that adequately compensates merchant nuclear plants for their environmental and fuel diversity benefits in the region in which the plant operates.
As a result of the decision to the United States Court of Appeals for the Second Circuit.
In January 2012, Entergy filed a motion requesting that the VPSB grant, based on the existing record in its proceeding, Vermont Yankee’s pending application for a new Certificate of Public Good. The VPSB scheduled a status conference for March 9, 2012, and requested comments from the parties by March 2, 2012. In a February 23, 2012 memorandum to the parties, the VPSB asked that the parties’ comments respond to certain questions relating to, among other issues, the VPSB’s authority to issue the Certificate of Public Good and Vermont Yankee’s authority to operate beyond March 21, 2012 and store spent fuel from such operations, despite the decision and order of the United States district court.
In light of these questions from the VPSB, Vermont Yankee filed a cross-appeal of the district court’s decision. Vermont Yankee also filed two motions with the district court asking it (1) to issue an injunction prohibiting Vermont from taking any action to force Vermont Yankee to shut down the plant, Entergy recognized non-cash impairment and other related charges of $291.5 million ($183.7 million after-tax) during the appeal of the district court’s decision or during the Certificate of Public Good proceeding before the VPSB and any judicial appeal from that proceeding, and (2)third quarter 2013 to amend the district court’s final judgment to include certain additional provisions of Vermont law relating to Vermont Yankee’s operation and storage of spent nuclear fuel from operation after March 21, 2012, that were part of the statutes the court found to be preempted in its decision, but which were not specifically included in the final judgment.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their authorizations to operate are not renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its original license expiration date in March 2012, it could result in an impairment of part or all of the carrying value of the plant. In preparing its 2011 financial statements, Entergy evaluated whetherwrite down the carrying value of Vermont Yankee was impaired asand related assets to their fair values. Entergy performed a fair value analysis based on the income approach, a discounted cash flow method, to determine the amount of December 31, 2011, before the outcome of the federal court lawsuit was known. For purposes of that evaluation, Entergy considered a number of factors associated with the plant’s continued operation, including the status of the federal lawsuit, the status of the state regulatory issues as described above, the potential saleimpairment. The estimated fair value of the plant and the application of federal laws regarding the continued operation of nuclear facilities. Based on its evaluation of those factors, Entergy determined thatrelated assets was $62 million, while the carrying value was $349 million. The carrying value of $349 million reflected the effect of a $58 million increase in Vermont Yankee’s estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to cease operations. Impairment and other related charges were recorded as a separate line item in Entergy’s consolidated statements of income for 2013 and this impairment charge is included within the results of the Entergy Wholesale Commodities segment.
The estimate of fair value was based on the price that Entergy would expect to receive in a hypothetical sale of the Vermont Yankee plant and related assets to a market participant. In order to determine this price, Entergy used significant observable inputs, including quoted forward power and gas prices, where available. Significant unobservable inputs, such as projected long-term pre-tax operating margins (cash basis), and estimated weighted average costs of capital were also used in the estimation of fair value. In addition, Entergy made certain assumptions regarding future tax deductions associated with the plant and related assets. Based on the use of significant unobservable inputs, the fair value measurement for the entirety of the asset group, and for each type of asset within the asset group, is classified as Level 3 in the fair value hierarchy discussed in Note 16 to the financial statements.
The following table sets forth a description of significant unobservable inputs used in the valuation of the Vermont Yankee plant and related assets as of July 31, 2013:
|
| | |
| Significant Unobservable Inputs | | Amount |
| | |
| Weighted average cost of capital | | 7.5% |
| Long-term pre-tax operating margin (cash basis) | | 7.0% |
Entergy’s Accounting Policy group, which reports to the Chief Accounting Officer, was primarily responsible for determining the valuation of the Vermont Yankee plant and related assets, in consultation with external advisors. Accounting Policy obtained and reviewed information from other Entergy departments with expertise on the various inputs and assumptions that were necessary to calculate the fair value of the asset group.
As a result of the settlement agreement entered into by Entergy and Vermont regarding the remaining operation and decommissioning of Vermont Yankee was not impaired asdiscussed above, Entergy reassessed its assumptions regarding the timing of decommissioning cash flows for Vermont Yankee. The reassessment resulted in a $27.2 million increase in the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
decommissioning cost liability and a corresponding impairment charge, recorded in December 31, 2011.2013. As of December 31, 2011 the net carrying valuepart of the plant, including nuclear fuel,development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014. The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge, recorded in September 2014. Impairment charges are recorded as a separate line item in Entergy’s consolidated statements of income for 2014 and 2013, and this impairment charge is $465 million.included within the results of the Entergy Wholesale Commodities segment.
In addition to the $101.6 million impairment charge in September 2014 and depreciation recorded on the remaining plant balance in 2014, Entergy also recorded charges of $45.8 million related to severance and employee retention costs in 2014 relating to the shutdown of Vermont Yankee.
Vermont Yankee ceased operation in December 2014. In January 2015, Vermont Yankee completed the defueling of the reactor and submitted the certification of permanent cessation of operations and permanent removal of fuel from the reactor vessel to the NRC.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Preferred Stock without Sinking Fund
Accounting standards regarding non-controlling interests and the classification and measurement of redeemable securities require the classification of preferred securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorporation provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Asset Management (whoseFinance Holding (an Entergy Wholesale Commodities subsidiary), whose preferred holders also hadhave protective rights, until the securities were repurchased in December 2011), are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in Entergy’s consolidated balance sheets. The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
New Accounting Pronouncements
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.projects. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income, financial position, or cash flows.
In May 2011April 2014 the FASB issued ASU No. 2011-4, “Fair Value Measurement2014-08, “Presentation of Financial Statements (Topic 820)205) and Property Plant, and Equipment (Topic 360): Amendments to Achieve Common Fair Value MeasurementReporting Discontinued Operations and Disclosure Requirements in U.S. GAAP and IFRSs,”Disclosures of Disposals of Components of an Entity” which states thatchanges the ASU explains how to measure fair value.requirements for reporting discontinued operations. The ASU states that: 1)that a disposal of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on an entity’s operations and financial results when the component of an entity or group of components of an entity meets the criteria to be classified as held for sale, is disposed of by sale, or is disposed of other than by sale. The amendments in thethis ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards; 2) consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing informationalso require additional disclosures about fair value measurements; 3) for many of the requirements, the FASB does not intend for thediscontinued operations. ASU to result in a change in the application of the requirements of current U.S. GAAP; 4) some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements; and 5) other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. ASU No. 2011-42014-08 is effective for Entergy for the first quarter 2012.2015. Entergy does not currently expect ASU No. 2011-42014-08 to affect materially its results of operations, financial position, or cash flows.
In September 2011May 2014 the FASB issued ASU No. 2011-8, “Intangibles – Goodwill and Other2014-09, “Revenue from Contracts with Customers (Topic 350): Testing Goodwill for Impairment.606).” The amendments permitASU’s core principle is that “an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to first assess qualitative factorsbe entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to determine whether it is more likely than not thatachieve the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment assessment.core principle. ASU No. 2011-82014-09 is effective for Entergy for the first quarter 2012. The adoption of2017. Entergy does not expect ASU No. 2011-8 will have no effect on Entergy’s2014-09 to affect materially its results of operations, financial position, or cash flows.
In November 2014 the FASB issued ASU No. 2014-16, “Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.” The ASU states that for hybrid financial instruments issued in the form of a share, an entity should determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of relevant facts and circumstances. ASU 2014-16 is effective for Entergy for the first quarter 2016. Entergy does not expect ASU 2014-16 to affect materially its results of operations, financial position, or cash flows.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
Other Regulatory Assets
Regulatory assets represent probable future revenues associated with costs that are expectedEntergy expects to be recoveredrecover from customers through the regulatory ratemaking process affectingunder which the Utility business.business operates. Regulatory liabilities represent probable future reductions in revenues associated with amounts that Entergy expects to benefit customers through the regulatory ratemaking process under which the Utility business operates. In addition to the regulatory assets and liabilities that are specifically disclosed on the face of the balance sheets, the tables below provide detail of “Other regulatory assets” and “Other regulatory liabilities” that are included on Entergy’s and the Registrant Subsidiaries’ balance sheets as of December 31, 20112014 and 2010:2013:
Other Regulatory Assets
Entergy
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $395.9 | | $406.4 |
Deferred capacity (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | - | | 15.8 |
Grand Gulf fuel - non-current and power management rider - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 12.4 | | 17.4 |
New nuclear generation development costs (Note 2) | | 56.8 | | - |
Gas hedging costs - recovered through fuel rates | | 30.3 | | 1.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 2,542.0 | | 1,734.7 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 2.4 | | 4.8 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 996.4 | | 1,026.0 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 81.2 | | 81.5 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 24.3 | | 26.2 |
Sale-leaseback deferral (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations) | | - | | 22.3 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 31.0 | | 32.6 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 89.2 | | 95.8 |
Little Gypsy cost proceeding – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy) | | 198.4 | | 200.9 |
Incremental ice storm costs - recovered through 2032 | | 10.5 | | 11.1 |
Michoud plant maintenance – recovered over a 7-year period through September 2018 | | 12.9 | | - |
Unamortized loss on reacquired debt - recovered over term of debt | | 108.8 | | 122.5 |
| Other | | 44.4 | | 38.3 |
Total | | $4,636.9 | | $3,838.2 |
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $2,798.8 |
| |
| $1,723.1 |
|
Storm damage costs, including hurricane costs - recovered through securitization and retail rates (Note 2 – Storm Cost Recovery Filings with Retail Regulators) | 736.2 |
| | 786.8 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (b) | 513.8 |
| | 447.6 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 245.1 |
| | 188.9 |
|
Little Gypsy costs – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy) | 139.2 |
| | 160.6 |
|
Under-recovered retail rate revenues - recovered through rate riders when rates are redetermined periodically | 79.6 |
| | 77.7 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 76.2 |
| | 83.0 |
|
MISO implementation costs - recovery through retail rate riders (Note 2 - Retail Rate Proceedings) | 69.6 |
| | 74.7 |
|
Transition to competition costs - recovered over a 15-year period through February 2021 | 66.2 |
| | 74.4 |
|
New nuclear generation development costs (Note 2 - New Nuclear Generation Development Costs) (c) | 58.4 |
| | 115.2 |
|
Human capital management costs - recovery through retail rate mechanisms (Note 2 - Retail Rate Proceedings) | 42.3 |
| | 45.0 |
|
| Other | 143.2 |
| | 116.4 |
|
| Entergy Total |
| $4,968.6 |
| |
| $3,893.4 |
|
64
74
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $187.7 | | $167.3 |
Incremental ice storm costs - recovered through 2032 | | 10.5 | | 11.1 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 768.3 | | 547.5 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 4.6 | | - |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 2.4 | | 4.8 |
Provision for storm damages - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 114.7 | | 118.5 |
Unamortized loss on reacquired debt - recovered over term of debt | | 34.7 | | 38.0 |
| Other | | 4.0 | | 5.2 |
Entergy Arkansas Total | | $1,126.9 | | $892.4 |
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $838.2 |
| |
| $517.1 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (b) | 254.8 |
| | 225.9 |
|
Storm damage costs - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | 125.6 |
| | 115.2 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 59.0 |
| | 18.6 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 26.2 |
| | 28.8 |
|
MISO implementation costs - recovery through retail rates through 2018 (Note 2 - Retail Rate Proceedings) (c) | 25.1 |
| | 30.9 |
|
Under-recovered retail rate revenues - recovered through rate riders when rates are redetermined periodically | 23.3 |
| | 36.1 |
|
Human capital management costs - recovery through retail rates through June 2017 (Note 2 - Retail Rate Proceedings) (c) | 17.3 |
| | 22.0 |
|
Incremental ice storm costs - recovered through 2032 | 9.0 |
| | 9.5 |
|
| Other | 12.8 |
| | 10.3 |
|
| Entergy Arkansas Total |
| $1,391.3 |
| |
| $1,014.4 |
|
Entergy Gulf States Louisiana
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $12.8 | | $17.8 |
Gas hedging costs - recovered through fuel rates | | 8.6 | | 1.0 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 231.3 | | 157.4 |
Provision for storm damages, including hurricane costs - recovered through retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 10.2 | | 6.0 |
Deferred capacity (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | - | | 14.0 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 24.3 | | 26.2 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 31.0 | | 32.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 11.6 | | 13.5 |
| Other | | 4.1 | | 2.4 |
Entergy Gulf States Louisiana Total | | $333.9 | | $270.9 |
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) |
| $286.8 |
| |
| $194.2 |
|
New nuclear generation development costs - recovery through formula rate plan beginning December 2014 through November 2022 (Note 2 - New Nuclear Generation Development Costs) (c) | 29.2 |
| | 29.5 |
|
Spindletop gas storage facility - recovery period through December 2032 (a) | 26.2 |
| | 27.8 |
|
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | 18.6 |
| | 20.5 |
|
MISO implementation costs - recovery through the MISO cost recovery mechanism beginning December 2014 through November 2017 (Note 2 - Retail Rate Proceedings) | 15.7 |
| | 15.3 |
|
Human capital management costs - recovery through formula rate plan beginning December 2014 through November 2017 (Note 2 - Retail Rate Proceedings) | 11.2 |
| | 10.0 |
|
Under-recovered retail rate revenues - recovered through rate riders when rates are redetermined periodically | 11.1 |
| | 3.0 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (b) | 10.8 |
| | 11.0 |
|
Gas hedging costs - recovered through fuel rates upon settlement (Note 16 - Derivatives) | 8.2 |
| | — |
|
Unamortized loss on reacquired debt - recovered over term of debt | 6.8 |
| | 8.3 |
|
| Other | 1.8 |
| | 1.9 |
|
| Entergy Gulf States Louisiana Total |
| $426.4 |
| |
| $321.5 |
|
Entergy Louisiana
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $125.8 | | $113.4 |
Gas hedging costs - recovered through fuel rates | | 12.4 | | 0.4 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 427.9 | | 309.1 |
Little Gypsy cost proceeding – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy) | | 198.4 | | 200.9 |
Provision for storm damages, including hurricane costs - recovered through retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 9.7 | | 1.0 |
Deferred capacity (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | - | | 1.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 20.0 | | 22.5 |
| Other | | 20.3 | | 13.6 |
Entergy Louisiana Total | | $814.5 | | $662.7 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) |
| $487.2 |
| |
| $318.4 |
|
Asset Retirement Obligation - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (b) | 156.7 |
| | 139.2 |
|
Little Gypsy costs – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy) | 139.2 |
| | 160.6 |
|
New nuclear generation development costs - recovery through formula rate plan beginning December 2014 through November 2022 (Note 2 - New Nuclear Generation Development Costs) (c) | 29.2 |
| | 29.5 |
|
MISO implementation costs - recovery through the MISO cost recovery mechanism beginning December 2014 through November 2017 (Note 2 - Retail Rate Proceedings) | 21.4 |
| | 20.8 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 14.3 |
| | 15.2 |
|
Human capital management costs - recovery through formula rate plan beginning December 2014 through November 2017 (Note 2 - Retail Rate Proceedings) | 13.8 |
| | 13.0 |
|
Storm damage costs, including hurricane costs - recovered through retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | 13.7 |
| | 3.4 |
|
| Other | 38.7 |
| | 15.4 |
|
| Entergy Louisiana Total |
| $914.2 |
| |
| $715.5 |
|
Entergy Mississippi
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $5.3 | | $5.0 |
Gas hedging costs - recovered through fuel rates | | 7.8 | | - |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 48.5 | | 46.1 |
Grand Gulf fuel - non-current and power management rider- recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 7.8 | | 17.4 |
| New nuclear generation development costs (Note 2) | | 56.8 | | - |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 221.1 | | 160.0 |
Provision for storm damages - recovered through retail rates | | 30.7 | | 8.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 10.7 | | 11.5 |
| Other | | 4.7 | | 4.5 |
Entergy Mississippi Total | | $393.4 | | $253.2 |
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $224.3 |
| |
| $135.3 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 76.3 |
| | 64.3 |
|
Under-recovered retail rate revenues - recovered through rate riders when rates are redetermined periodically | 28.7 |
| | 39.2 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 8.2 |
| | 8.9 |
|
Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (b) | 6.3 |
| | 5.9 |
|
Baxter Wilson outage costs - recovered through retail rates over two years beginning February 2015 (Note 8 - Baxter Wilson Plant Event) | 6.0 |
| | — |
|
MISO implementation costs - recovery through retail rate riders (Note 2 – Retail Rate Proceedings) | 4.0 |
| | 4.2 |
|
New nuclear generation development costs (Note 2 - New Nuclear Generation Development Costs) | — |
| | 56.2 |
|
| Other | 10.9 |
| | 4.5 |
|
| Entergy Mississippi Total |
| $364.7 |
| |
| $318.5 |
|
Entergy New Orleans
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $3.4 | | $3.2 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 16.3 | | 15.4 |
Gas hedging costs - recovered through fuel rates | | 1.5 | | 0.5 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 127.6 | | 95.3 |
Provision for storm damages, including hurricane costs - recovered through insurance proceeds and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 8.6 | | 10.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 2.6 | | 3.0 |
Michoud plant maintenance – recovered over a 7-year period through September 2018 | | 12.9 | | - |
| Other | | 5.9 | | 7.1 |
Entergy New Orleans Total | | $178.8 | | $135.3 |
Entergy Texas
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $1.3 | | $1.4 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 4.5 | | 7.3 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 244.9 | | 165.4 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 822.5 | | 881.7 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 89.2 | | 95.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 10.8 | | 12.7 |
| Other | | 4.9 | | 4.7 |
Entergy Texas Total | | $1,178.1 | | $1,169.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $115.8 |
| |
| $76.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 35.2 |
| | 34.9 |
|
Michoud plant maintenance – recovered over a 7-year period through September 2018 | 7.2 |
| | 9.1 |
|
Storm damage costs, including hurricane costs - recovered through retail rates and securitization (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | 5.0 |
| | 4.6 |
|
Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (b) | 3.8 |
| | 3.7 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 1.8 |
| | 2.0 |
|
| Other | 6.8 |
| | 6.1 |
|
| Entergy New Orleans Total |
| $175.6 |
| |
| $137.2 |
|
Entergy Texas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Storm damage costs, including hurricane costs - recovered through securitization and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) |
| $591.7 |
| |
| $663.6 |
|
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | 217.0 |
| | 143.0 |
|
Transition to competition costs - recovered over a 15-year period through February 2021 | 66.2 |
| | 74.4 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 18.9 |
| | 15.1 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 10.5 |
| | 7.7 |
|
Rate case costs - recovered through retail rates (c) | 8.4 |
| | 10.8 |
|
| Other | 9.4 |
| | 4.6 |
|
| Entergy Texas Total |
| $922.1 |
| |
| $919.2 |
|
System Energy
| | | 2011 | | 2010 |
| | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $59.6 | | $98.3 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 11.8 | | 12.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) | | 197.6 | | 142.0 |
Sale-leaseback deferral (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations) | | - | | 22.3 |
Unamortized loss on reacquired debt - recovered over term of debt | | 18.2 | | 21.5 |
| Other | | 0.6 | | 0.4 |
System Energy Total | | $287.8 | | $296.7 |
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) |
| $191.0 |
| |
| $132.9 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | 80.4 |
| | 60.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 55.7 |
| | 56.0 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 8.5 |
| | 12.0 |
|
| System Energy Total |
| $335.6 |
| |
| $261.7 |
|
| |
| (a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing occurs monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | Does not earn a return on investment, but is offset by related liabilities. |
| |
| (c) | Does not earn a return on investment. |
Other Regulatory Liabilities
Entergy
|
| | | | | | | |
| | 2014 | | 2013 |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $656.7 |
| |
| $529.6 |
|
Vidalia purchased power agreement (Note 8) | 242.8 |
| | 263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 156.0 |
| | 156.0 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 82.7 |
| | 72.3 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
| Other | 40.2 |
| | 46.1 |
|
| Entergy Total |
| $1,383.6 |
| |
| $1,296.0 |
|
Entergy Arkansas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $254.0 |
| |
| $214.1 |
|
Deferred capacity acquisition cost recovery - returned to customers through rate riders when rates are redetermined periodically | — |
| | 4.7 |
|
| Other | — |
| | 0.6 |
|
| Entergy Arkansas Total |
| $254.0 |
| |
| $219.4 |
|
Entergy Gulf States Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $85.9 |
| |
| $64.1 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 36.9 |
| | 35.3 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 25.5 |
| | 25.5 |
|
Gas hedging costs - returned to customers through fuel rates (Note 16 - Derivatives) | — |
| | 2.2 |
|
| Other | 0.3 |
| | 0.8 |
|
| Entergy Gulf States Louisiana Total |
| $176.3 |
| |
| $159.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Vidalia purchased power agreement (Note 8) |
| $242.8 |
| |
| $263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 130.5 |
| | 130.5 |
|
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) | 123.2 |
| | 98.9 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 45.7 |
| | 37.0 |
|
| Other | 3.9 |
| | 3.7 |
|
| Entergy Louisiana Total |
| $546.1 |
| |
| $533.2 |
|
Entergy Texas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Transition to competition costs - returned to customers through rate riders when rates are redetermined periodically |
| $5.1 |
| |
| $4.2 |
|
Line loss adjustment - returned to customers through fuel rates | — |
| | 1.0 |
|
| Entergy Texas Total |
| $5.1 |
| |
| $5.2 |
|
System Energy
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $193.6 |
| |
| $152.4 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
| System Energy Total |
| $371.1 |
| |
| $349.8 |
|
| |
| (a) | Offset by related asset. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is generally recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 20112014 and 2010,2013 that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
| Entergy Arkansas (a) |
| $209.2 |
| |
| $68.7 |
|
| Entergy Gulf States Louisiana (b) |
| $89.5 |
| |
| $109.7 |
|
| Entergy Louisiana (b) |
| $17.6 |
| |
| $37.6 |
|
| Entergy Mississippi |
| ($2.2 | ) | |
| $38.1 |
|
| Entergy New Orleans (b) |
| ($24.3 | ) | |
| ($19.1 | ) |
| Entergy Texas |
| $11.9 |
| |
| ($4.1 | ) |
| | 2011 | | 2010 |
| | (In Millions) |
| | | | |
| Entergy Arkansas | $209.8 | | $61.5 |
| Entergy Gulf States Louisiana (a) | $2.9 | | $77.8 |
| Entergy Louisiana (a) | $1.5 | | $8.8 |
| Entergy Mississippi | ($15.8) | | $3.2 |
| Entergy New Orleans (a) | ($7.5) | | ($2.8) |
| Entergy Texas | ($64.7) | | ($77.4) |
| |
| (a) | 20112014 includes $65.9 million for Entergy Arkansas of fuel, purchased power, and 2010capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
| |
| (b) | 2014 and 2013 include $100.1 million for Entergy Gulf States Louisiana, $68 million for Entergy Louisiana, and $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System“System Agreement Cost Equalization Proceedings”Proceedings” section below. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and in January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect the first billing cycle of February 2015.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Energy Cost Recovery RiderEntergy New Orleans
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In early October 2005, the APSC initiated an investigation into Entergy Arkansas's interim energy cost recovery rate. The investigation focused on Entergy Arkansas's 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006, the APSC extended its investigation to cover the costs included in Entergy Arkansas's March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resulting from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60 days of the order. After a final determination of the costs is made by the APSC, Entergy Arkansas would be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas’s rehearing petition and because the value for Entergy Arkansas’s customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas’s rehearing request and the unresolved issues in the proceeding. The APSC ordered the parties to submit their unresolved issues list in the pending proceeding, which the parties did. In February 2010 the APSC denied Entergy Arkansas’s request for rehearing, and held a hearing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concluded with testimony through September 2010. Testimony has been filed and the APSC will decide the case based on the record in the proceeding, including the prefiled testimony. |
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $115.8 |
| |
| $76.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 35.2 |
| | 34.9 |
|
Michoud plant maintenance – recovered over a 7-year period through September 2018 | 7.2 |
| | 9.1 |
|
Storm damage costs, including hurricane costs - recovered through retail rates and securitization (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | 5.0 |
| | 4.6 |
|
Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (b) | 3.8 |
| | 3.7 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 1.8 |
| | 2.0 |
|
| Other | 6.8 |
| | 6.1 |
|
| Entergy New Orleans Total |
| $175.6 |
| |
| $137.2 |
|
Entergy Gulf States Louisiana and Entergy LouisianaTexas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Storm damage costs, including hurricane costs - recovered through securitization and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) |
| $591.7 |
| |
| $663.6 |
|
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | 217.0 |
| | 143.0 |
|
Transition to competition costs - recovered over a 15-year period through February 2021 | 66.2 |
| | 74.4 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 18.9 |
| | 15.1 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 10.5 |
| | 7.7 |
|
Rate case costs - recovered through retail rates (c) | 8.4 |
| | 10.8 |
|
| Other | 9.4 |
| | 4.6 |
|
| Entergy Texas Total |
| $922.1 |
| |
| $919.2 |
|
Entergy Gulf States Louisiana and Entergy Louisiana recover electric fuel and purchased power costs for the billing month based upon the level of such costs incurred two months prior to the billing month. Entergy Gulf States Louisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
System Energy
68 |
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) |
| $191.0 |
| |
| $132.9 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | 80.4 |
| | 60.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 55.7 |
| | 56.0 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 8.5 |
| | 12.0 |
|
| System Energy Total |
| $335.6 |
| |
| $261.7 |
|
| |
| (a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing occurs monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | Does not earn a return on investment, but is offset by related liabilities. |
| |
| (c) | Does not earn a return on investment. |
In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Other Regulatory Liabilities
Entergy
|
| | | | | | | |
| | 2014 | | 2013 |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $656.7 |
| |
| $529.6 |
|
Vidalia purchased power agreement (Note 8) | 242.8 |
| | 263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 156.0 |
| | 156.0 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 82.7 |
| | 72.3 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
| Other | 40.2 |
| | 46.1 |
|
| Entergy Total |
| $1,383.6 |
| |
| $1,296.0 |
|
Entergy Arkansas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $254.0 |
| |
| $214.1 |
|
Deferred capacity acquisition cost recovery - returned to customers through rate riders when rates are redetermined periodically | — |
| | 4.7 |
|
| Other | — |
| | 0.6 |
|
| Entergy Arkansas Total |
| $254.0 |
| |
| $219.4 |
|
Entergy Gulf States Louisiana and its affiliates. The audit included a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004. Entergy Gulf States Louisiana and the LPSC Staff reached a settlement to resolve the audit that requires Entergy Gulf States Louisiana to refund $18 million to customers, including the realignment to base rates of $2 million of SO2 costs. The ALJ held a stipulation hearing and in November 2011 the LPSC issued an order approving the settlement. The refund was made in the November 2011 billing cycle. Entergy Gulf States Louisiana had previously recorded provisions for the estimated outcome of this proceeding.
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $85.9 |
| |
| $64.1 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 36.9 |
| | 35.3 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 25.5 |
| | 25.5 |
|
Gas hedging costs - returned to customers through fuel rates (Note 16 - Derivatives) | — |
| | 2.2 |
|
| Other | 0.3 |
| | 0.8 |
|
| Entergy Gulf States Louisiana Total |
| $176.3 |
| |
| $159.4 |
|
In December 2011 the LPSC authorized its staff to initiate another proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana's fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted quarterly to reflect accumulated over- or under-recoveries from the second prior quarter. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In July 2008 the MPSC began a proceeding to investigate the fuel procurement practices and fuel adjustment schedules of the Mississippi utility companies, including Entergy Mississippi. The MPSC stated that the goal of the proceeding is fact-finding so that the MPSC may decide whether to amend the current fuel cost recovery process. Hearings were held in July and August 2008. Further proceedings have not been scheduled.
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, Inc., and Entergy Power, Inc. alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of federal issues raised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint.
In July 2011, the attorney general requested a status conference regarding its motion to remand. The court granted the attorney general’s request for a status conference, which was held in September 2011. Consistent with the court’s instructions, both parties submitted letters to the court in September 2011 providing updates on the facts of the case and the law, and the court has now taken the parties’ arguments under advisement.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Vidalia purchased power agreement (Note 8) |
| $242.8 |
| |
| $263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 130.5 |
| | 130.5 |
|
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) | 123.2 |
| | 98.9 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 45.7 |
| | 37.0 |
|
| Other | 3.9 |
| | 3.7 |
|
| Entergy Louisiana Total |
| $546.1 |
| |
| $533.2 |
|
Entergy Texas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Transition to competition costs - returned to customers through rate riders when rates are redetermined periodically |
| $5.1 |
| |
| $4.2 |
|
Line loss adjustment - returned to customers through fuel rates | — |
| | 1.0 |
|
| Entergy Texas Total |
| $5.1 |
| |
| $5.2 |
|
System Energy
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $193.6 |
| |
| $152.4 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
| System Energy Total |
| $371.1 |
| |
| $349.8 |
|
| |
| (a) | Offset by related asset. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is generally recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 2014 and 2013 that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
| Entergy Arkansas (a) |
| $209.2 |
| |
| $68.7 |
|
| Entergy Gulf States Louisiana (b) |
| $89.5 |
| |
| $109.7 |
|
| Entergy Louisiana (b) |
| $17.6 |
| |
| $37.6 |
|
| Entergy Mississippi |
| ($2.2 | ) | |
| $38.1 |
|
| Entergy New Orleans (b) |
| ($24.3 | ) | |
| ($19.1 | ) |
| Entergy Texas |
| $11.9 |
| |
| ($4.1 | ) |
| |
| (a) | 2014 includes $65.9 million for Entergy Arkansas of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
| |
| (b) | 2014 and 2013 include $100.1 million for Entergy Gulf States Louisiana, $68 million for Entergy Louisiana, and $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost Equalization Proceedings” section below. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and in January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect the first billing cycle of February 2015.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) |
| $115.8 |
| |
| $76.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 35.2 |
| | 34.9 |
|
Michoud plant maintenance – recovered over a 7-year period through September 2018 | 7.2 |
| | 9.1 |
|
Storm damage costs, including hurricane costs - recovered through retail rates and securitization (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | 5.0 |
| | 4.6 |
|
Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (b) | 3.8 |
| | 3.7 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 1.8 |
| | 2.0 |
|
| Other | 6.8 |
| | 6.1 |
|
| Entergy New Orleans Total |
| $175.6 |
| |
| $137.2 |
|
Entergy Texas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Storm damage costs, including hurricane costs - recovered through securitization and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) |
| $591.7 |
| |
| $663.6 |
|
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | 217.0 |
| | 143.0 |
|
Transition to competition costs - recovered over a 15-year period through February 2021 | 66.2 |
| | 74.4 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 18.9 |
| | 15.1 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 10.5 |
| | 7.7 |
|
Rate case costs - recovered through retail rates (c) | 8.4 |
| | 10.8 |
|
| Other | 9.4 |
| | 4.6 |
|
| Entergy Texas Total |
| $922.1 |
| |
| $919.2 |
|
System Energy
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) |
| $191.0 |
| |
| $132.9 |
|
Asset retirement obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | 80.4 |
| | 60.8 |
|
Removal costs - recovered through depreciation rates (Note 9) (b) | 55.7 |
| | 56.0 |
|
Unamortized loss on reacquired debt - recovered over term of debt | 8.5 |
| | 12.0 |
|
| System Energy Total |
| $335.6 |
| |
| $261.7 |
|
| |
| (a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing occurs monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | Does not earn a return on investment, but is offset by related liabilities. |
| |
| (c) | Does not earn a return on investment. |
Other Regulatory Liabilities
Entergy
|
| | | | | | | |
| | 2014 | | 2013 |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $656.7 |
| |
| $529.6 |
|
Vidalia purchased power agreement (Note 8) | 242.8 |
| | 263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 156.0 |
| | 156.0 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 82.7 |
| | 72.3 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
| Other | 40.2 |
| | 46.1 |
|
| Entergy Total |
| $1,383.6 |
| |
| $1,296.0 |
|
Entergy Arkansas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $254.0 |
| |
| $214.1 |
|
Deferred capacity acquisition cost recovery - returned to customers through rate riders when rates are redetermined periodically | — |
| | 4.7 |
|
| Other | — |
| | 0.6 |
|
| Entergy Arkansas Total |
| $254.0 |
| |
| $219.4 |
|
Entergy Gulf States Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $85.9 |
| |
| $64.1 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 36.9 |
| | 35.3 |
|
Asset retirement obligation - will be returned to customers dependent upon timing of decommissioning (Note 9) (a) | 27.7 |
| | 31.5 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 25.5 |
| | 25.5 |
|
Gas hedging costs - returned to customers through fuel rates (Note 16 - Derivatives) | — |
| | 2.2 |
|
| Other | 0.3 |
| | 0.8 |
|
| Entergy Gulf States Louisiana Total |
| $176.3 |
| |
| $159.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Vidalia purchased power agreement (Note 8) |
| $242.8 |
| |
| $263.1 |
|
Louisiana Act 55 financing savings obligation (Note 2) | 130.5 |
| | 130.5 |
|
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) | 123.2 |
| | 98.9 |
|
Removal costs - returned to customers through depreciation rates (Note 9) (a) | 45.7 |
| | 37.0 |
|
| Other | 3.9 |
| | 3.7 |
|
| Entergy Louisiana Total |
| $546.1 |
| |
| $533.2 |
|
Entergy Texas
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Transition to competition costs - returned to customers through rate riders when rates are redetermined periodically |
| $5.1 |
| |
| $4.2 |
|
Line loss adjustment - returned to customers through fuel rates | — |
| | 1.0 |
|
| Entergy Texas Total |
| $5.1 |
| |
| $5.2 |
|
System Energy
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a) |
| $193.6 |
| |
| $152.4 |
|
Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions) | 79.5 |
| | 92.3 |
|
Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized and credited through the UPSA | 53.6 |
| | 60.7 |
|
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and FERC | 44.4 |
| | 44.4 |
|
| System Energy Total |
| $371.1 |
| |
| $349.8 |
|
| |
| (a) | Offset by related asset. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is generally recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 2014 and 2013 that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
| Entergy Arkansas (a) |
| $209.2 |
| |
| $68.7 |
|
| Entergy Gulf States Louisiana (b) |
| $89.5 |
| |
| $109.7 |
|
| Entergy Louisiana (b) |
| $17.6 |
| |
| $37.6 |
|
| Entergy Mississippi |
| ($2.2 | ) | |
| $38.1 |
|
| Entergy New Orleans (b) |
| ($24.3 | ) | |
| ($19.1 | ) |
| Entergy Texas |
| $11.9 |
| |
| ($4.1 | ) |
| |
| (a) | 2014 includes $65.9 million for Entergy Arkansas of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
| |
| (b) | 2014 and 2013 include $100.1 million for Entergy Gulf States Louisiana, $68 million for Entergy Louisiana, and $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost Equalization Proceedings” section below. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and in January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect the first billing cycle of February 2015.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly customer bills. The rider utilizes the prior calendar-year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over- or under-recovery, including carrying charges, of the energy costs for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In October 2005 the APSC initiated an investigation into Entergy Arkansas’s interim energy cost recovery rate. The investigation focused on Entergy Arkansas’s 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006 the APSC extended its investigation to cover the costs included in Entergy Arkansas’s March 2006 annual energy cost rate filing, and a hearing was held in the APSC investigation in October 2006.
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs that resulted from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within sixty days of the order. After a final determination of the costs is made by the APSC, Entergy Arkansas will be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order.
In February 2010 the APSC denied Entergy Arkansas’s request for rehearing, and held a hearing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concluded with testimony through September 2010. The testimony has been filed, and the APSC will decide the case based on the record in the proceeding.
In January 2014, Entergy Arkansas filed a motion with the APSC relating to its redetermination of its energy cost rate to be filed in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude $65.9 million of deferred fuel and purchased energy costs incurred in 2013 from the redetermination of its 2014 energy cost rate. The $65.9 million is an estimate of the incremental fuel and replacement energy costs that Entergy Arkansas incurred as a result of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in its deferred fuel balance, with recovery to be reviewed in a later period after more information is available regarding various claims associated with the ANO stator incident. The APSC approved Entergy Arkansas’s request in February 2014. See the “ANO Damage, Outage, and NRC Reviews” section in Note 8 to the financial statements for further discussion of the ANO stator incident.
Entergy Gulf States Louisiana and Entergy Louisiana
Entergy Gulf States Louisiana and Entergy Louisiana recover electric fuel and purchased power costs for the billing month based upon the level of such costs incurred two months prior to the billing month. Entergy Gulf States Louisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. The LPSC Staff issued its audit report in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervened in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC Staff report and any issues raised by intervenors. One intervenor is seeking further proceedings regarding certain issues it raised in its comments on the LPSC Staff report. Entergy Louisiana has filed responses to both the LPSC Staff report and the issues raised by the intervenor. As required by the procedural schedule, a joint status report was submitted in October 2013 by the parties. A status conference was held in December 2013. Discovery is in progress, but a procedural schedule has not been established.
In December 2011 the LPSC authorized its staff to initiate another proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.
In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted annually to reflect accumulated over- or under-recoveries. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
Entergy Mississippi had a deferred fuel balance of $60.4 million as of March 31, 2014. In May 2014, Entergy Mississippi filed for an interim adjustment under its energy cost recovery rider. The interim adjustment proposed a net energy cost factor designed to collect over a six-month period the under-recovered deferred fuel balance as of March 31, 2014 and also reflected a natural gas price of $4.50 per MMBtu. In May 2014, Entergy Mississippi and the Public Utilities Staff entered into a joint stipulation in which Entergy Mississippi agreed to a revised net energy cost factor that reflected the proposed interim adjustment with a reduction in costs recovered through the energy cost recovery rider associated with the suspension of the DOE nuclear waste storage fee. In June 2014 the MPSC approved the joint stipulation and allowed Entergy Mississippi’s interim adjustment. In November 2014, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. Due to lower gas prices and a lower deferred fuel balance, the redetermined annual factor was a decrease from the revised interim net energy cost factor. In January 2015 the MPSC approved the redetermined annual factor effective January 30, 2015.
Mississippi Attorney General Complaint
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 complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. In December 2008 the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
defendant Entergy companies removed the attorney general’s lawsuit to U.S. District Court in Jackson, Mississippi. The Mississippi attorney general moved to remand the matter to state court. In August 2012 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.
The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint. In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings. The District Court’s ruling on the motion for judgment on the pleadings is pending.
In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not subject to the federal law that allowed federal courts to hear those cases as “mass action” lawsuits. One day later the Attorney General renewed its motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies have responded to that motion and the District Court held oral argument on the motion to remand in February 2014. Entergy also has asserted federal question jurisdiction as a basis for the district court having jurisdiction and also has pending the motion for judgment on the pleadings.
Entergy New Orleans
Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.
Entergy Texas
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges,interest, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the PUCT allocation to Texas retail customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision resulted in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.
In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund, including interest, for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved by the PUCT in March 2011, Entergy Texas refunded over-collections through November 2010 of approximately $73 million, including interest through the refund period. The refund was made for most customers over a three-month period that began with the February 2011 billing cycle.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2011, Entergy Texas filed with the PUCT a request to refund approximately $43 million, including interest, of fuel cost recovery over-collections through October 2011. Entergy Texas and the parties to the proceeding reached an agreement that Entergy Texas willwould refund $67 million, including interest over a three-month period, which refund includesand additional over-recoveries through December 2011.2011, over a three-month period. Entergy Texas and the parties requested that interim rates consistent with the settlement be approved effective with the March 2012 billing month, and the PUCT approved the application in March 2012. Entergy Texas completed this request was granted by the presiding ALJ on February 16,refund to customers in May 2012.
In October 2012, Entergy Texas’s December 2009 rate case filing, which is discussed below, also includedTexas filed with the PUCT a request to reconcile $1.8 billionrefund approximately $78 million, including interest, of fuel cost recovery over-collections through September 2012. Entergy Texas requested that the refund be implemented over a six-month period effective with the January 2013 billing month. Entergy Texas and purchased power costs covering the parties to the proceeding reached an agreement that Entergy Texas would refund $84 million, including interest and additional over-recoveries through October 2012, to most customers over a three-month period April 2007 through June 2009.beginning January 2013. The PUCT approved the stipulation in January 2013. Entergy Texas completed this refund to customers in March 2013.
Entergy Texas’s November 2011 rate case filing, which is discussed below, also includes a request to reconcile $1.3 billion of fuel and purchased power costs covering the period July 2009 through June 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized
Return on
Common
Equity
| | |
| | | | |
Entergy Arkansas
| | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC.
|
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented based on Entergy Gulf States Louisiana's 2010 test year formula rate plan filing approved by the LPSC.
-Current retail gas base rates reflect the rate stabilization plan filing for the 2010 test year ended September 2010.
|
| | | | |
Entergy Louisiana
| | 9.45%-
11.05%
| | -Current retail base rates based on Entergy Louisiana's 2010 test year formula rate plan filing approved by the LPSC.
|
| | | | |
Entergy Mississippi | | 10.54%-
12.72%
| | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2010 test year, and a stipulation approved by the MPSC.
|
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates reflect Entergy New Orleans's 2010 test year formula rate plan filing and a settlement approved by the City Council.
|
| | | | |
Entergy Texas
| | 10.125% | | -Current retail base rates reflect Entergy Texas's 2009 base rate case filing and a settlement approved by the PUCT.
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
In July 2012, Entergy Texas filed with the PUCT an application to credit its customers approximately $37.5 million, including interest, resulting from the FERC’s October 2011 order in the System Agreement rough production cost equalization proceeding which is discussed below in “System Agreement Cost Equalization Proceedings.” In September 2012 the parties submitted a stipulation resolving the proceeding. The stipulation provided that most Entergy Texas customers would be credited over a four-month period beginning October 2012. The credits were initiated with the October 2012 billing month on an interim basis, and the PUCT subsequently approved the stipulation, also in October 2012.
In August 2014, Entergy Texas filed an application seeking PUCT approval to implement an interim fuel refund of approximately $24.6 million for over-collected fuel costs incurred during the months of November 2012 through April 2014. This refund resulted from (i) applying $48.6 million in bandwidth remedy payments that Entergy Texas received in May 2014 related to the June - December 2005 period to Entergy Texas’s $8.7 million under-recovered fuel balance as of April 30, 2014 and (ii) netting that fuel balance against the $15.3 million bandwidth remedy payment that Entergy Texas made related to calendar year 2013 production costs. Also in August 2014, Entergy Texas filed an unopposed motion for interim rates to implement these refunds for most customers over a two-month period commencing with September 2014. The PUCT issued its order approving the interim relief in August 2014 and Entergy Texas completed the refunds in October 2014. Parties intervened in this matter. All parties agreed that this case should be bifurcated such that the interim refunds would become final in a separate docket. The current docket would remain in place to potentially address additional rough production cost equalization-related matters that are not part of the interim refunds discussed above. In January 2015, Entergy Texas filed a request for this severance and final approval of the interim refund. Both applications are pending.
At the PUCT’s April 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity rider was good public policy. The PUCT issued an order in May 2013 adopting the rule allowing for a purchased power capacity rider, subject to an offsetting adjustment for load growth. The rule, as adopted, also includes a process for obtaining pre-approval by the PUCT of purchased power agreements. Entergy Texas has not exercised the option to recover its capacity costs under the new rider mechanism, but will continue to evaluate the benefits of utilizing the new rider to recover future capacity costs.
Retail Rate Proceedings
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009,March 2013, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing assumed Entergy Arkansas’s transition to MISO in December 2013, and requested a rate increase of $174 million, including $49 million of revenue being transferred from collection in riders to base rates. The filing also proposed a new transmission rider and a capacity cost recovery rider. The filing requested a 10.4% return on common equity. In June 2010September 2013, Entergy Arkansas filed testimony reflecting an updated rate increase request of $145 million, with no change to its requested return on common equity of 10.4%. Hearings in the proceeding began in October 2013, and in December 2013 the APSC approvedissued an order. The order authorized a settlement and subsequent compliance tariffs that provide for a $63.7 millionbase rate increase effective for bills rendered forof $81 million and included an authorized return on common equity of 9.3%. The order allows Entergy Arkansas to amortize its human capital management costs over a three-and-a-half year period, but also orders Entergy Arkansas to file a detailed report of the Arkansas-specific costs, savings and final payroll changes upon conclusion of the human capital management strategic imperative. The detailed report was subsequently filed in February 2015. The substance of the report will be addressed in Entergy Arkansas’s next base rate filing. New rates under the January 2014 order were implemented in the first billing cycle of July 2010. The settlement providesMarch 2014 and were effective as of January 2014. Additionally, in January 2014, Entergy Arkansas filed a petition for a 10.2%rehearing or clarification of several aspects of the APSC’s order, including the 9.3% authorized return on common equity. In February 2014 the APSC granted Entergy Arkansas’s petition for the purpose of considering the additional evidence identified by Entergy Arkansas. In August 2014 the APSC issued an order amending certain aspects of the original order, including providing for a 9.5% authorized return on common equity. Pursuant to the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
August 2014 order, revised rates are effective for all bills rendered after December 31, 2013 and were implemented in the first billing cycle of October 2014.
On January 30, 2015, Entergy Arkansas filed with the APSC a notice of intent to file a rate case within 60 to 90 days.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, established a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate plan filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
The formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have subsequently been extended, with return on common equity provisions consistent with the previously approved provisions, to cover the 2008, 2009, 2010, and 2011 test years.
Retail Rates - Electric
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommissioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
In May 2011, Entergy Gulf States Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $5.1 million rate decrease to reflect adjustments in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center by Entergy Louisiana. As a result of the closing of the acquisition and termination of the pre-acquisition power purchase agreement with Acadia, Entergy Gulf States Louisiana’s allocation of capacity related to this unit ended, resulting in a reduction in the additional capacity revenue requirement.
In May 2011, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2010 test year. The filing reflects an 11.11% earned return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing also reflects a $22.8 million rate decrease for incremental capacity costs. Entergy Gulf States Louisiana and the LPSC Staff subsequently filed a joint report that also stated that no cost of service rate change is necessary under the formula rate plan, and the LPSC approved it in October 2011.
In November 2011 the LPSC approved a one-year extension of Entergy Gulf States Louisiana’s formula rate plan. In addition,May 2012, Entergy Gulf States Louisiana is required to file a fullmade its formula rate case by January 2013, ifplan filing with the LPSC has not actedfor the 2011 test year. The filing reflected an 11.94% earned return on common equity, which was above the earnings bandwidth and indicated a $6.5 million cost of service rate decrease was necessary under the formula rate plan. The filing also reflected a $22.9 million rate decrease for the incremental capacity rider. Subsequently, in August 2012, Entergy Gulf States Louisiana submitted a revised filing that reflected an earned return on common equity of 11.86%, which indicated a $5.7 million cost of service rate decrease was necessary under the formula rate plan. The revised filing also indicated that a reduction of $20.3 million should be reflected in the incremental capacity rider. The rate reductions were implemented, subject to denyrefund, effective for bills rendered in the requested transmission change-of-controlfirst billing cycle of September 2012. Subsequently, in December 2012, Entergy Gulf States Louisiana submitted a revised evaluation report that reflected expected retail jurisdictional cost of $17 million for the first-year capacity charges for the purchase from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy. This rate change was implemented effective with the first billing cycle of January 2013. The 2011 test year filings, as revised, were approved by the LPSC in February 2013. In April 2013, Entergy Gulf States Louisiana submitted a revised evaluation report increasing the incremental capacity rider by approximately $7.3 million to reflect the cost of an additional capacity contract.
In connection with its decision to extend the formula rate plan to the MISO RTO. If2011 test year, the LPSC has denied this request, then therequired that a base rate case must be filed by September 30, 2012.Entergy Gulf States Louisiana, and the required filing was made in February 2013. The filing anticipated Entergy Gulf States Louisiana’s integration into MISO. In the filing Entergy Gulf States Louisiana requested, among other relief:
(authorization to increase the revenue it collects from customers by approximately $24 million;
an authorized return on common equity of 10.4%;
authorization to increase depreciation rates embedded in the proposed revenue requirement; and,
authorization to implement a three-year formula rate plan with a midpoint return on common equity of 10.4%, plus or minus 75 basis points (the deadband), that would provide a means for the annual re-setting of rates (commencing with calendar year 2013 as its first test year), that would include a mechanism to recover incremental transmission revenue requirement on the basis of a forward-looking test year as compared to the initial base year of 2014 with an annual true-up, that would retain the primary aspects of the prior formula rate plan, including a 60% to customers/40% to Entergy Louisiana)Gulf States Louisiana sharing mechanism for earnings outside the deadband, and a capacity rider mechanism that would permit recovery of incremental capacity additions approved by the LPSC.
In October 2009Following a hearing before an ALJ and the ALJ’s issuance of a Report of Proceedings, in December 2013 the LPSC approved an unopposed settlement of the proceeding. Major terms of the settlement include approval of a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings and provided for a newthree-year formula rate plan (effective for test years 2014-2016) modeled after the 2008, 2009, and 2010 test years. 10.25% isformula rate plan in effect for Entergy Gulf States Louisiana for 2011, including the targetfollowing: (1) a midpoint return on equity for the formula rate plan, with an earnings bandwidth of +/-9.95% plus or minus 80 basis points, (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with 60/40 sharing of earnings outside of the November 2009 billing cycle, to reset its ratesbandwidth; (2) recovery outside of the sharing mechanism for the non-fuel MISO-related costs, additional capacity revenue requirement, extraordinary items, such as the Ninemile 6 project, and certain special recovery items; (3) three-year amortization of costs to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.savings associated with
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the human capital management strategic imperative, with savings to be reflected as they are realized in subsequent years; (4) eight-year amortization of costs incurred in connection with potential development of a new nuclear unit at River Bend, without carrying costs, beginning December 2014, provided, however, that amortization of these costs shall not result in a future rate increase; (5) no change in rates related to test year 2013, except with respect to recovery of the non-fuel MISO-related costs and any changes to the additional capacity revenue requirement; and (6) no increase in rates related to test year 2014, except for those items eligible for recovery outside of the earnings sharing mechanism. Existing depreciation rates will not change. Implementation of rate changes for items recoverable outside of the earnings sharing mechanism occurred in December 2014.
Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Gulf States Louisiana submitted a compliance filing in May 2014 reflecting the effects of the estimated MISO cost recovery mechanism revenue requirement and adjustment of the additional capacity mechanism. In November 2014, Entergy Gulf States Louisiana submitted an additional compliance filing updating the estimated MISO cost recovery mechanism for the most recent actual data. Based on this updated filing, a net increase of $5.8 million in formula rate plan revenue to be collected over nine months was implemented in December 2014. The compliance filings are subject to LPSC review in accordance with the review process set forth in Entergy Gulf States Louisiana’s formula rate plan.
In July 2014, Entergy Gulf States Louisiana and Entergy Louisiana filed an unopposed stipulation with the LPSC that estimated a first year revenue requirement associated with Ninemile 6 and provided a mechanism to update the revenue requirement as the in-service date approached, which was subsequently approved by the LPSC. In late December 2014, roughly contemporaneous with the unit's placement in service, a final updated estimated revenue requirement of $26.8 million for Entergy Gulf States Louisiana was filed. The December 2014 estimate forms the basis of rates implemented effective with the first billing cycle of January 2015.
(Entergy Louisiana)
In November 2011 the LPSC approved a one-year extension of Entergy Louisiana’s formula rate plan. In May 2010,2012, Entergy Louisiana made its formula rate plan filing with the LPSC for the 20092011 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82%9.63% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
In May 2011, Entergy Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $43.1 million net rate increase to reflect adjustments in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center. The net rate increase represents the decrease in the additional capacity revenue requirement resulting from the termination of the power purchase agreement with Acadia and the increase in the revenue requirement resulting from the ownership of the Acadia facility. In August 2011, Entergy Louisiana made a filing to correct the May 2011 filing and decrease the rate by $1.1 million.
In May 2011, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2010 test year. The filing reflects an 11.07% earned return on common equity, which is just outside of the allowed earnings bandwidth and resultsresulted in no cost of service rate change under the formula rate plan. The filing also reflects a very slight ($9 thousand)reflected an $18.1 million rate increase for the incremental capacity costs.rider. In August 2012, Entergy Louisiana and the LPSC Staff subsequently filedsubmitted a joint reportrevised filing that reflectsreflected an 11.07% earned return and resultson common equity of 10.38%, which is still within the earnings bandwidth, resulting in no cost of service rate change. The revised filing also indicated that an increase of $15.9 million should be reflected in the incremental capacity rider. The rate change underwas implemented, subject to refund, effective for bills rendered the formula rate plan, and the LPSC approved the jointfirst billing cycle of September 2012. Subsequently, in December 2012, Entergy Louisiana submitted a revised evaluation report in October 2011.
In November 2011 the LPSC approvedthat reflected two items: 1) a one-year extension of Entergy Louisiana’s current formula rate plan. The next formula rate plan filing,$17 million reduction for the 2011 test year, will be made in May 2012first-year capacity charges for the purchase by Entergy Gulf States Louisiana from Entergy Louisiana of one-third of Acadia Unit 2 capacity and will include a separate identification of any operatingenergy, and maintenance expense savings that are expected to occur once2) an $88 million increase for the Waterford 3 steam generator replacement project is complete. Pursuant to the LPSC decision, from September 2012 through December 2012 earnings above an 11.05% return on common equity (based on the 2011 test year) would be accrued and used to offsetfirst-year retail revenue requirement associated with the Waterford 3 replacement steam generator revenue requirement forproject, which was in-service in December 2012. These rate changes were implemented, subject to refund, effective with the first twelve months thatbilling cycle of January 2013. In April 2013, Entergy Louisiana and the unit is in rates. If the project is not in service by January 1, 2013, earnings aboveLPSC staff filed a 10.25% return on common equity (based onjoint report resolving the 2011 test year) foryear formula rate plan and recovery related to the period January 1,Grand Gulf uprate. This report was approved by the LPSC in April 2013.
With completion of the Waterford 3 replacement steam generator project, the LPSC is conducting a prudence review in connection with a filing made by Entergy Louisiana in April 2013 throughwith regard to the date that the project is placed in service will be accrued and used to offset the incremental revenue requirement for the first twelve months that the unit is in rates. Upon the in-service datefollowing aspects of the replacement steam generators, rates will increase, subject to refund following any prudence review, byproject: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the full revenue requirement associated with the replacement steam generators, less (i) the previously accrued excess earnings from September 2012 until the in-service date and (ii) any earnings above a 10.25% return on common equity (based on the 2011 test year) for the period following the in-service date, provided that the excess earnings accrued prior to the in-service date shall only offset the revenue requirement for the first year of operationcosts of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from Entergy Louisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generators. These rates are anticipated to remain in effect until Entergy Louisiana’s next full rate case is resolved.generator fabricator was imprudent. Entergy Louisiana is required to file a full rate caseprovided further documentation and explanation requested by January 2013, if the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. A post-hearing briefing schedule has not acted to denybeen established. Entergy Louisiana believes that the requested transmission change-of-control to the MISO RTO. If the LPSC has denied this request, then the rate case must be filed by September 30, 2012.replacement steam
Entergy Corporation and Subsidiaries
Notes to Financial Statements
generator costs were prudently incurred and applicable legal principles support their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty associated with the resolution of the prudence review.
In connection with its decision to extend the formula rate plan to the 2011 test year, the LPSC required that a base rate case be filed by Entergy Louisiana, and the required filing was made on February 15, 2013. The filing anticipated Entergy Louisiana’s integration into MISO. In the filing Entergy Louisiana requested, among other relief:
authorization to increase the revenue it collects from customers by approximately $145 million (which does not take into account a revenue offset of approximately $2 million resulting from a proposed increase for those customers taking service under the Qualifying Facility Standby Service);
an authorized return on common equity of 10.4%;
authorization to increase depreciation rates embedded in the proposed revenue requirement; and,
authorization to implement a three-year formula rate plan with a midpoint return on common equity of 10.4%, plus or minus 75 basis points (the deadband), that would provide a means for the annual re-setting of rates (commencing with calendar year 2013 as its first test year), that would include a mechanism to recover incremental transmission revenue requirement on the basis of a forward-looking test year as compared to the initial base year of 2014 with an annual true-up, that would retain the primary aspects of the prior formula rate plan, including a 60% to customers/40% to Entergy Louisiana sharing mechanism for earnings outside the deadband, and a capacity rider mechanism that would permit recovery of incremental capacity additions approved by the LPSC.
Following a hearing before an ALJ and the ALJ’s issuance of a Report of Proceedings, in December 2013 the LPSC approved an unopposed settlement of the proceeding. The settlement provides for a $10 million rate increase effective with the first billing cycle of December 2014. Major terms of the settlement include approval of a three-year formula rate plan (effective for test years 2014-2016) modeled after the formula rate plan in effect for Entergy Louisiana for 2011, including the following: (1) a midpoint return on equity of 9.95% plus or minus 80 basis points, with 60/40 sharing of earnings outside of the bandwidth; (2) recovery outside of the sharing mechanism for the non-fuel MISO-related costs, additional capacity revenue requirement, extraordinary items, such as the Ninemile 6 project, and certain special recovery items; (3) three-year amortization of costs to achieve savings associated with the human capital management strategic imperative, with savings reflected as they are realized in subsequent years; (4) eight-year amortization of costs incurred in connection with potential development of a new nuclear unit at River Bend, without carrying costs, beginning December 2014, provided, however, that amortization of these costs shall not result in a future rate increase; (5) recovery of non-fuel MISO-related costs and any changes to the additional capacity revenue requirement related to test year 2013 effective with the first billing cycle of December 2014; and (6) a cumulative $30 million cap on cost of service increases over the three-year formula rate plan cycle, except for those items outside of the sharing mechanism. Existing depreciation rates will not change.
Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Louisiana submitted a compliance filing in May 2014 reflecting the effects of the $10 million agreed-upon increase in formula rate plan revenue, the estimated MISO cost recovery mechanism revenue requirement, and the adjustment of the additional capacity mechanism. In November 2014, Entergy Louisiana submitted an additional compliance filing updating the estimated MISO cost recovery mechanism for the most recent actual data, as well as providing for a refund and prospective reduction in rates for the true-up of the estimated revenue requirement for the Waterford 3 replacement steam generator project. Based on this updated filing, a net increase of $41.6 million in formula rate plan revenue to be collected over nine months was implemented in December 2014. The compliance filings are subject to LPSC review in accordance with the review process set forth in Entergy Louisiana’s formula rate plan. Additionally, the adjustments of rates made related to the Waterford 3 replacement steam generator project included in the December 2014 compliance filing are subject to final true-up following completion of the LPSC’s determination regarding the prudence of the project.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In July 2014, Entergy Gulf States Louisiana and Entergy Louisiana filed an unopposed stipulation with the LPSC that estimated a first year revenue requirement associated with Ninemile 6 and provided a mechanism to update the revenue requirement as the in-service date approached, which was subsequently approved by the LPSC. In late December 2014, roughly contemporaneous with the unit's placement in service, a final updated estimated revenue requirement of $51.1 million for Entergy Louisiana was filed. The December 2014 estimate forms the basis of rates implemented effective with the first billing cycle of January 2015. Entergy Louisiana will submit project and cost information to the LPSC in mid-2015 to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2012, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2011. The filing showed an earned return on common equity of 10.48%, which is within the earnings bandwidth of 10.5%, plus or minus fifty basis points. The sixty-day reviewIn April 2012 the LPSC Staff filed its findings, suggesting adjustments that produced an 11.54% earned return on common equity for the test year and comment period for this filing remains open.a $0.1 million rate reduction. Entergy Gulf States Louisiana accepted the LPSC Staff’s recommendations, and the rate reduction was effective with the first billing cycle of May 2012.
In January 2011,2013, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010.2012. The filing showed an earned return on common equity of 8.84% and11.18%, which results in a revenue deficiency of $0.3 million.$43 thousand rate reduction. In March 20112013 the LPSC Staff filedissued its proposed findings suggesting an adjustment that produced an 11.76% earned return on common equity for the test year and a $0.2 million rate reduction.recommended two adjustments. Entergy Gulf States Louisiana implementedand the $0.2 millionLPSC Staff reached agreement regarding the LPSC Staff’s proposed adjustments. As reflected in an unopposed joint report of proceedings filed by Entergy Gulf States Louisiana and the LPSC Staff in May 2013, Entergy Gulf States Louisiana accepted, with modification, the LPSC Staff’s proposed adjustment to property insurance expense and agreed to: (1) a three-year extension of the gas rate reduction effectivestabilization plan with a midpoint return on equity of 9.95%, with a first year midpoint reset; (2) dismissal of a docket initiated by the May 2011 billing cycle.LPSC to evaluate the allowed return on equity for Entergy Gulf States Louisiana’s gas rate stabilization plan; and (3) presentation to the LPSC by November 2014 by Entergy Gulf States Louisiana and the LPSC Staff of their recommendation for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment. The LPSC docket is now closed.approved the agreement in May 2013.
In January 2010,2014, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009.2013. The filing showed an earned return on common equity of 10.87%5.47%, which results in a $1.5 million rate increase. In April 2014 the LPSC Staff issued a report indicating “that Entergy Gulf States Louisiana has properly determined its earnings for the test year ended September 30, 2013.” The $1.5 million rate increase was implemented effective with the first billing cycle of April 2014.
In accordance with the settlement of Entergy Gulf States Louisiana’s gas rate stabilization plan for the test year ended September 30, 2012, in August 2014 Entergy Gulf States Louisiana submitted for consideration a proposal for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment and relocation projects mandated by local governments. After review by the LPSC staff and inclusion of certain customer safeguards required by the LPSC staff, in December 2014, Entergy Gulf States Louisiana and the LPSC staff submitted a joint settlement for implementation of an accelerated gas pipe replacement program providing for the replacement of approximately 100 miles of pipe over the next ten years, as well as relocation of certain existing pipe resulting from local government-related infrastructure projects, and for a rider to recover the investment associated with these projects. The rider allows for recovery of approximately $65 million over ten years. The rider recovery will be adjusted on a quarterly basis to include actual investment incurred for the prior quarter and is withinsubject to the following conditions, among others: a ten-year term; application of any earnings bandwidthin excess of 10.5%10.45% as an offset to the revenue requirement of the infrastructure rider; adherence to a specified spending plan, within plus or minus fifty basis points, resulting20 percent annually; annual filings comparing actual versus planned rider spending with actual spending and explanation of variances exceeding ten percent; and an annual true-up. The joint settlement was approved by the LPSC in no rate change. January 2015. Implementation of the infrastructure rider will commence with bills rendered on and after the first billing cycle of April 2015.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In April 2010,January 2015, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff.its gas rate stabilization plan for the test year ended September 30, 2014. The revised evaluation report also resultedfiling showed an earned return on common equity of 7.20%, which results in noa $706 thousand rate change.increase. The rate increase, if approved, will be implemented effective with the first billing cycle of April 2015.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi'sMississippi’s return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi'sMississippi’s request to use a projected test year for its annual scheduled formula rate plan filing and, therefore, Entergy Mississippi will continuecontinued to use a historical test year for its annual evaluation reports under the plan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
In March 2011,2012, Entergy Mississippi submitted its formula rate plan 2010filing for the 2011 test year filing.year. The filing shows an earned return on common equity of 10.65%10.92% for the test year, which is within the earnings bandwidth and results in no change in rates. In November 2011February 2013 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that providesprovided for no change in rates.
FilingsIn March 2013, Entergy Mississippi submitted its formula rate plan filing for the 2012 test year. The filing requested a $36.3 million revenue increase to reset Entergy Mississippi’s return on common equity to 10.55%, which is a point within the formula rate plan bandwidth. In June 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, in which both parties agreed that the MPSC should approve a $22.3 million rate increase for Entergy Mississippi which, with other adjustments reflected in the City Council (Entergy New Orleans)
Formula Rate Planstipulation, would have the effect of resetting Entergy Mississippi’s return on common equity to 10.59% when adjusted for performance under the formula rate plan. In August 2013 the MPSC approved the joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff authorizing the rate increase effective with September 2013 bills. Additionally, the MPSC authorized Entergy Mississippi to defer approximately $1.2 million in MISO-related implementation costs incurred in 2012 along with other MISO-related implementation costs incurred in 2013.
On July 31, 2008,In June 2014, Entergy New OrleansMississippi filed an electric and gas baseits first general rate case withbefore the City Council. On April 2, 2009,MPSC in almost 12 years. The rate filing laid out Entergy Mississippi’s plans for improving reliability, modernizing the City Council approved a comprehensive settlement. The settlement provided forgrid, maintaining its workforce, stabilizing rates, utilizing new technologies, and attracting new industry to its service territory. Entergy Mississippi requested a net $35.3increase in revenue of $49 million reductionfor bills rendered during calendar year 2015, including $30 million resulting from new depreciation rates to update the estimated service life of assets. In addition, the filing proposed, among other things: 1) realigning cost recovery of the Attala and Hinds power plant acquisitions from the power management rider to base rates; 2) including certain MISO-related revenues and expenses in combined fuelthe power management rider; 3) power management rider changes that reflect the changes in costs and non-fuel electric revenue requirement, including conversionrevenues that will accompany Entergy Mississippi’s withdrawal from participation in the System Agreement; and 4) a formula rate plan forward test year to allow for known changes in expenses and revenues for the rate effective period. Entergy Mississippi proposed maintaining the current authorized return on common equity of a $10.610.59%.
In October 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that addressed the majority of issues in the proceeding. The stipulations provided for:
an approximate $16 million voluntary recovery credit, implementednet increase in January 2008, to a permanent reduction and substantial realignment of Grand Gulfrevenues, which reflected an agreed upon 10.07% return on common equity;
Entergy Corporation and Subsidiaries
Notes to Financial Statements
revision of Entergy Mississippi’s formula rate plan by providing Entergy Mississippi with the ability to reflect known and measurable changes to historical rate base and certain expense amounts; resolving uncertainty around and obviating the need for an additional rate filing in connection with Entergy Mississippi’s withdrawal from participation in the System Agreement; updating depreciation rates; and moving costs associated with the Attala and Hinds generating plants from the power management rider to base rates;
recovery of non-fuel MISO-related costs through a separate rider for that purpose;
a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and a determination that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset over two years beginning in February 2015, and a provision that the capital costs will be reflected in rate base. See Note 8 to the financial statements for further discussion of the Baxter Wilson outage; and
consolidation of the new nuclear generation development costs proceeding with the general rate case proceeding for hearing purposes and a determination that Entergy Mississippi would not further pursue, except as noted below, recovery of the costs that were approved for deferral by the MPSC in November 2011. The stipulations state, however, that, if Entergy Mississippi decides to move forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs are verifiable and prudent and the ESP is still valid and relevant to any such option pursued. See "New Nuclear Generation Development Costs - Entergy Mississippi" below for further discussion of the new nuclear generation development costs proceeding and subsequent write-off in 2014 of the regulatory asset related to those costs.
In December 2014 the MPSC issued an order accepting the stipulations in their entirety and approving the revenue adjustments and rate changes effective with February 2015 bills.
Filings with the City Council
(Entergy Louisiana)
In March 2013, Entergy Louisiana filed a rate case for the Algiers area, which is in New Orleans and is regulated by the City Council. Entergy Louisiana is requesting a rate increase of $13 million over three years, including a 10.4% return on common equity and a formula rate plan mechanism identical to its LPSC request. In January 2014, the City Council Advisors filed direct testimony recommending a rate increase of $5.56 million over three years, including an 8.13% return on common equity. In June 2014 the City Council unanimously approved a settlement that includes the following:
a $9.3 million base rate revenue increase to be phased in on a levelized basis over four years;
recovery of an additional $853 thousand annually through a MISO recovery rider; and
the adoption of a four-year formula rate plan requiring the filing of annual evaluation reports in May of each year, commencing May 2015, with resulting rates being implemented in October of each year. The formula rate plan includes a midpoint target authorized return on common equity of 9.95% with a +/- 40 basis point bandwidth.
The rate increase was effective with bills rendered on and after the first billing cycle of July 2014. Additional compliance filings were made with the Council in October 2014 for approval of the form of certain rate riders, including among others, a Ninemile 6 non-fuel cost recovery from fuelinterim rider, allowing for contemporaneous recovery of capacity costs related to electric base rates,the commencement of commercial operation of the Ninemile 6 generating unit and a $4.95 million gas base rate increase, both effective June 1,purchased power capacity cost recovery rider. The Ninemile 6 cost recovery interim rider was implemented in December 2014 to collect $915 thousand from Entergy Louisiana customers in the Algiers area.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(Entergy New Orleans)
Formula Rate Plan
In April 2009 with adjustment of the customer charges for all rate classes. A newCity Council approved a three-year formula rate plan was also adopted,for Entergy New Orleans, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40-40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50-50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans iswas over- or under-earning. The formula rate plan also includesincluded a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
In May 2011,2012, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports for the 20102011 test year. The filings requestedSubsequent adjustments agreed upon with the City Council Advisors indicate a $6.5$4.9 million electric rate decreasebase revenue increase and a $1.1$0.05 million gas base revenue increase as necessary under the formula rate decrease.plan. As part of the original filing, Entergy New Orleans also requested to increase annual funding for its storm reserve by approximately $5.7 million for five years. On September 26, 2012, Entergy New Orleans made a filing with the City Council that implemented the $4.9 million electric formula rate plan rate increase and the City Council’s Advisors reached a settlement that results in an $8.5 million incremental electric rate decrease and a $1.6$0.05 million gas formula rate decrease. The settlement also provides for the deferral of $13.4 million of Michoud plant maintenance expenses incurred in 2010 and the establishment of a regulatory asset that will be amortized over the period October 2011 through September 2018. The City Council approved the settlement in September 2011.plan rate increase. The new rates were effective with the first billing cycle in October 2012. In August 2013 the City Council unanimously approved a settlement of all issues in the formula rate plan proceeding. Pursuant to the terms of the settlement, Entergy New Orleans implemented an approximately $1.625 million net decrease to the electric rates that were in effect prior to the electric rate increase implemented in October 2012, with no change in gas rates. Entergy New Orleans refunded to customers approximately $6 million over the four-month period from September 2013 through December 2013 to make the electric rate decrease effective as of the first billing cycle of October 2011.2012. Entergy New Orleans had previously recorded provisions for the majority of the refund to customers, but recorded an additional $1.1 million provision in second quarter 2013 as a result of the settlement. Entergy New Orleans’s formula rate plan ended with the 2011 test year and has not been extended. Entergy New Orleans is recovering the costs of its power purchase agreement with Entergy Louisiana for 20% of the capacity and energy of the Ninemile Unit 6 generating station, which commenced operation in December 2014, through a special Ninemile Unit 6 rider.
TheA 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. In October 2013 the City Council approved the extension of the current Energy Smart program through December 2014. The City Council approved the use of $3.5 million of rough production cost equalization funds for program costs. In addition, Entergy New Orleans will be allowed to recover its lost contribution to fixed costs and to earn an incentive for meeting program goals. In January 2015 the City Council approved extending the Energy Smart program through March 2015 and using $1.2 million of rough production cost equalization funds to cover program costs for the extended period. Additionally, the City Council approved funding for the Energy Smart 2 programs from April 2015 through March 2017 using the remainder of the approximately $12.8 million of 2014 rough production cost equalization funds, and with any remaining costs being recovered through the fuel adjustment clause.
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
2009 Rate Case
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testimony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River Bend decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2011 Rate Case
In November 2011, Entergy Texas filed a rate case requesting a $112 million base rate increase reflecting a 10.6% return on common equity based on an adjusted June 2011 test year. The rate case also proposed a purchased power recovery rider. The parties have agreed to a procedural schedule that contemplates a final decision by July 30, 2012, with rates relating back to June 30, 2012. On January 12, 2012, the PUCT voted not to address the purchased power recovery rider in the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
current rate case, but the PUCT voted to set a baseline in the rate case proceeding that would be applicable if a purchased power capacity rider is approved in a separate proceeding. In April 2012 the PUCT Staff filed direct testimony recommending a base rate increase of $66 million and a 9.6% return on common equity. The PUCT Staff, however, subsequently filed a statement of position in the proceeding indicating that it was still evaluating the position it would ultimately take in the case regarding Entergy Texas’s recovery of purchased power capacity costs and Entergy Texas’s proposal to defer its MISO transition expenses. In April 2012, Entergy Texas filed rebuttal testimony indicating a revised request for a $105 million base rate increase. A hearing was held in late-April through early-May 2012.
In September 2012 the PUCT issued an order approving a $28 million rate increase, effective July 2012. The order includes a finding that “a return on common equity (ROE) of 9.80 percent will allow [Entergy Texas] a reasonable opportunity to earn a reasonable return on invested capital.” The order also provides for increases in depreciation rates and the annual storm reserve accrual. The order also reduced Entergy Texas’s proposed purchased power capacity costs, stating that they are not known and measurable; reduced Entergy Texas’s regulatory assets associated with Hurricane Rita; excluded from rate recovery capitalized financially-based incentive compensation; included $1.6 million of MISO transition expense in base rates, and reduced Entergy’s Texas’s fuel reconciliation recovery by $4 million because it disagreed with the line-loss factor used in the calculation. After considering the progress of the proceeding in light of the PUCT order, Entergy Texas recorded in the third quarter 2012 an approximate $24 million charge to recognize that assets associated with Hurricane Rita, financially-based incentive compensation, and fuel recovery are no longer probable of recovery. Entergy Texas continues to believe that it is entitled to recover these prudently incurred costs, however, and it filed a motion for rehearing regarding these and several other issues in the PUCT’s order on October 4, 2012. Several other parties have also filed motions for rehearing of the PUCT’s order. The PUCT subsequently denied rehearing of substantive issues. Several parties, including Entergy Texas, have appealed the PUCT’s order to the Travis County District Court. A hearing was held in July 2014. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced above, which was found in favor of Entergy Texas. In November 2014, Entergy Texas appealed the Travis County District Court decision and the PUCT appealed the decision on the line-loss factor issue. Entergy Texas expects to file briefs during the first half of 2015.
2013 Rate Case
In September 2013, Entergy Texas filed a rate case requesting a $38.6 million base rate increase reflecting a 10.4% return on common equity based on an adjusted test year ending March 31, 2013. The rate case also proposed (1) a rough production cost equalization adjustment rider recovering Entergy Texas’s payment to Entergy New Orleans to achieve rough production cost equalization based on calendar year 2012 production costs and (2) a rate case expense rider recovering the cost of the 2013 rate case and certain costs associated with previous rate cases. The rate case filing also included a request to reconcile $0.9 billion of fuel and purchased power costs and fuel revenues covering the period July 2011 through March 2013. The fuel reconciliation also reflects special circumstances fuel cost recovery of approximately $22 million of purchased power capacity costs. In January 2014 the PUCT staff filed direct testimony recommending a retail rate reduction of $0.3 million and a 9.2% return on common equity. In March 2014, Entergy Texas filed an Agreed Motion for Interim Rates. The motion explained that the parties to this proceeding have agreed that Entergy Texas should be allowed to implement new rates reflecting an $18.5 million base rate increase, effective for usage on and after April 1, 2014, as well as recovery of charges for rough production cost equalization and rate case expenses. In March 2014 the State Office of Administrative Hearings, the body assigned to hear the case, approved the motion. In April 2014, Entergy Texas filed a unanimous stipulation in this case. Among other things, the stipulation provides for an $18.5 million base rate increase, recovery over three years of the calendar year 2012 rough production cost equalization charges and rate case expenses, and states a 9.8% return on common equity. In addition, the stipulation finalizes the fuel and purchased power reconciliation covering the period July 2011 through March 2013, with the parties stipulating an immaterial fuel disallowance. No special circumstances recovery of purchased power capacity costs was allowed. In April 2014 the State Office of Administrative Hearings remanded the case back to the PUCT for final processing. In May 2014 the PUCT approved the stipulation. No motions for rehearing were filed during the statutory rehearing period.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In September 2014, Entergy Texas filed for a distribution cost recovery factor rider based on a law that was passed in 2011 allowing for the recovery of increases in capital costs associated with distribution plant. Entergy Texas requested collection of approximately $7 million annually from retail customers. The parties reached a unanimous settlement authorizing recovery of $3.6 million annually commencing with usage on and after January 1, 2015. A State Office of Administrative Hearings ALJ issued an order in December 2014 authorizing this recovery on an interim basis and remanded the case to the PUCT. In February 2015 the PUCT entered a final order, making the settlement final and the interim rates permanent.
Entergy Louisiana and Entergy Gulf States Louisiana Business Combination
In June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the LPSC. The report contained a preliminary analysis of the potential combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility, including an overview of the combination that identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it would seek authorization to transfer to Entergy New Orleans the assets that currently support the provision of service to Entergy Louisiana’s customers in Algiers. Entergy Louisiana subsequently filed the referenced application with the City Council in October 2014. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.
On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.
The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. In December 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and the Algiers asset transfer. In January 2015, Entergy Services filed an application with the FERC for financing authority for the combined company. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.
The procedural schedule in the LPSC business combination proceeding calls for LPSC Staff and intervenor testimony to be filed in March 2015, with a hearing scheduled for June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015. In the City Council business combination proceeding, the City Council announced through a resolution that it would not initiate an active review of the business combination filing, but instead would establish a business combination docket for the limited purpose of receiving information filings relative to the business combination proceedings at the LPSC.
It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation
Entergy Corporation and Subsidiaries
Notes to Financial Statements
value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all of the liabilities of Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the liabilities of Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and hold the membership interests in New Entergy Gulf States Louisiana.
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.
Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.
Algiers Asset Transfer (Entergy Louisiana and Entergy New Orleans)
In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently serve Entergy Louisiana’s customers in Algiers. The transaction is expected to result in the transfer of net assets of approximately $60 million. The Algiers asset transfer is also subject to regulatory review and approval of the FERC. As discussed previously, Entergy Louisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Entergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and the FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In November 2014 the City Council approved a resolution establishing a procedural schedule that provides for a hearing on the joint application in late-May 2015, with a decision to be rendered no later than June 2015.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement.
In June 2005, the FERC issued a decision in System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing. The FERC decision concluded, among other things, that:
· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
94
· | In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
Entergy Corporation and Subsidiaries· | In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. |
Notes to Financial Statements· |
The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
The FERC’s decision reallocates total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies whose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effectsThe financial consequences of the FERC’s decision requires assumptions regardingare determined by the future total production cost of each Utility operating company, which assumptions includeare affected by the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increasegenerally increased the amount by which Entergy Arkansas’s total production costs arewere below the Entergy System average production costs.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The LPSC, APSC, MPSC, and the Arkansas Electric Energy Consumers appealed the FERC’s December 2005 decision to the United States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit concluded that the FERC’s orders had failed to adequately explain both its conclusion that it was prohibited from ordering refunds for the 20-month period from September 13, 2001 - May 2, 2003 and its determination to implement the bandwidth remedy commencing on January 1, 2006, rather than June 1, 2005. The D.C. Circuit remanded the case to the FERC for further proceedings on these issues.
OnIn October 20, 2011, the FERC issued an order addressing the D.C. Circuit remand on these two issues. On the first issue, the FERC concluded that it did have the authority to order refunds, but decided that it would exercise its equitable discretion and not require refunds for the 20-month period from September 13, 2001 - May 2, 2003. Because the ruling on refunds relied on findings in the interruptible load proceeding, thatwhich is discussed in a separate section below, the FERC concluded that the refund ruling will be held in abeyance pending the outcome of the rehearing requests in that proceeding. On the second issue, the FERC reversed its prior decision and ordered that the prospective bandwidth remedy begin on June 1, 2005 (the date of its initial order in the proceeding) rather than January 1, 2006, as it had previously ordered. Pursuant to the October 20, 2011 order, Entergy was required to calculate the additional bandwidth payments for the period June - December 2005 utilizing the bandwidth formula tariff prescribed by the FERC that was filed in a December 2006 compliance filing and accepted by the FERC in an April 2007 order. As is the case with bandwidth remedy payments, these payments and receipts will ultimately be paid by Utility operating company customers to other Utility operating company customers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2011, Entergy filed with the FERC its compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s October 2011 order. The filing shows the following payments/receipts among the Utility operating companies:
|
| |
| | Payments or (Receipts) |
| | (In Millions) |
| Entergy Arkansas | $156 |
| Entergy Gulf States Louisiana | ($75) |
| Entergy Louisiana | $- — |
| Entergy Mississippi | ($33) |
| Entergy New Orleans | ($5) |
| Entergy Texas | ($43) |
Entergy Arkansas made its payment in January 2012. In February 2012, Entergy Arkansas filed for an interim adjustment to its production cost allocation rider requesting that the $156 million payment be collected from customers over the 22-month period from March 2012 through December 2013. On February 27,In March 2012 the APSC staff responded to Entergy Arkansas’s filing and requestedissued an order stating that the APSC: 1) determine whether Entergy Arkansas must make a request separatepayment can be recovered from the production cost allocation rider to ask for recovery of the payment and 2) find that Arkansas law does not allow retroactive ratemaking and not permit recovery of the payment fromretail customers through the production cost allocation rider. In the alternative the APSC staff requested that the APSC determine that an interim production cost allocation rider, rate does not become effective without an APSC order.
subject to refund. The LPSC and the APSC have requested rehearing of the FERC’s October 2011 order. In December 2013 the LPSC filed a petition for a writ of mandamus at the United States Court of Appeals for the D.C. Circuit. In its petition, the LPSC requested that the D.C. Circuit issue an order compelling the FERC to issue a final order on pending rehearing requests. In its response to the LPSC petition, the FERC committed to rule on the pending rehearing request before the end of February. In January 2014 the D.C. Circuit denied the LPSC’s petition. The APSC, the LPSC, the PUCT, and other parties intervened in the December 2011 compliance filing proceeding, and the APSC and the LPSC also filed protests.
Calendar YearIn February 2014 the FERC issued a rehearing order addressing its October 2011 Production Costsorder. The FERC denied the LPSC’s request for rehearing on the issues of whether the bandwidth remedy should be made effective earlier than June 1, 2005, and whether refunds should be ordered for the 20-month refund effective period. The FERC granted the LPSC’s rehearing request on the issue of interest on the bandwidth payments/receipts for the June - December 2005 period, requiring that interest be accrued from June 1, 2006 until the date those bandwidth payments/receipts are made. Also in February 2014 the FERC issued an order rejecting the December 2011 compliance filing that calculated the bandwidth payments/receipts for the June - December 2005 period. The FERC order required a new compliance filing that calculates the bandwidth payments/receipts for the June - December 2005 period based on monthly data for the seven individual months including interest pursuant to the February 2014 rehearing order. Entergy has sought rehearing of the February 2014 orders with respect to the FERC’s determinations regarding interest. In April 2014 the LPSC filed a petition for review of the FERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit. The appeal is currently being held in abeyance pending resolution of Entergy’s request for rehearing with respect to the FERC’s determinations regarding interest.
The liabilitiesIn April and assets forMay 2014, Entergy filed with the preliminary estimate ofFERC an updated compliance filing that provides the payments and receipts required to implement the FERC’s remedy based on calendar year 2011 production costs were recorded in December 2011, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2012.pursuant to the FERC’s February 2014 orders. The filing shows the following net payments and receipts, including interest, among the Utility operating companies:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| |
| | Payments or (Receipts) |
| | (In Millions) |
| |
| Entergy Arkansas | $37 68 |
| Entergy Gulf States Louisiana | $- ($10) |
| Entergy Louisiana | ($37)$— |
| Entergy Mississippi | $- ($11) |
| Entergy New Orleans | $- 2 |
| Entergy Texas | $- ($49) |
These payments were made in May 2014. The LPSC, City Council, and APSC have filed protests.
Calendar Year 2014 Production Costs
Based on certain year-to-date information, Entergy preliminarily estimates that no payments and receipts are required in 2015 to implement the FERC’s remedy based on calendar year 2014 production costs. The actual payments/receipts for 2012,2015, based on calendar year 20112014 production costs, will not be calculated until the Utility operating companies’ 2014 FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
2011 Rate Filing Based on Calendar Year 2010 Production Costs
In May 2011, Entergy filed with the FERC the 2011 rates in accordance with the FERC’s orders in the System Agreement proceeding. The filing shows the following payments/receipts among the Utility operating companies for 2011, based on calendar year 2010 production costs, commencing for service in June 2011, are necessary to achieve rough production cost equalization under the FERC’s orders:
| Payments or
(Receipts)
|
| (In Millions) |
Entergy Arkansas | $77 |
Entergy Gulf States Louisiana | ($12) |
Entergy Louisiana | $- |
Entergy Mississippi | ($40) |
Entergy New Orleans | ($25) |
Entergy Texas | $- |
Several parties intervened in the proceeding at the FERC, including the LPSC, which filed a protest as well. In July 2011, the FERC accepted Entergy's proposed rates for filing, effective June 1, 2011, subject to refund, set the proceeding for hearing procedures, and then held those procedures in abeyance pending FERC decisions in the prior production cost proceedings currently before the FERC on review.
Prior Years’ Rough Production Cost Equalization Rates
Each May since 2007 Entergy has filed with the FERC the rates to implement the FERC’s orders in the System Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are necessary to achieve rough production cost equalization as defined by the FERC’s orders:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Payments (Receipts) |
| | 2007 | | 2008 | | 2009 | | 2010 | | 2011 | | 2012 | | 2013 | | 2014 |
| | (In Millions) | | |
| Entergy Arkansas |
| $252 |
| |
| $252 |
| |
| $390 |
| |
| $41 |
| |
| $77 |
| |
| $41 |
| |
| $— |
| |
| $— |
|
| Entergy Gulf States Louisiana |
| ($120 | ) | |
| ($124 | ) | |
| ($107 | ) | |
| $— |
| |
| ($12 | ) | |
| $— |
| |
| $— |
| |
| $— |
|
| Entergy Louisiana |
| ($91 | ) | |
| ($36 | ) | |
| ($140 | ) | |
| ($22 | ) | |
| $— |
| |
| ($41 | ) | |
| $— |
| |
| $— |
|
| Entergy Mississippi |
| ($41 | ) | |
| ($20 | ) | |
| ($24 | ) | |
| ($19 | ) | |
| ($40 | ) | |
| $— |
| |
| $— |
| |
| $— |
|
| Entergy New Orleans |
| $— |
| |
| ($7 | ) | |
| $— |
| |
| $— |
| |
| ($25 | ) | |
| $— |
| |
| ($15 | ) | |
| ($15 | ) |
| Entergy Texas |
| ($30 | ) | |
| ($65 | ) | |
| ($119 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| $15 |
| |
| $15 |
|
| | | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| | | (In Millions) |
| | | | | | | | | |
| Entergy Arkansas | | $252 | | $252 | | $390 | | $41 |
| Entergy Gulf States Louisiana | | ($120) | | ($124) | | ($107) | | $- |
| Entergy Louisiana | | ($91) | | ($36) | | ($140) | | ($22) |
| Entergy Mississippi | | ($41) | | ($20) | | ($24) | | ($19) |
| Entergy New Orleans | | $- | | ($7) | | $- | | $- |
| Entergy Texas | | ($30) | | ($65) | | ($119) | | $- |
The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas. Entergy Texas proposed a rough production cost equalization adjustment rider in its September 2013 rate filing, which is pending. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See “Fuel and purchased power cost recovery, Entergy Texas,” above for discussion of a PUCT decision that resulted in $18.6 million of trapped costs between Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below, however, for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.Arkansas related to a contract with AmerenUE.
Based on the FERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 97
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas recordedand, for December 2012 and 2013, Entergy Texas, record accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas recordedrecord accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy based on calendar year 2006 production costs.remedy. Entergy Arkansas recordedand, for December 2012 and 2013, Entergy Texas, record a corresponding regulatory asset for itsthe right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas recordedrecord corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice each year since then. The regulatory asset and liabilities are shown as “System Agreement cost equalization” on the respective balance sheets.
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverable under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ’s initial decision concluded, among other things, that: (1) the decisions to not exercise Entergy Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a portion of the bandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of nuclear depreciation and decommissioning expense reflected in the bandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the retail regulators for purposes of retail ratemaking. Following briefing by the parties, the matter was submitted to the FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and overturning certain
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of the ALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Arkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and requested clarification on certain other portions of the decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds, of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
In May 2012, the FERC issued an order on rehearing in the proceeding. The order may result in the reallocation of costs among the Utility operating companies, although there are still FERC decisions pending in other System Agreement proceedings that could affect the rough production cost equalization payments and receipts. The FERC directed Entergy, within 45 days of the issuance of a pending FERC order on rehearing regarding the functionalization of costs in the 2007 rate filing, to file a comprehensive bandwidth recalculation report showing updated payments and receipts in the 2007 rate filing proceeding. The May 2012 FERC order also denied Entergy’s request for rehearing regarding the AmerenUE contract and ordered Entergy Arkansas to refund to AmerenUE the rough production cost equalization payments collected from AmerenUE. Under the terms of the FERC’s order a refund of $30.6 million, including interest, was made in June 2012. Entergy and the LPSC appealed certain aspects of the FERC’s decisions to the U.S. Court of Appeals for the D.C. Circuit. On December 7, 2012, the D.C. Circuit dismissed Entergy’s petition for review as premature because Entergy filed a rehearing request of the May 2012 FERC order and that rehearing request is still pending. The court also ordered that the LPSC’s appeal be held in abeyance and that the parties file
Entergy Corporation and Subsidiaries
Notes to Financial Statements
motions to govern further proceedings within 30 days of the FERC’s completion of the ongoing “Entergy bandwidth proceedings.” On October 16, 2013, the FERC issued two orders related to this proceeding. The first order provided clarification with regard to the derivation of the ratio that should be used to functionalize net operating loss carryforwards for purposes of the annual bandwidth filings. The first order required a compliance filing that Entergy made in November 2013. The second order denied Entergy’s request for rehearing of the FERC’s prior determination that interest should be included on recalculated payment and receipt amounts required in this particular proceeding due to the length of time that had passed. Entergy subsequently appealed certain aspects of the FERC’s decisions to the U.S. Court of Appeals for the D.C. Circuit. On January 23, 2014, the D.C. Circuit returned the LPSC’s appeal to the active docket and consolidated it with Entergy’s petition for appellate review. The appeals are pending. In July 2014 the FERC issued an order accepting Entergy Services’ November 2013 compliance filing. The FERC directed Entergy Services to make a comprehensive bandwidth recalculation report by September 15, 2014 showing all the updated payment/receipt amounts based on the 2006 calendar year data in compliance with all bandwidth formula and bandwidth calculation adjustments that the FERC has accepted or ordered for those years. The FERC also directed the Entergy Operating Companies to make any true-up bandwidth payments associated with the 2006 bandwidth recalculation report with interest following the filing of the comprehensive recalculation report. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council, have intervened in the proceeding without filing a protest. In direct testimony filed onin January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies. In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did onin August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. In October 2011 the FERC issued an order on the ALJ’s initial decision. The FERC’s order resulted in a minor reallocation of payments/receipts among the Utility operating companies on one issue in the 2008 rate filing. Entergy made a compliance filing in December 2011 showing the updated payment/receipt amounts. The LPSC filed a protest in response to the compliance filing. In January 2013 the FERC issued an order accepting Entergy’s compliance filing. In the January 2013 order the FERC required Entergy to include interest on the recalculated bandwidth payment and receipt amounts for the period from June 1, 2008 until the date of the Entergy intra-system bill that will reflect the bandwidth recalculation amounts for calendar year 2007. In February 2013, Entergy filed a request for rehearing of the FERC’s ruling requiring interest. In March 2013 the LPSC filed a petition for review with the U.S. Court of Appeals for the Fifth Circuit seeking appellate review of the FERC’s earlier orders addressing the ALJ’s initial decision. In July 2014 the FERC issued an order denying Entergy’s rehearing request and decided that it is appropriate to allow interest to be paid on the bandwidth recalculation amounts. The FERC also directed Entergy to file a comprehensive bandwidth recalculation report by September 15, 2014 showing all the updated payment/receipt amounts based on the 2007 calendar year data in compliance with all bandwidth formula and bandwidth calculation adjustments that the FERC has accepted or ordered for that year. The FERC also directed the Entergy Operating Companies to make any true-up bandwidth payments associated with the 2007 bandwidth recalculation report with interest following the filing of the comprehensive
Entergy Corporation and Subsidiaries
Notes to Financial Statements
recalculation report. In August 2014 the Fifth Circuit issued its opinion dismissing in part and denying in part the LPSC petition for review of the FERC’s order. In December 2014 the LPSC petitioned the U.S. Supreme Court for a writ of certiorari of the Fifth Circuit’s decision. In September 2014, Entergy filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking appellate review of the FERC’s interest determination. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. In July 2009 the FERC accepted Entergy'sEntergy’s proposed rates for filing, effective June 1, 2009, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures were terminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy'sEntergy’s position in the filing, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceeding. In May 2012 the FERC issued an order affirming the ALJ’s initial decision, or finding certain issues in that decision moot. Rehearing and clarification of FERC’s order have been requested. In January 2013 the LPSC filed a protest of Entergy’s July 2012 compliance filing submitted in response to the FERC’s May 2012 order. In October 2013 the FERC issued orders denying the LPSC’s rehearing request with respect to the FERC’s May 2012 order and addressing Entergy’s compliance filing implementing the FERC’s directives in the May 2012 order. The compliance filing order referred to guidance provided in a separate order issued on that same day in the 2007 rate proceeding with respect to the ratio used to functionalize net operating loss carryforwards for bandwidth purposes and directed Entergy to make an additional compliance filing in the 2009 rate proceeding consistent with the guidance provided in that order. In November 2013 the LPSC sought rehearing of the FERC’s October 2013 order and Entergy submitted its compliance filing implementing the FERC’s directives in the October 2013 order. In August 2014, the FERC issued an order accepting the November 2013 compliance filing that was made in response to the FERC’s October 2013 order. The LPSC appealed to the U.S. Court of Appeals for the Fifth Circuit the FERC’s May 2012 and October 2013 orders. In November 2014 the Fifth Circuit issued its opinion denying the LPSC petition for review of the FERC’s order. In December 2014 the LPSC petitioned the U.S. Supreme Court for a writ of certiorari of the Fifth Circuit’s decision. See discussion below regarding the comprehensive bandwidth recalculation and filings made with the FERC in connection with this proceeding.
Comprehensive Bandwidth Recalculation for 2007, 2008, and 2009 Rate Filing Proceedings
In July 2014 the FERC issued four orders in connection with various Service Schedule MSS-3 rough production cost equalization formula compliance filings and rehearing requests. Specifically, the FERC accepted Entergy Services’ revised methodologies for calculating certain cost components of the formula and affirmed its prior ruling requiring interest on the true-up amounts. The FERC directed that a comprehensive recalculation of the formula be performed for the filing years 2007, 2008, and 2009 based on calendar years 2006, 2007, and 2008 production costs. In September 2014, Entergy filed with the FERC its compliance filing that provides the payments and receipts, including interest, among the Utility operating companies pursuant to the FERC’s orders for the 2007, 2008, and 2009 rate filing proceedings. The filing shows the following additional payments/receipts among the Utility operating companies:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| |
| Payments (Receipts) |
| (In Millions) |
| Entergy Arkansas | $38 |
| Entergy Gulf States Louisiana | ($22) |
| Entergy Louisiana | ($16) |
| Entergy Mississippi | $16 |
| Entergy New Orleans | ($1) |
| Entergy Texas | ($15) |
Entergy Arkansas and Entergy Mississippi made the payments in September and October 2014. The updated compliance filings in the 2008 and 2009 rate filing proceedings have not been protested, and one protest was filed at the FERC related to the 2007 rate filing proceeding. The filings are pending at the FERC.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC’s orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy’s proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for
Entergy Corporation and Subsidiaries
Notes to Financial Statements
hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in March 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC Staff to show cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. In March 2011 the ALJ issued an order placing this proceeding in abeyance. In October 2013 the FERC issued an order granting clarification and denying rehearing with respect to its October 2011 rehearing order in this proceeding. The FERC clarified that in a bandwidth proceeding parties can challenge erroneous inputs, implementation errors, or prudence of cost inputs, but challenges to the bandwidth formula itself must be raised in a Federal Power Act section 206 complaint or section 205 filing. Subsequently in October 2013 the presiding ALJ lifted the stay order holding in abeyance the hearing previously ordered by the FERC and directing that the remaining issues proceed to a hearing on the merits. The hearing was held in March 2014 and the presiding ALJ issued an initial decision in September 2014. Briefs on exception were filed in October 2014, and the case is pending before the FERC.
2011 Rate Filing Based on Calendar Year 2010 Production Costs
In May 2011, Entergy filed with the FERC the 2011 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. In July 2011 the FERC accepted Entergy’s proposed rates for filing, effective June 1, 2011, subject to refund, set the proceeding for hearing procedures, and then held those procedures in abeyance pending FERC decisions in the prior production cost proceedings currently before the FERC on review. In January 2014 the LPSC filed a petition for a writ of mandamus at the United States Court of Appeals for the Fifth Circuit. In its petition, the LPSC requested that the Fifth Circuit issue an order compelling the FERC to issue a final order in several proceedings related to the System Agreement, including the 2011 rate filing based on calendar year 2010 production costs and the 2012 and 2013 rate filings discussed below. In March 2014 the Fifth Circuit rejected the LPSC’s petition for a writ of mandamus. In December 2014 the FERC rescinded its earlier abeyance order and consolidated the 2011 Rate Filing with the 2012, 2013, and 2014 Rate Filings for settlement and hearing procedures. A procedural schedule was adopted in February 2015, and a hearing on the merits is scheduled for November 2015.
2012 Rate Filing Based on Calendar Year 2011 Production Costs
In May 2012, Entergy filed with the FERC the 2012 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also
Entergy Corporation and Subsidiaries
Notes to Financial Statements
filed a protest. In August 2012 the FERC accepted Entergy’s proposed rates for filing, effective June 2012, subject to refund, set the proceeding for hearing procedures, and then held those procedures in abeyance pending FERC decisions in the prior production cost proceedings currently before the FERC on review. In December 2014 the FERC rescinded its earlier abeyance order and consolidated the 2012 Rate Filing with the 2011, 2013, and 2014 Rate Filings for settlement and hearing procedures. A procedural schedule was adopted in February 2015, and a hearing on the merits is scheduled for November 2015.
2013 Rate Filing Based on Calendar Year 2012 Production Costs
In May 2013, Entergy filed with the FERC the 2013 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Council intervened and filed comments related to including the outcome of a related FERC proceeding in the 2013 cost equalization calculation. In August 2013 the FERC issued an order accepting the 2013 rates, effective June 1, 2013, subject to refund, set the proceeding for hearing procedures, and then held those procedures in abeyance pending FERC decisions in the prior production cost proceedings currently before the FERC on review. In December 2014 the FERC rescinded its earlier abeyance order and consolidated the 2013 Rate Filing with the 2011, 2012, and 2014 Rate Filings for settlement and hearing procedures. A procedural schedule was adopted in February 2015, and a hearing on the merits is scheduled for November 2015.
2014 Rate Filing Based on Calendar Year 2013 Production Costs
In May 2014, Entergy filed with the FERC the 2014 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Council intervened and filed comments. In December 2014 the FERC issued an order accepting the 2014 rates, effective June 1, 2014, subject to refund, set the proceeding for hearing procedures, and consolidated the 2014 Rate Filing with the 2011, 2012, and 2013 Rate Filings for settlement and hearing procedures. A procedural schedule was adopted in February 2015, and a hearing on the merits is scheduled for November 2015.
Interruptible Load Proceeding
In April 2007, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads. In its opinion the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the matter to the FERC for a more considered determination on the issue of refunds. The FERC issued its order on remand in September 2007, in which it directed Entergy to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, the order directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In November 2007 the Utility operating companies filed a refund report describing the refunds to be issued pursuant to the FERC'sFERC’s orders. The LPSC filed a protest to the refund report in December 2007, and the Utility operating companies filed an answer to the protest in January 2008. The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companies that were due a refund under the decision. The APSC and the Utility operating companies appealed the FERC decisions to the D.C. Circuit. Because of its refund obligation to its customers as a result of this proceeding and a related LPSC proceeding, Entergy Louisiana recorded provisions during 2008 of approximately $16 million, including interest, for rate refunds. The refunds were made in the fourth quarter 2009.
Following the filing of petitioners'petitioners’ initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC’s decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC. The D.C. Circuit granted the FERC’s unopposed motion in June 2009. In December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate
Entergy Corporation and Subsidiaries
Notes to Financial Statements
to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. In August 2010 the FERC issued an order stating that it has the authority and refunds are appropriate. The APSC, MPSC, and Entergy requested rehearing of the FERC’s decision. In June 2011 the FERC issued an order granting rehearing in part and denying rehearing in part, in which the FERC determined to invoke its discretion to deny refunds. The FERC held that in this case where “the Entergy system as a whole collected the proper level of revenue, but, as was later established, incorrectly allocated peak load responsibility among the various Entergy operating companies….the Commission will apply here our usual practice in such cases, invoking our equitable discretion to not order refunds, notwithstanding our authority to do so.” The LPSC has requested rehearing of the FERC’s June 2011 decision. OnIn July 2011 the refunds made in the fourth quarter 2009 described above were reversed. In October 6, 2011 the FERC issued an “Order Establishing Paper Hearing” inviting parties that oppose refunds to file briefs within 30 days addressing the LPSC’s argument that FERC precedent supports refunds under the circumstances present in this proceeding. Parties that favor refunds were then invited to file reply briefs within 21 days of the date that the initial briefs are due. Briefs were submitted and the matter is pending.
In September 2010 the FERC had issued an order setting the refund report filed in the proceeding in November 2007 for hearing and settlement judge procedures. In May 2011, Entergy filed a settlement agreement that resolved all issues relating to the refund report set for hearing. In June 2011 the settlement judge certified the settlement as uncontested and the settlement agreement is currently pending before the FERC. In July 2011, Entergy filed an amended/corrected refund report and a motion to defer action on the settlement agreement until after the FERC rules on the LPSC’s rehearing request regarding the June 2011 decision denying refunds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Prior to the FERC’s June 2011 order on rehearing, Entergy Arkansas filed an application in November 2010 with the APSC for recovery of the refund that it paid. The APSC denied Entergy Arkansas’s application, and also denied Entergy Arkansas’s petition for rehearing. If the FERC were to order Entergy Arkansas to pay refunds on rehearing in the interruptible load proceeding the APSC’s decision would trap FERC-approved costs at Entergy Arkansas with no regulatory-approved mechanism to recover them. In August 2011, Entergy Arkansas filed a complaint in the United States District Court for the Eastern District of Arkansas asking for a declaratory judgment. In the complaint Entergy Arkansas asks the court to declarejudgment that the rejection of Entergy Arkansas’s application by the APSC is preempted by the Federal Power Act. The APSC filed a motion to dismiss the complaint. A trialIn April 2012 the United States district court dismissed Entergy Arkansas’s complaint without prejudice stating that Entergy Arkansas’s claim is not ripe for adjudication and that Entergy Arkansas did not have standing to bring suit at this time.
In March 2013 the FERC issued an order denying the LPSC’s request for rehearing of the FERC’s June 2011 order wherein the FERC concluded it would exercise its discretion and not order refunds in the proceedinginterruptible load proceeding. Based on its review of the LPSC’s request for rehearing and the briefs filed as part of the paper hearing established in October 2011, the FERC affirmed its earlier ruling and declined to order refunds under the circumstances of the case. In May 2013 the LPSC filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking review of FERC prior orders in the Interruptible Load Proceeding that concluded that the FERC would exercise its discretion and not order refunds in the proceeding. Oral argument was held on the appeal in the D.C. Circuit in September 2014. In December 2014 the D.C. Circuit issued an order on the LPSC’s appeal and remanded the case back to the FERC. The D.C. Circuit rejected the LPSC’s argument that there is scheduled for July 2012.a presumption in favor of refunds, but it held that the FERC had not adequately explained its decision to deny refunds and directed the FERC “to consider the relevant factors and weigh them against one another.”
Entergy Arkansas Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds. OnIn July 20, 2009 the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Utility operating companies filed a response to the complaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explainsexplained that the FERC already hashad determined that Entergy Arkansas’s short-term wholesale sales did not trigger the “right-of-first-refusal” provision of the System Agreement. While the D.C. Circuit recently determined that the “right-of-first-refusal” issue was not properly before the FERC at the time of its earlier decision on the issue, the LPSC has raised no additional claims or facts that would warrant the FERC reaching a different conclusion. On December 7, 2009, the FERC issued an order setting the matter for hearing and settlement procedures.
The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers of $144 million and these customers should be compensated for this harm by Entergy. In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills, which has not occurred.bills. The Utility operating companies believe the LPSC'sLPSC’s allegations are without merit. A hearing in the matter was held in August 2010.
In December 2010, the ALJ issued an initial decision. The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest. Entergy Corporation, or an Entergy Corporation subsidiary, is the shareholder of each of the Utility operating companies. Entergy disagreesdisagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision.
The FERC considerationissued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does provide authority for individual Utility operating companies to make opportunity sales for their own account and Entergy Arkansas made and priced these sales in good faith. The FERC found, however, that the System Agreement does not provide authority for an individual Utility operating company to allocate the energy associated with such opportunity sales as part of its load, but provides a different allocation authority. The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the sales was inconsistent with the System Agreement. Quantifying the effect of the initialFERC’s decision is pending.will require re-running intra-system bills for a ten-year period, and the FERC in its decision established further hearing procedures to determine the calculation of the effects. In July 2012, Entergy is unable to estimateand the LPSC filed requests for rehearing of the FERC’s June 2012 decision, which are pending with the FERC.
As required by the procedural schedule established in the calculation proceeding, Entergy filed its direct testimony that included a proposed illustrative re-run, consistent with the directives in FERC’s order, of intra-system bills for 2003, 2004, and 2006, the three years with the highest volume of opportunity sales. Entergy’s proposed illustrative re-run of intra-system bills shows that the potential damages in this matter because certain aspects of how the refundscost for Entergy Arkansas would be calculated require clarificationup to $12 million for the years 2003, 2004, and 2006, excluding interest, and the potential benefit would be significantly less than that for each of the other Utility operating companies. Entergy’s proposed illustrative re-run of the intra-system bills also shows an offsetting potential benefit to Entergy Arkansas for the years 2003, 2004, and 2006 resulting from the effects of the FERC’s order on System Agreement Service Schedules MSS-1, MSS-2, and MSS-3, and the potential offsetting cost would be significantly less than that for each of the other Utility operating companies. Entergy provided to the LPSC an illustrative intra-system bill recalculation as specified by the FERC.LPSC for the years 2003, 2004, and 2006, and the LPSC then filed answering testimony in December 2012. In its testimony the LPSC claims that the damages, excluding interest, that should be paid by Entergy Arkansas to the other Utility operating company’s customers for 2003, 2004, and 2006 are $42 million to Entergy Gulf States, Inc., $7 million to Entergy Louisiana, $23 million to Entergy Mississippi, and $4 million to Entergy New Orleans. The FERC staff and certain intervenors filed direct and answering testimony in February 2013. In April 2013, Entergy filed its rebuttal testimony in that proceeding, including a revised illustrative re-run of the intra-system bills for the years 2003, 2004, and 2006. The revised calculation
Entergy Corporation and Subsidiaries
Notes to Financial Statements
determines the re-pricing of the opportunity sales based on consideration of moveable resources only and the removal of exchange energy received by Entergy Arkansas, which increases the potential cost for Entergy Arkansas over the three years 2003, 2004, and 2006 by $2.3 million from the potential costs identified in the Utility operating companies’ prior filings in September and October 2012. A hearing was held in May 2013 to quantify the effect of repricing the opportunity sales in accordance with the FERC’s decision.
In August 2013 the presiding judge issued an initial decision in the calculation proceeding. The initial decision concludes that the methodology proposed by the LPSC, rather than the methodologies proposed by Entergy or the FERC Staff, should be used to calculate the payments that Entergy Arkansas is to make to the other Utility operating companies. The initial decision also concludes that the other System Agreement service schedules should not be adjusted and that payments by Entergy Arkansas should not be reflected in the rough production cost equalization bandwidth calculations for the applicable years. The initial decision does recognize that the LPSC’s methodology would result in an inequitable windfall to the other Utility operating companies and, therefore, concludes that any payments by Entergy Arkansas should be reduced by 20%. The LPSC, APSC, City Council, and FERC staff filed briefs on exceptions and/or briefs opposing exceptions. Entergy filed a brief on exceptions requesting that FERC reverse the initial decision and a brief opposing certain exceptions taken by the LPSC and FERC staff. The FERC’s review of the initial decision is pending. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas December 2012 Winter Storm
In January 2009December 2012 a severe winter storm consisting of ice, stormsnow, and high winds caused significant damage to Entergy Arkansas's transmission andArkansas’s distribution lines, equipment, poles, and other facilities. A law was enactedTotal restoration costs for the repair and/or replacement of Entergy Arkansas’s electrical facilities in April 2009 inareas damaged from the winter storm were $63 million, including costs recorded as regulatory assets of approximately $22 million. In the Entergy Arkansas that authorizes securitization of storm damage restoration costs. In June 20102013 rate case, the APSC issued a financing order authorizingapproved inclusion of the issuance of approximately $126.3 millionconstruction spending in rate base and approved an increase in the normal storm cost recovery bonds,accrual, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 towill effectively amortize the financial statements forregulatory asset over a discussion of the August 2010 issuance of the securitization bonds.five-year period.
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Isaac
In August 2012, Hurricane Isaac caused extensive damage to portions of Entergy’s service area in Louisiana, and to a lesser extent in Mississippi and Arkansas. The storm resulted in widespread power outages, significant damage primarily to distribution infrastructure, and the loss of sales during the power outages. In January 2013, Entergy Gulf States Louisiana and Entergy Louisiana drew $65 million and $187 million, respectively, from their funded storm reserve escrow accounts. In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs. Specifically, Entergy Gulf States Louisiana and Entergy Louisiana requested that the LPSC determine the amount of such costs that were prudently incurred and are, thus, eligible for recovery from customers. Including carrying costs and additional storm escrow funds for prior storms, Entergy Gulf States Louisiana requested an LPSC determination that $73.8 million in system restoration costs were prudently incurred and Entergy Louisiana requested an LPSC determination that $247.7 million in system restoration costs were prudently incurred. In May 2013, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana's and Entergy Louisiana's storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55). The LPSC Staff filed direct testimony in September 2013 concluding that Hurricane
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Isaac system restoration costs incurred by Entergy Gulf States Louisiana and Entergy Louisiana were reasonable and prudent, subject to proposed minor adjustments which totaled approximately 1% of each company’s costs. Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ($90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Gulf States Louisiana committed to pass on to customers a minimum of $6.9 million of customer benefits through annual customer credits of approximately $1.4 million for five years. Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.
In July 2014, Entergy Gulf States Louisiana issued $110 million of 3.78% Series first mortgage bonds due April 2025 and used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes. In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025 and used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.
In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $71 million in bonds under Act 55 of the Louisiana Legislature. From the $69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $66 million directly to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana used the $66 million received from the LURC to acquire 662,426.80 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.
In August 2014 the LCDA issued another $243.85 million in bonds under Act 55 of the Louisiana Legislature. From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana. Entergy Louisiana used the $227 million received from the LURC to acquire 2,272,725.89 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA and there is no recourse against Entergy, Entergy Gulf States Louisiana, or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy'sEntergy’s service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana, and Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings)55). Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana'sLouisiana’s storm reserve in the amount of $90 million and Entergy Louisiana'sLouisiana’s storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana'sLouisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75$27.8 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55$5.6 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010, the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In July 2010, the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008 the Louisiana State Bond Commission granted final approval of the Act 55 financings.
In July 2008, the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In August 2008, the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred
Entergy Corporation and Subsidiaries
Notes to Financial Statements
membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion. In February 2012, Entergy Gulf States Louisiana sold 500,000 of its Class A preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, to a third party in exchange for $51 million plus accrued but unpaid distributions on the units. The 500,000 preferred membership units are mandatorily redeemable in January 2112.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy Mississippi
On July 1, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, wherein both parties agreed that approximately $32 million in storm restoration costs incurred in 2011 and 2012 were prudently incurred and chargeable to the storm damage provision, while approximately $700,000 in prudently incurred costs were more properly recoverable through the formula rate plan. Entergy Mississippi and the Mississippi Public Utilities Staff also agreed that the storm damage accrual should be increased from $750,000 per month to $1.75 million per month. In September 2013 the MPSC approved the joint stipulation with the increase in the storm damage accrual effective with October 2013 bills. In February 2015, Entergy Mississippi provided notice to the Mississippi Public Utilities Staff that the storm damage accrual would be set to zero effective with the March 2015 billing cycle as a result of Entergy Mississippi's storm damage accrual balance exceeding $15 million as of January 31, 2015, but will return to its current level when the storm damage accrual balance becomes less than $10 million.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
In October 2006, the City Council approved a rate filing settlement agreement that, among other things, authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider that began in March 2007. These storm reserve funds will beare held in a restricted escrow account.account until needed in response to a storm.
In August 2012, Hurricane Isaac caused extensive damage to Entergy Texas
Entergy Texas filed an applicationNew Orleans’s service area. The storm resulted in April 2009 seeking a determination that $577.5 millionwidespread power outages, significant damage primarily to distribution infrastructure, and the loss of Hurricane Ike and Hurricane Gustavsales during the power outages. Total restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009,the repair and/or replacement of Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues inNew Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million. Entergy New Orleans withdrew $17.4 million from the storm cost recovery case. Underreserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs. In January 2015 the City Council issued a resolution approving the terms of a joint agreement in principle filed by Entergy New Orleans, Entergy Louisiana, and the agreement $566.4City Council Advisors determining, among other things, that Entergy New Orleans’s prudently-incurred storm recovery costs were $49.3 million, plus carryingof which $31.7 million, net of reimbursements from the storm reserve escrow account, remains recoverable from Entergy New Orleans’s electric customers. The resolution also directs Entergy New Orleans to file an application to securitize the unrecovered Council-approved storm recovery costs are eligible for recovery. Insurance proceeds will be credited as an offsetof $31.7 million pursuant to the securitized amount. OfLouisiana Electric Utility Storm Recovery Securitization Act (Louisiana Act 64). In addition, the $11.1 million difference betweenresolution found that it is reasonable for Entergy Texas’s requestNew Orleans to include in the principal amount of its potential securitization the costs to fund and replenish Entergy New Orleans’s storm reserve in an amount that achieves the amount agreedCouncil-approved funding level of $75 million. In January 2015, in compliance with that directive, Entergy New Orleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the financing of Entergy New Orleans's storm costs, storm reserves, and issuance costs pursuant to which is part of the black box agreement and notLouisiana Act 64.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
directly attributable to any specific individual issues raised, $6.8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
New Nuclear Generation Development Costs
Entergy Gulf States Louisiana and Entergy Louisiana
Entergy Gulf States Louisiana and Entergy Louisiana have been developing and are preserving a project option for new nuclear generation at River Bend. In March 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the limited development activities necessary to preserve an option to construct a new unit at River Bend. At its June 2012 meeting the LPSC voted to uphold an ALJ recommendation that the request of Entergy Gulf States Louisiana and Entergy Louisiana be declined on the basis that the LPSC’s rule on new nuclear development does not apply to activities to preserve an option to develop and on the further grounds that the companies improperly engaged in advanced preparation activities prior to certification. The LPSC directed that Entergy Gulf States Louisiana and Entergy Louisiana be permitted to seek recovery of these costs in their upcoming rate case filings that were subsequently filed in February 2013. In the resolution of the rate case proceeding the LPSC provided for an eight-year amortization of costs incurred in connection with the potential development of new nuclear generation at River Bend, without carrying costs, beginning in December 2014, provided, however, that amortization of these costs shall not result in a future rate increase. As of December 31, 2014, Entergy Gulf States Louisiana and Entergy Louisiana each have a regulatory asset of $29.2 million on its balance sheet related to these new nuclear generation development costs.
Entergy Mississippi
Pursuant to the Mississippi Baseload Act and the Mississippi Public Utilities Act, Entergy Mississippi ishad been developing and preserving a project option for new nuclear generation at Grand Gulf Nuclear Station. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In 2010, Entergy Mississippi paid for and has recognized on its books $49 million in costs associated with the development of new nuclear generation at Grand Gulf; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. In October 2010, Entergy Mississippi filed an application with the MPSC requesting that the MPSC determine that it iswas in the public interest to preserve the option to construct new nuclear generation at Grand Gulf and that the MPSC approve the deferral of Entergy Mississippi’s costs incurred to date and in the future related to this project, including the accrual of AFUDC or similar carrying charges. In October 2011, Entergy Mississippi and the Mississippi Public Utilities Staff filed with the MPSC a joint stipulation.stipulation that the MPSC approved in November 2011. The stipulation statesstated that there should be a deferral of the $57 million of costs incurred through September 2011 in connection with planning, evaluation, monitoring, and other and related generation resource development activities for new nuclear generation at Grand Gulf. The costs shall be treated as a regulatory asset until
In October 2014, Entergy Mississippi and the proceeding is resolved. The Mississippi Public Utilities Staff entered into and filed joint stipulations in Entergy Mississippi also agreeMississippi’s general rate case proceeding, which are discussed above. In consideration of the comprehensive terms for settlement in that the MPSC should conduct a hearing during 2012 to consider the relief requested by Entergy Mississippi in its application, including evidence regarding whether costs incurred in connection with planning, evaluation, monitoring, and other and related generation resource development activities for new nuclear generation at Grand Gulf were prudently incurred and are otherwise allowable. The Mississippi Public Utilities Staff and Entergy Mississippi further agree that such prudently incurred costs shall be recoverable in a manner to be determined by the MPSC. In the Stipulation,rate case proceeding, the Mississippi Public Utilities Staff and Entergy Mississippi agreeagreed that the development of a nuclear unit project option is consistent with the Mississippi Baseload Act. The Mississippi Public Utilities Staff and Entergy Mississippi further agree thatwould request consolidation of the deferral of costs incurred in connection with planning, evaluation, monitoring, and other and related generation resource development activities for new nuclear generation at Grand Gulf also is consistentdevelopment costs proceeding with the Mississippi Baseload Act.rate case proceeding for hearing purposes and will not further pursue, except as noted below, recovery of the costs deferred by MPSC order in the new nuclear generation development docket. The stipulations state, however, that, if Entergy Mississippi will not accrue carrying charges or continuedecides to accrue AFUDC onmove forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs pendingare verifiable and prudent and the outcomeESP is still valid and relevant to any such option pursued. After considering the progress of the proceeding. Thenew nuclear generation costs proceeding in light of the joint stipulations, Entergy Mississippi recorded in 2014 a $56.2 million pre-tax charge to recognize that the regulatory asset associated with new nuclear generation development is no longer probable of recovery. In December 2014 the MPSC approvedissued an order accepting in their entirety the stipulation in November 2011.October 2014 stipulations, including the findings and terms of the stipulations regarding new nuclear generation development costs.
Error in the Allocation of Transmission Costs
In the fourth quarter 2011, Entergy determined that the allocation of transmission costs among the Utility operating companies under the System Agreement inadvertently excluded certain transmission costs. This exclusion resulted in the over or understatement of System Agreement bills among the Utility operating companies during the period from 1996 through the third quarter 2011. The effect was immaterial to the balance sheets, results of operations, and cash flows of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Texas for all prior reporting periods and on a cumulative basis. Therefore, cumulative adjustments were recorded in the fourth quarter 2011 to correct for the amounts previously misstated. These adjustments increased (reduced) 2011 income before income taxes by $8.9 million for Entergy Arkansas, $5.8 million for Entergy Gulf States Louisiana, ($17.1) million for Entergy Louisiana, and ($3.1) million for Entergy Texas.
The effect was also immaterial to the balance sheets, results of operations, and cash flows of Entergy Mississippi and Entergy New Orleans for all prior reporting periods. Correcting the cumulative effect of the error in the fourth quarter 2011 would have been material, however, to the results of operations of Entergy Mississippi and Entergy New Orleans. Accordingly, Entergy Mississippi and Entergy New Orleans are restating their 2009 and 2010 financial statements. The effects of the correction for 2009 and 2010 were the following increases or (decreases) to the previously reported amounts for the following financial statement items:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Income before income taxes | | Income taxes | | Net income | | Accounts receivable- associated companies | | Taxes accrued/ Prepayments and other |
| | (In Millions) |
| | | | | | | | | | |
| Entergy Mississippi | | | | | | | | | |
| 2009 | $2.8 | | $1.1 | | $1.7 | | $- | | $- |
| 2010 | $2.7 | | $1.0 | | $1.7 | | $11.1 | | $4.3 |
| | | | | | | | | | |
| Entergy New Orleans | | | | | | | | | |
| 2009 | ($0.9) | | ($0.4) | | ($0.5) | | $- | | $- |
| 2010 | $0.2 | | $0.1 | | $0.1 | | ($5.8) | | $2.3 |
The cumulative effectsIn August 2003, a lawsuit was filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class of the correction on beginning retained earningsTexas retail customers of Entergy Gulf States, Inc. who were billed and paid for 2009 wereelectric power from January 1, 1994 to the following increasepresent. The named defendants include Entergy Corporation, Entergy Services, Entergy Power, Entergy Power Marketing Corp., and (decrease):Entergy Arkansas. Entergy Gulf States, Inc. was not a named defendant, but was alleged to be a co-conspirator. The court granted the request of Entergy Gulf States, Inc. to intervene in the lawsuit to protect its interests.
| Cumulative Effect of the Correction on
Beginning Retained Earnings for 2009
|
| |
Entergy Mississippi | $3.5 million |
Entergy New Orleans | ($3.0 million) |
Plaintiffs allege that the defendants implemented a “price gouging accounting scheme” to sell to plaintiffs and similarly situated utility customers higher priced power generated by the defendants while rejecting less expensive power offered from off-system suppliers. In particular, plaintiffs allege that the defendants manipulated and continue to manipulate the dispatch of generation so that power is purchased from affiliated expensive resources instead of buying cheaper off-system power.
TherePlaintiffs stated in their pleadings that customers in Texas were charged at least $57 million above prevailing market prices for power. Plaintiffs seek actual, consequential and exemplary damages, costs and attorneys’ fees, and disgorgement of profits. The plaintiffs’ experts have tendered a report calculating damages in a large range, from $153 million to $972 million in present value, under various scenarios as of the date of the report. The Entergy defendants have tendered expert reports challenging the assumptions, methodologies, and conclusions of the plaintiffs’ expert reports.
In March 2012 the state district court found that the case met the requirements to be maintained as a class action under Texas law. In April 2012 the court entered an order certifying the class. The defendants appealed the order to the Texas Court of Appeals – First District and oral argument was no effect onheld in May 2013. In November 2014 the Texas Court of Appeals - First District reversed the state district court’s class certification order and dismissed the case holding that the state district court lacked subject matter jurisdiction to address the issues. Plaintiffs filed a motion for rehearing and a motion for rehearing en banc. The Entergy financial statements for any period becausedefendants filed responsive briefings, and the error only involvedparties are awaiting rulings by the allocation of shared transmission costs among the Utility operating companies under the System Agreement and, therefore, had no effect on a consolidated basis.Court.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Income tax expensestaxes from continuing operations for 2011, 2010,2014, 2013, and 20092012 for Entergy Corporation and Subsidiaries consist of the following:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Current: | | | | | |
| Federal |
| $90,061 |
| |
| $88,291 |
| |
| ($47,851 | ) |
| Foreign | 90 |
| | 101 |
| | 143 |
|
| State | (12,637 | ) | | 20,584 |
| | (41,516 | ) |
| Total | 77,514 |
| | 108,976 |
| | (89,224 | ) |
| Deferred and non-current - net | 528,326 |
| | 126,935 |
| | 131,130 |
|
| Investment tax credit adjustments - net | (16,243 | ) | | (9,930 | ) | | (11,051 | ) |
| Income tax expense from continuing operations |
| $589,597 |
| |
| $225,981 |
| |
| $30,855 |
|
| | | 2011 | | 2010 | | 2009 |
| | | (In Thousands) |
| Current: | | | | | | |
| Federal | | $452,713 | | $145,161 | | ($433,105) |
| Foreign | | 130 | | 131 | | 154 |
| State | | 152,711 | | 19,313 | | (108,552) |
| Total | | 605,554 | | 164,605 | | (541,503) |
| Deferred and non-current -- net | (311,708) | | 468,698 | | 1,191,418 |
| Investment tax credit | | | | | | |
| adjustments -- net | | (7,583) | | (16,064) | | (17,175) |
| Income tax expense from | | | | | | |
| continuing operations | | $286,263 | | $617,239 | | $632,740 |
| | | | | | | |
Income tax expenses (benefit) for 2011, 2010, and 2009 for Entergy’s Registrant Subsidiaries consist of the following:
| | | | | Entergy | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | |
| 2011 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
| | | (In Thousands) | |
| Current: | | | | | | | | | | | | | | | |
| Federal | | ($12,448) | | ($30,106) | | ($136,800) | | ($9,466) | | $14,641 | | ($33,045) | | $139,529 | |
| State | | (1,751) | | 15,950 | | 34,832 | | 6,069 | | 1,724 | | 3,153 | | 16,825 | |
| Total | | (14,199) | | (14,156) | | (101,968) | | (3,397) | | 16,365 | | (29,892) | | 156,354 | |
| Deferred and non-current -- net | | 148,978 | | 105,827 | | (265,046) | | 32,380 | | (201) | | 80,993 | | (84,505) | |
| Investment tax credit | | | | | | | | | | | | | | | |
| adjustments -- net | | (2,014) | | (3,358) | | (3,197) | | (182) | | (302) | | (1,609) | | 3,104 | |
| Income taxes (benefit) | | $132,765 | | $88,313 | | ($370,211) | | $28,801 | | $15,862 | | $49,492 | | $74,953 | |
| | | | | | | | | | | | | | | | |
| | | | | Entergy | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | |
| 2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
| | | (In Thousands) | |
| Current: | | | | | | | | | | | | | | | |
| Federal | | | | $196,230 | | $73,174 | | $13,722 | | ($114,382) | | ($10,607) | | ($4,102) | |
| State | | (9,200) | | 481 | | (4,324) | | 5,959 | | 1,427 | | 1,060 | | 3,328 | |
| Total | | 105,621 | | 196,711 | | 68,850 | | 19,681 | | (112,955) | | (9,547) | | (774) | |
| Deferred and non-current -- net | | 10,328 | | (117,426) | | 918 | | 31,415 | | 129,880 | | 53,539 | | 60,305 | |
| Investment tax credit | | | | | | | | | | | | | | | |
| adjustments -- net | | (3,005) | | (3,407) | | (3,222) | | (985) | | (324) | | (1,609) | | (3,482) | |
| Income taxes (benefit) | | $112,944 | | $75,878 | | $66,546 | | $50,111 | | $16,601 | | $42,383 | | $56,049 | |
| | | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income taxes for 2014, 2013, and 2012 for Entergy’s Registrant Subsidiaries consist of the following:
| | | | | Entergy | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | | | | | | | | | | | | | | | |
| 2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
| 2014 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | | (In Thousands) |
| Current: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Federal | | ($37,544) | | ($203,651) | | $12,387 | | $20,279 | | $160,552 | | ($72,207) | | $73,183 | |
| ($34,258 | ) | |
| ($3,857 | ) | |
| ($41,052 | ) | |
| $8,103 |
| |
| ($1,924 | ) | |
| $48,610 |
| |
| $19,908 |
|
| State | | 22,710 | | (12,416) | | (49,843) | | (2,181) | | 1,098 | | 2,478 | | (12,667) | | (678 | ) | | (769 | ) | | (422 | ) | | 7,474 |
| | 520 |
| | 4,877 |
| | 15,379 |
|
| Total | | (14,834) | | (216,067) | | (37,456) | | 18,098 | | 161,650 | | (69,729) | | 60,516 | | (34,936 | ) | | (4,626 | ) | | (41,474 | ) | | 15,577 |
| | (1,404 | ) | | 53,487 |
| | 35,287 |
|
| Deferred and non-current -- net | | 100,584 | | 308,659 | | 85,728 | | 26,400 | | (145,981) | | 108,253 | | 39,866 | |
| Investment tax credit | | | | | | | | | | | | | | | |
| adjustments -- net | | (3,994) | | (3,407) | | (3,222) | | (1,103) | | (323) | | (1,609) | | (3,481) | |
| Deferred and non-current - net | | | 119,841 |
| | 96,446 |
| | 140,348 |
| | 42,305 |
| | 13,952 |
| | (2,418 | ) | | 53,501 |
|
| Investment tax credit adjustments - net | | | (1,276 | ) | | (3,038 | ) | | (2,604 | ) | | (2,172 | ) | | (224 | ) | | (1,425 | ) | | (5,478 | ) |
| Income taxes | | $81,756 | | $89,185 | | $45,050 | | $43,395 | | $15,346 | | $36,915 | | $96,901 | |
| $83,629 |
| |
| $88,782 |
| |
| $96,270 |
| |
| $55,710 |
| |
| $12,324 |
| |
| $49,644 |
| |
| $83,310 |
|
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Current: | | | | | | | | | | | | | | |
| Federal | |
| ($13,574 | ) | |
| $12,176 |
| |
| ($30,973 | ) | |
| $2,498 |
| |
| $15,017 |
| |
| $37,199 |
| |
| ($6,199 | ) |
| State | | 6,122 |
| | (9,939 | ) | | (5,692 | ) | | 4,849 |
| | (1,221 | ) | | (843 | ) | | 15,845 |
|
| Total | | (7,452 | ) | | 2,237 |
| | (36,665 | ) | | 7,347 |
| | 13,796 |
| | 36,356 |
| | 9,646 |
|
| Deferred and non-current - net | | 101,253 |
| | 57,620 |
| | 121,416 |
| | 41,150 |
| | (11,952 | ) | | (4,639 | ) | | 60,614 |
|
| Investment tax credit adjustments - net | | (2,014 | ) | | (3,038 | ) | | (2,874 | ) | | 1,260 |
| | (225 | ) | | (1,609 | ) | | (1,407 | ) |
| Income taxes | |
| $91,787 |
| |
| $56,819 |
| |
| $81,877 |
| |
| $49,757 |
| |
| $1,619 |
| |
| $30,108 |
| |
| $68,853 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Current: | | | | | | | | | | | | | | |
| Federal | |
| $64,069 |
| |
| ($66,081 | ) | |
| ($132,999 | ) | |
| $3,188 |
| |
| ($9,484 | ) | |
| ($114,677 | ) | |
| ($50,491 | ) |
| State | | 6,712 |
| | 9,535 |
| | (1,269 | ) | | (4,425 | ) | | (1,617 | ) | | 4,933 |
| | (8,544 | ) |
| Total | | 70,781 |
| | (56,546 | ) | | (134,268 | ) | | (1,237 | ) | | (11,101 | ) | | (109,744 | ) | | (59,035 | ) |
| Deferred and non-current - net | | 26,042 |
| | 112,390 |
| | 8,463 |
| | 59,045 |
| | 18,586 |
| | 144,471 |
| | 137,832 |
|
| Investment tax credit adjustments - net | | (2,017 | ) | | (3,228 | ) | | (3,117 | ) | | 871 |
| | (245 | ) | | (1,609 | ) | | (1,682 | ) |
| Income taxes | |
| $94,806 |
| |
| $52,616 |
| |
| ($128,922 | ) | |
| $58,679 |
| |
| $7,240 |
| |
| $33,118 |
| |
| $77,115 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes. The reasons for the differences for the years 2011, 2010,2014, 2013, and 20092012 are:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Net income attributable to Entergy Corporation |
| $940,721 |
| |
| $711,902 |
| |
| $846,673 |
|
| Preferred dividend requirements of subsidiaries | 19,536 |
| | 18,670 |
| | 21,690 |
|
| Consolidated net income | 960,257 |
| | 730,572 |
| | 868,363 |
|
| Income taxes | 589,597 |
| | 225,981 |
| | 30,855 |
|
| Income before income taxes |
| $1,549,854 |
| |
| $956,553 |
| |
| $899,218 |
|
| Computed at statutory rate (35%) |
| $542,449 |
| |
| $334,794 |
| |
| $314,726 |
|
| Increases (reductions) in tax resulting from: | |
| | |
| | |
|
| State income taxes net of federal income tax effect | 44,708 |
| | 13,599 |
| | 40,699 |
|
| Regulatory differences - utility plant items | 39,321 |
| | 32,324 |
| | 35,527 |
|
| Equity component of AFUDC | (21,108 | ) | | (22,356 | ) | | (30,838 | ) |
| Amortization of investment tax credits | (12,211 | ) | | (13,535 | ) | | (14,000 | ) |
| Flow-through / permanent differences | (18,003 | ) | | (301 | ) | | (14,801 | ) |
| Net-of-tax regulatory liability | — |
| | (2,899 | ) | | (4,356 | ) |
| New York tax law change | (21,500 | ) | | — |
| | — |
|
| Deferred tax asset on additional depreciation (a) | — |
| | — |
| | (155,300 | ) |
| Termination of business reorganization | — |
| | (27,192 | ) | | — |
|
| Write-off of regulatory asset for income taxes | — |
| | — |
| | 42,159 |
|
| Capital losses | — |
| | — |
| | (20,188 | ) |
| Provision for uncertain tax positions (b) | 32,573 |
| | (59,249 | ) | | (159,957 | ) |
| Valuation allowance | — |
| | (31,573 | ) | | — |
|
| Other - net | 3,368 |
| | 2,369 |
| | (2,816 | ) |
| Total income taxes as reported |
| $589,597 |
| |
| $225,981 |
| |
| $30,855 |
|
| Effective Income Tax Rate | 38.0 | % | | 23.6 | % | | 3.4 | % |
| |
| (a) | See “Income Tax Audits- 2004-2005 IRS Audit” below for discussion of this item. |
| |
| (b) | See “Income Tax Audits- 2008-2009 IRS Audit” below for discussion of the most significant items in 2013 and 2012. |
| | | 2011 | | 2010 | | 2009 |
| | | (In Thousands) |
| | | | | | | |
| Net income attributable to Entergy Corporation | | $1,346,439 | | $1,250,242 | | $1,231,092 |
| Preferred dividend requirements of subsidiaries | | 20,933 | | 20,063 | | 19,958 |
| Consolidated net income | | 1,367,372 | | 1,270,305 | | 1,251,050 |
| Income taxes | | 286,263 | | 617,239 | | 632,740 |
| Income before income taxes | | $1,653,635 | | $1,887,544 | | $1,883,790 |
| | | | | | | |
| Computed at statutory rate (35%) | | $578,772 | | $660,640 | | $659,327 |
| Increases (reductions) in tax resulting from: | | | | | | |
| State income taxes net of federal income tax effect | | 93,940 | | 40,530 | | 65,241 |
| Regulatory differences - utility plant items | | 39,970 | | 31,473 | | 57,383 |
| Equity component of AFUDC | | (30,184) | | (16,542) | | (17,741) |
| Amortization of investment tax credits | | (14,962) | | (15,980) | | (16,745) |
| Net-of-tax regulatory liability (a) | | 65,357 | | - | | - |
| Deferred tax reversal on PPA settlement (a) | | (421,819) | | - | | - |
| Write-off of reorganization costs | | - | | (19,974) | | �� - |
| Tax law change-Medicare Part D | | - | | 13,616 | | - |
| Decommissioning trust fund basis | | - | | - | | (7,917) |
| Capital gains / (losses) | | - | | - | | (28,051) |
| Flow-through / permanent differences | | (17,848) | | (26,370) | | (31,745) |
| Provision for uncertain tax positions | | 2,698 | | (43,115) | | (17,435) |
| Valuation allowance | | - | | - | | (40,795) |
| Other - net | | (9,661) | | (7,039) | | 11,218 |
| Total income taxes as reported | | $286,263 | | $617,239 | | $632,740 |
| | | | | | | |
| Effective Income Tax Rate | | 17.3% | | 32.7% | | 33.6% |
| | | | | | | |
(a) See "Income Tax Audits - 2006-2007 IRS Audit" below for discussion of these items. |
In March 2014, New York enacted legislation that substantially modifies various aspects of New York tax law. The most significant effect of the legislation for Entergy is the adoption of full water's-edge unitary combined reporting, meaning that all of Entergy's domestic entities will be included in New York's combined filing group. The effect of the tax law change resulted in a deferred state income tax reduction of approximately $21.5 million as shown in the table above.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2011, 2010,2014, 2013, and 20092012 are:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net income | |
| $121,392 |
| |
| $162,491 |
| |
| $283,531 |
| |
| $74,821 |
| |
| $28,707 |
| |
| $74,804 |
| |
| $96,334 |
|
| Income taxes | | 83,629 |
| | 88,782 |
| | 96,270 |
| | 55,710 |
| | 12,324 |
| | 49,644 |
| | 83,310 |
|
| Pretax income | |
| $205,021 |
| |
| $251,273 |
| |
| $379,801 |
| |
| $130,531 |
| |
| $41,031 |
| |
| $124,448 |
| |
| $179,644 |
|
| Computed at statutory rate (35%) | |
| $71,757 |
| |
| $87,946 |
| |
| $132,930 |
| |
| $45,686 |
| |
| $14,361 |
| |
| $43,557 |
| |
| $62,875 |
|
| Increases (reductions) in tax resulting from: | | | | |
| | |
| | |
| | |
| | |
| | |
|
| State income taxes net of federal income tax effect | | 9,591 |
| | 6,532 |
| | 5,134 |
| | 5,180 |
| | 1,643 |
| | 3,221 |
| | 6,877 |
|
| Regulatory differences - utility plant items | | 8,653 |
| | 4,618 |
| | 2,869 |
| | 4,448 |
| | 777 |
| | 4,165 |
| | 13,791 |
|
| Equity component of AFUDC | | (2,533 | ) | | (2,602 | ) | | (12,010 | ) | | (833 | ) | | (320 | ) | | (1,035 | ) | | (1,774 | ) |
| Amortization of investment tax credits | | (1,251 | ) | | (3,018 | ) | | (2,576 | ) | | (260 | ) | | (218 | ) | | (1,412 | ) | | (3,476 | ) |
| Flow-through / permanent differences | | (5,082 | ) | | 799 |
| | (1,024 | ) | | 555 |
| | (4,458 | ) | | 393 |
| | (327 | ) |
| Non-taxable dividend income | | — |
| | (10,590 | ) | | (30,665 | ) | | — |
| | — |
| | — |
| | — |
|
| Provision for uncertain tax positions | | 1,881 |
| | 4,108 |
| | 1,228 |
| | 718 |
| | 405 |
| | 522 |
| | 5,235 |
|
| Other - net | | 613 |
| | 989 |
| | 384 |
| | 216 |
| | 134 |
| | 233 |
| | 109 |
|
| Total income taxes | |
| $83,629 |
| |
| $88,782 |
| |
| $96,270 |
| |
| $55,710 |
| |
| $12,324 |
| |
| $49,644 |
| |
| $83,310 |
|
| Effective Income Tax Rate | | 40.8 | % | | 35.3 | % | | 25.3 | % | | 42.7 | % | | 30.0 | % | | 39.9 | % | | 46.4 | % |
| | | | | Entergy | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
| 2011 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Net income | | $164,891 | | $203,027 | | $473,923 | | $108,729 | | $35,976 | | $80,845 | | $64,197 |
| Income taxes (benefit) | | 132,765 | | 88,313 | | (370,211) | | 28,801 | | 15,862 | | 49,492 | | 74,953 |
| Pretax income | | $297,656 | | $291,340 | | $103,712 | | $137,530 | | $51,838 | | $130,337 | | $139,150 |
| | | | | | | | | | | | | | | |
| Computed at statutory rate (35%) | | $104,180 | | $101,969 | | $36,299 | | $48,136 | | $18,143 | | $45,618 | | $48,703 |
| Increases (reductions) in tax | | | | | | | | | | | | | | |
| resulting from: | | | | | | | | | | | | | | |
| State income taxes net of | | | | | | | | | | | | | | |
| federal income tax effect | | 13,727 | | 9,618 | | 943 | | 3,211 | | 3,350 | | 2,033 | | 4,436 |
| Regulatory differences - | | | | | | | | | | | | | | |
| utility plant items | | 10,079 | | 8,379 | | 1,404 | | 2,038 | | 3,860�� | | 4,003 | | 10,207 |
| Equity component of AFUDC | | (3,363) | | (3,181) | | (11,315) | | (2,963) | | (215) | | (1,322) | | (7,825) |
| Amortization of investment | | | | | | | | | | | | | | |
| tax credits | | (1,992) | | (3,336) | | (3,168) | | (960) | | (295) | | (1,596) | | (3,480) |
| Net-of-tax regulatory liability (a) | | - | | - | | 65,357 | | - | | - | | - | | - |
| Deferred tax reversal on PPA | | | | | | | | | | | | | | |
| settlement (a) | | - | | - | | (421,819) | | - | | - | | - | | - |
| Flow-through / permanent | | | | | | | | | | | | | | |
| differences | | (1,365) | | (836) | | (1,285) | | 304 | | (4,983) | | 88 | | 529 |
| Non-taxable | | | | | | | | | | | | | | |
| dividend income | | - | | (11,364) | | (27,336) | | - | | - | | - | | - |
| Benefit of Entergy Corporation | | | | | | | | | | | | | | |
| expenses | | - | | (5,694) | | - | | (21,248) | | (6,235) | | (16) | | 16,559 |
| Provision for uncertain | | | | | | | | | | | | | | |
| tax positions | | 12,016 | | (7,144) | | (4,880) | | (2) | | 2,241 | | 717 | | 5,878 |
| Other -- net | | (517) | | (98) | | (4,411) | | 285 | | (4) | | (33) | | (54) |
| Total income taxes (benefit) | | $132,765 | | $88,313 | | ($370,211) | | $28,801 | | $15,862 | | $49,492 | | $74,953 |
| | | | | | | | | | | | | | | |
| Effective Income Tax Rate | | 44.6% | | 30.3% | | -357.0% | | 20.9% | | 30.6% | | 38.0% | | 53.9% |
| | | | | | | | | | | | | | | |
(a) See "Income Tax Audits - 2006-2007 IRS Audit" below for discussion of these items. | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net income | |
| $161,948 |
| |
| $161,662 |
| |
| $252,464 |
| |
| $82,159 |
| |
| $11,683 |
| |
| $57,881 |
| |
| $113,664 |
|
| Income taxes | | 91,787 |
| | 56,819 |
| | 81,877 |
| | 49,757 |
| | 1,619 |
| | 30,108 |
| | 68,853 |
|
| Pretax income | |
| $253,735 |
| |
| $218,481 |
| |
| $334,341 |
| |
| $131,916 |
| |
| $13,302 |
| |
| $87,989 |
| |
| $182,517 |
|
| Computed at statutory rate (35%) | |
| $88,807 |
| |
| $76,468 |
| |
| $117,019 |
| |
| $46,171 |
| |
| $4,656 |
| |
| $30,796 |
| |
| $63,881 |
|
| Increases (reductions) in tax resulting from: | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| State income taxes net of federal income tax effect | | 10,954 |
| | 7,719 |
| | 11,365 |
| | 4,564 |
| | 1,012 |
| | (897 | ) | | 5,900 |
|
| Regulatory differences - utility plant items | | 7,938 |
| | 4,865 |
| | 2,140 |
| | 2,603 |
| | 453 |
| | 3,256 |
| | 11,070 |
|
| Equity component of AFUDC | | (3,820 | ) | | (2,822 | ) | | (10,278 | ) | | (764 | ) | | (322 | ) | | (1,626 | ) | | (2,724 | ) |
| Amortization of investment tax credits | | (1,989 | ) | | (3,018 | ) | | (2,846 | ) | | (260 | ) | | (216 | ) | | (1,596 | ) | | (3,476 | ) |
| Flow-through / permanent differences | | 2,540 |
| | 2,377 |
| | 1,269 |
| | 1,702 |
| | (4,402 | ) | | 2,467 |
| | (491 | ) |
| Net-of-tax regulatory liability | | — |
| | — |
| | (2,899 | ) | | — |
| | — |
| | — |
| | — |
|
| Termination of business reorganization | | (6,753 | ) | | (3,619 | ) | | (3,834 | ) | | (4,177 | ) | | (501 | ) | | (3,542 | ) | | (13 | ) |
| Non-taxable dividend income | | — |
| | (9,612 | ) | | (27,341 | ) | | — |
| | — |
| | — |
| | — |
|
| Provision for uncertain tax positions | | (6,527 | ) | | (15,557 | ) | | (3,088 | ) | | (326 | ) | | 795 |
| | 1,027 |
| | (5,353 | ) |
| Other - net | | 637 |
| | 18 |
| | 370 |
| | 244 |
| | 144 |
| | 223 |
| | 59 |
|
| Total income taxes | |
| $91,787 |
| |
| $56,819 |
| |
| $81,877 |
| |
| $49,757 |
| |
| $1,619 |
| |
| $30,108 |
| |
| $68,853 |
|
| Effective Income Tax Rate | | 36.2 | % | | 26.0 | % | | 24.5 | % | | 37.7 | % | | 12.2 | % | | 34.2 | % | | 37.7 | % |
| | | | | Entergy | | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | | |
| 2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | | |
| | | (In Thousands) | | |
| | | | | | | | | | | | | | | | | |
| Net income | | $172,618 | | $190,738 | | $231,435 | | $85,377 | | $31,114 | | $66,200 | | $82,624 | | |
| Income taxes | | 112,944 | | 75,878 | | 66,546 | | 50,111 | | 16,601 | | 42,383 | | 56,049 | | |
| Pretax income | | $285,562 | | $266,616 | | $297,981 | | $135,488 | | $47,715 | | $108,583 | | $138,673 | | |
| | | | | | | | | | | | | | | | | |
| Computed at statutory rate (35%) | | $99,947 | | $93,316 | | $104,293 | | $47,421 | | $16,700 | | $38,004 | | $48,536 | | |
| Increases (reductions) in tax | | | | | | | | | | | | | | | | |
| resulting from: | | | | | | | | | | | | | | | | |
| State income taxes net of | | | | | | | | | | | | | | | | |
| federal income tax effect | | 13,156 | | 1,142 | | (10,618) | | 1,245 | | 1,387 | | 424 | | 2,206 | | |
| Regulatory differences - | | | | | | | | | | | | | | | | |
| utility plant items | | 6,126 | | (4,004) | | 7,374 | | 3,455 | | 3,999 | | 4,089 | | 10,435 | | |
| Equity component of AFUDC | | (144) | | (1,547) | | (8,361) | | (1,643) | | (184) | | (1,525) | | (3,138) | | |
| Amortization of investment | | | | | | | | | | | | | | | | |
| tax credits | | (2,983) | | (3,309) | | (3,192) | | (972) | | (313) | | (1,596) | | (3,480) | | |
| Flow-through / permanent | | | | | | | | | | | | | | | | |
| differences | | (1,235) | | (7,996) | | (754) | | 153 | | (4,883) | | 236 | | (497) | | |
| Non-taxable | | | | | | | | | | | | | | | | |
| dividend income | | - | | (9,189) | | (23,603) | | - | | - | | - | | - | | |
| Provision for uncertain | | | | | | | | | | | | | | | | |
| tax positions | | (2,100) | | 7,200 | | 2,200 | | 700 | | (300) | | 2,800 | | 2,090 | | |
| Other -- net | | 177 | | 265 | | (793) | | (248) | | 195 | | (49) | | (103) | | |
| Total income taxes | | $112,944 | | $75,878 | | $66,546 | | $50,111 | | $16,601 | | $42,383 | | $56,049 | | |
| | | | | | | | | | | | | | | | | |
| Effective Income Tax Rate | | 39.6% | | 28.5% | | 22.3% | | 37.0% | | 34.8% | | 39.0% | | 40.4% | | |
| | | | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | Entergy | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | |
| 2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Net income | | $66,875 | | $153,047 | | $232,845 | | $79,367 | | $30,479 | | $63,841 | | $48,908 | |
| Income taxes | | 81,756 | | 89,185 | | 45,050 | | 43,395 | | 15,346 | | 36,915 | | 96,901 | |
| Pretax income | | $148,631 | | $242,232 | | $277,895 | | $122,762 | | $45,825 | | $100,756 | | $145,809 | |
| | | | | | | | | | | | | | | | |
| Computed at statutory rate (35%) | | $52,021 | | $84,781 | | $97,263 | | $42,967 | | $16,039 | | $35,264 | | $51,033 | |
| Increases (reductions) in tax | | | | | | | | | | | | | | | |
| resulting from: | | | | | | | | | | | | | | | |
| State income taxes net of | | | | | | | | | | | | | | | |
| federal income tax effect | | 9,617 | | 6,487 | | 5,095 | | 2,508 | | 1,339 | | 1,509 | | 4,033 | |
| Regulatory differences - | | | | | | | | | | | | | | | |
| utility plant items | | 19,275 | | 10,303 | | 14,463 | | 1,365 | | (55) | | 2,008 | | 10,024 | |
| Equity component of AFUDC | | (1,827) | | (1,898) | | (9,796) | | (1,037) | | (82) | | (1,831) | | (1,270) | |
| Amortization of investment | | | | | | | | | | | | | | | |
| tax credits | | (3,972) | | (3,088) | | (3,192) | | (1,092) | | (324) | | (1,596) | | (3,480) | |
| Flow-through / permanent | | | | | | | | | | | | | | | |
| differences | | 4,158 | | 1,208 | | 2,257 | | 718 | | (2,218) | | 293 | | (3,192) | |
| Non-taxable | | | | | | | | | | | | | | | |
| dividend income | | - | | (6,627) | | (19,075) | | - | | - | | - | | - | |
| Benefit of Entergy Corporation | | | | | | | | | | | | | | | |
| expenses | | 978 | | (170) | | (24,231) | | (2,841) | | 31 | | - | | 35,027 | |
| Provision for uncertain | | | | | | | | | | | | | | | |
| tax positions | | - | | (5,400) | | (17,700) | | 800 | | (400) | | 600 | | 4,900 | |
| Other -- net | | 1,506 | | 3,589 | | (34) | | 7 | | 1,016 | | 668 | | (174) | |
| Total income taxes | | $81,756 | | $89,185 | | $45,050 | | $43,395 | | $15,346 | | $36,915 | | $96,901 | |
| | | | | | | | | | | | | | | | |
| Effective Income Tax Rate | | 55.0% | | 36.8% | | 16.2% | | 35.3% | | 33.5% | | 36.6% | | 66.5% | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net income | |
| $152,365 |
| |
| $158,977 |
| |
| $281,081 |
| |
| $46,768 |
| |
| $17,065 |
| |
| $41,971 |
| |
| $111,866 |
|
| Income taxes (benefit) | | 94,806 |
| | 52,616 |
| | (128,922 | ) | | 58,679 |
| | 7,240 |
| | 33,118 |
| | 77,115 |
|
| Pretax income | |
| $247,171 |
| |
| $211,593 |
| |
| $152,159 |
| |
| $105,447 |
| |
| $24,305 |
| |
| $75,089 |
| |
| $188,981 |
|
| Computed at statutory rate (35%) | |
| $86,510 |
| |
| $74,058 |
| |
| $53,256 |
| |
| $36,906 |
| |
| $8,507 |
| |
| $26,281 |
| |
| $66,143 |
|
| Increases (reductions) resulting from: | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| State income taxes net of federal income tax effect | | 11,282 |
| | 5,087 |
| | 1,976 |
| | 3,944 |
| | 505 |
| | 3,115 |
| | 6,652 |
|
| Regulatory differences - utility plant items | | 6,778 |
| | 8,472 |
| | 312 |
| | 2,619 |
| | 2,289 |
| | 3,668 |
| | 11,389 |
|
| Equity component of AFUDC | | (2,495 | ) | | (3,042 | ) | | (12,919 | ) | | (1,383 | ) | | (276 | ) | | (1,587 | ) | | (9,136 | ) |
| Amortization of investment tax credits | | (1,992 | ) | | (3,204 | ) | | (3,089 | ) | | (264 | ) | | (240 | ) | | (1,596 | ) | | (3,480 | ) |
| Net-of-tax regulatory liability | | — |
| | — |
| | (4,356 | ) | | — |
| | — |
| | — |
| | — |
|
| Flow-through / permanent differences | | 3,427 |
| | (7,646 | ) | | 1,397 |
| | 1,961 |
| | (4,385 | ) | | 1,585 |
| | (357 | ) |
| Non-taxable dividend income | | — |
| | (9,836 | ) | | (27,336 | ) | | — |
| | — |
| | — |
| | — |
|
| Expense (benefit) of Entergy Corporation expenses | | (19,403 | ) | | (17,703 | ) | | — |
| | 14,449 |
| | 2,758 |
| | — |
| | (10,241 | ) |
| Provision for uncertain tax positions | | 11,227 |
| | 8,745 |
| | (143,583 | ) | | 870 |
| | (2,095 | ) | | 1,651 |
| | 17,966 |
|
| Change in regulatory recovery | | — |
| | (553 | ) | | 7,854 |
| | — |
| | — |
| | — |
| | — |
|
| Other - net | | (528 | ) | | (1,762 | ) | | (2,434 | ) | | (423 | ) | | 177 |
| | 1 |
| | (1,821 | ) |
| Total income taxes | |
| $94,806 |
| |
| $52,616 |
| |
| ($128,922 | ) | |
| $58,679 |
| |
| $7,240 |
| |
| $33,118 |
| |
| $77,115 |
|
| Effective Income Tax Rate | | 38.4 | % | | 24.9 | % | | (84.7 | %) | | 55.6 | % | | 29.8 | % | | 44.1 | % | | 40.8 | % |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 20112014 and 20102013 are as follows:
| | | | | 2011 | | 2010 | 2014 | | 2013 |
| | | (In Thousands) | (In Thousands) |
| Deferred tax liabilities: | | | | | | | |
| Plant basis differences - net | | ($7,349,990) | | ($6,572,627) |
| ($8,128,096 | ) | |
| ($7,941,319 | ) |
| Regulatory asset for income taxes - net | | (430,807) | | (449,266) | |
| Regulatory assets | | (922,161 | ) | | (922,312 | ) |
| Nuclear decommissioning trusts | | (1,248,737 | ) | | (1,100,439 | ) |
| Pension, net funding | | (324,881 | ) | | (299,951 | ) |
| Combined unitary state taxes | | (162,340 | ) | | (183,934 | ) |
| Power purchase agreements | | (17,138) | | (265,429) | (110,889 | ) | | (8,096 | ) |
| Nuclear decommissioning trusts | | (553,558) | | (439,481) | |
| Other | | (686,006) | | (679,302) | (500,424 | ) | | (404,749 | ) |
| Total | | (9,037,499) | | (8,406,105) | (11,397,528 | ) | | (10,860,800 | ) |
| | | | | | |
| Deferred tax assets: | | | | | |
| | |
|
| Accumulated deferred investment | | | | | |
| tax credit | | 108,338 | | 111,170 | |
| Nuclear decommissioning liabilities | | 874,493 |
| | 754,828 |
|
| Regulatory liabilities | | 458,230 |
| | 403,370 |
|
| Pension and other post-employment benefits | | 315,134 | | 161,730 | 586,455 |
| | 469,190 |
|
| Nuclear decommissioning liabilities | | 612,945 | | 285,889 | |
| Sale and leaseback | | 217,430 | | 256,157 | 153,308 |
| | 176,119 |
|
| Provision for regulatory adjustments | | 97,607 | | 100,504 | |
| Provision for contingencies | | 28,504 | | 28,554 | |
| Unbilled/deferred revenues | | 12,217 | | 18,642 | |
| Customer deposits | | 14,825 | | 15,724 | |
| Compensation | | 74,692 |
| | 125,552 |
|
| Accumulated deferred investment tax credit | | 100,442 |
| | 106,777 |
|
| Provision for allowances and contingencies | | 160,551 |
| | 66,026 |
|
| Net operating loss carryforwards | | 253,518 | | 123,710 | 457,758 |
| | 548,756 |
|
| Capital losses | | 12,995 | | 56,602 | |
| Capital losses and miscellaneous tax credits | | 12,146 |
| | 13,140 |
|
| Valuation allowance | | (27,387 | ) | | (28,146 | ) |
| Other | | 96,676 | | 19,009 | 58,334 |
| | 109,606 |
|
| Valuation allowance | | (85,615) | | (70,089) | |
| Total | | 1,684,574 | | 1,107,602 | 2,909,022 |
| | 2,745,218 |
|
| | | | | | |
| Noncurrent accrued taxes (including unrecognized | | | | | |
| tax benefits) | | (814,597) | | (1,261,455) | |
| | | | | | |
| Noncurrent accrued taxes (including unrecognized tax benefits) | | (606,560 | ) | | (400,276 | ) |
| Accumulated deferred income taxes and taxes accrued | | ($8,167,522) | | ($8,559,958) |
| ($9,095,066 | ) | |
| ($8,515,858 | ) |
| | | | | | |
Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 20112014 are as follows:
|
| | | | |
| Carryover Description | | Carryover Amount | | Year(s) of expiration |
| | | | | |
| Federal net operating losses | | $912.3 billion | | 2023-20312023-2034 |
| State net operating losses | | $810.2 billion | | 2012-20312015-2033 |
State capital losses | | $162 million | | 2013-2015 |
Federal minimum tax credits | | $79 million | | never |
OtherMiscellaneous federal and state credits | | $8097.6 million | | 2012-20312015-2034 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns.
Because it is more likely than not that the benefit from certain state net operating and capital loss carryovers will not be utilized, a valuation allowance of $66 million and $13$21.2 million has been provided on the deferred tax assets relating to these state net operating and capital loss carryovers, respectively.carryovers.
In the third quarter 2013, Entergy reduced a valuation allowance by $44 million ($28 million net of the federal income tax effect) that had been provided on a state net operating loss carryover due to the prospective utilization of such loss carryover.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 20112014 and 20102013 are as follows:
| | | | | Entergy | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
| 2011 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Deferred tax liabilities: | | | | | | | | | | | | | | |
| Plant basis differences - net | | ($1,375,502) | | ($1,224,422) | | ($1,085,047) | | ($608,596) | | ($169,538) | | ($892,707) | | ($505,369) |
| Regulatory asset for income taxes - net | (64,204) | | (140,644) | | (121,388) | | (28,183) | | 70,973 | | (59,812) | | (87,550) |
| Power purchase agreements | | 94 | | 3,938 | | (1) | | 2,383 | | 22 | | 2,547 | | - |
| Nuclear decommissioning trusts | | (53,789) | | (21,096) | | (22,441) | | - | | - | | - | | (19,138) |
| Deferred fuel | | (82,452) | | (1,225) | | (4,285) | | 718 | | (331) | | 3,932 | | (8) |
| Other | | (107,558) | | (1,532) | | (26,373) | | (10,193) | | (18,319) | | (14,097) | | (9,333) |
| Total | | ($1,683,411) | | ($1,384,981) | | ($1,259,535) | | ($643,871) | | ($117,193) | | ($960,137) | | ($621,398) |
| | | | | | | | | | | | | | | |
| Deferred tax assets: | | | | | | | | | | | | | | |
| Accumulated deferred investment | | | | | | | | | | | | | | |
| tax credits | | 16,843 | | 31,367 | | 28,197 | | 2,437 | | 592 | | 6,769 | | 22,133 |
| Pension and OPEB | | (75,399) | | 92,602 | | 19,866 | | (30,390) | | (11,713) | | (41,964) | | (19,593) |
| Nuclear decommissioning liabilities | | (104,862) | | (38,683) | | 56,399 | | - | | - | | - | | (47,360) |
| Sale and leaseback | | - | | - | | 66,801 | | - | | - | | - | | 150,629 |
| Provision for regulatory adjustments | | - | | 97,608 | | - | | - | | - | | - | | - |
| Provision for contingencies | | 4,167 | | 90 | | 3,940 | | 2,465 | | 10,121 | | 2,299 | | - |
| Unbilled/deferred revenues | | 15,222 | | (21,918) | | (7,108) | | 8,990 | | 2,707 | | 14,324 | | - |
| Customer deposits | | 7,019 | | 618 | | 5,699 | | 1,379 | | 109 | | - | | - |
| Rate refund | | 11,627 | | - | | 134 | | - | | 2 | | (3,924) | | - |
| Net operating loss carryforwards | | - | | - | | 39,153 | | - | | - | | 58,546 | | - |
| Other | | 3,485 | | 27,392 | | 18,824 | | 4,826 | | 5,248 | | 37,734 | | 25,724 |
| Total | | (121,898) | | 189,076 | | 231,905 | | (10,293) | | 7,066 | | 73,784 | | 131,533 |
| | | | | | | | | | | | | | | |
| Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
| unrecognized tax benefits) | | (27,718) | | (206,752) | | (75,750) | | (6,271) | | (27,859) | | 39,799 | | (165,981) |
| | | | | | | | | | | | | | | |
| Accumulated deferred income | | | | | | | | | | | | | | |
| taxes and taxes accrued | | ($1,833,027) | | ($1,402,657) | | ($1,103,380) | | ($660,435) | | ($137,986) | | ($846,554) | | ($655,846) |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Deferred tax liabilities: | | | | | | | | | | | | | |
| Plant basis differences - net |
| ($1,657,503 | ) | |
| ($1,233,761 | ) | |
| ($1,515,091 | ) | |
| ($753,576 | ) | |
| ($186,153 | ) | |
| ($771,135 | ) | |
| ($668,779 | ) |
| Regulatory assets | (198,662 | ) | | (106,287 | ) | | (274,432 | ) | | (30,114 | ) | | — |
| | (202,402 | ) | | (110,087 | ) |
| Nuclear decommissioning trusts | (130,524 | ) | | (43,611 | ) | | (62,551 | ) | | — |
| | — |
| | — |
| | (74,063 | ) |
| Pension, net funding | (93,355 | ) | | (46,403 | ) | | (53,190 | ) | | (27,861 | ) | | (13,285 | ) | | (25,616 | ) | | (23,440 | ) |
| Deferred fuel | (82,050 | ) | | (3,034 | ) | | (500 | ) | | (5,303 | ) | | (407 | ) | | 2,045 |
| | (120 | ) |
| Power purchase agreements | (17,073 | ) | | (67,083 | ) | | — |
| | 2,129 |
| | 13 |
| | 847 |
| | — |
|
| Other | (33,827 | ) | | (8,850 | ) | | (75,432 | ) | | (11,423 | ) | | (11,500 | ) | | (22,546 | ) | | (19,802 | ) |
| Total | (2,212,994 | ) | | (1,509,029 | ) | | (1,981,196 | ) | | (826,148 | ) | | (211,332 | ) | | (1,018,807 | ) | | (896,291 | ) |
| Deferred tax assets: | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Regulatory liabilities | 145,466 |
| | 70,068 |
| | 111,533 |
| | 7,214 |
| | 29,580 |
| | 4,079 |
| | 90,290 |
|
| Nuclear decommissioning liabilities | (43,134 | ) | | 48,815 |
| | 97,323 |
| | — |
| | — |
| | — |
| | (62,571 | ) |
| Pension and other post-employment benefits | (17,534 | ) | | 88,606 |
| | 70,055 |
| | (7,288 | ) | | (7,504 | ) | | (15,053 | ) | | (1,413 | ) |
| Sale and leaseback | — |
| | — |
| | 45,136 |
| | — |
| | — |
| | — |
| | 108,172 |
|
| Accumulated deferred investment tax credit | 14,791 |
| | 33,941 |
| | 24,922 |
| | 2,436 |
| | 332 |
| | 5,158 |
| | 18,862 |
|
| Provision for allowances and contingencies | (7,149 | ) | | 43,512 |
| | 82,293 |
| | 19,590 |
| | 10,986 |
| | 8,017 |
| | 133 |
|
| Unbilled/deferred revenues | 12,322 |
| | (18,553 | ) | | (6,463 | ) | | 12,956 |
| | 3,395 |
| | 11,573 |
| | — |
|
| Compensation | 2,085 |
| | 641 |
| | (483 | ) | | (846 | ) | | 475 |
| | 4,155 |
| | — |
|
| Net operating loss carryforwards | 105,063 |
| | — |
| | 241,803 |
| | — |
| | — |
| | — |
| | — |
|
| Capital losses and miscellaneous tax credits | — |
| | — |
| | — |
| | 3,504 |
| | — |
| | — |
| | — |
|
| Other | 258 |
| | 8,102 |
| | 7,406 |
| | 5,887 |
| | 2,891 |
| | 3,850 |
| | 2,000 |
|
| Total | 212,168 |
| | 275,132 |
| | 673,525 |
| | 43,453 |
| | 40,155 |
| | 21,779 |
| | 155,473 |
|
| Noncurrent accrued taxes (including unrecognized tax benefits) | 9,367 |
| | (388,230 | ) | | (24,278 | ) | | (12,481 | ) | | (19,502 | ) | | (48,921 | ) | | (81,528 | ) |
| Accumulated deferred income taxes and taxes accrued |
| ($1,991,459 | ) | |
| ($1,622,127 | ) | |
| ($1,331,949 | ) | |
| ($795,176 | ) | |
| ($190,679 | ) | |
| ($1,045,949 | ) | |
| ($822,346 | ) |
95
118
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | Entergy | | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | | | | | | | | | | | | | | | |
| 2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
| | | (In Thousands) | |
| 2013 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | | | (In Thousands) |
| Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Plant basis differences - net | | ($1,213,900) | | ($1,114,183) | | ($1,135,092) | | ($564,928) | | ($206,739) | | ($881,037) | | ($474,446) | |
| ($1,613,195 | ) | |
| ($1,259,173 | ) | |
| ($1,347,534 | ) | |
| ($727,545 | ) | |
| ($196,726 | ) | |
| ($759,263 | ) | |
| ($698,151 | ) |
| Regulatory asset for income taxes - net | (87,848) | | (132,145) | | (138,131) | | (24,649) | | 66,251 | | (53,906) | | (78,836) | |
| Regulatory assets | | | (212,339 | ) | | (102,362 | ) | | (255,068 | ) | | (33,277 | ) | | — |
| | (205,402 | ) | | (113,849 | ) |
| Nuclear decommissioning trusts | | | (110,004 | ) | | (32,574 | ) | | (50,248 | ) | | — |
| | — |
| | — |
| | (58,308 | ) |
| Pension, net funding | | | (79,589 | ) | | (45,342 | ) | | (50,630 | ) | | (24,392 | ) | | (11,606 | ) | | (23,598 | ) | | (21,187 | ) |
| Deferred fuel | | | (26,946 | ) | | (4,361 | ) | | (512 | ) | | (21,823 | ) | | 63 |
| | (470 | ) | | (129 | ) |
| Power purchase agreements | | 582 | | 102,581 | | (417,388) | | (766) | | (61) | | (6,851) | | - | | (7,053 | ) | | (20,234 | ) | | — |
| | — |
| | 13 |
| | 1,269 |
| | — |
|
| Nuclear decommissioning trusts | | (9,968) | | (978) | | (3,806) | | - | | - | | - | | (4,102) | |
| Deferred fuel | | (24,210) | | (935) | | (7,584) | | (4,521) | | (626) | | 10,025 | | (60) | |
| Other | | (123,524) | | (2,505) | | (21,971) | | (10,991) | | (13,839) | | (19,712) | | (15,234) | | (62,046 | ) | | (25,694 | ) | | (69,194 | ) | | (10,732 | ) | | (13,446 | ) | | (58,963 | ) | | (8,969 | ) |
| Total | | ($1,458,868) | | ($1,148,165) | | ($1,723,972) | | ($605,855) | | ($155,014) | | ($951,481) | | ($572,678) | | (2,111,172 | ) | | (1,489,740 | ) | | (1,773,186 | ) | | (817,769 | ) | | (221,702 | ) | | (1,046,427 | ) | | (900,593 | ) |
| | | | | | | | | | | | | | | | |
| Deferred tax assets: | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Accumulated deferred investment | | | | | | | | | | | | | | | |
| tax credits | | 17,623 | | 32,651 | | 29,417 | | 2,502 | | 706 | | 7,327 | | 20,944 | |
| Pension and OPEB | | (64,774) | | 70,954 | | 7,922 | | (27,111) | | (11,527) | | (38,152) | | (18,255) | |
| Regulatory liabilities | | | 120,966 |
| | 60,176 |
| | 94,019 |
| | 8,357 |
| | 35,764 |
| | 7,952 |
| | 76,135 |
|
| Nuclear decommissioning liabilities | | (173,666) | | (41,829) | | - | | - | | - | | - | | (69,610) | | (64,571 | ) | | 49,439 |
| | 92,206 |
| | — |
| | — |
| | — |
| | (71,898 | ) |
| Pension and other post-employment benefits | | | (12,132 | ) | | 73,136 |
| | 62,999 |
| | (1,345 | ) | | 1,532 |
| | (13,417 | ) | | (2,073 | ) |
| Sale and leaseback | | - | | - | | 80,117 | | - | | - | | - | | 176,040 | | — |
| | — |
| | 52,054 |
| | — |
| | — |
| | — |
| | 124,065 |
|
| Provision for regulatory adjustments | | - | | 100,504 | | - | | - | | - | | - | | - | |
| Accumulated deferred investment tax credit | | | 15,281 |
| | 35,297 |
| | 25,913 |
| | 3,263 |
| | 416 |
| | 5,651 |
| | 20,956 |
|
| Provision for allowances and contingencies | | | 12,313 |
| | 14,784 |
| | 3,347 |
| | 13,066 |
| | 8,535 |
| | 5,980 |
| | — |
|
| Unbilled/deferred revenues | | 8,056 | | (23,853) | | 6,892 | | 8,914 | | 1,538 | | 15,775 | | - | | 37,825 |
| | (22,340 | ) | | 3,026 |
| | 6,791 |
| | 4,226 |
| | 10,655 |
| | — |
|
| Customer deposits | | 7,907 | | 618 | | 5,699 | | 1,391 | | 109 | | - | | - | |
| Rate refund | | 10,873 | | (5,386) | | 131 | | - | | - | | (4,008) | | - | |
| Compensation | | | 7,131 |
| | 4,701 |
| | 3,470 |
| | 1,778 |
| | 1,696 |
| | 6,774 |
| | 822 |
|
| Net operating loss carryforwards | | - | | 40 | | 41 | | - | | 8 | | 139,859 | | - | | 85,875 |
| | — |
| | 230,592 |
| | 19,400 |
| | — |
| | — |
| | — |
|
| Capital losses and miscellaneous tax credits | | | — |
| | — |
| | — |
| | 6,173 |
| | — |
| | — |
| | — |
|
| Other | | 13,589 | | 26,468 | | 25,897 | | 14,585 | | 21,310 | | 28,508 | | 16,486 | | 3,682 |
| | 4,939 |
| | 4,148 |
| | 4,224 |
| | 2,930 |
| | 3,807 |
| | 2,001 |
|
| Total | | (180,392) | | 160,167 | | 156,116 | | 281 | | 12,144 | | 149,309 | | 125,605 | | 206,370 |
| | 220,132 |
| | 571,774 |
| | 61,707 |
| | 55,099 |
| | 27,402 |
| | 150,008 |
|
| | | | | | | | | | | | | | | | |
| Noncurrent accrued taxes (including | | | | | | | | | | | | | | | |
| unrecognized tax benefits) | | (104,925) | | (419,125) | | (321,757) | | (55,585) | | (22,328) | | 17,256 | | (178,447) | |
| | | | | | | | | | | | | | | | |
| Accumulated deferred income | | | | | | | | | | | | | | | |
| taxes and taxes accrued | | ($1,744,185) | | ($1,407,123) | | ($1,889,613) | | ($661,159) | | ($165,198) | | ($784,916) | | ($625,520) | |
| | | | | | | | | | | | | | | | |
| Noncurrent accrued taxes (including unrecognized tax benefits) | | | 22,565 |
| | (279,269 | ) | | 25,512 |
| | (6,290 | ) | | (5,015 | ) | | (37,777 | ) | | 10,302 |
|
| Accumulated deferred income taxes and taxes accrued | | |
| ($1,882,237 | ) | |
| ($1,548,877 | ) | |
| ($1,175,900 | ) | |
| ($762,352 | ) | |
| ($171,618 | ) | |
| ($1,056,802 | ) | |
| ($740,283 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 20112014 are as follows:
| | Entergy
Arkansas
| | Entergy
Gulf States
Louisiana
| | Entergy
Louisiana
| | Entergy
Mississippi
| | Entergy
New Orleans
| | Entergy
Texas
| | System
Energy
|
| | | | | | | | | | | | | | |
Federal net operating
losses
| | $374 million
| | -
| | $621 million
| | -
| | -
| | $197 million
| | $3 million
|
Year(s) of expiration | | 2028-2031 | | N/A | | 2029-2031 | | N/A | | N/A | | 2028-2029 | | 2031 |
| | | | | | | | | | | | | | |
State net operating losses | | $28 million | | $207 million | | $975 million | | - | | - | | - | | - |
Year(s) of expiration | | 2025 | | 2023-2024 | | 2023-2025 | | N/A | | N/A | | N/A | | N/A |
| | | | | | | | | | | | | | |
Federal minimum tax
credits
| | $10 million
| | $18 million
| | -
| | -
| | -
| | $2 million
| | $1 million
|
Year(s) of expiration | | never | | never | | N/A | | N/A | | N/A | | never | | never |
| | | | | | | | | | | | | | |
Other federal credits | | $2 million | | $1 million | | $1 million | | $1 million | | $1 million | | - | | $1 million |
Year(s) of expiration | | 2024-2030 | | 2024-2030 | | 2024-2030 | | 2024-2030 | | 2024-2030 | | N/A | | 2024-2030 |
| | | | | | | | | | | | | | |
State credits | | - | | - | | - | | $8.3 million | | - | | $3.8 million | | $12.8 million |
Year(s) of expiration | | N/A | | N/A | | N/A | | 2013-2016 | | N/A | | 2012-2027 | | 2015-2016 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | |
| Federal net operating losses | |
| $1.3 | billion | |
| $151 | million | |
| $2.1 | billion | | — | |
| $55 | million | | — | |
| $392 | million |
| Year(s) of expiration | | 2029-2034 |
| | 2029-2032 |
| | 2029-2034 |
| | N/A | | 2031-2034 |
| | N/A | | 2030-2032 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| State net operating losses | |
| $235 | million | |
| $580 | million | |
| $3 | billion | | — | |
| $24 | million | | — | | — |
| Year(s) of expiration | | 2015-2028 |
| | 2024-2027 |
| | 2024-2029 |
| | N/A | | 2026-2029 |
| | N/A | | N/A |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Misc. federal credits | |
| $1 | million | |
| $6 | million | |
| $13 | million | |
| $1 | million | | — | | — | |
| $10 | million |
| Year(s) of expiration | | 2029-2033 |
| | 2029-2033 |
| | 2026-2033 |
| | 2029-2033 |
| | N/A | | N/A | | 2029-2033 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| State credits | | — | | — | | — | |
| $9.5 | million | | — | |
| $3.4 | million | |
| $15.7 | million |
| Year(s) of expiration | | N/A | | N/A | | N/A | | 2015-2019 |
| | N/A | | 2026 |
| | 2015-2019 |
|
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unrecognized tax benefits
Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Gross balance at January 1 |
| $4,593,224 |
| |
| $4,170,403 |
| |
| $4,387,780 |
|
| Additions based on tax positions related to the current year | 348,543 |
| | 162,338 |
| | 163,612 |
|
| Additions for tax positions of prior years | 11,637 |
| | 410,108 |
| | 1,517,797 |
|
| Reductions for tax positions of prior years | (213,401 | ) | | (103,360 | ) | | (476,873 | ) |
| Settlements | — |
| | (43,620 | ) | | (1,421,913 | ) |
| Lapse of statute of limitations | (3,218 | ) | | (2,645 | ) | | — |
|
| Gross balance at December 31 | 4,736,785 |
| | 4,593,224 |
| | 4,170,403 |
|
| Offsets to gross unrecognized tax benefits: | |
| | |
| | |
|
| Credit and loss carryovers | (4,295,643 | ) | | (4,400,498 | ) | | (4,022,535 | ) |
| Unrecognized tax benefits net of unused tax attributes and payments (a) |
| $441,142 |
| |
| $192,726 |
| |
| $147,868 |
|
| | | 2011 | | 2010 | | 2009 |
| | | (In Thousands) |
| | | | | | | |
| Gross balance at January 1 | | $4,949,788 | | $4,050,491 | | $1,825,447 |
Additions based on tax positions related to the current year | | 211,966 | | 480,843 | | 2,286,759 |
| Additions for tax positions of prior years | | 332,744 | | 871,682 | | 697,615 |
| Reductions for tax positions of prior years | | (259,895) | | (438,460) | | (372,862) |
| Settlements | | (841,528) | | (10,462) | | (385,321) |
| Lapse of statute of limitations | | (5,295) | | (4,306) | | (1,147) |
| Gross balance at December 31 | | 4,387,780 | | 4,949,788 | | 4,050,491 |
| Offsets to gross unrecognized tax benefits: | | | | | | |
| Credit and loss carryovers | | (3,212,397) | | (3,771,301) | | (3,349,589) |
| Cash paid to taxing authorities | | (363,266) | | (373,000) | | (373,000) |
| Unrecognized tax benefits net of unused tax attributes and payments (1) | | $812,117 | | $805,487 | | $327,902 |
(1) | |
| (a) | Potential tax liability above what is payable on tax returns |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The balances of unrecognized tax benefits include $521$516 million, $605$176 million, and $522$203 million as of December 31, 2011, 2010,2014, 2013, and 2009,2012, respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3.867$4.221 billion, $4.345$4.417 billion, and $3.528$3.968 billion as of December 31, 2011, 2010,2014, 2013, and 2009,2012, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
Entergy has made deposits with the IRS against its potential liabilities arising from audit adjustments and settlements related to its uncertain tax positions. Deposits are expected to be made to the IRS as the cash tax benefits of uncertain tax positions are realized. As of December 31, 2011, Entergy has deposits of $363 million on account with the IRS to cover its uncertain tax positions.
Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31, 2011, 2010,2014, 2013, and 20092012 accrued balance for the possible payment of interest is approximately $99$127 million, $45$96.4 million, and $48$146.3 million, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2011, 2010,2014, 2013, and 20092012 is as follows:
2011 | | Entergy Arkansas | Entergy Gulf States Louisiana | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Gross balance at January 1, 2011 | | $240,239 | | $353,886 | | $505,188 | | $24,163 | | $18,176 | | $14,229 | | $224,518 |
| Additions based on tax | | | | | | | | | | | | | | |
| positions related to the | | | | | | | | | | | | | | |
| current year | | 11,216 | | 9,398 | | 8,748 | | 457 | | 50,212 | | 1,760 | | 44,419 |
| Additions for tax positions | | | | | | | | | | | | | | |
| of prior years | | 44,202 | | 50,944 | | 21,052 | | 21,902 | | 7,343 | | 7,533 | | 14,200 |
| Reductions for tax | | | | | | | | | | | | | | |
| positions of prior years | | (3,255) | | (21,719) | | (27,991) | | (5,022) | | (12,289) | | (3,432) | | (4,942) |
| Settlements | | 43,091 | | (2,016) | | (60,810) | | (30,448) | | (7,390) | | (865) | | 2,988 |
| Gross balance at December 31, 2011 | | 335,493 | | 390,493 | | 446,187 | | 11,052 | | 56,052 | | 19,225 | | 281,183 |
| Offsets to gross unrecognized | | | | | | | | | | | | | | |
| tax benefits: | | | | | | | | | | | | | | |
| Loss carryovers | | (146,429) | | (26,394) | | (216,720) | | (5,930) | | (1,211) | | (10,645) | | (10,752) |
| Cash paid to taxing authorities | | (75,977) | | (45,493) | | 0 | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
| Unrecognized tax benefits net of | | | | | | | | | | | | | | |
| unused tax attributes and payments | | $113,087 | | $318,606 | | $229,467 | | ($2,434) | | $53,667 | | $7,204 | | $228,553 |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Gross balance at January 1, 2014 | |
| $347,713 |
| |
| $465,075 |
| |
| $611,605 |
| |
| $16,186 |
| |
| $51,679 |
| |
| $13,017 |
| |
| $265,185 |
|
| Additions based on tax positions related to the current year | | 14,511 |
| | 55,053 |
| | 96,196 |
| | 3,928 |
| | 2,235 |
| | 4,225 |
| | 2,744 |
|
| Additions for tax positions of prior years | | 1,767 |
| | 5,204 |
| | 1,720 |
| | 319 |
| | 37 |
| | 303 |
| | 566 |
|
| Reductions for tax positions of prior years | | (1,079 | ) | | (7,995 | ) | | (20,929 | ) | | (289 | ) | | (188 | ) | | (267 | ) | | (10,253 | ) |
| Settlements | | — |
| | — |
| | — |
| | — |
| | — |
| | (14 | ) | | — |
|
| Gross balance at December 31, 2014 | | 362,912 |
| | 517,337 |
| | 688,592 |
| | 20,144 |
| | 53,763 |
| | 17,264 |
| | 258,242 |
|
| Offsets to gross unrecognized tax benefits: | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Loss carryovers | | (361,043 | ) | | (89,448 | ) | | (650,540 | ) | | (6,992 | ) | | (20,735 | ) | | (241 | ) | | (163,124 | ) |
| Unrecognized tax benefits net of unused tax attributes and payments | |
| $1,869 |
| |
| $427,889 |
| |
| $38,052 |
| |
| $13,152 |
| |
| $33,028 |
| |
| $17,023 |
| |
| $95,118 |
|
2010 | | Entergy Arkansas | Entergy Gulf States Louisiana | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Gross balance at January 1, 2010 | | $293,920 | | $311,311 | | $352,577 | | $17,137 | | ($53,295) | | $32,299 | | $211,247 |
| Additions based on tax | | | | | | | | | | | | | | |
| positions related to the | | | | | | | | | | | | | | |
| current year | | 38,205 | | 87,755 | | 183,188 | | 4,679 | | 173 | | 5,169 | | 16,829 |
| Additions for tax positions | | | | | | | | | | | | | | |
| of prior years | | 1,838 | | 25,960 | | 34,236 | | 6,857 | | 72,169 | | 5,868 | | 10,402 |
| Reductions for tax | | | | | | | | | | | | | | |
| positions of prior years | | (92,699) | | (71,033) | | (64,868) | | (4,469) | | (863) | | (29,100) | | (13,116) |
| Settlements | | (1,025) | | (107) | | 55 | | (41) | | (8) | | (7) | | (844) |
| Gross balance at December 31, 2010 | | 240,239 | | 353,886 | | 505,188 | | 24,163 | | 18,176 | | 14,229 | | 224,518 |
| Offsets to gross unrecognized | | | | | | | | | | | | | | |
| tax benefits: | | | | | | | | | | | | | | |
| Loss carryovers | | (123,968) | | (29,257) | | (131,805) | | (6,477) | | (3,751) | | (6,269) | | (10,487) |
| Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
| Unrecognized tax benefits net of | | | | | | | | | | | | | | |
| unused tax attributes and payments | | $40,294 | | $279,136 | | $373,383 | | $10,130 | | $13,251 | | $6,584 | | $172,153 |
| | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Gross balance at January 1, 2013 | |
| $344,669 |
| |
| $465,721 |
| |
| $536,673 |
| |
| $16,841 |
| |
| $52,018 |
| |
| $13,954 |
| |
| $260,346 |
|
| Additions based on tax positions related to the current year | | 6,427 |
| | 7,276 |
| | 10,611 |
| | 957 |
| | 583 |
| | 2,170 |
| | 4,170 |
|
| Additions for tax positions of prior years | | 1,228 |
| | 7,189 |
| | 118,025 |
| | 401 |
| | 3,506 |
| | 587 |
| | 8,391 |
|
| Reductions for tax positions of prior years | | (3,943 | ) | | (15,045 | ) | | (38,428 | ) | | (1,941 | ) | | (962 | ) | | (4,186 | ) | | (967 | ) |
| Settlements | | (668 | ) | | (66 | ) | | (15,276 | ) | | (72 | ) | | (3,466 | ) | | 492 |
| | (6,755 | ) |
| Gross balance at December 31, 2013 | | 347,713 |
| | 465,075 |
| | 611,605 |
| | 16,186 |
| | 51,679 |
| | 13,017 |
| | 265,185 |
|
| Offsets to gross unrecognized tax benefits: | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Loss carryovers | | (345,674 | ) | | (136,151 | ) | | (611,605 | ) | | (16,186 | ) | | (22,078 | ) | | (266 | ) | | (225,286 | ) |
| Unrecognized tax benefits net of unused tax attributes and payments | |
| $2,039 |
| |
| $328,924 |
| |
| $— |
| |
| $— |
| |
| $29,601 |
| |
| $12,751 |
| |
| $39,899 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | Entergy Gulf States Louisiana | Entergy Louisiana | Entergy Mississippi | Entergy New Orleans | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Gross balance at January 1, 2009 | | $240,203 | | $275,378 | | $298,650 | | $31,724 | | $26,050 | | $39,202 | | $172,168 |
| Additions based on tax | | | | | | | | | | | | | | |
| positions related to the | | | | | | | | | | | | | | |
| current year | | 9,826 | | 5,436 | | 10,197 | | 283 | | 17 | | 97 | | 6,812 |
| Additions for tax positions | | | | | | | | | | | | | | |
| of prior years | | 80,968 | | 102,466 | | 108,399 | | 1,256 | | 109 | | 28,821 | | 30,586 |
| Reductions for tax | | | | | | | | | | | | | | |
| positions of prior years | | (22,830) | | (33,000) | | (45,613) | | (4,235) | | (70,391) | | (17,853) | | (244) |
| Settlements | | (14,247) | | (38,969) | | (19,056) | | (11,891) | | (9,080) | | (17,968) | | 1,925 |
| Gross balance at December 31, 2009 | | 293,920 | | 311,311 | | 352,577 | | 17,137 | | (53,295) | | 32,299 | | 211,247 |
| Offsets to gross unrecognized | | | | | | | | | | | | | | |
| tax benefits: | | | | | | | | | | | | | | |
| Loss carryovers | | (39,847) | | (20,031) | | (70,428) | | (1,618) | | (633) | | (30,921) | | (1,297) |
| Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
| Unrecognized tax benefits net of | | | | | | | | | | | | | | |
| unused tax attributes and payments | | $178,096 | | $245,787 | | $282,149 | | $7,963 | | ($55,102) | | $2 | | $168,072 |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Gross balance at January 1, 2012 | |
| $335,493 |
| |
| $390,493 |
| |
| $446,187 |
| |
| $11,052 |
| |
| $56,052 |
| |
| $19,225 |
| |
| $281,183 |
|
| Additions based on tax positions related to the current year | | 10,409 |
| | 8,974 |
| | 67,721 |
| | 8,401 |
| | 497 |
| | 1,656 |
| | 8,715 |
|
| Additions for tax positions of prior years | | 429,232 |
| | 392,548 |
| | 331,432 |
| | 4,057 |
| | 445 |
| | 4,834 |
| | 271,172 |
|
| Reductions for tax positions of prior years | | (39,534 | ) | | (50,518 | ) | | (169,465 | ) | | (5,703 | ) | | (2,506 | ) | | (11,649 | ) | | (20,934 | ) |
| Settlements | | (390,931 | ) | | (275,776 | ) | | (139,202 | ) | | (966 | ) | | (2,470 | ) | | (112 | ) | | (279,790 | ) |
| Gross balance at December 31, 2012 | | 344,669 |
| | 465,721 |
| | 536,673 |
| | 16,841 |
| | 52,018 |
| | 13,954 |
| | 260,346 |
|
| Offsets to gross unrecognized tax benefits: | | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Loss carryovers | | (342,127 | ) | | (160,955 | ) | | (536,673 | ) | | (16,841 | ) | | (35,511 | ) | | (1,593 | ) | | (249,424 | ) |
| Unrecognized tax benefits net of unused tax attributes and payments | |
| $2,542 |
| |
| $304,766 |
| |
| $— |
| |
| $— |
| |
| $16,507 |
| |
| $12,361 |
| |
| $10,922 |
|
The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would affect the effectivehave reduced income tax rateexpense as follows:
| | | | December 31, 2011 | | December 31, 2010 | | December 31, 2009 | December 31, |
| | (In Millions) | 2014 | | 2013 | | 2012 |
| | | | | | | (In Millions) |
| Entergy Arkansas | $- | | $0.2 | | $1.2 |
| $2.6 |
| |
| $0.6 |
| |
| $0.6 |
|
| Entergy Gulf States Louisiana | $107.9 | | $129.6 | | $69.8 |
| $91.9 |
| |
| $44.0 |
| |
| $44.0 |
|
| Entergy Louisiana | $281.3 | | $286.7 | | $192.7 |
| $175.4 |
| |
| $87.9 |
| |
| $92.4 |
|
| Entergy Mississippi | $3.8 | | $5.3 | | $3.3 |
| $3.9 |
| |
| $3.9 |
| |
| $3.9 |
|
| Entergy New Orleans | $- | | $- | | $0.3 |
| $50.7 |
| |
| $— |
| |
| $— |
|
| Entergy Texas | $7.3 | | $6.0 | | $1.2 |
| $10.5 |
| |
| $10.1 |
| |
| $8.6 |
|
| System Energy | $- | | $12.1 | | $8.7 |
| $3.7 |
| |
| $3.3 |
| |
| $3.5 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Penalties have not been accrued. Accrued balances for the possible payment of interest and penalties are as follows:
|
| | | | | | | | | | | |
| | December 31, |
| | 2014 | | 2013 | | 2012 |
| | (In Millions) |
| Entergy Arkansas |
| $17.0 |
| |
| $15.2 |
| |
| $21.8 |
|
| Entergy Gulf States Louisiana |
| $21.0 |
| |
| $17.0 |
| |
| $33.1 |
|
| Entergy Louisiana |
| $1.2 |
| |
| $1.0 |
| |
| $0.9 |
|
| Entergy Mississippi |
| $2.8 |
| |
| $2.1 |
| |
| $2.4 |
|
| Entergy New Orleans |
| $1.3 |
| |
| $0.9 |
| |
| $0.1 |
|
| Entergy Texas |
| $1.0 |
| |
| $0.8 |
| |
| $0.7 |
|
| System Energy |
| $23.8 |
| |
| $19.0 |
| |
| $33.2 |
|
| | December 31, 2011 | | December 31, 2010 | | December 31, 2009 |
| | (In Millions) |
| | | | | | |
| Entergy Arkansas | $11.4 | | $- | | $0.7 |
| Entergy Gulf States Louisiana | $14.4 | | $9.7 | | $2.3 |
| Entergy Louisiana | $0.8 | | $3.3 | | $1.2 |
| Entergy Mississippi | $1.7 | | $1.6 | | $2.1 |
| Entergy New Orleans | $2.4 | | $- | | $0.3 |
| Entergy Texas | $0.1 | | $0.1 | | $0.2 |
| System Energy | $18.5 | | $8.2 | | $7.2 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Tax Litigation
In October 2010 the United StatesU.S. Tax Court entered a decision in favor of Entergy forregarding the ability to credit the U.K. Windfall Tax against U.S. income tax years 1997 and 1998.as a foreign tax credit. The issues decided by theU.K. Windfall Tax Court are as follows:relates to Entergy’s former investment in London Electricity.
· | The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit. The U.K. Windfall Tax relates to Entergy’s former investment in London Electricity. |
· | The validity of Entergy’s change in method of tax accounting for street lighting assets and the related increase in depreciation deductions. |
The IRS did not appeal street lighting depreciation, and that matter is considered final. The IRS filed an appeal of the U.K. Windfall Tax decision however, with the United StatesU.S. Court of Appeals for the Fifth Circuit in December 2010. Oral arguments were heard in November 2011, and2011. In June 2012 the U.S. Court of Appeals for the Fifth Circuit unanimously affirmed the U.S. Tax Court decision. As a result of this decision, is pending.Entergy reversed its liability for uncertain tax positions associated with this issue. On September 4, 2012, the U.S. Solicitor General, on behalf of the Commissioner of Internal Revenue, petitioned the U.S. Supreme Court for a writ of certiorari to review the Fifth Circuit judgment.
Concurrent with the Tax Court’s issuance of a favorable decision regarding the above issues, the Tax Court issued a favorable decision in a separate proceeding, PPL Corp. v. Commissioner, regarding the creditability of the U.K. Windfall Tax. The IRS appealed the PPL decision to the United States Court of Appeals for the Third Circuit. In December 2011 the Third Circuit reversed the Tax Court’s holding in PPL Corp. v. Commissioner, stating that the U.K. tax was not eligible for the foreign tax credit. Entergy is awaitingPPL Corp. petitioned the U.S. Supreme Court for a decision in its proceeding beforewrit of certiorari to review the Fifth CircuitU.S. Court of Appeals. Although Entergy believes thatAppeals for the Third Circuit opinion is incorrect, its decision constitutes adverse, although not controlling authority. After consideringdecision. On October 29, 2012, the Third Circuit decision,U.S. Supreme Court granted PPL Corp.’s petition for certiorari. The Solicitor General’s petition for writ of certiorari in Entergy’s case was held pending the fourth quarter 2011, Entergy revised its provision for uncertain tax positions associated with this issue.disposition of the PPL case.
The total tax included On May 20, 2013, the U.S. Supreme Court issued a unanimous decision in IRS Notices of Deficiency relating toPPL’s favor, holding that the U.K. Windfall Tax credit issue is $82 million. The totala creditable tax and interest associated with this issue for all years is approximately $239 million. This assumes that Entergy would utilize a portionU.S. federal income tax purposes. On May 28, 2013, the Supreme Court denied the petition for certiorari filed by the Commissioner of its cash deposits discussedInternal Revenue in “Unrecognized tax benefits” above to offset underpayment interest.
In February 2008Entergy’s U.K. Windfall Tax case, allowing the IRS issued a Statutory Noticedecision in Entergy’s favor from the United States Court of DeficiencyAppeals for the year 2000. The deficiency resulted from a disallowance of the same two 1997-1998 issues discussed above as well as one additional issue. That issue is depreciation deductions that resulted from Entergy’s purchase price allocations on its acquisitions of its non-utility nuclear plants. Entergy filed a Tax Court petition in May 2008 challenging the three issues in dispute. In June 2010 a trial on these issues was held in Washington, D.C. In February 2011 a joint stipulation of settled issues was filed addressing the depreciation issue in the Tax Court case. As a result, the IRS agreed that Entergy was entitledFifth Circuit to allocate all of the cash consideration to plant and equipment rather than to nuclear decommissioning trusts thereby entitling Entergy to its claimed depreciation.become final.
Income Tax Audits
Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns. Other than the matters discussed in the Income Tax Litigation section above, the IRS’s andIRS examinations are substantially allcompleted for years before 2009. All state taxing authorities’ examinations are completed for years before 2004.2005.
2002-2003 IRS Audit
In September 2009, Entergy entered into a partial agreement with the IRS for the years 2002 and 2003. It is a partial agreement because Entergy did not agree to the IRS’s disallowance of foreign tax credits for the U.K. Windfall Tax and the street lighting depreciation issues as they relate to 2002. As discussed above the, the IRS did not appeal the Tax Court ruling on the street lighting depreciation. Therefore, the U.K. Windfall tax credit issue will be governed by the decision by the Fifth Circuit Court of Appeals for the tax years 1997 and 1998.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2004-2005 IRS Audit
The IRS issued its 2004-2005 Revenue Agent’s Report (RAR) in May 2009.
In June 2009, Entergy filed a formal protest with the IRS Appeals Division indicating disagreement with certain issues contained in the 2004-2005 RAR.Revenue Agent’s Report (RAR). The major issues in dispute are:
· | Depreciation of street lighting assets (Because the IRS did not appeal the Tax Court’s 2010 decision on thismost significant issue it will be fully allowed in the final Appeals Division calculations for this audit). |
· | Qualified research expenditures for purposes of the research credit. |
· | Inclusion of nuclear decommissioning liabilities in cost of goods sold. |
The initial IRS appeals conference to discuss these disputed issues occurred in September 2010. Negotiations are ongoing.
2006-2007 IRS Audit
The IRS issued its 2006-2007 RAR in October 2011. In connection with the 2006-2007 IRS audit and resulting RAR, Entergy resolved the significant issues discussed below.
In August 2011, Entergy entered into a settlement agreement with the IRS relating to the mark-to-market income tax treatment of various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility. See Note 8 to the financial statements for further details regarding this contract and a previous LPSC-approved settlement regarding sharing of tax benefits from the tax treatment of the contract.
With respect to income tax accounting for wholesale electric power purchase agreements, Entergy recognized income for tax purposes of approximately $1.5 billion, which represents a reversal of previously deducted temporary differences on which deferred taxes had been provided. Also in connection with this settlement, Entergy recognized a gain for income tax purposes of approximately $1.03 billion on the formation of a wholly-owned subsidiary in 2005 with a corresponding step-up in the tax basis of depreciable assets resulting in additional tax depreciation at Entergy Louisiana. Because Entergy Louisiana is entitled to deduct additional tax depreciation of $1.03 billion in the future, Entergy Louisiana recorded a deferred tax asset for this additional tax basis. The tax expense associated with the gain is offset by recording the deferred tax asset and by utilization of net operating losses. With the recording of the deferred tax asset, there was a corresponding increase to Entergy Louisiana’s member’s equity account. The agreement with the IRS effectively settled the tax treatment of various wholesale electric power purchase and sale agreements, resulting in the reversal in third quarter 2011 of approximately $422 million of deferred tax liabilities and liabilities for uncertain tax positions at Entergy Louisiana, with a corresponding reduction in income tax expense. Under the terms of an LPSC-approved final settlement, Entergy Louisiana will share over a 15-year period a portion of the benefits of the settlement with its customers, and recorded a $199 million regulatory charge and a corresponding net-of-tax regulatory liability to reflect this obligation.
After consideration of the taxable income recognition and the additional depreciation deductions provided for in the settlement, Entergy’s net operating loss carryover was reduced by approximately $2.5 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
inclusion of nuclear decommissioning liabilities in cost of goods sold for the nuclear power plants owned by the Utility resulting from an Application for Change in Accounting Method for tax purposes (the “2004 CAM”).
During the fourth quarter 2012, Entergy settled the position relating to the 2004 CAM. Under the settlement Entergy conceded its tax position, resulting in an increase in taxable income of approximately $2.97 billion for the tax years 2004 - 2007. The settlement provides that Entergy Louisiana is entitled to additional tax depreciation of approximately $547 million for years 2006 and beyond. The deferred tax asset net of interest charges associated with the settlement is $155 million for Entergy. There was a related increase to Entergy Louisiana’s member’s equity account.
2008-2009 IRS Audit
In the third quarter 2008, Entergy Louisiana and Entergy Gulf States Louisiana received $679 million and $274.7 million, respectively, from the Louisiana Utilities Restoration Corporation (“LURC”). These receipts from LURC were from the proceeds of a Louisiana Act 55 financing of the costs incurred to restore service following Hurricane Katrina and Hurricane Rita. See Note 2 to the financial statements for further details regarding the financings.
In June 2012, Entergy effectively settled the tax treatment of the storm restoration, which resulted in an increase to 2008 taxable income of $129 million for Entergy Louisiana and $104 million for Entergy Gulf States Louisiana and a reduction of income tax expense of $172 million, including $143 million for Entergy Louisiana and $20 million for Entergy Gulf States Louisiana. Under the terms of an LPSC-approved settlement related to the Louisiana Act 55 financings, Entergy Louisiana and Entergy Gulf States Louisiana recorded, respectively, a $137 million ($84 million net-of-tax) and a $28 million ($17 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect their obligations to customers with respect to the settlement.
In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code. In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold. The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income. The 2009 CAM was adjusted to $9.3 billion in 2012.
In the fourth quarter 2012 the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM. In the third quarter 2013, the Internal Revenue Service issued its RAR for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagrees with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division on October 24, 2013. Two conferences with the Appeals Division have taken place during 2014. The resolution of this issue is in process. The issuance of the RAR by the IRS effectively settled all other issues, which resulted in an adjustment to the provision for uncertain tax positions.
Other Tax Matters
Entergy regularly negotiates with the IRS to achieve settlements. The resultsresolution of all pending litigations andthe nuclear decommissioning liability audit issuesissue, discussed above, could result in significant changes to the amounts of unrecognized tax benefits as discussed above.in the next twelve months.
WhenIn September 2013 the U.S. Treasury Department and the IRS issued final regulations that provide guidance on the deductibility and capitalization of costs incurred associated with tangible property. Entergy Louisiana, Inc. restructured effective December 31, 2005, Entergy Louisiana agreed, underand the terms of the merger plan, to indemnify its parent, Entergy Louisiana Holdings, Inc. (formerly, Entergy Louisiana, Inc.) for certain tax obligations that arose from the 2002-2003 IRS partial agreement. Because the agreementRegistrant Subsidiaries filed with the IRS was settledan automatic application for change in accounting method which is in compliance with the fourth quarter 2009, Entergy Louisiana paid Entergy Louisiana Holdings approximately $289 million pursuant to these intercompany obligations infinal regulations and the fourth quarter 2009.
On November 20, 2009, Entergy Corporation and subsidiaries amended the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement such that Entergy Corporation shall be treated, under allsafe harbor provisions of such Agreement, in a mannerthe relevant IRS Revenue Procedures. Entergy estimates that is identical to the treatment afforded all subsidiaries, direct or indirect, of Entergy Corporation.
In the fourth quarter 2009, Entergy filed Applications for Change in Method of Accounting with the IRS for certain costs under Section 263A of the Internal Revenue Code. In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold. The effect of this accounting method change for Entergy waswill result in a $5.7 billion reduction in 2009net increase to Entergy’s taxable income within the Entergy Wholesale Commodities segment.
In March 2010, Entergy filed an Application for Change in Accounting Methodof approximately $548 million, which will be recognized over a four year period beginning with the IRS. Intax year ended 2014. The adoption of the application Entergy proposed to changefinal regulations and safe harbor method results in approximate changes in the definition of unit of property for its generation assets to determine the appropriate characterization of costs associated with such units as capital or repair under the Internal Revenue Code and related Treasury Regulations. The effect of this change was an approximate $1.3 billion reduction in 2010Registrant Subsidiaries taxable income for Entergy, including reductions of $292 million for Entergy Arkansas, $132 million for Entergy Gulf States Louisiana, $185 million for Entergy Louisiana, $48 million for Entergy Mississippi, $45 million for Entergy Texas, $13 million for Entergy New Orleans, and $180 million for System Energy.
During the second quarter 2011, Entergy filed an Application for Change in Accounting Method with the IRS related to the allocation of overhead costs between production and non-production activities. The accounting method affects the amount of overhead that will be capitalized or deducted for tax purposes. The accounting method is expected to be implemented for the 2014 tax year.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
income as follows: an increase of $157 million for Entergy Arkansas, an increase of $42 million for Entergy Gulf States Louisiana, an increase of $49 million for Entergy Louisiana, an increase of $23 million for Entergy Mississippi, an increase of $169 million for Entergy Texas, a decrease of $11 million for Entergy New Orleans, and an increase of $34 million for System Energy.
In March 2013, Entergy Louisiana distributed to its parent, Entergy Louisiana Holdings, Inc., Louisiana income tax credits of $20.6 million, which resulted in a decrease in Entergy Louisiana’s member’s equity account.
The Tax Increase Prevention Act of 2014 was enacted in December 2014. The most significant provisions affecting Entergy and the Registrant Subsidiaries were a one-year extension of 50% bonus depreciation and the research and experimentation tax credit. These provisions do not result in an immediate cash flow benefit but will result in cash flow benefits for Entergy in a future period.
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, AND SHORT-TERM BORROWINGS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of approximately $3.5 billion and expires in August 2012, which Entergy intends to renew before expiration. Because the facility is now within one year of its expiration date, borrowings outstanding on the facility are classified as currently maturing long-term debt on the balance sheet.March 2019. Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility. The facilitycommitment fee is currently 0.125%0.275% of the undrawn commitment amount. FacilityCommitment 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 year ended December 31, 20112014 was 0.745%1.93% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of December 31, 2011.2014.
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
| (In Millions) |
| | | | | | | |
| $3,451 | | $1,920 | | $28 | | $1,503 |
|
| | | | | | |
Capacity (a) | | Borrowings | | Letters of Credit | | Capacity Available |
| (In Millions) |
| $3,500 | | $695 | | $9 | | $2,796 |
Entergy Corporation’s facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to$1.5 billion. At December 31, 2014, Entergy Corporation had $484 million of commercial paper outstanding. The weighted-average interest rate for the year ended December 31, 2014 was 0.88%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of December 31, 20112014 as follows:
Company
|
| | Expiration
Date
| | Amount of
Facility
| | Interest Rate (a)
| | Amount Drawn
as of
December 31, 2011
|
| | | | | | | | | Amount Drawn as of |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | December 31, 2014 |
| Entergy Arkansas | | April 20122015 | | $7820 million (b) | | 3.25%1.67% | | -— |
| Entergy Arkansas | | March 2019 | | $150 million (c) | | 1.67% | | — |
| Entergy Gulf States Louisiana | | August 2012March 2019 | | $100150 million (c)(d) | | 0.71%1.42% | | -— |
| Entergy Louisiana | | August 2012March 2019 | | $200 million (d)(e) | | 0.67%1.42% | | $50 million— |
| Entergy Mississippi | | May 20122015 | | $3510 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 20122015 | | $2535 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 20122015 | | $1020 million (e)(f) | | 2.05%1.67% | | -— |
| Entergy Mississippi | | May 2015 | | $37.5 million (f) | | 1.67% | | — |
| Entergy New Orleans | | November 2015 | | $25 million | | 1.92% | | — |
| Entergy Texas | | August 2012March 2019 | | $100150 million (f)(g) | | 0.77%1.67% | | -— |
| |
| (a) | The interest rate is the rate as of December 31, 20112014 that would be applied to outstanding borrowings under the facility. |
| |
| (b) | The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization. Borrowings under thethis Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable.receivable at Entergy Arkansas’s option. |
| |
| (c) | The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2014, no letters of credit were outstanding. |
| |
| (d) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011,2014, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
| |
(d)(e) | The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011,2014, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(e) | |
| (f) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.receivable at Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization.Mississippi’s option. |
| |
(f)(g) | The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011, no2014, $1.3 million in letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement securitization bonds are excluded from debt and capitalization in calculating the debt ratio. |
The facilitycommitment fees on the credit facilities range from 0.09%0.125% to 0.15%0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations related to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2014:
|
| | | | | | | |
| Company | | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of December 31, 2014 |
| Entergy Arkansas | | | $25 million | | 0.70% | | $2.0 million |
| Entergy Gulf States Louisiana | | | $75 million | | 0.70% | | $27.9 million |
| Entergy Louisiana | | | $50 million | | 0.70% | | $4.7 million |
| Entergy Mississippi | | | $40 million | | 0.70% | | $14.4 million |
| Entergy Mississippi | | | $40 million | | 1.50% | | — |
| Entergy New Orleans | | | $15 million | | 0.75% | | $8.1 million |
| Entergy Texas | | | $50 million | | 0.70% | | $24.5 million |
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through October 31, 2013.2015. In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of December 31, 20112014 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:
| | Authorized | | Borrowings |
| | (In Millions) |
| Entergy Arkansas | $250 | | - |
| Entergy Gulf States Louisiana | $200 | | - |
| Entergy Louisiana | $250 | | $168 |
| Entergy Mississippi | $175 | | $2 |
| Entergy New Orleans | $100 | | - |
| Entergy Texas | $200 | | - |
| System Energy | $200 | | - |
|
| | | |
| Authorized | | Borrowings |
| (In Millions) |
| Entergy Arkansas | $250 | | — |
| Entergy Gulf States Louisiana | $200 | | — |
| Entergy Louisiana | $250 | | — |
| Entergy Mississippi | $175 | | — |
| Entergy New Orleans | $100 | | — |
| Entergy Texas | $200 | | — |
| System Energy | $200 | | — |
Entergy Nuclear Vermont Yankee Credit Facilities
In January 2015, Entergy Nuclear Vermont Yankee entered into a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $60 million which expires in January 2018. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against this facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Entergy Nuclear Vermont Yankee’s nuclear facilities. The commitment fee is currently 0.25% of the undrawn commitment amount. The weighted average interest rate that would have applied to any outstanding borrowings at the time Entergy Nuclear Vermont Yankee entered into the facility was 1.92% on the drawn portion of the facility.
Also in January 2015, Entergy Nuclear Vermont Yankee entered into an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against this facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Entergy Nuclear Vermont Yankee’s nuclear facilities. The weighted average interest rate that
Entergy Corporation and Subsidiaries
Notes to Financial Statements
would have applied to any outstanding borrowings at the time Entergy Nuclear Vermont Yankee entered into the facility was 1.92% on the drawn portion of the facility.
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)
See Note 18 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE). The nuclear fuel company variable interest entities have credit facilities and also issue commercial paper to finance the acquisition and ownership of nuclear fuel as follows as of December 31, 2011:2014:
|
| | | | | | | | |
Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of December 31, 2014 |
| | | (Dollars in Millions) |
| Entergy Arkansas VIE | | June 2016 | | $85 | | 1.61% | | $48.0 |
| Entergy Gulf States Louisiana VIE | | June 2016 | | $100 | | n/a | | $— |
| Entergy Louisiana VIE | | June 2016 | | $90 | | 1.54% | | $46.0 |
| System Energy VIE | | June 2016 | | $125 | | 1.68% | | $20.4 |
Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of December 31, 2011 | |
| | | (Dollars in Millions) | |
| | | | | | | | | | |
| Entergy Arkansas VIE | | July 2013 | | $85 | | 2.43% | | $35.9 | |
| Entergy Gulf States Louisiana VIE | | July 2013 | | $85 | | 2.25% | | $29.4 | |
| Entergy Louisiana VIE | | July 2013 | | $90 | | 2.38% | | $44.3 | |
| System Energy VIE | | July 2013 | | $100 | | - | | - | |
| |
| (a) | Includes letter of credit fees and bank fronting fees on commercial paper issuances by the VIEsnuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The VIEnuclear fuel company variable interest entity for Entergy Gulf States Louisiana does not issue commercial paper, but borrows directly on its bank credit facility. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amountAmounts outstanding on the Entergy Gulf States Louisiana nuclear fuel company variable interest entity’s credit facility, isif any, are included in long-term debt on its balance sheet and the commercial paper outstanding for the other VIEsnuclear fuel company variable interest entities is classified as a current liability on the respective balance sheets. The commitment fees on the credit facilities are 0.20%0.10% of the undrawn commitment amount.amount for the Entergy
Louisiana and Entergy Gulf States Louisiana VIEs and 0.125% of the undrawn commitment amount for the Entergy
Arkansas and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or Entergy Corporation as Guarantorguarantor for System Energy) to maintain a consolidated debt ratio of 70% or less of its total capitalization.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that are included in long-term debt on the respective balance sheets as of December 31, 20112014 as follows:
|
| | | | |
| Company | | Description | | Amount |
| | | | | |
| Entergy Arkansas VIE | | 9% Series H due June 2013 | | $30 million |
Entergy Arkansas VIE | | 5.69% Series I due July 2014 | | $70 million |
Entergy Arkansas VIE | | 3.23% Series J due July 2016 | | $55 million |
| Entergy Arkansas VIE | | 2.62% Series K due December 2017 | | $60 million |
| Entergy Arkansas VIE | | 3.65% Series L due July 2021 | | $90 million |
| Entergy Gulf States Louisiana VIE | | 5.56%3.25% Series NQ due May 2013July 2017 | | $75 million |
| Entergy Gulf States Louisiana VIE | | 5.41%3.38% Series OR due July 2012August 2020 | | $60 million |
Entergy Louisiana VIE | | 5.69% Series E due July 2014 | | $5070 million |
| Entergy Louisiana VIE | | 3.30% Series F due March 2016 | | $20 million |
System EnergyEntergy Louisiana VIE | | 6.29%3.25% Series FG due September 2013July 2017 | | $7025 million |
| Entergy Louisiana VIE | | 3.92% Series H due February 2021 | | $40 million |
| System Energy VIE | | 5.33% Series G due April 2015 | | $60 million |
| System Energy VIE | | 4.02% Series H due February 2017 | | $50 million |
| System Energy VIE | | 3.78% Series I due October 2018 | | $85 million |
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is included asreported in fuel expense.
In February 2012,Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy VIE issued $50 million of 4.02% Series H notes due February 2017. System Energy usedeach have obtained long-term financing authorizations from the proceeds to purchase additionalFERC that extend through October 2015 for issuances by its nuclear fuel.fuel company variable interest entity.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Long-term debt for Entergy Corporation and subsidiaries as of December 31, 20112014 and 20102013 consisted of:
| | Type of Debt and Maturity | | Weighted Average Interest Rate December 31, 2011 | | Interest Rate Ranges at December 31, | | Outstanding at December 31, | | Weighted Average Interest Rate December 31, 2014 | | Interest Rate Ranges at December 31, | | Outstanding at December 31, |
2011 | | 2010 | 2011 | | 2010 | 2014 | | 2013 | | 2014 | | 2013 |
| | | | | | | | | (In Thousands) | | | | | | | | (In Thousands) |
| | | | | | | | | | | | |
| Mortgage Bonds | | | | | | | | | | | | | | | | | | | | |
| 2011-2016 | | 4.18% | | 3.25%-6.20% | | 3.6%-6.2% | | $865,000 | | $920,000 | |
| 2017-2021 | | 5.40% | | 3.75%-7.13% | | 3.75%-7.125% | | 2,435,000 | | 2,160,000 | |
| 2022-2026 | | 5.27% | | 4.44%-5.66% | | 4.44%-5.66% | | 1,158,449 | | 1,158,738 | |
| 2027-2036 | | 6.18% | | 5.65%-6.40% | | 5.65%-6.4% | | 868,145 | | 868,546 | |
| 2039-2051 | | 6.22% | | 5.75%-7.88% | | 5.75%-7.875% | | 905,000 | | 755,000 | |
| | | | | | | | | | | | |
| 2014-2019 | | | 6.49% | | 3.25%-7.13% | | 1.88%-7.13% | |
| $1,650,000 |
| |
| $2,110,000 |
|
| 2020-2024 | | | 4.18% | | 3.05%-5.60% | | 3.05%-5.60% | | 3,483,303 |
| | 3,008,363 |
|
| 2025-2029 | | | 4.54% | | 3.78%-5.66% | | 4.44%-5.66% | | 762,859 |
| | 462,914 |
|
| 2032-2039 | | | 6.16% | | 5.90%-6.38% | | 5.90%-7.88% | | 660,000 |
| | 980,000 |
|
| 2040-2064 | | | 5.28% | | 4.70%-6.20% | | 4.70%-6.20% | | 2,215,000 |
| | 1,410,000 |
|
| Governmental Bonds (a) | | | | | | | | | | | | | | | | | | | | |
| 2011-2016 | | 3.67% | | 2.88%-5.80% | | 2.875%-6.75% | | 42,795 | | 90,135 | |
| 2017-2021 | | 4.83% | | 4.60%-5.00% | | 4.6%-5.0% | | 99,700 | | 99,700 | |
| 2022-2026 | | 5.82% | | 4.60%-6.20% | | 4.6%-6.2% | | 415,005 | | 455,005 | |
| 2027-2030 | | 5.00% | | 5.0% | | 5.0% | | 198,680 | | 198,680 | |
| | | | | | | | | | | | |
| 2015-2017 | | | 1.75% | | 1.55%-2.88% | | 1.55%-2.88% | | 86,655 |
| | 86,655 |
|
| 2021-2022 | | | 5.31% | | 2.375%-5.88% | | 2.375%-5.88% | | 291,000 |
| | 291,000 |
|
| 2028-2030 | | | 5.00% | | 5.00% | | 5.00% | | 198,680 |
| | 198,680 |
|
| Securitization Bonds | | | | | | | | | | | | | | | | | | | | |
| 2013-2020 | | 4.05% | | 2.12%-5.79% | | 2.12%-5.79% | | 416,899 | | 474,318 | |
| 2021-2023 | | 3.65% | | 2.04%-5.93% | | 2.30%-5.93% | | 653,948 | | 457,100 | |
| | | | | | | | | | | | |
| 2016-2023 | | | 3.88% | | 2.04%-5.93% | | 2.04%-5.93% | | 785,059 |
| | 883,243 |
|
| Variable Interest Entities Notes Payable (Note 4) | Variable Interest Entities Notes Payable (Note 4) | | | | | | | | | | | | | | | | |
| 2012-2016 | | 4.96% | | 2.25%-9.00% | | 2.125%-9% | | 519,400 | | 474,200 | |
| | | | | | | | | | | | |
| 2014-2021 | | | 3.53% | | 2.62%-5.33% | | 1.38%-5.69% | | 630,000 |
| | 634,800 |
|
| Entergy Corporation Notes | | | | | | | | | | | | | | | | | | | | |
| due March 2011 | | n/a | | - | | 7.06% | | - | | 86,000 | |
| due September 2015 | | n/a | | 3.625% | | 3.625% | | 550,000 | | 550,000 | | n/a | | 3.625% | | 3.625% | | 550,000 |
| | 550,000 |
|
| due January 2017 | | | n/a | | 4.70% | | 4.70% | | 500,000 |
| | 500,000 |
|
| due September 2020 | | n/a | | 5.125% | | 5.125% | | 450,000 | | 450,000 | | n/a | | 5.125% | | 5.125% | | 450,000 |
| | 450,000 |
|
| | | | | | | | | | | | |
| Note Payable to NYPA | | (b) | | (b) | | (b) | | 133,363 | | 155,971 | | (b) | | (b) | | (b) | | 79,638 |
| | 95,011 |
|
| 5 Year Credit Facility (Note 4) | | n/a | | 0.75% | | 0.78% | | 1,920,000 | | 1,632,120 | | n/a | | 1.93% | | 1.96% | | 695,000 |
| | 255,000 |
|
| Long-term DOE Obligation (c) | | - | | - | | - | | 181,031 | | 180,919 | | — | | — | | — | | 181,329 |
| | 181,253 |
|
| Waterford 3 Lease Obligation (d) | | n/a | | 7.45% | | 7.45% | | 188,255 | | 223,802 | | n/a | | 7.45% | | 7.45% | | 128,488 |
| | 148,716 |
|
| Grand Gulf Lease Obligation (d) | | n/a | | 5.13% | | 5.13% | | 178,784 | | 222,280 | | n/a | | 5.13% | | 5.13% | | 50,671 |
| | 97,414 |
|
Bank Credit Facility – Entergy Louisiana | | n/a | | 0.67% | | - | | 50,000 | | - | |
| Term Loan - Entergy Arkansas | | | n/a | | — | | 1.13% | | — |
| | 250,000 |
|
| Unamortized Premium and Discount - Net | Unamortized Premium and Discount - Net | | | | | | (9,531) | | (10,181) | | | | | | (12,529 | ) | | (11,172 | ) |
| Other | | | | | | | | 16,523 | | 14,372 | | | | | | | | 14,331 |
| | 14,367 |
|
| Total Long-Term Debt | | | | | | | | 12,236,446 | | 11,616,705 | | | | | | | | 13,399,484 |
| | 12,596,244 |
|
| Less Amount Due Within One Year | Less Amount Due Within One Year | | | | | | 2,192,733 | | 299,548 | | | | | | 899,375 |
| | 457,095 |
|
| Long-Term Debt Excluding Amount Due Within One Year | Long-Term Debt Excluding Amount Due Within One Year | | | | $10,043,713 | | $11,317,157 | | | |
| $12,500,109 |
| |
| $12,139,149 |
|
| | | | | | | | | | | | |
| Fair Value of Long-Term Debt (e) | Fair Value of Long-Term Debt (e) | | | | | | $12,176,251 | | $10,988,646 | | | |
| $13,607,242 |
| |
| $12,439,785 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (a) | Consists of pollution control revenue bonds and environmental revenue bonds, some of which are secured by collateral first mortgage bonds. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | These notes do not have a stated interest rate, but have an implicit interest rate of 4.8%. |
| |
| (c) | Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt. |
| |
| (d) | See Note 10 to the financial statements for further discussion of the Waterford 3 and Grand Gulf Lease Obligations.lease obligations. |
| |
| (e) | The fair value excludes lease obligations of $188$128 million at Entergy Louisiana and $179$51 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $133$80 million at Entergy, and includes debt due within one year. Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 16 to the financial statements and are based on prices derived by independent third parties that usefrom inputs such as benchmark yields and reported trades, broker/dealer quotes, and issuer spreads.trades. |
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2011,2014, for the next five years are as follows:
| | Amount |
| | (In Thousands) |
| | |
| 2012 | $2,124,679 |
| 2013 | $707,684 |
| 2014 | $135,899 |
| 2015 | $860,566 |
| 2016 | $344,850 |
|
| | | |
| | Amount |
| | (In Thousands) |
| 2015 |
| $310,566 |
|
| 2016 |
| $765,821 |
|
| 2017 |
| $266,801 |
|
| 2018 |
| $1,336,396 |
|
| 2019 |
| $1,492,107 |
|
In November 2000, Entergy’s non-utility nuclear business purchased the FitzPatrick and Indian Point 3 power plants in a seller-financed transaction. Entergy issued notes to NYPA with seven annual installments of approximately $108 million commencing one year from the date of the closing, and eight annual installments of $20 million commencing eight years from the date of the closing. These notes do not have a stated interest rate, but have an implicit interest rate of 4.8%. In accordance with the purchase agreement with NYPA, the purchase of Indian Point 2 in 2001 resulted in Entergy becoming liable to NYPA for an additional $10 million per year for 10 years, beginning in September 2003. This liability was recorded upon the purchase of Indian Point 2 in September 2001, and is included in the note payable to NYPA balance above.2001. In July 2003 a payment of $102 million was made prior to maturity on the note payable to NYPA. Under a provision in a letter of credit supporting these notes, if certain of the Utility operating companies or System Energy were to default on other indebtedness, Entergy could be required to post collateral to support the letter of credit.
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through July 2013.October 2015. Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2012.2015. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2012.2016.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
· | maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
· | pay in full all System Energy indebtedness for borrowed money when due; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Long-term debt for the Registrant Subsidiaries as of December 31, 20112014 and 20102013 consisted of:
|
| | | | | | | | |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| Entergy Arkansas | | | | |
| Mortgage Bonds: | | | | |
| 5.0% Series due July 2018 | |
| $— |
| |
| $115,000 |
|
| 3.75% Series due February 2021 | | 350,000 |
| | 350,000 |
|
| 3.05% Series due June 2023 | | 250,000 |
| | 250,000 |
|
| 3.7% Series due June 2024 | | 375,000 |
| | — |
|
| 5.66% Series due February 2025 | | 175,000 |
| | 175,000 |
|
| 5.9% Series due June 2033 | | 100,000 |
| | 100,000 |
|
| 6.38% Series due November 2034 | | 60,000 |
| | 60,000 |
|
| 5.75% Series due November 2040 | | 225,000 |
| | 225,000 |
|
| 4.95% Series due December 2044 | | 250,000 |
| | — |
|
| 4.9% Series due December 2052 | | 200,000 |
| | 200,000 |
|
| 4.75% Series due June 2063 | | 125,000 |
| | 125,000 |
|
| Total mortgage bonds | | 2,110,000 |
| | 1,600,000 |
|
| Governmental Bonds (a): | | | | |
| 1.55% Series due 2017, Jefferson County (d) | | 54,700 |
| | 54,700 |
|
| 2.375% Series due 2021, Independence County (d) | | 45,000 |
| | 45,000 |
|
| Total governmental bonds | | 99,700 |
| | 99,700 |
|
| Variable Interest Entity Notes Payable (Note 4): | | | | |
| 5.69% Series I due July 2014 | | — |
| | 70,000 |
|
| 3.23% Series J due July 2016 | | 55,000 |
| | 55,000 |
|
| 2.62% Series K due December 2017 | | 60,000 |
| | 60,000 |
|
| 3.65% Series L due July 2021 | | 90,000 |
| | — |
|
| Total variable interest entity notes payable | | 205,000 |
| | 185,000 |
|
| Securitization Bonds: | | | | |
| 2.30% Series Senior Secured due August 2021 | | 76,185 |
| | 88,986 |
|
| Total securitization bonds | | 76,185 |
| | 88,986 |
|
| Other: | | | | |
| Long-term DOE Obligation (b) | | 181,329 |
| | 181,253 |
|
| Term Loan due January 2015, weighted avg rate 1.13% | | — |
| | 250,000 |
|
| Unamortized Premium and Discount – Net | | (2,960 | ) | | (1,242 | ) |
| Other | | 2,089 |
| | 2,105 |
|
| Total Long-Term Debt | | 2,671,343 |
| | 2,405,802 |
|
| Less Amount Due Within One Year | | — |
| | 70,000 |
|
| Long-Term Debt Excluding Amount Due Within One Year | |
| $2,671,343 |
| |
| $2,335,802 |
|
| Fair Value of Long-Term Debt (c) | |
| $2,517,633 |
| |
| $2,142,527 |
|
| | 2011 | | 2010 |
| | (In Thousands) |
| Entergy Arkansas | | | |
Mortgage Bonds: | | | |
5.40% Series due August 2013 | $300,000 | | $300,000 |
5.0% Series due July 2018 | 115,000 | | 115,000 |
3.75% Series due February 2021 | 350,000 | | 350,000 |
5.66% Series due February 2025 | 175,000 | | 175,000 |
5.9% Series due June 2033 | 100,000 | | 100,000 |
6.38% Series due November 2034 | 60,000 | | 60,000 |
5.75% Series due November 2040 | 225,000 | | 225,000 |
Total mortgage bonds | 1,325,000 | | 1,325,000 |
| | | | |
Governmental Bonds (a): | | | |
4.6% Series due 2017, Jefferson County (d) | 54,700 | | 54,700 |
5.0% Series due 2021, Independence County (d) | 45,000 | | 45,000 |
Total governmental bonds | 99,700 | | 99,700 |
| | | | |
Variable Interest Entity Notes Payable (Note 4): | | | |
5.60% Series G due September 2011 | - | | 35,000 |
9% Series H due June 2013 | 30,000 | | 30,000 |
| 5.69% Series I due July 2014 | 70,000 | | 70,000 |
3.23% Series J due July 2016 | 55,000 | | - |
Total variable interest entity notes payable | 155,000 | | 135,000 |
| | | | |
Securitization Bonds: | | | |
2.30% Series Senior Secured due August 2021 | 113,792 | | 124,100 |
Total securitization bonds | 113,792 | | 124,100 |
| | | | |
Other: | | | |
Long-term DOE Obligation (b) | 181,031 | | 180,919 |
Unamortized Premium and Discount – Net | (733) | | (812) |
Other | 2,131 | | 3 |
| | | | |
Total Long-Term Debt | 1,875,921 | | 1,863,910 |
Less Amount Due Within One Year | - | | 35,000 |
Long-Term Debt Excluding Amount Due Within One Year | $1,875,921 | | $1,828,910 |
| | | | |
Fair Value of Long-Term Debt (c) | $1,756,361 | | $1,712,663 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | 2011 | | 2010 | | 2014 | | 2013 |
| | (In Thousands) | | (In Thousands) |
| Entergy Gulf States Louisiana | | | | | | | |
Mortgage Bonds: | | | | | | | |
6.0% Series due May 2018 | $375,000 | | $375,000 | |
| $375,000 |
| |
| $375,000 |
|
3.95% Series due October 2020 | 250,000 | | 250,000 | | 250,000 |
| | 250,000 |
|
5.59% Series due October 2024 | 300,000 | | 300,000 | | 300,000 |
| | 300,000 |
|
| 3.78% Series due April 2025 | | | 110,000 |
| | — |
|
6.2% Series due July 2033 | 240,000 | | 240,000 | | 240,000 |
| | 240,000 |
|
6.18% Series due March 2035 | 85,000 | | 85,000 | | 85,000 |
| | 85,000 |
|
Total mortgage bonds | 1,250,000 | | 1,250,000 | | 1,360,000 |
| | 1,250,000 |
|
| | | | | |
Governmental Bonds (a): | | | | | | | |
6.75% Series due 2012, Calcasieu Parish | - | | 26,170 | |
6.7% Series due 2013, Pointe Coupee Parish | - | | 9,460 | |
5.7% Series due 2014, Iberville Parish | - | | 11,710 | |
2.875% Series due 2015, Louisiana Public Facilities Authority (d) | 31,955 | | 31,955 | | 31,955 |
| | 31,955 |
|
5.8% Series due 2016, West Feliciana Parish | 10,840 | | 10,840 | |
5.0% Series due 2028, Louisiana Public Facilities Authority (d) | 83,680 | | 83,680 | | 83,680 |
| | 83,680 |
|
Total governmental bonds | 126,475 | | 173,815 | | 115,635 |
| | 115,635 |
|
| | | | | |
Variable Interest Entity Notes Payable (Note 4): | | | | | | | |
5.41% Series O due July 2012 | 60,000 | | 60,000 | |
5.56% Series N due May 2013 | 75,000 | | 75,000 | |
Credit Facility due July 2013, weighted avg rate 2.25% | 29,400 | | 24,200 | |
| 3.25% Series Q due July 2017 | | | 75,000 |
| | 75,000 |
|
| 3.38% Series R due August 2020 | | | 70,000 |
| | 70,000 |
|
| Credit Facility due June 2016, weighted avg rate 1.38% | | | — |
| | 14,800 |
|
Total variable interest entity notes payable | 164,400 | | 159,200 | | 145,000 |
| | 159,800 |
|
| | | | | |
Other: | | | | | | | |
Unamortized Premium and Discount - Net | (2,048) | | (2,287) | |
| Unamortized Premium and Discount – Net | | | (1,422 | ) | | (1,574 | ) |
Other | 3,603 | | 3,604 | | 3,604 |
| | 3,604 |
|
| | | | | |
Total Long-Term Debt | 1,542,430 | | 1,584,332 | | 1,622,817 |
| | 1,527,465 |
|
Less Amount Due Within One Year | 60,000 | | - | | 31,955 |
| | — |
|
Long-Term Debt Excluding Amount Due Within One Year | $1,482,430 | | $1,584,332 | |
| $1,590,862 |
| |
| $1,527,465 |
|
| | | | | |
Fair Value of Long-Term Debt (c) | $1,642,388 | | $1,643,514 | |
| $1,743,143 |
| |
| $1,631,308 |
|
| | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | 2011 | | 2010 | | 2014 | | 2013 |
| | (In Thousands) | | (In Thousands) |
| Entergy Louisiana | | | | | | | |
Mortgage Bonds: | | | | | | | |
| 1.875% Series due December 2014 | | |
| $— |
| |
| $250,000 |
|
6.50% Series due September 2018 | $300,000 | | $300,000 | | 300,000 |
| | 300,000 |
|
4.8% Series due May 2021 | 200,000 | | - | | 200,000 |
| | 200,000 |
|
| 3.3% Series due December 2022 | | | 200,000 |
| | 200,000 |
|
| 4.05% Series due September 2023 | | | 325,000 |
| | 325,000 |
|
5.40% Series due November 2024 | 400,000 | | 400,000 | | 400,000 |
| | 400,000 |
|
| 3.78% Series due April 2025 | | | 190,000 |
| | — |
|
4.44% Series due January 2026 | 250,000 | | 250,000 | | 250,000 |
| | 250,000 |
|
6.4% Series due October 2034 | 70,000 | | 70,000 | | — |
| | 70,000 |
|
6.3% Series due September 2035 | 100,000 | | 100,000 | | — |
| | 100,000 |
|
6.0% Series due March 2040 | 150,000 | | 150,000 | | 150,000 |
| | 150,000 |
|
5.875% Series due June 2041 | 150,000 | | 150,000 | | 150,000 |
| | 150,000 |
|
| 5.0% Series due July 2044 | | | 170,000 |
| | — |
|
| 4.95% Series due January 2045 | | | 250,000 |
| | — |
|
| 5.25% Series due July 2052 | | | 200,000 |
| | 200,000 |
|
| 4.7% Series due June 2063 | | | 100,000 |
| | 100,000 |
|
Total mortgage bonds | 1,620,000 | | 1,420,000 | | 2,885,000 |
| | 2,695,000 |
|
| | | | | |
Governmental Bonds (a): | | | | | | | |
5.0% Series due 2030, Louisiana Public Facilities Authority (d) | 115,000 | | 115,000 | | 115,000 |
| | 115,000 |
|
Total governmental bonds | 115,000 | | 115,000 | | 115,000 |
| | 115,000 |
|
| | | | | |
Variable Interest Entity Notes Payable (Note 4): | | | | | | | |
5.69% Series E due July 2014 | 50,000 | | 50,000 | | — |
| | 50,000 |
|
3.30% Series F due March 2016 | 20,000 | | - | | 20,000 |
| | 20,000 |
|
| 3.25% Series G due July 2017 | | | 25,000 |
| | 25,000 |
|
| 3.92% Series H due February 2021 | | | 40,000 |
| | — |
|
Total variable interest entity notes payable | 70,000 | | 50,000 | | 85,000 |
| | 95,000 |
|
| | | | | |
Securitization Bonds: | | | | | | | |
2.04% Series Senior Secured due June 2021 | 207,156 | | - | | 143,064 |
| | 164,993 |
|
Total securitization bonds | 207,156 | | - | | 143,064 |
| | 164,993 |
|
| | | | | |
Other: | | | | | | | |
Waterford 3 Lease Obligation 7.45% (Note 10) | 188,255 | | 223,802 | | 128,488 |
| | 148,716 |
|
Bank Credit Facility, weighted average rate 0.67% (Note 4) | 50,000 | | - | |
Unamortized Premium and Discount - Net | (1,912) | | (1,689) | | (3,719 | ) | | (2,962 | ) |
Other | 3,813 | | 3 | | 3,746 |
| | 3,769 |
|
| | | | | |
| Total Long-Term Debt | 2,252,312 | | 1,807,116 | | 3,356,579 |
| | 3,219,516 |
|
| Less Amount Due Within One Year | 75,309 | | 35,550 | | 19,525 |
| | 320,231 |
|
| Long-Term Debt Excluding Amount Due Within One Year | $2,177,003 | | $1,771,566 | |
| $3,337,054 |
| |
| $2,899,285 |
|
| | | | | |
| Fair Value of Long-Term Debt (c) | $2,211,355 | | $1,515,121 | |
| $3,447,404 |
| |
| $3,148,877 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | 2011 | | 2010 | | 2014 | | 2013 |
| | (In Thousands) | | (In Thousands) |
| Entergy Mississippi | | | | | | | |
Mortgage Bonds: | | | | | | | |
4.65% Series due May 2011 | $- | | $80,000 | |
5.15% Series due February 2013 | 100,000 | | 100,000 | |
5.92% Series due February 2016 | - | | 100,000 | |
3.25% Series due June 2016 | 125,000 | | - | |
| $125,000 |
| |
| $125,000 |
|
4.95% Series due June 2018 | 95,000 | | 95,000 | | — |
| | 95,000 |
|
6.64% Series due July 2019 | 150,000 | | 150,000 | | 150,000 |
| | 150,000 |
|
| 3.1% Series due July 2023 | | | 250,000 |
| | 250,000 |
|
| 3.75% Series due July 2024 | | | 100,000 |
| | — |
|
6.0% Series due November 2032 | 75,000 | | 75,000 | | 75,000 |
| | 75,000 |
|
6.25% Series due April 2034 | 100,000 | | 100,000 | | 100,000 |
| | 100,000 |
|
6.20% Series due April 2040 | 80,000 | | 80,000 | | 80,000 |
| | 80,000 |
|
6.0% Series due May 2051 | 150,000 | | - | | 150,000 |
| | 150,000 |
|
Total mortgage bonds | 875,000 | | 780,000 | | 1,030,000 |
| | 1,025,000 |
|
| | | | | |
Governmental Bonds (a): | | | | | | | |
4.60% Series due 2022, Mississippi Business Finance Corp.(d) | 16,030 | | 16,030 | |
4.90% Series due 2022, Independence County (d) | 30,000 | | 30,000 | | 30,000 |
| | 30,000 |
|
Total governmental bonds | 46,030 | | 46,030 | | 30,000 |
| | 30,000 |
|
| | | | | |
Other: | | | | | | | |
Unamortized Premium and Discount - Net | (591) | | (652) | |
| | | | | |
| Unamortized Premium and Discount – Net | | | (1,162 | ) | | (1,330 | ) |
| Total Long-Term Debt | 920,439 | | 825,378 | | 1,058,838 |
| | 1,053,670 |
|
| Less Amount Due Within One Year | - | | 80,000 | | — |
| | — |
|
| Long-Term Debt Excluding Amount Due Within One Year | $920,439 | | $745,378 | |
| $1,058,838 |
| |
| $1,053,670 |
|
| | | | | |
| Fair Value of Long-Term Debt (c) | $985,600 | | $802,045 | |
| $1,102,741 |
| |
| $1,067,006 |
|
| | 2011 | | 2010 |
| | (In Thousands) |
| Entergy New Orleans | | | |
Mortgage Bonds: | | | |
5.25% Series due August 2013 | $70,000 | | $70,000 |
5.10% Series due December 2020 | 25,000 | | 25,000 |
5.6% Series due September 2024 | 33,449 | | 33,738 |
5.65% Series due September 2029 | 38,145 | | 38,546 |
Total mortgage bonds | 166,594 | | 167,284 |
| | | | |
Other: | | | |
Unamortized Premium and Discount - Net | (57) | | (69) |
| | | | |
| Total Long-Term Debt | 166,537 | | 167,215 |
| Less Amount Due Within One Year | - | | - |
| Long-Term Debt Excluding Amount Due Within One Year | $166,537 | | $167,215 |
| | | | |
| Fair Value of Long-Term Debt (c) | $169,270 | | $171,077 |
|
| | | | | | | | |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| Entergy New Orleans | | | | |
| Mortgage Bonds: | | | | |
| 5.10% Series due December 2020 | |
| $25,000 |
| |
| $25,000 |
|
| 3.9% Series due July 2023 | | 100,000 |
| | 100,000 |
|
| 5.6% Series due September 2024 | | 33,303 |
| | 33,363 |
|
| 5.65% Series due September 2029 | | 37,859 |
| | 37,914 |
|
| 5.0% Series due December 2052 | | 30,000 |
| | 30,000 |
|
| Total mortgage bonds | | 226,162 |
| | 226,277 |
|
| Other: | | | | |
| Unamortized Premium and Discount – Net | | (296 | ) | | (333 | ) |
| Total Long-Term Debt | | 225,866 |
| | 225,944 |
|
| Less Amount Due Within One Year | | — |
| | — |
|
| Long-Term Debt Excluding Amount Due Within One Year | |
| $225,866 |
| |
| $225,944 |
|
| Fair Value of Long-Term Debt (c) | |
| $226,349 |
| |
| $217,692 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | 2011 | | 2010 | | 2014 | | 2013 |
| | (In Thousands) | | (In Thousands) |
| Entergy Texas | | | | | | | |
Mortgage Bonds: | | | | | | | |
3.60% Series due June 2015 | $200,000 | | $200,000 | |
| $200,000 |
| |
| $200,000 |
|
7.125% Series due February 2019 | 500,000 | | 500,000 | | 500,000 |
| | 500,000 |
|
4.1% Series due September 2021 | 75,000 | | - | | 75,000 |
| | 75,000 |
|
7.875% Series due June 2039 | 150,000 | | 150,000 | | — |
| | 150,000 |
|
| 5.625% Series due June 2064 | | | 135,000 |
| | — |
|
Total mortgage bonds | 925,000 | | 850,000 | | 910,000 |
| | 925,000 |
|
| | | | | |
Securitization Bonds: | | | | | | | |
5.51% Series Senior Secured, Series A due October 2013 | 18,494 | | 38,152 | |
| 2.12% Series Senior Secured, Series A due February 2016 | | | 13,816 |
| | 54,047 |
|
5.79% Series Senior Secured, Series A due October 2018 | 121,600 | | 121,600 | | 74,194 |
| | 97,414 |
|
| 3.65% Series Senior Secured, Series A due August 2019 | | | 144,800 |
| | 144,800 |
|
5.93% Series Senior Secured, Series A due June 2022 | 114,400 | | 114,400 | | 114,400 |
| | 114,400 |
|
2.12% Series Senior Secured due February 2016 | 132,005 | | 169,766 | |
3.65% Series Senior Secured due August 2019 | 144,800 | | 144,800 | |
4.38% Series Senior Secured due November 2023 | 218,600 | | 218,600 | |
| 4.38% Series Senior Secured, Series A due November 2023 | | | 218,600 |
| | 218,600 |
|
Total securitization bonds | 749,899 | | 807,318 | | 565,810 |
| | 629,261 |
|
| | | | | |
Other: | | | | | | | |
Unamortized Premium and Discount - Net | (3,103) | | (3,419) | | (1,769 | ) | | (2,211 | ) |
Other | 5,331 | | 5,331 | | 4,890 |
| | 4,889 |
|
| | | | | |
| Total Long-Term Debt | 1,677,127 | | 1,659,230 | | 1,478,931 |
| | 1,556,939 |
|
| Less Amount Due Within One Year | - | | - | | 200,000 |
| | — |
|
| Long-Term Debt Excluding Amount Due Within One Year | $1,677,127 | | $1,659,230 | |
| $1,278,931 |
| |
| $1,556,939 |
|
| | | | | |
| Fair Value of Long-Term Debt (c) | $1,906,081 | | $1,822,219 | |
| $1,629,124 |
| |
| $1,726,623 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | 2011 | | 2010 | | 2014 | | 2013 |
| | (In Thousands) | | (In Thousands) |
| System Energy | | | | | | | |
Mortgage Bonds: | | | | | | | |
6.2% Series due October 2012 | $70,000 | | $70,000 | |
| 4.1% Series due April 2023 | | |
| $250,000 |
| |
| $250,000 |
|
Total mortgage bonds | 70,000 | | 70,000 | | 250,000 |
| | 250,000 |
|
| | | | | |
Governmental Bonds (a): | | | | | | | |
5.875% Series due 2022, Mississippi Business Finance Corp. | 216,000 | | 216,000 | | 216,000 |
| | 216,000 |
|
5.9% Series due 2022, Mississippi Business Finance Corp. | 102,975 | | 102,975 | |
6.2% Series due 2026, Claiborne County | 50,000 | | 90,000 | |
Total governmental bonds | 368,975 | | 408,975 | | 216,000 |
| | 216,000 |
|
| | | | | |
Variable Interest Entity Notes Payable (Note 4): | | | | | | | |
6.29% Series F due September 2013 | 70,000 | | 70,000 | |
5.33% Series G due April 2015 | 60,000 | | 60,000 | | 60,000 |
| | 60,000 |
|
| 4.02% Series H due February 2017 | | | 50,000 |
| | 50,000 |
|
| 3.78% Series I due October 2018 | | | 85,000 |
| | 85,000 |
|
Total variable interest entity notes payable | 130,000 | | 130,000 | | 195,000 |
| | 195,000 |
|
| | | | | |
Other: | | | | | | | |
Grand Gulf Lease Obligation 5.13% (Note 10) | 178,784 | | 222,280 | | 50,671 |
| | 97,414 |
|
Unamortized Premium and Discount - Net | (714) | | (789) | |
| Unamortized Premium and Discount – Net | | | (867 | ) | | (981 | ) |
Other | 3 | | 2 | | 2 |
| | 3 |
|
| | | | | |
| Total Long-Term Debt | 747,048 | | 830,468 | | 710,806 |
| | 757,436 |
|
| Less Amount Due Within One Year | 110,163 | | 33,740 | | 76,310 |
| | 48,653 |
|
| Long-Term Debt Excluding Amount Due Within One Year | $636,885 | | $796,728 | |
| $634,496 |
| |
| $708,783 |
|
| | | | | |
| Fair Value of Long-Term Debt (c) | $582,952 | | $611,837 | |
| $677,475 |
| |
| $664,890 |
|
| |
| (a) | Consists of pollution control revenue bonds and environmental revenue bonds. |
| |
| (b) | Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt. |
| |
| (c) | The fair value excludes lease obligations of $188$128 million at Entergy Louisiana and $179$51 million at System Energy and long-term DOE obligations of $181 million at Entergy Arkansas, and includes debt due within one year. Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 16 to the financial statements and are based on prices derived by independent third parties that usefrom inputs such as benchmark yields and reported trades, broker/dealer quotes, and issuer spreads.trades. |
| |
| (d) | The bonds are secured by a series of collateral first mortgage bonds. |
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2011,2014, for the next five years are as follows:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | |
| 2012 | | - | | $60,000 | | $50,000 | | - | | - | | - | | $70,000 |
| 2013 | | $330,000 | | $104,400 | | - | | $100,000 | | $70,000 | | $18,494 | | $70,000 |
| 2014 | | $70,000 | | - | | $50,000 | | - | | - | | - | | - |
| 2015 | | - | | $31,955 | | - | | - | | - | | $200,000 | | $60,000 |
| 2016 | | $55,000 | | $10,840 | | $20,000 | | $125,000 | | - | | $132,005 | | - |
113 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| 2015 |
| $— |
| |
| $31,955 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $200,000 |
| |
| $60,000 |
|
| 2016 |
| $55,000 |
| |
| $— |
| |
| $20,000 |
| |
| $125,000 |
| |
| $— |
| |
| $13,816 |
| |
| $— |
|
| 2017 |
| $114,700 |
| |
| $75,000 |
| |
| $25,000 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $50,000 |
|
| 2018 |
| $— |
| |
| $375,000 |
| |
| $300,000 |
| |
| $— |
| |
| $— |
| |
| $74,194 |
| |
| $85,000 |
|
| 2019 |
| $— |
| |
| $— |
| |
| $— |
| |
| $150,000 |
| |
| $— |
| |
| $644,800 |
| |
| $— |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Corporation Debt Issuance
In January 2012, Entergy Corporation issued $500 million of 4.70% senior notes due January 2017. Entergy Corporation used the proceeds to repay borrowings under its $3.5 billion credit facility.
Entergy Louisiana Debt Issuances
On December 14, 2011, Entergy Louisiana issued $750 million of 1.1007% Series first mortgage bonds, due December 31, 2012, to Entergy Corporation. Entergy Louisiana repurchased the bonds at par, plus accrued interest of $161 thousand, on December 22, 2011.
In January 2012, Entergy Louisiana issued $250 million of 1.875% Series first mortgage bonds due December 2014. Entergy Louisiana used the proceeds to repay short-term borrowings under the Entergy System money pool.
Entergy Arkansas Securitization Bonds
In June 2010 the APSC issued a financing order authorizing the issuance of bonds to recover Entergy Arkansas’s January 2009 ice storm damage restoration costs, including carrying costs of $11.5 million and $4.6 million of up-front financing costs. In August 2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds. The bonds have a coupon of 2.30% and an expected maturity date of August 2021. Although the principal amount is not due until the date given above, Entergy Arkansas Restoration Funding expects to make principal payments on the bonds over the next five years in the amount of $12.2 million for 2012, $12.6 million for 2013, $12.8 million for 2014, $13.2 million for 2015, and $13.4 million for 2016.2016, $13.8 million for 2017, $14.1 million for 2018, and $14.4 million for 2019. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas. Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections.
Entergy Louisiana Securitization Bonds – Little Gypsy
In August 2011 the LPSC issued a financing order authorizing the issuance of bonds to recover Entergy Louisiana’s investment recovery costs associated with the cancelled Little Gypsy repowering project. In September 2011, Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, issued $207.2 million of senior secured investment recovery bonds. The bonds have an interest rate of 2.04% and an expected maturity date of June 2021. Although the principal amount is not due until the date given above, Entergy Louisiana Investment Recovery Funding expects to make principal payments on the bonds over the next five years in the amounts of $25.6 million for 2012, $16.6 million for 2013, $21.9 million for 2014, $20.5 million for 2015, and $21.6 million for 2016.2016, $21.7 million for 2017, $22.3 million for 2018, and $22.7 million for 2019. With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficient to service the bonds. In accordance with the financing order, Entergy Louisiana will apply the proceeds it received from the sale of the investment recovery property as a reimbursement for previously-incurred investment recovery costs. The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet. The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana. Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recovery charge collections.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas Securitization Bonds - Hurricane Rita
In April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company that is now wholly-owned and consolidated by Entergy Texas, issued $329.5 million of senior secured transition bonds (securitization bonds) as follows:
|
| | | |
| | Amount |
| | (In Thousands) |
| Senior Secured Transition Bonds, Series A: | |
|
| Tranche A-1 (5.51%) due October 2013 |
| $93,500 |
|
| Tranche A-2 (5.79%) due October 2018 | 121,600 |
|
| Tranche A-3 (5.93%) due June 2022 | 114,400 |
|
| Total senior secured transition bonds |
| $329,500 |
|
Although the principal amount of each tranche is not due until the dates given above, Entergy Gulf States Reconstruction Funding expects to make principal payments on the bonds over the next five years in the amounts of $20.8 million for 2012, $21.9 million for 2013, $23.2 million for 2014, $24.6 million for 2015, and $26.0$26 million for 2016. Of the scheduled principal payments2016, $27.6 million for 2012, $18.52017, $29.2 million are for Tranche A-12018, and $2.3$30.9 million are for Tranche A-2, and all2019. All of the scheduled principal payments for 2013-20162015-2016 are for Tranche A-2.A-2, $23.6 million of the scheduled principal payments for 2017 are for Tranche A-2 and $4 million of the scheduled principal payments for 2017 are for Tranche A-3. All of the scheduled principal payments for 2018-2019 are for Tranche A-3.
With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.
Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane Gustav
In September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transaction costs, offset by insurance proceeds. In November 2009, Entergy Texas Restoration funding,Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds), as follows:
|
| | | |
| | Amount |
| | (In Thousands) |
| Senior Secured Transition Bonds | |
|
| Tranche A-1 (2.12%) due February 2016 |
| $182,500 |
|
| Tranche A-2 (3.65%) due August 2019 | 144,800 |
|
| Tranche A-3 (4.38%) due November 2023 | 218,600 |
|
| Total senior secured transition bonds |
| $545,900 |
|
Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding expects to make principal payments on the bonds over the next five years in the amount of $38.6 million for 2012, $39.4 million for 2013, $40.2 million for 2014, $41.2 million for 2015, and $42.6 million for 2016. All2016, $44.1 million for 2017, $45.8 million for 2018, and $47.6 million for 2019. A total of the scheduled principal payments for 2012-2014 are for Tranche A-1, $13.8 million of the scheduled principal payments for 2015 are for Tranche A-1 and $27.4 million are for Tranche A-2, and all of the scheduled principal payments for 2016 are for Tranche A-2. All
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of the scheduled principal payments for 2016-2017 are for Tranche A-2, $30.8 million of the scheduled principal payments for 2018 are for Tranche A-2 and $15 million are for Tranche A-3. All of the scheduled principle payments for 2019 are for Tranche A-3.
With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding, including the transition property, and the creditors of Entergy Texas Restoration Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding except to remit transition charge collections.
Entergy New Orleans Affiliate Notes
Pursuant to its plan of reorganization, in May 2007 Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. In May 2010, Entergy New Orleans repaid, at maturity, the notes payable.
NOTE 6. PREFERRED EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
The number of shares and units authorized and outstanding and dollar value of preferred stock, preferred membership interests, and minoritynon-controlling interest for Entergy Corporation subsidiaries as of December 31, 20112014 and 20102013 are presented below. All series of the Utility preferred stock are redeemable at the option of the related company.
|
| | | | | | | | | | | | | | | | | | | | |
| | | Shares/Units Authorized | | Shares/Units Outstanding | | | | |
| | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 | | 2013 |
| Entergy Corporation | | | | | | | | (Dollars in Thousands) |
| Utility: | | | | | | | | | | | | |
| Preferred Stock or Preferred Membership Interests without sinking fund: | | | | | | | | | | | | |
| Entergy Arkansas, 4.32%-6.45% Series | | 3,413,500 |
| | 3,413,500 |
| | 3,413,500 |
| | 3,413,500 |
| |
| $116,350 |
| |
| $116,350 |
|
| Entergy Gulf States Louisiana, Series A 8.25% | | 100,000 |
| | 100,000 |
| | 100,000 |
| | 100,000 |
| | 10,000 |
| | 10,000 |
|
| Entergy Louisiana, 6.95% Series (a) | | 1,000,000 |
| | 1,000,000 |
| | 840,000 |
| | 840,000 |
| | 84,000 |
| | 84,000 |
|
| Entergy Mississippi, 4.36%-6.25% Series | | 1,403,807 |
| | 1,403,807 |
| | 1,403,807 |
| | 1,403,807 |
| | 50,381 |
| | 50,381 |
|
| Entergy New Orleans, 4.36%-5.56% Series | | 197,798 |
| | 197,798 |
| | 197,798 |
| | 197,798 |
| | 19,780 |
| | 19,780 |
|
| Total Utility Preferred Stock or Preferred Membership Interests without sinking fund | | 6,115,105 |
| | 6,115,105 |
| | 5,955,105 |
| | 5,955,105 |
| | 280,511 |
| | 280,511 |
|
| Entergy Wholesale Commodities: | | | | | | | | | | | | |
| Preferred Stock without sinking fund: | | | | | | | | | | | | |
| Entergy Finance Holding, Inc. 8.75% (b) | | 250,000 |
| | 250,000 |
| | 250,000 |
| | 250,000 |
| | 24,249 |
| | 24,249 |
|
| Total Subsidiaries’ Preferred Stock without sinking fund | | 6,365,105 |
| | 6,365,105 |
| | 6,205,105 |
| | 6,205,105 |
| |
| $304,760 |
| |
| $304,760 |
|
| | | Shares/Units Authorized | | Shares/Units Outstanding | | | | |
| | | 2011 | | 2010 | | 2011 | | 2010 | | 2011 | | 2010 |
| Entergy Corporation | | | | | | | | | | (Dollars in Thousands) |
Utility: | | | | | | | | | | | | |
Preferred Stock or Preferred Membership Interests without sinking fund: | | | | | | | | | | | | |
Entergy Arkansas, 4.32%-6.45% Series | | 3,413,500 | | 3,413,500 | | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 |
Entergy Gulf States Louisiana, Series A 8.25 % | | 100,000 | | 100,000 | | 100,000 | | 100,000 | | 10,000 | | 10,000 |
Entergy Louisiana, 6.95% Series (a) | | 1,000,000 | | 1,000,000 | | 840,000 | | 840,000 | | 84,000 | | 84,000 |
Entergy Mississippi, 4.36%-6.25% Series | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 50,381 | | 50,381 |
Entergy New Orleans, 4.36%-5.56% Series | | 197,798 | | 197,798 | | 197,798 | | 197,798 | | 19,780 | | 19,780 |
Total Utility Preferred Stock or Preferred Membership Interests without sinking fund | | 6,115,105 | | 6,115,105 | | 5,955,105 | | 5,955,105 | | 280,511 | | 280,511 |
| | | | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | | |
Preferred Stock without sinking fund: | | | | | | | | | | | | |
Entergy Asset Management, 8.95% rate (b) | | 1,000,000 | | 1,000,000 | | - | | 305,240 | | - | | 29,375 |
Other | | - | | - | | - | | - | | - | | 852 |
Total Subsidiaries’ Preferred Stock without sinking fund | | 7,115,105 | | 7,115,105 | | 5,955,105 | | 6,260,345 | | $280,511 | | $310,738 |
| |
| (a) | In 2007, Entergy Louisiana Holdings, an Entergy subsidiary, purchased 160,000 of these shares from the holders. |
| |
| (b) | Dollar amount outstanding is net of $751 thousand of preferred stock issuance costs. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b) | Upon the saleIn December 2013, Entergy Finance Holding, Inc. issued 250,000 shares of $100 par value 8.75% Series Preferred Stock, all of which are outstanding as of Class B preferred shares in December 2009, Entergy Asset Management had issued and outstanding Class A and Class B preferred shares. On December 20, 2011, Entergy Asset Management purchased all of the outstanding Class B preferred shares from the holder thereof; currently, there are no outstanding Class B preferred shares. On December 20, 2011, Entergy Asset Management purchased all of the outstanding Class A preferred shares (278,905 shares) that were held by a third party; currently, there are 4,759 shares held by an Entergy affiliate. |
At December 31, 2011 and 2010, Entergy Gulf States Louisiana had outstanding 100,000 units of no par value 8.25% Series Preferred Membership Interests that were initially issued by Entergy Gulf States, Inc. as preference stock.2014. The preference shares were converted into the preferred units as part of the jurisdictional separation. The distributionsdividends are cumulative and payable quarterly beginning March 15, 2008.quarterly. The preferred membership interests arestock is redeemable on or after December 15, 2015,16, 2023, at Entergy Gulf States Louisiana’sFinance Holding, Inc.’s option, at the fixed redemption price of $100 per unit.share.
The number of shares and units authorized and outstanding and dollar value of preferred stock and membership interests for Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans as of December 31, 20112014 and 20102013 are presented below. All series of the Utility operating companies’ preferred stock and membership interests are redeemable at the respective company’s option at the call prices presented. Dividends and distributions paid on all of Entergy’s preferred stock and membership interests series are eligible for the dividends received deduction. The dividends received deduction is limited by Internal Revenue Code section 244 for the following preferred stock series: Entergy Arkansas 4.72%, Entergy Mississippi 4.56%, and Entergy New Orleans 4.75%.
|
| | | | | | | | | | | | | | | | | | |
| | | Shares Authorized and Outstanding | | | | Call Price per Share as of December 31, |
| | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 |
| Entergy Arkansas Preferred Stock | | | | | | (Dollars in Thousands) | | |
| Without sinking fund: | | | | | | | | | | |
| Cumulative, $100 par value: | | | | | | | | | | |
| 4.32% Series | | 70,000 |
| | 70,000 |
| |
| $7,000 |
| |
| $7,000 |
| |
| $103.65 |
|
| 4.72% Series | | 93,500 |
| | 93,500 |
| | 9,350 |
| | 9,350 |
| |
| $107.00 |
|
| 4.56% Series | | 75,000 |
| | 75,000 |
| | 7,500 |
| | 7,500 |
| |
| $102.83 |
|
| 4.56% 1965 Series | | 75,000 |
| | 75,000 |
| | 7,500 |
| | 7,500 |
| |
| $102.50 |
|
| 6.08% Series | | 100,000 |
| | 100,000 |
| | 10,000 |
| | 10,000 |
| |
| $102.83 |
|
| Cumulative, $25 par value: | | | | | | | | | | |
| 6.45% Series | | 3,000,000 |
| | 3,000,000 |
| | 75,000 |
| | 75,000 |
| |
| $25 |
|
| Total without sinking fund | | 3,413,500 |
| | 3,413,500 |
| |
| $116,350 |
| |
| $116,350 |
| | |
| | Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, |
| | 2011 | | 2010 | | 2011 | | 2010 | | 2011 |
| Entergy Arkansas Preferred Stock | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | |
4.32% Series | 70,000 | | 70,000 | | $7,000 | | $7,000 | | $103.65 |
4.72% Series | 93,500 | | 93,500 | | 9,350 | | 9,350 | | $107.00 |
4.56% Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.83 |
4.56% 1965 Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.50 |
6.08% Series | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.83 |
Cumulative, $25 par value: | | | | | | | | | |
6.45% Series (a) | 3,000,000 | | 3,000,000 | | 75,000 | | 75,000 | | $- |
Total without sinking fund | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 | | |
|
| | | | | | | | | | | | | | | | | | |
| | | Units Authorized and Outstanding | | | | Call Price per Unit as of December 31, |
| | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 |
Entergy Gulf States Louisiana Preferred Membership Interests | | | | | | (Dollars in Thousands) | | |
| Without sinking fund: | | | | | | | | | | |
| Cumulative, $100 liquidation value: | | | | | | | | | | |
| 8.25% Series (a) | | 100,000 |
| | 100,000 |
| |
| $10,000 |
| |
| $10,000 |
| |
| $— |
|
| Total without sinking fund | | 100,000 |
| | 100,000 |
| |
| $10,000 |
| |
| $10,000 |
| | |
| | Units Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Unit as of December 31, |
| | 2011 | | 2010 | | 2011 | | 2010 | | 2011 |
Entergy Gulf States Louisiana Preferred Membership Interests | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 liquidation value: | | | | | | | | | |
8.25% Series (b) | 100,000 | | 100,000 | | $10,000 | | $10,000 | | $- |
Total without sinking fund | 100,000 | | 100,000 | | $10,000 | | $10,000 | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Units Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Unit as of December 31, | | Units Authorized and Outstanding | | | | Call Price per Unit as of December 31, |
| | 2011 | | 2010 | | 2011 | | 2010 | | 2011 | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 |
| Entergy Louisiana Preferred Membership Interests | | | | | | | | | | | | | | | (Dollars in Thousands) | | |
Without sinking fund: | | | | | | | | | | | | | | | | | | | |
Cumulative, $100 liquidation value: | | | | | | | | | | | | | | | | | | | |
6.95% Series (c) | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | $- | |
| 6.95% Series | | | 1,000,000 |
| | 1,000,000 |
| |
| $100,000 |
| |
| $100,000 |
| |
| $100 |
|
Total without sinking fund | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | | | 1,000,000 |
| | 1,000,000 |
| |
| $100,000 |
| |
| $100,000 |
| | |
| | | | Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, | | Shares Authorized and Outstanding | | | | Call Price per Share as of December 31, |
| | 2011 | | 2010 | | 2011 | | 2010 | | 2011 | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 |
| Entergy Mississippi Preferred Stock | | | | | | | | | | | | | | | (Dollars in Thousands) | | |
Without sinking fund: | | | | | | | | | | | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | | | | | | | | | | | |
4.36% Series | 59,920 | | 59,920 | | $5,992 | | $5,992 | | $103.88 | | 59,920 |
| | 59,920 |
| |
| $5,992 |
| |
| $5,992 |
| |
| $103.86 |
|
4.56% Series | 43,887 | | 43,887 | | 4,389 | | 4,389 | | $107.00 | | 43,887 |
| | 43,887 |
| | 4,389 |
| | 4,389 |
| |
| $107.00 |
|
4.92% Series | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.88 | | 100,000 |
| | 100,000 |
| | 10,000 |
| | 10,000 |
| |
| $102.88 |
|
Cumulative, $25 par value | | | | | | | | | | | | | | | | | | | |
6.25% Series (d) | 1,200,000 | | 1,200,000 | | 30,000 | | 30,000 | | $- | |
| 6.25% Series | | | 1,200,000 |
| | 1,200,000 |
| | 30,000 |
| | 30,000 |
| |
| $25 |
|
Total without sinking fund | 1,403,807 | | 1,403,807 | | $50,381 | | $50,381 | | | | 1,403,807 |
| | 1,403,807 |
| |
| $50,381 |
| |
| $50,381 |
| | |
| | Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, |
| | 2011 | | 2010 | | 2011 | | 2010 | | 2011 |
| Entergy New Orleans Preferred Stock | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | |
4.36% Series | 60,000 | | 60,000 | | $6,000 | | $6,000 | | $104.58 |
4.75% Series | 77,798 | | 77,798 | | 7,780 | | 7,780 | | $105.00 |
5.56% Series | 60,000 | | 60,000 | | 6,000 | | 6,000 | | $102.59 |
Total without sinking fund | 197,798 | | 197,798 | | $19,780 | | $19,780 | | |
|
| | | | | | | | | | | | | | | | | | |
| | | Shares Authorized and Outstanding | | | | Call Price per Share as of December 31, |
| | | 2014 | | 2013 | | 2014 | | 2013 | | 2014 |
| Entergy New Orleans Preferred Stock | | | | | | (Dollars in Thousands) | | |
| Without sinking fund: | | | | | | | | | | |
| Cumulative, $100 par value: | | | | | | | | | | |
| 4.36% Series | | 60,000 |
| | 60,000 |
| |
| $6,000 |
| |
| $6,000 |
| |
| $104.58 |
|
| 4.75% Series | | 77,798 |
| | 77,798 |
| | 7,780 |
| | 7,780 |
| |
| $105.00 |
|
| 5.56% Series | | 60,000 |
| | 60,000 |
| | 6,000 |
| | 6,000 |
| |
| $102.59 |
|
| Total without sinking fund | | 197,798 |
| | 197,798 |
| |
| $19,780 |
| |
| $19,780 |
| | |
(a) | Series is callable at par. |
(b)(a) | Series is callable at par on and after December 15, 2015. |
(c) | Series is callable at par. |
(d) | Series is callable at par. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. COMMON EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Common Stock
Common stock and treasury stock shares activity for Entergy for 2011, 2010,2014, 2013, and 20092012 is as follows:
| | | 2011 | | 2010 | | 2009 |
| | | Common Shares Issued | | Treasury Shares | | Common Shares Issued | | Treasury Shares | | Common Shares Issued | | Treasury Shares |
| | | | | | | | | | | | | |
| Beginning Balance, January 1 | | 254,752,788 | | 76,006,920 | | 254,752,788 | | 65,634,580 | | 248,174,087 | | 58,815,518 |
Equity Unit Transaction | | - | | - | | - | | - | | 6,578,701 | | - |
Repurchases | | - | | 3,475,000 | | - | | 11,490,551 | | - | | 7,680,000 |
Issuances: | | | | | | | | | | | | |
Employee Stock-Based Compensation Plans | | - | | (1,079,008) | | - | | (1,113,411) | | - | | (856,390) |
Directors’ Plan | | - | | (5,924) | | - | | (4,800) | | - | | (4,548) |
| Ending Balance, December 31 | | 254,752,788 | | 78,396,988 | | 254,752,788 | | 76,006,920 | | 254,752,788 | | 65,634,580 |
In December 2005, Entergy Corporation sold 10 million equity units with a stated amount of $50 each. An equity unit consisted of (1) a note, initially due February 2011 and initially bearing interest at an annual rate of 5.75%, and (2) a purchase contract that obligated the holder of the equity unit to purchase for $50 between 0.5705 and 0.7074 shares of Entergy Corporation common stock on or before February 17, 2009. Entergy paid the holders quarterly contract adjustment payments of 1.875% per year on the stated amount of $50 per equity unit. Under the terms of the purchase contracts, Entergy attempted to remarket the notes in February 2009 but was unsuccessful, the note holders put the notes to Entergy, Entergy retired the notes, and Entergy issued shares of common stock to settle the purchase contracts. |
| | | | | | | | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | Common Shares Issued | |
Treasury Shares | | Common Shares Issued | | Treasury Shares | | Common Shares Issued | | Treasury Shares |
| Beginning Balance, January 1 | 254,752,788 |
| | 76,381,936 |
| | 254,752,788 |
| | 76,945,239 |
| | 254,752,788 |
| | 78,396,988 |
|
| Repurchases | — |
| | 2,154,490 |
| | — |
| | — |
| | — |
| | — |
|
| Issuances: | |
| | |
| | |
| | |
| | |
| | |
|
| Employee Stock-Based Compensation Plans | — |
| | (3,019,475 | ) | | — |
| | (557,734 | ) | | — |
| | (1,446,305 | ) |
| Directors’ Plan | — |
| | (4,872 | ) | | — |
| | (5,569 | ) | | — |
| | (5,444 | ) |
| Ending Balance, December 31 | 254,752,788 |
| | 75,512,079 |
| | 254,752,788 |
| | 76,381,936 |
| | 254,752,788 |
| | 76,945,239 |
|
Entergy Corporation reissues treasury shares to meet the requirements of the Stock Plan for Outside Directors (Directors’ Plan), two Equity Ownership Plans of Entergy Corporation and Subsidiaries, the Equity Awards Plan of Entergy Corporation and Subsidiaries, and certain other stock benefit plans. The Directors’ Plan awards to non-employee directors a portion of their compensation in the form of a fixed numberdollar value of shares of Entergy Corporation common stock.
In January 2007, the Board approved a repurchase program that authorized Entergy to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase program to enable Entergy to consider opportunistic purchases in response to equity market conditions. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009, the Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additionala $500 million share repurchase program. As of December 31, 2011,2014, $350 million of authority remains under the $500 million share repurchase program.
Dividends declared per common share were $3.32 in 2014, 2013, and 2012.
Retained Earnings and Dividend Restrictions
Provisions within the articles of incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred equity. As of December 31, 2011,2014, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had retained earnings
Entergy Corporation and Subsidiaries
Notes to Financial Statements
unavailable for distribution to Entergy Corporation of $394.9 million and $68.5 million, respectively. Entergy Corporation received dividend payments from subsidiaries totaling $595$893 million in 2011, $5802014, $702 million in 2010,2013, and $417$439 million in 2009.2012.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana. AccumulatedThe following table presents changes in accumulated other comprehensive income (loss) infor Entergy for the balance sheets included the following components:
| | | Entergy | | Entergy Gulf States Louisiana | | Entergy Louisiana |
| | | December 31, 2011 | | December 31, 2010 | | December 31, 2011 | | December 31, 2010 | | December 31, 2011 | | December 31, 2010 |
| | | (In Thousands) |
| | | | | | | | | | | | | |
Cash flow hedges net unrealized gain | | $177,497 | | $106,258 | | $- | | $- | | $- | | $- |
Pension and other postretirement liabilities | | (499,556) | | (276,466) | | (69,610) | | (40,304) | | (39,507) | | (24,962) |
Net unrealized investment gains | | 150,939 | | 129,685 | | - | | - | | - | | - |
| Foreign currency translation | | 2,668 | | 2,311 | | - | | - | | - | | - |
| Total | | ($168,452) | | ($38,212) | | ($69,610) | | ($40,304) | | ($39,507) | | ($24,962) |
Other comprehensive income and total comprehensive income for yearsyear ended December 31, 2011, 2010,2014 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow
hedges
net
unrealized
gain (loss) | | Pension
and
other
postretirement
liabilities | |
Net
unrealized
investment
gains (loss) | | Foreign
currency
translation | | Total
Accumulated
Other
Comprehensive
Income (Loss) |
| | (In Thousands) |
| | | | | | | | | | |
| Beginning balance, December 31, 2013 |
| ($81,777 | ) | |
| ($288,223 | ) | |
| $337,256 |
| |
| $3,420 |
| |
| ($29,324 | ) |
| Other comprehensive income (loss) before reclassifications | 52,433 |
| | (278,361 | ) | | 99,900 |
| | (751 | ) | | (126,779 | ) |
| Amounts reclassified from accumulated other comprehensive income (loss) | 127,462 |
| | (3,205 | ) | | (10,461 | ) | | — |
| | 113,796 |
|
| Net other comprehensive income (loss) for the period | 179,895 |
| | (281,566 | ) | | 89,439 |
| | (751 | ) | | (12,983 | ) |
| Ending balance, December 31, 2014 |
| $98,118 |
| |
| ($569,789 | ) | |
| $426,695 |
| |
| $2,669 |
| |
| ($42,307 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year ended December 31, 2013 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow
hedges
net
unrealized
gain (loss) | | Pension
and
other
postretirement
liabilities | |
Net
unrealized
investment
gains (loss) | | Foreign
currency
translation | | Total
Accumulated
Other
Comprehensive
Income (Loss) |
| | (In Thousands) |
| | | | | | | | | | |
| Beginning balance, December 31, 2012 |
| $79,905 |
|
|
| ($590,712 | ) |
|
| $214,547 |
|
|
| $3,177 |
| |
| ($293,083 | ) |
| Other comprehensive income (loss) before reclassifications | (133,312 | ) | | 260,567 |
| | 143,936 |
| | 243 |
| | 271,434 |
|
Amounts reclassified from
accumulated other comprehensive
income (loss) | (28,370 | ) | | 41,922 |
| | (21,227 | ) | | — |
| | (7,675 | ) |
| Net other comprehensive income (loss) for the period | (161,682 | ) | | 302,489 |
| | 122,709 |
| | 243 |
| | 263,759 |
|
| Ending balance, December 31, 2013 |
| ($81,777 | ) | |
| ($288,223 | ) | |
| $337,256 |
| |
| $3,420 |
| |
| ($29,324 | ) |
Entergy Corporation and 2009 are presentedSubsidiaries
Notes to Financial Statements
The following table presents changes in Entergy’s,accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana’s,Louisiana and Entergy Louisiana’sLouisiana for the year ended December 31, 2014:
|
| | | | | | | | |
| | | Pension and Other Postretirement Liabilities |
| | | Entergy Gulf States Louisiana | |
Entergy Louisiana |
| | | (In Thousands) |
| | | | | |
| Beginning balance, December 31, 2013 | |
| ($28,202 | ) | |
| ($9,635 | ) |
| Other comprehensive income (loss) before reclassifications | | (25,677 | ) | | (15,078 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) | | 532 |
| | (1,163 | ) |
| Net other comprehensive income (loss) for the period | | (25,145 | ) | | (16,241 | ) |
| Ending balance, December 31, 2014 | |
| ($53,347 | ) | |
| ($25,876 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the year ended December 31, 2013:
|
| | | | | | | | |
|
| Pension and Other Postretirement Liabilities |
| | | Entergy Gulf States Louisiana | |
Entergy Louisiana |
|
| (In Thousands) |
| | | | | |
| Beginning balance, December 31, 2012 | |
| ($65,229 | ) | |
| ($46,132 | ) |
| Other comprehensive income (loss) before reclassifications | | 33,233 |
| | 33,869 |
|
Amounts reclassified from accumulated other comprehensive income (loss) | | 3,794 |
| | 2,628 |
|
| Net other comprehensive income (loss) for the period | | 37,027 |
| | 36,497 |
|
| Ending balance, December 31, 2013 | |
| ($28,202 | ) | |
| ($9,635 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of Comprehensive Income.accumulated other comprehensive income (loss) (AOCI) for Entergy for the year ended December 31, 2014 are as follows:
|
| | | | | | |
| | Amounts reclassified from AOCI | | Income Statement Location |
| | (In Thousands) | | |
| | | | |
| Cash flow hedges net unrealized gain (loss) | | | | |
| Power contracts | |
| ($193,297 | ) | | Competitive business operating revenues |
| Interest rate swaps | | (2,799 | ) | | Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | | (196,096 | ) | | |
| | 68,634 |
| | Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) | |
| ($127,462 | ) | | |
| | | | |
| Pension and other postretirement liabilities | | |
| | |
| Amortization of prior-service costs | |
| $20,294 |
| | (a) |
| Amortization of loss | | (35,836 | ) | | (a) |
| Settlement loss | | (3,643 | ) | | (a) |
| Total amortization | | (19,185 | ) | | |
| | 22,390 |
| | Income taxes |
| Total amortization (net of tax) | |
| $3,205 |
| | |
| | | | |
| Net unrealized investment gain (loss) | | | | |
| Realized gain (loss) | |
| $20,511 |
| | Interest and investment income |
| | (10,050 | ) | | Income taxes |
| Total realized investment gain (loss) (net of tax) | |
| $10,461 |
| | |
| | | | |
| Total reclassifications for the period (net of tax) | |
| ($113,796 | ) | | |
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 11 to the financial statements for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the year ended December 31, 2013 are as follows:
|
| | | | | | |
| | Amounts reclassified from AOCI | | Income Statement Location |
| | (In Thousands) | | |
|
|
|
|
|
| Cash flow hedges net unrealized gain (loss) | |
| |
|
| Power contracts |
|
| $47,019 |
|
| Competitive business operating revenues |
| Interest rate swaps |
| (1,565 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges |
| 45,454 |
|
|
|
|
| (17,084 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
|
| $28,370 |
|
|
|
|
|
|
|
|
| Pension and other postretirement liabilities | | |
| |
|
| Amortization of prior-service costs | |
| $10,556 |
| | (a) |
| Acceleration of prior-service cost due to curtailment | | 315 |
| | (a) |
| Amortization of loss |
| (68,130 | ) |
| (a) |
| Settlement loss |
| (11,612 | ) |
| (a) |
| Total amortization |
| (68,871 | ) |
|
|
|
| 26,949 |
|
| Income taxes |
| Total amortization (net of tax) |
|
| ($41,922 | ) |
|
|
|
|
|
|
|
| Net unrealized investment gain (loss) |
|
|
|
|
| Realized gain (loss) |
|
| $41,622 |
|
| Interest and investment income |
|
| (20,395 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
|
| $21,227 |
|
|
|
|
|
|
|
|
| Total reclassifications for the period (net of tax) | |
| $7,675 |
| |
|
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 11 to the financial statements for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the year ended December 31, 2014 are as follows:
|
| | | | | | | | | | |
| | | Amounts reclassified from AOCI | | |
| | | Entergy Gulf States Louisiana | |
Entergy Louisiana | | Income Statement Location |
| | | (In Thousands) | | |
| | | | | | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service costs | |
| $2,237 |
| |
| $3,377 |
| | (a) |
| Amortization of loss | | (3,126 | ) | | (1,511 | ) | | (a) |
| Total amortization | | (889 | ) | | 1,866 |
| | |
| | | 357 |
| | (703 | ) | | Income tax expense (benefit) |
| Total amortization (net of tax) | | (532 | ) | | 1,163 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| ($532 | ) | |
| $1,163 |
| | |
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 11 to the financial statements for additional details. |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the year ended December 31, 2013 are as follows:
|
| | | | | | | | | | |
|
| Amounts reclassified from AOCI |
|
|
| | Entergy Gulf States Louisiana | |
Entergy Louisiana | | Income Statement Location |
| | (In Thousands) | | |
|
|
|
|
|
|
|
| Pension and other postretirement liabilities | |
|
|
| |
|
| Amortization of prior-service costs | |
| $941 |
| |
| $508 |
| | (a) |
| Acceleration of prior-service cost due to curtailment | | 91 |
| | 41 |
| | (a) |
| Amortization of loss | | (7,644 | ) | | (5,050 | ) | | (a) |
| Total amortization |
| (6,612 | ) |
| (4,501 | ) |
|
|
|
| 2,818 |
| | 1,873 |
|
| Income taxes |
| Total amortization (net of tax) |
| (3,794 | ) |
| (2,628 | ) |
|
|
|
|
|
|
|
|
|
| Total reclassifications for the period (net of tax) | |
| ($3,794 | ) | |
| ($2,628 | ) | |
|
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension cost. See Note 11 to the financial statements for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 8. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material effect on Entergy’s results of operations, cash flows, or financial condition. Entergy discusses regulatory proceedings in Note 2 to the financial statements and discusses tax proceedings in Note 3 to the financial statements.
Vidalia Purchased Power Agreement
Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a hydroelectric facility known as the Vidalia project. Entergy Louisiana made payments under the contract of approximately $185.6$152.8 million in 2011, $216.52014, $181.1 million in 2010,2013, and $204.9$125.0 million in 2009.2012. If the maximum percentage (94%) of the energy is made available to Entergy Louisiana, current production projections would require estimated payments of approximately $172.1$148.5 million in 2012,2015, and a total of $2.5$2.06 billion for the years 20132016 through 2031. Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustment clause.
In an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract, Entergy Louisiana agreed to credit rates by $11 million each year for up to ten10 years, beginning in October 2002. In addition, in accordance with an LPSC settlement, Entergy Louisiana credited rates in August 2007 by $11.3 million (including interest) as a result of a settlement with the IRS of the 2001 tax treatment of the Vidalia contract. As
Entergy Corporation and Subsidiaries
Notes to Financial Statements
discussed in more detail in Note 3 to the financial statements, inIn August 2011, Entergy agreed to a settlement with the IRS regarding the mark-to-market income tax treatment of various wholesale electric power purchase and sale agreements,contracts, including the Vidalia agreement.contract. The agreement with the IRS effectively settled the tax treatment of such contracts which allowed Entergy Louisiana to propose a final settlement with the LPSC regarding Entergy Louisiana’s obligation to customers related to the Vidalia contract. In October 2011 the LPSC approved a final settlement under which Entergy Louisiana agreed to shareprovide credits to the remaining benefits of this tax accounting electionfuel adjustment clause resulting from the IRS settlement to customers by crediting customersbillings an additional $20.235 million per year for 15 years beginning January 2012. Entergy Louisiana recorded a $199 million regulatory charge and a corresponding net-of-tax regulatory liability to reflect this obligation. The provisions of the settlement also provide that the LPSC shall not recognize or use Entergy Louisiana’s use of the cash benefits from the tax treatment in setting any of Entergy Louisiana’s rates. Therefore, to the extent Entergy Louisiana’s usebenefit of the proceeds would ordinarily have reduced its rate base, no changeis not reflected in rate base shallfor ratemaking purposes.
ANO Damage, Outage, and NRC Reviews
On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant. ANO 2 reconnected to the grid on April 28, 2013 and ANO 1 reconnected to the grid on August 7, 2013. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.
Entergy Arkansas is pursuing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual
Entergy Corporation and Subsidiaries
Notes to Financial Statements
insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO. NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO. Entergy has responded that it disagrees with NEIL’s position and is evaluating its options for enforcing its rights under the policy. During 2014, Entergy Arkansas collected $50 million from NEIL. On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop.
Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant’s response. In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.
In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy’s response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.
In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issues that led to the finding have been addressed at ANO, NRC processes still required that the NRC assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with substantial safety significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings. The NRC indicated that these preliminary findings may warrant additional regulatory oversight. Entergy requested a public regulatory conference regarding the inspection, and the conference was held on October 28, 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” In January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.”
The NRC’s January 2015 letter did not advise ANO of the additional level of oversight that will result from the yellow finding related to the flood barrier issue, and it stated that the NRC would inform ANO of this decision by separate correspondence. The yellow finding may result in ANO being placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Baxter Wilson Plant Event
On September 11, 2013, Entergy Mississippi’s Baxter Wilson (Unit 1) power plant experienced a significant unplanned outage event. Entergy Mississippi completed the repairs to the unit in December 2014. As of December 31, 2014, Entergy Mississippi incurred $22.3 million of capital spending and $26.6 million of operation and maintenance expenses to return the unit to service. The damage was covered by Entergy Mississippi’s property insurance policy, subject to a $20 million deductible. As of December 31, 2014, Entergy Mississippi recorded an insurance receivable of $28.2 million for the amount expected to be received from its insurance policy, allocating $12.9 million of the expected insurance proceeds to capital spending and $15.3 million to operation and maintenance expenses. In June 2014, Entergy Mississippi filed a rate case with the MPSC, which includes recovery of the costs associated with Baxter Wilson (Unit 1) repair activities, net of applicable insurance proceeds. In December 2014 the MPSC issued an order that provided for a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset to occur over two years beginning in February 2015, and provided that the capital costs will be reflected for ratemaking purposes.in rate base. The final accounting of costs to return the unit to service and insurance proceeds will be addressed in Entergy Mississippi’s next formula rate plan filing.
Nuclear Insurance
Third Party Liability Insurance
The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident. The costs of this insurance are borne by the nuclear power industry. Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act requires nuclear power plants to show evidence of financial protection in the event of a nuclear accident. This protection must consist of two layers of coverage:
| |
| 1. | The primary level is private insurance underwritten by American Nuclear Insurers (ANI) and provides public liability insurance coverage of $375 million. If this amount is not sufficient to cover claims arising from an accident, the second level, Secondary Financial Protection, applies. |
| |
| 2. | Within the Secondary Financial Protection level, each nuclear reactor has a contingent obligation to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident or fault, up to a maximum of $117.5$127.3 million per reactor per incident (Entergy’s maximum total contingent obligation per incident is $1.3$1.4 billion). This consists of a $111.9$121.3 million maximum retrospective premium plus a five percent surcharge, which equates to $117.5$127.3 million, that may be payable, if needed, at a rate that is currently set at $17.5$19.0 million per year per incident per nuclear power reactor. |
| |
| 3. | In the event that one or more acts of terrorism cause a nuclear power plant accident, which results in third-party damages – off-site property and environmental damage, off-site bodily injury, and on-site third-party bodily injury (i.e. contractors); the primary level provided by ANI combined with the Secondary Financial Protection would provide $12.6$13.6 billion in coverage. The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event. The Terrorism Risk Insurance Reauthorization Act of 2007 expired on December 31, 2014. However, The Terrorism Risk Insurance Reauthorization Act of 2015 was signed into law by the President of the United States on January 12, 2015 thereby extending the Terrorism Risk Insurance Act for six years until December 31, 2020. |
Currently, 104 nuclear reactors are participating in the Secondary Financial Protection program. The product of the maximum retrospective premium assessment to the nuclear power industry and the number of nuclear power reactors provides over $12.2$13.2 billion in secondary layer insurance coverage to compensate the public in the event of a nuclear power reactor accident. The Price-Anderson Act provides that all potential liability for a nuclear accident is limited to the amounts of insurance coverage available under the primary and secondary layers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas has two licensed reactors and Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have one licensed reactor (10% of Grand Gulf is owned by a non-affiliated company (SMEPA) that would share on a pro-rata basis in any retrospective premium assessment to System Energy under the Price-Anderson Act). The Entergy Wholesale Commodities segment includes the ownership, operation, and operationdecommissioning of six nuclear power reactors and the ownership of the shutdown Indian Point 1 reactor and Big Rock Point facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Property Insurance
Entergy’s nuclear owner/licensee subsidiaries are members of Nuclear Electric Insurance Limited (NEIL),NEIL, a mutual insurance company that provides property damage coverage, including decontamination and premature decommissioning expense, to the members’ nuclear generating plants. Effective April 1, 2011,2014, Entergy was insured against such losses per the following structures:
Utility Plants (ANO 1 and 2, Grand Gulf, River Bend, and Waterford 3)
· | Primary Layer (per plant) - $500 millionPrimary Layer (per plant) - $1.5 billion per occurrence |
· | Excess Layer (per plant) - $750Blanket Excess Layer (shared among the Utility plants) - $100 million per occurrence |
· | Blanket Layer (shared among the Utility plants) - $350 millionTotal limit - $1.6 billion per occurrence |
· | Total limit - $1.6 billion per occurrence |
Deductibles:$2.5 million per occurrence - Turbine/generator damage · | $2.5 million per occurrence - Turbine/$2.5 million per occurrence - Other than turbine/generator damage |
· | $2.5 million per occurrence - Other than turbine/generator damage |
· | $10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption |
Note: ANO 1 and 2 share in the primary and blanket excess layers with common policies because the policies are issued on a per site basis. Flood and earthquake coverage are excluded from the primary layer’s first $500 million in coverage. Entergy currently purchases flood coverage at Waterford 3 and River Bend for the primary layer’s first $500 million in coverage.
Entergy Wholesale Commodities Plants (Indian Point, FitzPatrick,(FitzPatrick, Pilgrim, Vermont Yankee, Palisades, and Big Rock Point)Palisades)
· | Primary Layer (per plant) - $500 millionPrimary Layer (per plant) - $1.115 billion per occurrence |
· | Excess Layer - $615 millionTotal limit (per plant) - $1.115 billion per occurrence |
· | Total limit - $1.115 billion per occurrence |
Deductibles:$2.5 million per occurrence - Turbine/generator damage · | $2.5 million per occurrence - Turbine/$2.5 million per occurrence - Other than turbine/generator damage |
· | $2.5 million per occurrence - Other than turbine/generator damage |
· | $10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption |
Note: Flood and earthquake coverage are excluded from the primary layer’s first $500 million in coverage. Entergy currently purchases flood and earthquake coverage at Palisades for the primary layer’s first $500 million in coverage.
Entergy Wholesale Commodities Plant (Indian Point)
Primary Layer (per plant) - $1.5 billion per occurrence
Excess Layer - $100 million per occurrence
Total limit - $1.6 billion per occurrence
Deductibles:
$2.5 million per occurrence - Turbine/generator damage
$2.5 million per occurrence - Other than turbine/generator damage
$10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption
Note: The Indian Point Units share in the primary and excess layers with common policies because the policies are issued on a per site basis. Flood and earthquake coverage are excluded from the primary layer’s first $500 million
Entergy Corporation and Subsidiaries
Notes to Financial Statements
in coverage. Entergy currently purchases flood coverage at Indian Point for the primary layer’s first $500 million in coverage.
Entergy Wholesale Commodities Plant (Vermont Yankee)
Primary Layer (per plant) - $1.06 billion per occurrence
Total limit - $1.06 billion per occurrence
Deductibles:
$2.5 million per occurrence - Turbine/generator damage
$2.5 million per occurrence - Other than turbine/generator damage
$10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption
Note: Flood and earthquake coverage are excluded from the primary layer’s first $500 million in coverage. Entergy currently purchases flood and earthquake coverage at Vermont Yankee for the primary layer’s first $500 million in coverage.
Entergy Wholesale Commodities Plant (Big Rock Point)
Primary Layer (per plant) - $500 million per occurrence
Total limit - $500 million per occurrence
Note: Flood and earthquake coverage are excluded from the primary layer’s first $500 million in coverage. Entergy currently purchases flood and earthquake coverage at Big Rock Point has its ownfor the primary policy with no excesslayer’s first $500 million in coverage.
In addition, Waterford 3, Grand Gulf, and the Entergy Wholesale Commodities plants, with the exception of Vermont Yankee, are also covered under NEIL’s Accidental Outage Coverage program. Due to the shutdown of the Vermont Yankee Nuclear Power Plant in December 2014, and the required 12 week deductible waiting period for the accidental outage coverage to take effect, accidental outage coverage was removed effective October 1, 2014. This coverage provides certain fixed indemnities in the event of an unplanned outage that results from a covered NEIL primary property damage loss, subject to a deductible period. The payout for damage resulting from non-nuclear events is limited to a $327.6 million per occurrence sub-limit. The following summarizes this coverage effective AprilOctober 1, 2011:2014:
Waterford 3
· | $2.95 million weekly indemnity |
· | $413 million maximum indemnity |
· | Deductible: 26 week deductible period |
Grand Gulf
· | $400,000 weekly indemnity (total for four policies) |
· | $56 million maximum indemnity (total for four policies) |
· | Deductible: 26 week deductible period |
Deductible: 26 week deductible period
Indian Point 2, Indian Point 3, and Palisades
$4.5 million weekly indemnity
$490 million maximum indemnity
Deductible: 12 week deductible period
FitzPatrick and Pilgrim
$4 million weekly indemnity
$490 million maximum indemnity
Deductible: 12 week deductible period
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Indian Point 2, Indian Point 3, and Palisades
· | $4.5 million weekly indemnity |
· | $490 million maximum indemnity |
· | Deductible: 12 week deductible period |
FitzPatrick and Pilgrim
· | $4.0 million weekly indemnity |
· | $490 million maximum indemnity |
· | Deductible: 12 week deductible period |
Vermont Yankee
· | $3.5 million weekly indemnity |
· | $435 million maximum indemnity |
· | Deductible: 12 week deductible period |
Under the property damage and accidental outage insurance programs, all NEIL insured plants could be subject to assessments should losses exceed the accumulated funds available from NEIL. Effective April 1, 2011,2014, the maximum amounts of such possible assessments per occurrence were as follows:
|
| |
| | Assessments |
| | | (In(In Millions) |
| Utility: | | |
| Entergy Arkansas | | $20.132.2 |
| Entergy Gulf States Louisiana | | $16.325.5 |
| Entergy Louisiana | | $19.326.1 |
| Entergy Mississippi | | $0.070.09 |
| Entergy New Orleans | | $0.070.09 |
| Entergy Texas | | N/A |
| System Energy | | $16.321.5 |
| | |
| Entergy Wholesale Commodities | | $-— |
Potential assessments for the Entergy Wholesale Commodities plants are covered by insurance obtained through NEIL’s reinsurers.
Entergy maintains property insurance for its nuclear units in excess of the NRC’s minimum requirement of $1.06 billion per site for nuclear power plant licensees. NRC regulations provide that the proceeds of this insurance must be used, first, to render the reactor safe and stable, and second, to complete decontamination operations. Only after proceeds are dedicated for such use and regulatory approval is secured would any remaining proceeds be made available for the benefit of plant owners or their creditors.
In the event that one or more acts of terrorism causes property damage under one or more or all nuclear insurance policies issued by NEIL (including, but not limited to, those described above) within 12 months from the date the first property damage occurs, the maximum recovery under all such nuclear insurance policies shall be an aggregate of $3.24 billion plus the additional amounts recovered for such losses from reinsurance, indemnity, and any other sources applicable to such losses. The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event. The Terrorism Risk Insurance Reauthorization Act of 2007 expired on December 31, 2014. However, The Terrorism Risk Insurance Reauthorization Act of 2015 was signed into law by the President of the United States on January 12, 2015 thereby extending the Terrorism Risk Insurance Act for six years until December 31, 2020.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Conventional Property Insurance
Entergy’s conventional property insurance program provides coverage of up to $400 million on an Entergy system-wide basis for all operational perils (direct physical loss or damage due to machinery breakdown, electrical failure, fire, lightning, hail, or explosion) on an “each and every loss” basis; up to $400 million in coverage for certain natural perils (direct physical loss or damage due to earthquake, tsunami, flood, ice storm, and tornado)flood) on an annual aggregate basis; and up to $125 million for certain other natural perils (direct physical loss or damage due to a named windstorm orand associated storm surge) on an annual aggregate basis; and up to $400 million in coverage for all other natural perils not previously stated (direct physical loss or damage due to a tornado, ice storm, or any other natural peril except named windstorm and associated storm surge, earthquake, tsunami, and flood) on an “each and every loss” basis. The conventional property insurance program provides up to $50 million in coverage for the Entergy New Orleans gas distribution system on an “each and every loss” basis. This $50 million limit is subject to: the $400 million annual aggregate basis.limit for the natural perils of earthquake, tsunami, and flood; the $125 million annual aggregate limit for the natural perils of named windstorm and associated storm surge. The coverage is subject to a $40 million self-insured retention per occurrence for the natural perils of named windstorm and associated storm surge, earthquake, flood, and tsunami; and a $20 million
Entergy Corporation and Subsidiaries
Notes to Financial Statements
self-insured retention per occurrence for operational perils and a $35 million self-insured retention per occurrence forall other natural perils not previously stated, which includes tornado and for the Entergy New Orleans gas distribution system.ice storm, but excludes named windstorm and associated storm surge, earthquake, tsunami, and flood.
Covered property generally includes power plants, substations, facilities, inventories, and gas distribution-related properties. Excluded property generally includes above-ground transmission and distribution lines, poles, and towers. The primary layer consists of a $65towers for substations valued at $5 million layer in excess of the self-insured retentionor less, coverage for named windstorm and the excess layer consists of a $335 million layer in excess of the $65 million primary layer. Both layers are placed on a quota share basis through several insurers.associated storm surge is excluded. This coverage is in place for Entergy Corporation, the Registrant Subsidiaries, and certain other Entergy subsidiaries, including the owners of the nuclear power plants in the Entergy Wholesale Commodities segment. Entergy also purchases $300 million in terrorism insurance coverage for its conventional property. The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event. The Terrorism Risk Insurance Reauthorization Act of 2007 expired on December 31, 2014. However, The Terrorism Risk Insurance Reauthorization Act of 2015 was signed into law by the President of the United States on January 12, 2015 thereby extending the Terrorism Risk Insurance Act for six years until December 31, 2020.
In addition to the conventional property insurance program, Entergy has purchased additional coverage ($20 million per occurrence) for some of its non-regulated, non-generation assets. This policy serves to buy-down the $20 million deductible and is placed on a scheduled location basis. The applicable deductibles are $100,000 to $250,000, except for properties that are damaged by flooding and properties whose values are greater than $20 million; these properties have a $500,000 deductible. Four nuclear locations have a $2.5 million deductible, which coincides with the nuclear property insurance deductible at each respective nuclear site.
Gas System Rebuild Insurance Proceeds (Entergy New Orleans)
Entergy New Orleans received insurance proceeds for future construction expenditures associated with rebuilding its gas system, and the October 2006 City Council resolution approving the settlement of Entergy New Orleans’s rate and storm-cost recovery filings requires Entergy New Orleans to record those proceeds in a designated sub-account of other deferred credits until the proceeds are spent on the rebuild project. This other deferred credit is shown as “Gas system rebuild insurance proceeds” on Entergy New Orleans’s balance sheet.
Employment and Labor-related Proceedings
The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees, recognized bargaining representatives, and third parties not selected for open positions.positions or providing services directly or indirectly to one or more of the Registrant Subsidiaries and other Entergy subsidiaries. Generally, the amount of damages being sought is not specified in these proceedings. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender, age, and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board;Board or concerning the National Labor Relations Act; claims of retaliation; claims of harassment and hostile work environment; and claims for or regarding benefits under various Entergy Corporation sponsoredCorporation-sponsored plans. Entergy and the Registrant Subsidiaries are responding to these suitslawsuits and proceedings and deny liability to the claimants. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of Entergy or the Utility operating companies.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Asbestos Litigation (Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
Numerous lawsuits have been filed in federal and state courts primarily in Texas and Louisiana, primarily by contractor employees who worked in the 1940-1980s timeframe, against Entergy Gulf States Louisiana and Entergy Texas, and to a lesser extent the other Utility operating companies, as premises owners of power plants, for damages caused by alleged exposure to asbestos. Many other defendants are named in these lawsuits as well. Currently, there are approximately 500400 lawsuits involving approximately 5,0004,000 claimants. Management believes that adequate provisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recover reimbursements. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of the Utility operating companies.
Grand Gulf - Related Agreements
Capital Funds Agreement (Entergy Corporation and System Energy)
System Energy has entered into agreements with Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby they are obligated to purchase their respective entitlements of capacity and energy from System Energy’s interest in Grand Gulf, and to make payments that, together with other available funds, are adequate to cover System Energy’s operating expenses. System Energy would have to secure funds from other sources, including Entergy Corporation’s obligations under the Capital Funds Agreement, to cover any shortfalls from payments received from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under these agreements.
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy has agreed to sell all of its share of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans in accordance with specified percentages (Entergy Arkansas-36%, Entergy Louisiana-14%, Entergy Mississippi-33%, and Entergy New Orleans-17%) as ordered by the FERC. Charges under this agreement are paid in consideration for the purchasing companies’ respective entitlement to receive capacity and energy and are payable irrespective of the quantity of energy delivered. The agreement will remain in effect until terminated by the parties and the termination is approved by the FERC, most likely upon Grand Gulf’s retirement from service. Monthly obligations are based on actual capacity and energy costs. The average monthly payments for 20112014 under the agreement are approximately $17.2$20.2 million for Entergy Arkansas, $6.9$8.0 million for Entergy Louisiana, $14.4$17.4 million for Entergy Mississippi, and $8.4$9.8 million for Entergy New Orleans.
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are individually obligated to make payments or subordinated advances to System Energy in accordance with stated percentages (Entergy Arkansas-17.1%, Entergy Louisiana-26.9%, Entergy Mississippi-31.3%, and Entergy New Orleans-24.7%) in amounts that, when added to amounts received under the Unit Power Sales Agreement or otherwise, are adequate to cover all of System Energy’s operating expenses as defined, including an amount sufficient to amortize the cost of Grand Gulf 2 over 27 years (See Reallocation Agreement terms below) and expenses incurred in connection with a permanent shutdown of Grand Gulf. System Energy has assigned its rights to payments and advances to certain creditors as security for certain obligations. Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement have exceeded the amounts payable under the Availability Agreement. Accordingly, no payments under the Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans entered into the Reallocation Agreement relating to the sale of capacity and energy from Grand Gulf and the related costs, in which Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans agreed to assume all of Entergy Arkansas’s responsibilities and obligations with respect to Grand Gulf under the Availability Agreement. FERC’s decision allocating a portion of Grand Gulf capacity and energy to Entergy Arkansas supersedes the Reallocation Agreement as it relates to Grand Gulf. Responsibility for any Grand Gulf 2 amortization amounts has been individually allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and Entergy New Orleans-29.80%) under the terms of the Reallocation Agreement. However, the Reallocation Agreement does not affect Entergy Arkansas’s obligation to System Energy’s lenders under the assignments referred to in the preceding paragraph. Entergy Arkansas would be liable for its share of such amounts if Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans were unable to meet their contractual obligations. No payments of any amortization amounts will be required so long as amounts paid to System Energy under the Unit Power Sales Agreement, including other funds available to System Energy, exceed amounts required under the Availability Agreement, which is expected to be the case for the foreseeable future.
Reimbursement Agreement (System Energy)
In December 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 interests represent approximately 11.5% of Grand Gulf. During the term of the leases, System Energy is required to maintain letters of credit for the equity investors to secure certain amounts payable to the equity investors under the transactions.
Under the provisions of the reimbursement agreement relating to the letters of credit, System Energy has agreed to a number of covenants regarding the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the reimbursement agreement, to maintain a ratio of debt to total liabilities and equity less than or equal to 70%. In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the reimbursement agreement, a ratio of adjusted net income to interest expense of at least 1.50 times earnings. As of December 31, 2011,2014, System Energy was in compliance with these covenants.
NOTE 9. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Accounting standards require the recording ofcompanies to record liabilities for all legal obligations associated with the retirement of long-lived assets that result from the normal operation of thosethe assets. For Entergy, substantially all of its asset retirement obligations consist of its liability for decommissioning its nuclear power plants. In addition, an insignificant amount of removal costs associated with non-nuclear power plants is also included in the decommissioning line item on the balance sheets.
These liabilities are recorded at their fair values (which are the present values of the estimated future cash outflows) in the period in which they are incurred, with an accompanying addition to the recorded cost of the long-lived asset. The asset retirement obligation is accreted each year through a charge to expense, to reflect the time value of money for this present value obligation. The accretion will continue through the completion of the asset retirement activity. The amounts added to the carrying amounts of the long-lived assets will be depreciated over the useful lives
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of the assets. The application of accounting standards related to asset retirement obligations is earnings neutral to the rate-regulated business of the Registrant Subsidiaries.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In accordance with ratemaking treatment and as required by regulatory accounting standards, the depreciation provisions for the Registrant Subsidiaries include a component for removal costs that are not asset retirement obligations under accounting standards. In accordance with regulatory accounting principles, the Registrant Subsidiaries have recorded regulatory assets (liabilities) in the following amounts to reflect their estimates of the difference between estimated incurred removal costs and estimated removal costs recovered in rates:
| | | | December 31, | | | |
| | | 2011 | | 2010 | December 31, |
| | | (In Millions) | 2014 | | 2013 |
| | | | | | (In Millions) |
| Entergy Arkansas | | ($16.4) | | ($24.0) | $59.0 | | $18.6 |
| Entergy Gulf States Louisiana | | ($30.3) | | ($24.9) | ($36.9) | | ($35.3) |
| Entergy Louisiana | | ($62.6) | | ($52.9) | ($45.7) | | ($37.0) |
| Entergy Mississippi | | $48.5 | | $46.1 | $76.3 | | $64.3 |
| Entergy New Orleans | | $16.3 | | $15.4 | $35.2 | | $34.9 |
| Entergy Texas | | $4.5 | �� | $7.3 | $18.9 | | $15.1 |
| System Energy | | $11.8 | | $12.2 | $55.7 | | $56.0 |
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 20112014 by Entergy were as follows:
|
| | | | | | | | | | | | | | | | | |
| | Liabilities as of December 31, 2013 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2014 |
| | (In Millions) |
| Utility: | | | | | | | | | |
| Entergy Arkansas | $723.8 | |
| $47.0 |
| |
| $47.6 |
| |
| $— |
| |
| $818.4 |
|
| Entergy Gulf States Louisiana | $403.1 | |
| $23.5 |
| |
| $20.0 |
| |
| $— |
| |
| $446.6 |
|
| Entergy Louisiana | $479.1 | |
| $24.6 |
| |
| $— |
| |
| $— |
| |
| $503.7 |
|
| Entergy Mississippi | $6.4 | |
| $0.4 |
| |
| $— |
| |
| $— |
| |
| $6.8 |
|
| Entergy New Orleans | $2.3 | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $2.5 |
|
| Entergy Texas | $4.3 | |
| $0.3 |
| |
| $— |
| |
| $— |
| |
| $4.6 |
|
| System Energy | $616.2 | |
| $41.8 |
| |
| $99.9 |
| |
| $— |
| |
| $757.9 |
|
| Entergy Wholesale Commodities | $1,698.2 | |
| $139.7 |
| |
| $101.6 |
| |
| ($21.7 | ) | |
| $1,917.8 |
|
| | Liabilities as of December 31, 2010 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2011 |
| | | | | | (In Millions) | | | | |
| Utility: | | | | | | | | | |
| Entergy Arkansas | $602.2 | | $38.0 | | $- | | $- | | $640.2 |
| Entergy Gulf States Louisiana | $339.9 | | $19.9 | | $- | | $- | | $359.8 |
| Entergy Louisiana | $321.2 | | $24.6 | | $- | | $- | | $345.8 |
| Entergy Mississippi | $5.4 | | $0.3 | | $- | | $- | | $5.7 |
| Entergy New Orleans | $3.4 | | $0.2 | | $- | | ($0.7) | | $2.9 |
| Entergy Texas | $3.6 | | $0.3 | | $- | | $- | | $3.9 |
| System Energy | $452.8 | | $31.5 | | ($38.9) | | $- | | $445.4 |
| | | | | | | | | | |
| Entergy Wholesale Commodities | $1,420.0 | | $115.6 | | ($34.1) | | ($8.6) | | $1,492.9 |
159
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 20102013 by Entergy were as follows:
|
| | | | | | | | | | | | | | | | | | | |
| | Liabilities as of December 31, 2012 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2013 |
| | (In Millions) |
| Utility: | | | | | | | | | |
| Entergy Arkansas |
| $680.7 |
| |
| $43.1 |
| |
| $— |
| |
| $— |
| |
| $723.8 |
|
| Entergy Gulf States Louisiana |
| $380.8 |
| |
| $22.3 |
| |
| $— |
| |
| $— |
| |
| $403.1 |
|
| Entergy Louisiana |
| $418.1 |
| |
| $21.6 |
| |
| $39.4 |
| |
| $— |
| |
| $479.1 |
|
| Entergy Mississippi |
| $6.0 |
| |
| $0.4 |
| |
| $— |
| |
| $— |
| |
| $6.4 |
|
| Entergy New Orleans |
| $2.2 |
| |
| $0.1 |
| |
| $— |
| |
| $— |
| |
| $2.3 |
|
| Entergy Texas |
| $4.1 |
| |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $4.3 |
|
| System Energy |
| $478.4 |
| |
| $35.5 |
| |
| $102.3 |
| |
| $— |
| |
| $616.2 |
|
| Entergy Wholesale Commodities |
| $1,543.3 |
| |
| $125.3 |
| |
| $38.6 |
| |
| ($9.0 | ) | |
| $1,698.2 |
|
| | Liabilities as of December 31, 2009 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2010 |
| | | | | | (In Millions) | | | | |
| Utility: | | | | | | | | | |
| Entergy Arkansas | $566.4 | | $35.8 | | $- | | $- | | $602.2 |
| Entergy Gulf States Louisiana | $321.2 | | $18.7 | | $- | | $- | | $339.9 |
| Entergy Louisiana | $298.2 | | $23.0 | | $- | | $- | | $321.2 |
| Entergy Mississippi | $5.1 | | $0.3 | | $- | | $- | | $5.4 |
| Entergy New Orleans | $3.2 | | $0.2 | | $- | | $- | | $3.4 |
| Entergy Texas | $3.4 | | $0.2 | | $- | | $- | | $3.6 |
| System Energy | $421.4 | | $31.4 | | $- | | $- | | $452.8 |
| | | | | | | | | | |
| Entergy Wholesale Commodities | $1,320.6 | | $107.6 | | $- | | ($8.2) | | $1,420.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
20112014 and 2013 Entergy updated decommissioning cost estimates for certain nuclear power plants. There were no updates
In 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $47.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.
See Note 1 to the financial statements for 2010.
further discussion of the shutdown of Vermont Yankee and the December 2013 settlement agreement involving Entergy and Vermont parties. In accordance with the settlement agreement, Entergy Vermont Yankee provided to the Vermont parties, in 2014, a site assessment study of the costs and tasks of radiological decommissioning, spent nuclear fuel management, and site restoration for Vermont Yankee. Entergy Vermont Yankee also filed its Post-Shutdown Decommissioning Activities Report (PSDAR) for Vermont Yankee with the NRC in December 2014. As part of the development of the site assessment study and PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter 2014. The revised estimate, along with reassessment of the assumptions regarding the timing of decommissioning cash flows, resulted in a $101.6 million increase in the decommissioning cost liability and a corresponding impairment charge.
In the firstfourth quarter 2014, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of 2011,a revised decommissioning cost study. The revised estimate resulted in a $20 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining useful life of the unit.
In the fourth quarter 2014, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $38.9$99.9 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the first quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for a nuclear site as a result of a revised decommissioning cost study. The revised estimate resulted in a $46.6 million reduction in itsthe decommissioning cost liability, along with a corresponding reduction in the related regulatoryasset retirement cost asset.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In the third quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Vermont Yankee as a result of a revised decommissioning cost study. The revised estimate resulted in a $58 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset. The increase in the estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to cease operations of the plant. The asset retirement cost asset was included in the carrying value used to write down Vermont Yankee and related assets to their fair values in third quarter 2013. See Note 1 to the financial statements for further discussion of the resulting impairment charge recorded in third quarter 2013.
In the fourth quarter 2013, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of 2011,a revised decommissioning cost study. The revised estimate resulted in a $102.3 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the fourth quarter 2013, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Waterford 3 as a result of a revised decommissioning cost study. The revised estimate resulted in a $39.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the fourth quarter 2013, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Vermont Yankee. As a result of the settlement agreement regarding the remaining operation and decommissioning of Vermont Yankee, Entergy reassessed its assumptions regarding the timing of decommissioning cash flows. The reassessment resulted in a $27.2 million increase in the decommissioning cost liability and a corresponding impairment charge, which will not result in future cash expenditures. See Note 1 to the financial statements for further discussion of the Vermont Yankee plant.
In the second quarter 2012, Entergy Wholesale Commodities recorded a reduction of $34.1$60.6 million in the estimated decommissioning cost liability for a plant as a result of a revised decommissioning cost study obtained to comply with a state regulatory requirement.study. The revised cost studyestimate resulted in a change in the undiscounted cash flows and a credit to decommissioning expense of $34.1$49 million, ($21 million net-of-tax) was recorded, reflecting the excess of the reduction in the liability over the amount of the undepreciated assets.asset retirement costs asset.
Vermont Yankee submitted notification of permanent cessation of operations and permanent removal of fuel from the reactor in January 2015 after final shutdown in December 2014. The PSDAR for Vermont Yankee, including a site specific cost estimate, was submitted to the NRC in December 2014. Vermont Yankee’s future certifications to satisfy the NRC’s financial assurance requirements will now be based on the site specific cost estimate, including the estimated cost of managing spent fuel, rather than the NRC minimum formula for estimating decommissioning costs. Entergy expects that amounts available in Vermont Yankee’s decommissioning trust fund, including expected earnings, together with the credit facilities entered into in January 2015 that are expected to be repaid with recoveries from DOE litigation related to spent fuel storage, will be sufficient to cover expected costs of decommissioning, spent fuel management costs, and site restoration. Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligation.
For the Indian Point 3 and FitzPatrick plants purchased in 2000, NYPA retained the decommissioning trusts and the decommissioning liability.liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specify their decommissioning obligations. NYPA has the right to require the Entergy subsidiaries to assume each of the decommissioning liabilityliabilities provided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. If the decommissioning liability isliabilities are retained by NYPA, the Entergy subsidiaries will perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts. Entergy recorded an asset, which is now $521.6$599.9 million as of December 31, 2011,2014, representing its estimate of the present value of the difference between the stipulated contract amount for decommissioning the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
plants less the decommissioning costcosts estimated in an independent decommissioning cost study.studies. The asset is increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion is recorded as interest income.
Entergy maintains decommissioning trust funds that are committed to meeting its obligations for the costs of decommissioning the nuclear power plants. The fair values of the decommissioning trust funds and the related asset retirement obligation regulatory assets (liabilities) of Entergy as of December 31, 20112014 are as follows:
| | | | Decommissioning Trust Fair Values | | Regulatory Asset | | | | | |
| | | (In Millions) | Decommissioning Trust Fair Values | | Regulatory Asset (Liability) |
| | | | | | (In Millions) |
| Utility: | | | | | | | |
| ANO 1 and ANO 2 | | $541.7 | | $181.5 |
| $769.9 |
| |
| $247.6 |
|
| River Bend | | $420.9 | | $5.5 |
| $637.7 |
| |
| ($25.5 | ) |
| Waterford 3 | | $254.0 | | $116.1 |
| $383.6 |
| |
| $145.5 |
|
| Grand Gulf | | $423.4 | | $59.6 |
| $679.8 |
| |
| $80.4 |
|
| Entergy Wholesale Commodities | | $2,148.0 | | $- |
| $2,899.9 |
| |
| $— |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
decommissioning the nuclear power plants. The fair values of the decommissioning trust funds and the related asset retirement obligation regulatory assets (liabilities) of Entergy as of December 31, 20102013 are as follows:
| | | | Decommissioning Trust Fair Values | | Regulatory Asset | | | | | |
| | | (In Millions) | Decommissioning Trust Fair Values | | Regulatory Asset (Liability) |
| | | | | | (In Millions) |
| Utility: | | | | | | | |
| ANO 1 and ANO 2 | | $520.8 | | $161.4 |
| $710.9 |
| |
| $219.1 |
|
| River Bend | | $393.6 | | $10.9 |
| $573.7 |
| |
| ($28.7 | ) |
| Waterford 3 | | $240.5 | | $104.2 |
| $347.3 |
| |
| $128.5 |
|
| Grand Gulf | | $387.9 | | $98.3 |
| $603.9 |
| |
| $60.8 |
|
| Entergy Wholesale Commodities | | $2,052.9 | | $- |
| $2,667.3 |
| |
| $— |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 10. LEASES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
General
As of December 31, 2011,2014, 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 and Waterford 3 sale and leaseback transactions) with minimum lease payments as follows:transactions, all of which are discussed elsewhere):
|
| | | | | | | | |
Year | | Operating Leases | | Capital Leases |
| | | (In Thousands) |
| 2015 | |
| $90,010 |
| |
| $4,615 |
|
| 2016 | | 77,060 |
| | 4,457 |
|
| 2017 | | 62,103 |
| | 4,457 |
|
| 2018 | | 49,630 |
| | 3,672 |
|
| 2019 | | 47,527 |
| | 2,887 |
|
| Years thereafter | | 95,530 |
| | 27,664 |
|
| Minimum lease payments | | 421,860 |
| | 47,752 |
|
| Less: Amount representing interest | | — |
| | 15,773 |
|
| Present value of net minimum lease payments | |
| $421,860 |
| |
| $31,979 |
|
Year | | Operating Leases | | Capital Leases |
| | | (In Thousands) |
| | | | | |
| 2012 | | $84,860 | | $6,494 |
| 2013 | | 78,552 | | 6,494 |
| 2014 | | 78,559 | | 4,694 |
| 2015 | | 62,043 | | 4,615 |
| 2016 | | 37,963 | | 4,457 |
| Years thereafter | | 166,445 | | 38,025 |
| Minimum lease payments | | 508,422 | | 64,779 |
| Less: Amount representing interest | | - | | 23,621 |
| Present value of net minimum lease payments | | $508,422 | | $41,158 |
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 $75.3$59 million in 2011, $80.82014, $63.7 million in 2010,2013, and $71.6$69.9 million in 2009.2012.
As of December 31, 2011,2014 the Registrant Subsidiaries had a capital leaseslease 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 and Waterford 3 sale and leaseback transactions) with minimum lease payments as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statementswhich are discussed elsewhere):
Capital Leases
| | Year | | Entergy Arkansas | | Entergy Mississippi | | Entergy Mississippi |
| | | (In Thousands) | | (in Thousands) |
| | | | | | |
| 2012 | | $237 | | $3,370 | |
| 2013 | | 237 | | 3,370 | |
| 2014 | | 237 | | 1,570 | |
| 2015 | | 158 | | 1,570 | |
| $1,570 |
|
| 2016 | | - | | 1,570 | | 1,570 |
|
| 2017 | | | 1,570 |
|
| 2018 | | | 785 |
|
| 2019 | | | — |
|
| Years thereafter | | - | | 1,701 | | — |
|
| Minimum lease payments | | 869 | | 13,151 | | 5,495 |
|
| Less: Amount representing interest | | 530 | | 2,430 | | 656 |
|
| Present value of net minimum lease payments | | $339 | | $10,721 | |
| $4,839 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Operating Leases
| | Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | |
| 2012 | | $22,843 | | $11,437 | | $9,068 | | $6,192 | | $1,698 | | $5,646 | |
| 2013 | | 21,318 | | 10,904 | | 7,876 | | 5,568 | | 1,464 | | 5,435 | |
| 2014 | | 20,296 | | 17,596 | | 6,522 | | 4,466 | | 1,320 | | 4,028 | |
| 2015 | | 21,692 | | 8,341 | | 5,540 | | 3,324 | | 1,077 | | 1,999 | |
| $28,647 |
| |
| $12,643 |
| |
| $11,006 |
| |
| $6,885 |
| |
| $2,115 |
| |
| $5,837 |
|
| 2016 | | 7,545 | | 7,901 | | 2,171 | | 1,878 | | 728 | | 1,066 | | 23,674 |
| | 10,880 |
| | 9,695 |
| | 5,388 |
| | 1,856 |
| | 5,111 |
|
| 2017 | | | 16,501 |
| | 10,035 |
| | 7,784 |
| | 4,020 |
| | 1,587 |
| | 4,239 |
|
| 2018 | | | 10,736 |
| | 9,100 |
| | 6,343 |
| | 3,376 |
| | 1,264 |
| | 3,707 |
|
| 2019 | | | 11,365 |
| | 10,795 |
| | 5,003 |
| | 3,073 |
| | 1,087 |
| | 2,719 |
|
| Years thereafter | | 5,013 | | 65,565 | | 1,801 | | 6,156 | | 604 | | 1,274 | | 8,412 |
| | 26,671 |
| | 5,458 |
| | 3,212 |
| | 2,227 |
| | 2,981 |
|
| Minimum lease payments | | $98,707 | | $121,744 | | $32,978 | | $27,584 | | $6,891 | | $19,448 | |
| $99,335 |
| |
| $80,124 |
| |
| $45,289 |
| |
| $25,954 |
| |
| $10,136 |
| |
| $24,594 |
|
Rental Expenses
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| | | | | | | | | | | | | | | |
| 2011 | | $13.4 | | $12.2 | | $12.2 | | $5.2 | | $1.7 | | $8.4 | | $1.6 |
| 2010 | | $13.0 | | $12.5 | | $11.7 | | $5.5 | | $1.7 | | $7.4 | | $1.4 |
| 2009 | | $12.0 | | $11.6 | | $10.7 | | $5.3 | | $1.6 | | $9.9 | | $1.3 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| 2014 | |
| $12.0 |
| |
| $10.9 |
| |
| $9.8 |
| |
| $4.3 |
| |
| $1.2 |
| |
| $3.8 |
| |
| $2.0 |
|
| 2013 | |
| $12.0 |
| |
| $10.9 |
| |
| $10.1 |
| |
| $4.6 |
| |
| $1.3 |
| |
| $4.1 |
| |
| $2.5 |
|
| 2012 | |
| $12.6 |
| |
| $11.9 |
| |
| $11.2 |
| |
| $5.5 |
| |
| $1.5 |
| |
| $6.4 |
| |
| $1.5 |
|
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 $8.3$4.8 million in 2011, $8.42014, $8.6 million in 2010,2013, and $7.2$8.5 million in 20092012 for Entergy Arkansas and $2.0$1.7 million in 2011, $2.32014, $2.2 million in 2010,2013, and $3.1$1.7 million in 20092012 for Entergy Gulf States Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2014, $3.4 million in 2011, $3.4 million in 2010,2013, and $3.4 million in 2009.2012.
Power Purchase Agreements
As of December 31, 2014, 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)
|
| 2015 | |
| $28,450 |
| |
| $28,450 |
|
| 2016 | | 29,104 |
| | 29,104 |
|
| 2017 | | 29,772 |
| | 29,772 |
|
| 2018 | | 30,458 |
| | 30,458 |
|
| 2019 | | 31,158 |
| | 31,158 |
|
| Years thereafter | | 74,664 |
| | 74,664 |
|
| Minimum lease payments | | 223,606 |
| | 223,606 |
|
(a) Amounts reflect 100% of minimum payments. Under a separate contract, Entergy Gulf States Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $29.2 million in 2014, $28.6 million in 2013, and $19.2 million in 2012.
Sale and Leaseback Transactions
Waterford 3 Lease Obligations
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 interests represent approximately 9.3% of Waterford 3. The leases expire in July 2017. Under certain circumstances, Entergy Louisiana may repurchase the leased interests prior to the end of the term of the leases. At the end of the lease terms, Entergy Louisiana has the option to repurchase the leased interests in Waterford 3 at fair market value or to renew the leases for either fair market value or, under certain conditions, a fixed rate. In the event that Entergy Louisiana does not renew or purchase the interests, Entergy Louisiana would surrender such interests and their associated entitlement of Waterford 3’s capacity and energy.
Entergy Louisiana issued $208.2 million of non-interest bearing first mortgage bonds as collateral for the equity portion of certain amounts payable under the leases.
Upon the occurrence of certain events, Entergy Louisiana may be obligated to assume the outstanding bonds used to finance the purchase of the interests in the unit and to pay an amount sufficient to withdraw from the lease transaction. Such events include lease events of default, events of loss, deemed loss events, or certain adverse “Financial Events.” “Financial Events” include, among other things, failure by Entergy Louisiana, following the expiration of any applicable grace or cure period, to maintain (i) total equity capital (including preferred membership interests) at least equal to 30% of adjusted capitalization, or (ii) a fixed charge coverage ratio of at least 1.50 computed on a rolling 12 month basis. As of December 31, 2011,2014, Entergy Louisiana was in compliance with these provisions.
As of December 31, 2011,2014, Entergy Louisiana, in connection with the Waterford 3 sale and leaseback transactions, had future minimum lease payments (reflecting an overall implicit rate of 7.45%) in connection with the Waterford 3 sale and leaseback transactions, whichthat are recorded as long-term debt, as follows:
| | | Amount | |
| | | (In Thousands) | | | |
| | | | Amount |
| 2012 | | $39,067 | |
| 2013 | | 26,301 | |
| 2014 | | 31,036 | |
| | | (In Thousands) |
| | | |
| 2015 | | 28,827 |
| $28,827 |
|
| 2016 | | 16,938 | 16,938 |
|
| 2017 | | 106,335 |
|
| 2018 | | — |
|
| 2019 | | — |
|
| Years thereafter | | 106,335 | — |
|
| Total | | 248,504 | 152,100 |
|
| Less: Amount representing interest | | 60,249 | 23,612 |
|
| Present value of net minimum lease payments | | $188,255 |
| $128,488 |
|
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 interests represent approximately 11.5% of Grand Gulf. The leases expire in 2015. Under certain circumstances, System Entergy may repurchase the leased interests prior to the end of theinitial term of the leases.leases was to expire in July 2015. In December 2013, System Energy exercised its options to renew the leases for fair market value with a renewal term for one lease expiring in July 2018 and the renewal term of the other lease 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 valuevalue. 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.
Entergy Corporation and Subsidiaries
Notes to renew the leases for either fair market value or, under certain conditions, a fixed rate.Financial Statements
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 asset (liability)liability of ($2.0)$62.9 million and $60.6$61.6 million as of December 31, 20112014 and 2010,2013, respectively.
As of December 31, 2011,2014, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13%), which that are recorded as long-term debt, as follows:
|
| | | |
| | Amount |
| | (In Thousands) |
| | |
| 2015 |
| $52,253 |
|
| 2016 | 13,750 |
|
| 2017 | 13,750 |
|
| 2018 | 13,750 |
|
| 2019 | 13,750 |
|
| Years thereafter | 233,750 |
|
| Total | 341,003 |
|
| Less: Amount representing interest | 290,332 |
|
| Present value of net minimum lease payments |
| $50,671 |
|
| | | Amount |
| | | (In Thousands) |
| | | |
| 2012 | | $49,959 |
| 2013 | | 50,546 |
| 2014 | | 51,637 |
| 2015 | | 52,253 |
| 2016 | | - |
| Years thereafter | | - |
| Total | | 204,395 |
| Less: Amount representing interest | | 25,611 |
| Present value of net minimum lease payments | | $178,784 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 11. RETIREMENT, OTHER POSTRETIREMENT BENEFITS, AND DEFINED CONTRIBUTION PLANS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Qualified Pension Plans
Entergy has sevennine qualified pension plans covering substantially all employees:employees. The “Entergy Corporation Retirement Plan for Non-Bargaining Employees,” “Entergy Corporation Retirement Plan for Bargaining Employees,” “Entergy Corporation Retirement Plan II for Non-Bargaining Employees,” “Entergy Corporation Retirement Plan II for Bargaining Employees,” “Entergy Corporation Retirement Plan III,” “Entergy Corporation Retirement Plan IV for Non-Bargaining Employees,” and “Entergy Corporation Retirement Plan IV for Bargaining Employees.”Employees” are non-contributory final average pay plans and provide pension benefits that are based on employees’ credited service and compensation during employment. The Registrant Subsidiaries participate in two of these plans: “Entergy Corporation Retirement Plan for Non-Bargaining Employees” and “Entergy Corporation Retirement Plan for Bargaining Employees.” Except for the Entergy Corporation Retirement Plan III, the pension plans are noncontributory and provideIII” is a final average pay plan that provides pension benefits that are based on employees’ credited service and compensation during the final years before retirement. The Entergy Corporation Retirement Plan IIIretirement and includes a mandatory employee contribution of 3% of earnings during the first 10 years of plan participation, and allows voluntary contributions from 1% to 10% of earnings for a limited group of employees. Non-bargaining employees hired or rehired after June 30, 2014 participate in the “Entergy Corporation Cash Balance Plan for Non-Bargaining Employees.” Certain bargaining employees hired or rehired after June 30, 2014, or such later date provided for in their applicable collective bargaining agreements, participate in the “Entergy Corporation Cash Balance Plan for Bargaining Employees.” The Registrant Subsidiaries participate in these four plans: “Entergy Corporation Retirement Plan for Non-Bargaining Employees,” “Entergy Corporation Retirement Plan for Bargaining Employees,” “Entergy Corporation Cash Balance Plan for Non-Bargaining Employees,” and “Entergy Cash Balance Plan for Bargaining Employees.”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The assets of the seven final average pay qualified pension plans are held in a master trust established by Entergy and the assets of the two cash balance pension plans are held in a second master trust established by Entergy. Each pension plan has an undivided beneficial interest in each of the investment accounts of thein its respective master trust that is maintained by a trustee. Use of the master trusttrusts permits the commingling of the trust assets of the pension plans of Entergy Corporation and its Registrant Subsidiaries for investment and administrative purposes. Although assets are commingled in the master trust,trusts are commingled, the trustee maintains supporting records for the purpose of allocating the trust level equity in net earnings (loss) and the administrative expenses of the investment accounts in each trust to the various participating pension plans.plans in that particular trust. The fair value of the trusttrusts’ assets is determined by the trustee and certain investment managers. TheFor each trust, the trustee calculates a daily earnings factor, including realized and unrealized gains or losses, collected and accrued income, and administrative expenses, and allocates earnings to each plan in the master trusttrusts on a pro rata basis.
Further, withinWithin each pension plan, the record of each Registrant Subsidiary’s beneficial interest in the plan assets is maintained by the plan’s actuary and is updated quarterly. Assets for each Registrant Subsidiary are increased for investment income and contributions, and are decreased for benefit payments. A plan’s investment net income/(loss)loss (i.e. interest and dividends, realized and unrealized gains and losses and expenses) is allocated to the Registrant Subsidiaries participating in that plan based on the value of assets for each Registrant Subsidiary at the beginning of the quarter adjusted for contributions and benefit payments made during the quarter.
Entergy Corporation and its subsidiaries fund pension costs in accordance with contribution guidelines established by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended. The assets of the plans include common and preferred stocks, fixed-income securities, interest in a money market fund, and insurance contracts. The Registrant Subsidiaries’ pension costs are recovered from customers as a component of cost of service in each of their respective jurisdictions.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Qualified Net Pension Cost and Other Amounts Recognized as a Regulatory Asset and/or Accumulated Other Comprehensive Income (AOCI)
Entergy Corporation and its subsidiaries’ total 2011, 2010,2014, 2013, and 20092012 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the following components:
| | | | | 2011 | | 2010 | | 2009 | 2014 | | 2013 | | 2012 |
| | | (In Thousands) | (In Thousands) |
| Net periodic pension cost: | | | | | | | |
| | |
| | |
|
Service cost - benefits earned during the period | | $121,961 | | $104,956 | | $89,646 |
| $140,436 |
| |
| $172,280 |
| |
| $150,763 |
|
| Interest cost on projected benefit obligation | | 236,992 | | 231,206 | | 218,172 | 290,076 |
| | 263,296 |
| | 260,929 |
|
| Expected return on assets | | (301,276) | | (259,608) | | (249,220) | (361,462 | ) | | (328,227 | ) | | (317,423 | ) |
| Amortization of prior service cost | | 3,350 | | 4,658 | | 4,997 | 1,600 |
| | 2,125 |
| | 2,733 |
|
| Recognized net loss | | 92,977 | | 65,901 | | 22,401 | 145,095 |
| | 213,194 |
| | 167,279 |
|
| Curtailment loss | | — |
| | 16,318 |
| | — |
|
| Special termination benefit | | 732 |
| | 13,139 |
| | — |
|
| Net periodic pension costs | | $154,004 | | $147,113 | | $85,996 |
| $216,477 |
| |
| $352,125 |
| |
| $264,281 |
|
| | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | |
| Net loss | | $1,045,624 | | $232,279 | | $76,799 | |
| Net (gain)/loss | |
| $1,389,912 |
| |
| ($894,150 | ) | |
| $552,303 |
|
| Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | |
| Amortization of prior service cost | | (3,350) | | (4,658) | | (4,997) | (1,600 | ) | | (2,125 | ) | | (2,733 | ) |
| Acceleration of prior service cost to curtailment | | — |
| | (1,307 | ) | | — |
|
| Amortization of net loss | | (92,977) | | (65,901) | | (22,401) | (145,095 | ) | | (213,194 | ) | | (167,279 | ) |
| Total | | 949,297 | | 161,720 | | 49,401 | 1,243,217 |
| | (1,110,776 | ) | | 382,291 |
|
| | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $1,103,301 | | $308,834 | | $135,397 | |
| | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | |
| Total recognized as net periodic pension (income)/cost, regulatory asset, and/or AOCI (before tax) | |
| $1,459,694 |
| |
| ($758,651 | ) | |
| $646,572 |
|
| Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year: | | | | | | |
| Prior service cost | | $2,733 | | $3,350 | | $4,658 |
| $1,561 |
| |
| $1,600 |
| |
| $2,268 |
|
| Net loss | | $169,064 | | $92,977 | | $65,901 |
| $237,013 |
| |
| $146,958 |
| |
| $219,805 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ total 2011, 2010,2014, 2013, and 20092012 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, for their employees included the following components:
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net periodic pension cost: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $18,072 | | $9,848 | | $11,543 | | $5,308 | | $2,242 | | $4,788 | | $4,941 |
Interest cost on projected benefit obligation | | 51,965 | | 23,713 | | 32,636 | | 15,637 | | 7,050 | | 15,971 | | 11,758 |
| Expected return on assets | | (62,434) | | (33,358) | | (38,866) | | (20,152) | | (8,455) | | (22,005) | | (15,138) |
Amortization of prior service cost | | 459 | | 79 | | 280 | | 152 | | 35 | | 65 | | 16 |
| Recognized net loss | | 25,681 | | 9,118 | | 17,990 | | 6,717 | | 4,666 | | 5,579 | | 5,284 |
| Net pension cost | | $33,743 | | $9,400 | | $23,583 | | $7,662 | | $5,538 | | $4,398 | | $6,861 |
| | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss | | $217,989 | | $102,329 | | $137,100 | | $56,714 | | $29,297 | | $64,662 | | $52,876 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of prior service cost | | (459) | | (79) | | (280) | | (152) | | (35) | | (65) | | (16) |
| Amortization of net loss | | (25,681) | | (9,118) | | (17,990) | | (6,717) | | (4,666) | | (5,579) | | (5,284) |
| Total | | $191,849 | | $93,132 | | $118,830 | | $49,845 | | $24,596 | | $59,018 | | $47,576 |
| | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $225,592 | | $102,532 | | $142,413 | | $57,507 | | $30,134 | | $63,416 | | $54,437 |
| | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service cost | | $200 | | $19 | | $208 | | $30 | | $7 | | $15 | | $13 |
| Net loss | | $41,309 | | $16,295 | | $28,486 | | $10,667 | | $6,935 | | $10,261 | | $9,135 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net periodic pension cost: | | | | | | | | | | | | | | |
| Service cost - benefits earned during the period | |
| $20,090 |
| |
| $11,524 |
| |
| $14,182 |
| |
| $6,094 |
| |
| $2,666 |
| |
| $5,142 |
| |
| $5,785 |
|
Interest cost on projected benefit obligation | | 59,537 |
| | 29,114 |
| | 37,870 |
| | 17,273 |
| | 8,164 |
| | 17,746 |
| | 13,561 |
|
| Expected return on assets | | (73,218 | ) | | (37,950 | ) | | (45,796 | ) | | (22,794 | ) | | (10,019 | ) | | (23,723 | ) | | (16,619 | ) |
| Amortization of prior service cost | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
|
| Recognized net loss | | 35,956 |
| | 15,923 |
| | 24,523 |
| | 9,415 |
| | 5,796 |
| | 9,356 |
| | 9,500 |
|
| Net pension cost | |
| $42,365 |
| |
| $18,611 |
| |
| $30,779 |
| |
| $9,988 |
| |
| $6,607 |
| |
| $8,521 |
| |
| $12,229 |
|
| Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss | |
| $300,907 |
| |
| $125,090 |
| |
| $193,842 |
| |
| $88,199 |
| |
| $38,161 |
| |
| $65,363 |
| |
| $60,763 |
|
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
| Amortization of prior service cost | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) |
| Amortization of net loss | | (35,956 | ) | | (15,923 | ) | | (24,523 | ) | | (9,415 | ) | | (5,796 | ) | | (9,356 | ) | | (9,500 | ) |
| Total | |
| $264,951 |
| |
| $109,167 |
| |
| $169,319 |
| |
| $78,784 |
| |
| $32,365 |
| |
| $56,007 |
| |
| $51,261 |
|
Total recognized as net periodic pension income regulatory asset, and/or AOCI (before tax) | |
| $307,316 |
| |
| $127,778 |
| |
| $200,098 |
| |
| $88,772 |
| |
| $38,972 |
| |
| $64,528 |
| |
| $63,490 |
|
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Net loss | |
| $54,254 |
| |
| $23,098 |
| |
| $36,704 |
| |
| $14,896 |
| |
| $8,053 |
| |
| $12,950 |
| |
| $13,055 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | 2013 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | (In Thousands) |
| Net periodic pension cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $15,775 | | $8,462 | | $9,770 | | $4,651 | | $2,063 | | $4,267 | | $4,132 | |
| $25,229 |
| |
| $14,258 |
| |
| $17,044 |
| |
| $7,295 |
| |
| $3,264 |
| |
| $6,475 |
| |
| $7,242 |
|
Interest cost on projected benefit obligation | | 49,277 | | 24,377 | | 28,541 | | 15,230 | | 6,040 | | 15,869 | | 9,009 | | 54,473 |
| | 26,741 |
| | 34,857 |
| | 15,802 |
| | 7,462 |
| | 16,303 |
| | 12,170 |
|
| Expected return on assets | | (50,635) | | (30,752) | | (32,775) | | (17,252) | | (7,236) | | (20,549) | | (11,808) | | (66,951 | ) | | (34,982 | ) | | (41,948 | ) | | (21,139 | ) | | (9,117 | ) | | (22,277 | ) | | (17,249 | ) |
Amortization of prior service cost | | 782 | | 302 | | 474 | | 318 | | 177 | | 237 | | 34 | | 23 |
| | 9 |
| | 83 |
| | 10 |
| | 2 |
| | 6 |
| | 9 |
|
| Recognized net loss | | 16,506 | | 7,622 | | 8,604 | | 4,361 | | 2,544 | | 3,208 | | 523 | | 49,517 |
| | 23,374 |
| | 34,107 |
| | 13,189 |
| | 7,878 |
| | 13,302 |
| | 9,560 |
|
| Curtailment loss | | | 4,938 |
| | 805 |
| | 3,542 |
| | 767 |
| | 343 |
| | 1,559 |
| | — |
|
| Special termination benefit | | | 1,784 |
| | 808 |
| | 1,631 |
| | 359 |
| | 581 |
| | 855 |
| | 1,970 |
|
| Net pension cost | | $31,705 | | $10,011 | | $14,614 | | $7,308 | | $3,588 | | $3,032 | | $1,890 | |
| $69,013 |
| |
| $31,013 |
| |
| $49,316 |
| |
| $16,283 |
| |
| $10,413 |
| |
| $16,223 |
| |
| $13,702 |
|
| | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net loss | | $97,117 | | $4,748 | | $99,129 | | $21,801 | | $22,600 | | $17,316 | | $56,756 | |
| Net gain | | |
| ($177,105 | ) | |
| ($98,610 | ) | |
| ($123,234 | ) | |
| ($52,525 | ) | |
| ($25,419 | ) | |
| ($55,772 | ) | |
| ($35,511 | ) |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost | | (782) | | (302) | | (474) | | (318) | | (177) | | (237) | | (34) | | (23 | ) | | (9 | ) | | (83 | ) | | (10 | ) | | (2 | ) | | (6 | ) | | (9 | ) |
| Amortization of net loss | | (16,506) | | (7,622) | | (8,604) | | (4,361) | | (2,544) | | (3,208) | | (523) | | (49,517 | ) | | (23,374 | ) | | (34,107 | ) | | (13,189 | ) | | (7,878 | ) | | (13,302 | ) | | (9,560 | ) |
| Total | | $79,829 | | ($3,176) | | $90,051 | | $17,122 | | $19,879 | | $13,871 | | $56,199 | |
| ($226,645 | ) | |
| ($121,993 | ) | |
| ($157,424 | ) | |
| ($65,724 | ) | |
| ($33,299 | ) | |
| ($69,080 | ) | |
| ($45,080 | ) |
| | | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $111,534 | | $6,835 | | $104,665 | | $24,430 | | $23,467 | | $16,903 | | $58,089 | |
| | | | | | | | | | | | | | | | |
Total recognized as net periodic pension income, regulatory asset, and/or AOCI (before tax) | | |
| ($157,632 | ) | |
| ($90,980 | ) | |
| ($108,108 | ) | |
| ($49,441 | ) | |
| ($22,886 | ) | |
| ($52,857 | ) | |
| ($31,378 | ) |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Prior service cost | | $459 | | $79 | | $280 | | $152 | | $35 | | $65 | | $16 | |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $2 |
|
| Net loss | | $25,681 | | $9,118 | | $17,990 | | $6,717 | | $4,666 | | $5,579 | | $5,284 | |
| $35,984 |
| |
| $15,935 |
| |
| $24,360 |
| |
| $9,421 |
| |
| $5,802 |
| |
| $9,363 |
| |
| $9,510 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net periodic pension cost: | | | | | | | | | | | | | | |
| Service cost - benefits earned during the period | |
| $22,169 |
| |
| $12,273 |
| |
| $14,675 |
| |
| $6,410 |
| |
| $2,824 |
| |
| $5,684 |
| |
| $5,920 |
|
Interest cost on projected benefit obligation | | 55,686 |
| | 25,679 |
| | 35,201 |
| | 16,279 |
| | 7,608 |
| | 16,823 |
| | 12,987 |
|
| Expected return on assets | | (65,763 | ) | | (34,370 | ) | | (40,836 | ) | | (20,945 | ) | | (8,860 | ) | | (22,325 | ) | | (16,436 | ) |
| Amortization of prior service cost | | 200 |
| | 19 |
| | 208 |
| | 30 |
| | 7 |
| | 15 |
| | 13 |
|
| Recognized net loss | | 40,772 |
| | 16,173 |
| | 28,197 |
| | 10,532 |
| | 6,878 |
| | 10,179 |
| | 9,001 |
|
| Net pension cost | |
| $53,064 |
| |
| $19,774 |
| |
| $37,445 |
| |
| $12,306 |
| |
| $8,457 |
| |
| $10,376 |
| |
| $11,485 |
|
| Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss | |
| $105,133 |
| |
| $77,207 |
| |
| $76,163 |
| |
| $27,106 |
| |
| $14,282 |
| |
| $28,745 |
| |
| $10,266 |
|
| Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
| Amortization of prior service cost | | (200 | ) | | (19 | ) | | (208 | ) | | (30 | ) | | (7 | ) | | (15 | ) | | (13 | ) |
| Amortization of net loss | | (40,772 | ) | | (16,173 | ) | | (28,197 | ) | | (10,532 | ) | | (6,878 | ) | | (10,179 | ) | | (9,001 | ) |
| Total | |
| $64,161 |
| |
| $61,015 |
| |
| $47,758 |
| |
| $16,544 |
| |
| $7,397 |
| |
| $18,551 |
| |
| $1,252 |
|
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | |
| $117,225 |
| |
| $80,789 |
| |
| $85,203 |
| |
| $28,850 |
| |
| $15,854 |
| |
| $28,927 |
| |
| $12,737 |
|
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service cost | |
| $23 |
| |
| $9 |
| |
| $83 |
| |
| $10 |
| |
| $2 |
| |
| $6 |
| |
| $10 |
|
| Net loss | |
| $50,175 |
| |
| $23,731 |
| |
| $34,906 |
| |
| $13,375 |
| |
| $8,046 |
| |
| $13,494 |
| |
| $9,717 |
|
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Net periodic pension cost: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $13,601 | | $6,993 | | $7,896 | | $3,981 | | $1,701 | | $3,668 | | $3,519 |
Interest cost on projected benefit obligation | | 47,043 | | 21,116 | | 27,760 | | 14,706 | | 5,878 | | 15,741 | | 8,555 |
| Expected return on assets | | (48,749) | | (30,065) | | (32,789) | | (16,943) | | (7,261) | | (20,740) | | (11,064) |
Amortization of prior service cost | | 849 | | 438 | | 474 | | 341 | | 206 | | 321 | | 34 |
| Recognized net loss | | 7,058 | | 319 | | 2,817 | | 1,289 | | 1,225 | | 168 | | 439 |
| Net pension cost/(income) | | $19,802 | | ($1,199) | | $6,158 | | $3,374 | | $1,749 | | ($842) | | $1,483 |
| | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss/(gain) | | $32,528 | | $36,704 | | $7,113 | | $5,609 | | $724 | | ($3,444) | | $5,076 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of prior service cost | | (849) | | (438) | | (474) | | (341) | | (206) | | (321) | | (34) |
| Amortization of net loss | | (7,058) | | (319) | | (2,817) | | (1,289) | | (1,225) | | (168) | | (439) |
| Total | | $24,621 | | $35,947 | | $3,822 | | $3,979 | | ($707) | | ($3,933) | | $4,603 |
| | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost/(income), regulatory asset, and/or AOCI (before tax) | | $44,423 | | $34,748 | | $9,980 | | $7,353 | | $1,042 | | ($4,775) | | $6,086 |
| | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service cost | | $782 | | $302 | | $474 | | $318 | | $177 | | $237 | | $34 |
| Net loss | | $16,506 | | $7,621 | | $8,603 | | $4,362 | | $2,544 | | $3,207 | | $523 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Obligations, Plan Assets, Funded Status, Amounts Recognized in the Balance Sheet for Entergy Corporation and its Subsidiaries as of December 31, 20112014 and 20102013
|
| | | | | | | |
| | December 31, |
| | 2014 | | 2013 |
| | (In Thousands) |
| Change in Projected Benefit Obligation (PBO) | |
| | |
|
| Balance at beginning of year |
| $5,770,999 |
| |
| $6,096,639 |
|
| Service cost | 140,436 |
| | 172,280 |
|
| Interest cost | 290,076 |
| | 263,296 |
|
| Curtailment | — |
| | 15,011 |
|
| Special termination benefit | 732 |
| | 13,139 |
|
| Actuarial loss/(gain) | 1,284,049 |
| | (571,990 | ) |
| Employee contributions | 560 |
| | 598 |
|
| Benefits paid | (256,310 | ) | | (217,974 | ) |
| Balance at end of year |
| $7,230,542 |
| |
| $5,770,999 |
|
| Change in Plan Assets | |
| | |
|
| Fair value of assets at beginning of year |
| $4,429,237 |
| |
| $3,832,860 |
|
| Actual return on plan assets | 255,599 |
| | 650,386 |
|
| Employer contributions | 398,880 |
| | 163,367 |
|
| Employee contributions | 560 |
| | 598 |
|
| Benefits paid | (256,310 | ) | | (217,974 | ) |
| Fair value of assets at end of year |
| $4,827,966 |
| |
| $4,429,237 |
|
| Funded status |
| ($2,402,576 | ) | |
| ($1,341,762 | ) |
| Amount recognized in the balance sheet | | | |
| Non-current liabilities |
| ($2,402,576 | ) | |
| ($1,341,762 | ) |
| Amount recognized as a regulatory asset | | | |
| Prior service cost |
| $3,704 |
| |
| $5,027 |
|
| Net loss | 2,451,172 |
| | 1,494,117 |
|
| |
| $2,454,876 |
| |
| $1,499,144 |
|
| Amount recognized as AOCI (before tax) | | | |
| Prior service cost |
| $1,015 |
| |
| $1,292 |
|
| Net loss | 671,682 |
| | 383,920 |
|
| |
| $672,697 |
| |
| $385,212 |
|
| | | December 31, |
| | | 2011 | | 2010 |
| | | (In Thousands) |
| Change in Projected Benefit Obligation (PBO) | | | | |
| Balance at beginning of year | | $4,301,218 | | $3,837,744 |
| Service cost | | 121,961 | | 104,956 |
| Interest cost | | 236,992 | | 231,206 |
| Actuarial loss | | 703,895 | | 293,189 |
| Employee contributions | | 828 | | 894 |
| Benefits paid | | (177,259) | | (166,771) |
| Balance at end of year | | $5,187,635 | | $4,301,218 |
| | | | | |
| Change in Plan Assets | | | | |
| Fair value of assets at beginning of year | | $3,216,268 | | $2,607,274 |
| Actual return on plan assets | | (40,453) | | 320,517 |
| Employer contributions | | 400,532 | | 454,354 |
| Employee contributions | | 828 | | 894 |
| Benefits paid | | (177,259) | | (166,771) |
| Fair value of assets at end of year | | $3,399,916 | | $3,216,268 |
| | | | | |
| Funded status | | ($1,787,719) | | ($1,084,950) |
| | | | | |
| Amount recognized in the balance sheet | | | | |
| Non-current liabilities | | ($1,787,719) | | ($1,084,950) |
| | | | | |
| Amount recognized as a regulatory asset | | | | |
| Prior service cost | | $9,836 | | $12,979 |
| Net loss | | 2,048,743 | | 1,350,616 |
| | | $2,058,579 | | $1,363,595 |
| Amount recognized as AOCI (before tax) | | | | |
| Prior service cost | | $2,648 | | $2,855 |
| Net loss | | 551,613 | | 297,093 |
| | | $554,261 | | $299,948 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Obligations, Plan Assets, Funded Status, and Amounts Recognized in the Balance Sheet for the Registrant Subsidiaries as of December 31, 20112014 and 20102013
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in Projected Benefit Obligation (PBO) | | | | | | | | | | | | | | |
| Balance at beginning of year | |
| $1,192,640 |
| |
| $579,862 |
| |
| $761,350 |
| |
| $345,824 |
| |
| $163,707 |
| |
| $356,080 |
| |
| $270,789 |
|
| Service cost | | 20,090 |
| | 11,524 |
| | 14,182 |
| | 6,094 |
| | 2,666 |
| | 5,142 |
| | 5,785 |
|
| Interest cost | | 59,537 |
| | 29,114 |
| | 37,870 |
| | 17,273 |
| | 8,164 |
| | 17,746 |
| | 13,561 |
|
| Actuarial loss | | 279,781 |
| | 113,883 |
| | 180,763 |
| | 81,600 |
| | 35,131 |
| | 58,556 |
| | 55,410 |
|
| Benefits paid | | (66,330 | ) | | (24,389 | ) | | (37,624 | ) | | (18,622 | ) | | (7,113 | ) | | (19,026 | ) | | (11,233 | ) |
| Balance at end of year | |
| $1,485,718 |
| |
| $709,994 |
| |
| $956,541 |
| |
| $432,169 |
| |
| $202,555 |
| |
| $418,498 |
| |
| $334,312 |
|
| Change in Plan Assets | | | | | | | | | | | | | | |
| Fair value of assets at beginning of year | |
| $896,295 |
| |
| $469,295 |
| |
| $561,892 |
| |
| $281,837 |
| |
| $122,960 |
| |
| $295,751 |
| |
| $196,328 |
|
| Actual return on plan assets | | 52,092 |
| | 26,744 |
| | 32,716 |
| | 16,196 |
| | 6,988 |
| | 16,916 |
| | 11,265 |
|
| Employer contributions | | 95,464 |
| | 30,176 |
| | 54,549 |
| | 21,839 |
| | 10,509 |
| | 17,072 |
| | 21,261 |
|
| Benefits paid | | (66,330 | ) | | (24,389 | ) | | (37,624 | ) | | (18,622 | ) | | (7,113 | ) | | (19,026 | ) | | (11,233 | ) |
Fair value of assets at end of year | |
| $977,521 |
| |
| $501,826 |
| |
| $611,533 |
| |
| $301,250 |
| |
| $133,344 |
| |
| $310,713 |
| |
| $217,621 |
|
| Funded status | |
| ($508,197 | ) | |
| ($208,168 | ) | |
| ($345,008 | ) | |
| ($130,919 | ) | |
| ($69,211 | ) | |
| ($107,785 | ) | |
| ($116,691 | ) |
Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | |
| Non-current liabilities | |
| ($508,197 | ) | |
| ($208,168 | ) | |
| ($345,008 | ) | |
| ($130,919 | ) | |
| ($69,211 | ) | |
| ($107,785 | ) | |
| ($116,691 | ) |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | |
|
| Net loss | |
| $722,119 |
| |
| $272,695 |
| |
| $468,779 |
| |
| $198,972 |
| |
| $102,141 |
| |
| $176,522 |
| |
| $172,463 |
|
| Amounts recognized as AOCI (before tax) | | | | | | | | | | | | | | |
| Net loss | |
| $— |
| |
| $40,748 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in Projected Benefit | | | | | | | | | | | | | | |
| Obligation (PBO) | | | | | | | | | | | | | | |
| Balance at beginning of year | | $950,595 | | $431,870 | | $596,730 | | $286,179 | | $128,477 | | $292,551 | | $213,098 |
| Service cost | | 18,072 | | 9,848 | | 11,543 | | 5,308 | | 2,242 | | 4,788 | | 4,941 |
| Interest cost | | 51,965 | | 23,713 | | 32,636 | | 15,637 | | 7,050 | | 15,971 | | 11,758 |
| Actuarial loss | | 146,514 | | 65,000 | | 93,175 | | 33,865 | | 19,695 | | 40,122 | | 35,775 |
| Benefits paid | | (50,574) | | (17,999) | | (29,336) | | (14,612) | | (5,498) | | (15,763) | | (7,304) |
| Balance at end of year | | $1,116,572 | | $512,432 | | $704,748 | | $326,377 | | $151,966 | | $337,669 | | $258,268 |
| | | | | | | | | | | | | | | |
| Change in Plan Assets | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $646,491 | | $361,207 | | $406,216 | | $212,122 | | $88,688 | | $237,502 | | $128,007 |
| Actual return on plan assets | | (9,042) | | (3,971) | | (5,059) | | (2,698) | | (1,148) | | (2,536) | | (1,963) |
| Employer contributions | | 120,400 | | 27,318 | | 60,597 | | 29,169 | | 12,160 | | 18,235 | | 28,351 |
| Benefits paid | | (50,574) | | (17,999) | | (29,336) | | (14,612) | | (5,498) | | (15,763) | | (7,304) |
Fair value of assets at end of year | | $707,275 | | $366,555 | | $432,418 | | $223,981 | | $94,202 | | $237,439 | | $147,091 |
| | | | | | | | | | | | | | | |
| Funded status | | ($409,297) | | ($145,877) | | ($272,330) | | ($102,396) | | ($57,764) | | ($100,231) | | ($111,177) |
| | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | |
| Non-current liabilities | | ($409,297) | | ($145,877) | | ($272,330) | | ($102,396) | | ($57,764) | | ($100,231) | | ($111,177) |
| | | | | | | | | | | | | | | |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | |
| Prior service cost | | $223 | | $23 | | $291 | | $39 | | $10 | | $22 | | $19 |
| Net loss | | 619,430 | | 214,833 | | 408,835 | | 169,329 | | 95,667 | | 171,023 | | 165,011 |
| | | $619,653 | | $214,856 | | $409,126 | | $169,368 | | $95,677 | | $171,045 | | $165,030 |
| | | | | | | | | | | | | | | |
Amounts recognized as AOCI (before tax) | | | | | | | | | | | | | | |
| Prior service cost | | $- | | $6 | | $- | | $- | | $- | | $- | | $- |
| Net loss | | - | | 50,393 | | - | | - | | - | | - | | - |
| | | $- | | $50,399 | | $- | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in Projected Benefit Obligation (PBO) | | | | | | | | | | | | | | |
| Balance at beginning of year | |
| $1,274,886 |
| |
| $623,068 |
| |
| $817,745 |
| |
| $369,852 |
| |
| $174,585 |
| |
| $382,176 |
| |
| $282,841 |
|
| Service cost | | 25,229 |
| | 14,258 |
| | 17,044 |
| | 7,295 |
| | 3,264 |
| | 6,475 |
| | 7,242 |
|
| Interest cost | | 54,473 |
| | 26,741 |
| | 34,857 |
| | 15,802 |
| | 7,462 |
| | 16,303 |
| | 12,170 |
|
| Curtailment | | 4,938 |
| | 805 |
| | 3,542 |
| | 767 |
| | 343 |
| | 1,559 |
| | — |
|
| Special termination benefit | | 1,784 |
| | 808 |
| | 1,631 |
| | 359 |
| | 581 |
| | 855 |
| | 1,970 |
|
| Actuarial gain | | (110,943 | ) | | (64,119 | ) | | (80,794 | ) | | (31,684 | ) | | (16,276 | ) | | (33,792 | ) | | (23,882 | ) |
| Benefits paid | | (57,727 | ) | | (21,699 | ) | | (32,675 | ) | | (16,567 | ) | | (6,252 | ) | | (17,496 | ) | | (9,552 | ) |
| Balance at end of year | |
| $1,192,640 |
| |
| $579,862 |
| |
| $761,350 |
| |
| $345,824 |
| |
| $163,707 |
| |
| $356,080 |
| |
| $270,789 |
|
| Change in Plan Assets | | | | | | | | | | | | | | |
| Fair value of assets at beginning of year | |
| $785,527 |
| |
| $409,971 |
| |
| $489,027 |
| |
| $248,272 |
| |
| $106,778 |
| |
| $262,110 |
| |
| $168,697 |
|
| Actual return on plan assets | | 133,113 |
| | 69,473 |
| | 84,388 |
| | 41,980 |
| | 18,259 |
| | 44,257 |
| | 28,878 |
|
| Employer contributions | | 35,382 |
| | 11,550 |
| | 21,152 |
| | 8,152 |
| | 4,175 |
| | 6,880 |
| | 8,305 |
|
| Benefits paid | | (57,727 | ) | | (21,699 | ) | | (32,675 | ) | | (16,567 | ) | | (6,252 | ) | | (17,496 | ) | | (9,552 | ) |
| Fair value of assets at end of year | |
| $896,295 |
| |
| $469,295 |
| |
| $561,892 |
| |
| $281,837 |
| |
| $122,960 |
| |
| $295,751 |
| |
| $196,328 |
|
| Funded status | |
| ($296,345 | ) | |
| ($110,567 | ) | |
| ($199,458 | ) | |
| ($63,987 | ) | |
| ($40,747 | ) | |
| ($60,329 | ) | |
| ($74,461 | ) |
| Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | |
| Non-current liabilities | |
| ($296,345 | ) | |
| ($110,567 | ) | |
| ($199,458 | ) | |
| ($63,987 | ) | |
| ($40,747 | ) | |
| ($60,329 | ) | |
| ($74,461 | ) |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | |
| Prior service cost | |
| $— |
| |
| $— |
| |
| ($1 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| ($4 | ) |
| Net loss | | 457,485 |
| | 178,990 |
| | 299,740 |
| | 120,290 |
| | 69,856 |
| | 120,619 |
| | 121,327 |
|
| | |
| $457,485 |
| |
| $178,990 |
| |
| $299,739 |
| |
| $120,290 |
| |
| $69,856 |
| |
| $120,619 |
| |
| $121,323 |
|
| Amounts recognized as AOCI (before tax) | | |
| | | | | | | | | | | | |
| Net loss | |
| $— |
| |
| $25,437 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in Projected Benefit | | | | | | | | | | | | | | |
| Obligation (PBO) | | | | | | | | | | | | | | |
| Balance at beginning of year | | $824,261 | | $405,228 | | $480,503 | | $255,057 | | $101,325 | | $266,371 | | $149,387 |
| Service cost | | 15,775 | | 8,462 | | 9,770 | | 4,651 | | 2,063 | | 4,267 | | 4,132 |
| Interest cost | | 49,277 | | 24,377 | | 28,541 | | 15,230 | | 6,040 | | 15,869 | | 9,009 |
| Actuarial loss | | 108,171 | | 11,050 | | 106,227 | | 25,438 | | 24,211 | | 21,055 | | 56,841 |
| Employee contribution | | - | | - | | - | | - | | - | | - | | 2 |
| Benefits paid | | (46,889) | | (17,247) | | (28,311) | | (14,197) | | (5,162) | | (15,011) | | (6,273) |
| Balance at end of year | | $950,595 | | $431,870 | | $596,730 | | $286,179 | | $128,477 | | $292,551 | | $213,098 |
| | | | | | | | | | | | | | | |
| Change in Plan Assets | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $494,732 | | $310,445 | | $328,520 | | $171,912 | | $72,046 | | $209,936 | | $91,061 |
| Actual return on plan assets | | 61,690 | | 37,054 | | 39,872 | | 20,889 | | 8,847 | | 24,289 | | 11,893 |
| Employer contributions | | 136,958 | | 30,955 | | 66,135 | | 33,518 | | 12,957 | | 18,288 | | 31,324 |
| Employee contribution | | - | | - | | - | | - | | - | | - | | 2 |
| Benefits paid | | (46,889) | | (17,247) | | (28,311) | | (14,197) | | (5,162) | | (15,011) | | (6,273) |
Fair value of assets at end of year | | $646,491 | | $361,207 | | $406,216 | | $212,122 | | $88,688 | | $237,502 | | $128,007 |
| | | | | | | | | | | | | | | |
| Funded status | | ($304,104) | | ($70,663) | | ($190,514) | | ($74,057) | | ($39,789) | | ($55,049) | | ($85,091) |
| | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | |
| Non-current liabilities | | ($304,104) | | ($70,663) | | ($190,514) | | ($74,057) | | ($39,789) | | ($55,049) | | ($85,091) |
| | | | | | | | | | | | | | | |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | |
| Prior service cost | | $682 | | $88 | | $571 | | $191 | | $45 | | $86 | | $35 |
| Net loss | | 427,122 | | 141,052 | | 289,726 | | 119,333 | | 71,035 | | 111,940 | | 117,419 |
| | | $427,804 | | $141,140 | | $290,297 | | $119,524 | | $71,080 | | $112,026 | | $117,454 |
| | | | | | | | | | | | | | | |
Amounts recognized as AOCI (before tax) | | | | | | | | | | | | | | |
| Prior service cost | | $- | | $19 | | $- | | $- | | $- | | $- | | $- |
| Net loss | | - | | 30,963 | | - | | - | | - | | - | | - |
| | | $- | | $30,982 | | $- | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefits
Entergy also currently provides health careoffers retiree medical, dental, vision, and life insurance benefits (other postretirement benefits) for eligible retired employees. Substantially all employeesEmployees who commenced employment before July 1, 2014 and who satisfy certain eligibility requirements (including retiring from Entergy after a certain age and/or years of service with Entergy and immediately commencing their Entergy pension benefit), may become eligible for theseother postretirement benefits.
In December 2013, Entergy announced changes to its other postretirement benefits if they reachwhich include, among other things, elimination of other postretirement benefits for all non-bargaining employees hired or rehired after June 30, 2014 and for certain bargaining employees hired or rehired after June 30, 2014, or such later date provided for in their applicable collective bargaining agreement, and setting a dollar limit cap on Entergy’s contribution to retiree medical costs, effective 2019 for those non-bargaining employees who commence their Entergy retirement agebenefits on or after
Entergy Corporation and meetSubsidiaries
Notes to Financial Statements
January 1, 2015 and for certain eligibility requirements while still workingbargaining employees who commence their Entergy retirement benefits on or after January 1, 2015 or such later date as provided for Entergy. in their applicable collective bargaining agreement. In accordance with accounting standards, certain of the other postretirement benefit changes have been reflected in the December 31, 2013 other postretirement obligation. The changes affecting active bargaining unit employees are being negotiated with the unions prior to implementation, where necessary, and to the extent required by law.
Entergy uses a December 31 measurement date for its postretirement benefit plans.
Effective January 1, 1993, Entergy adopted an accounting standard requiring a change from a cash method to an accrual method of accounting for postretirement benefits other than pensions. At January 1, 1993, the actuarially determined accumulated postretirement benefit obligation (APBO) earned by retirees and active employees was estimated to be approximately $241.4 million for Entergy (other than the former Entergy Gulf States) and $128 million for the former Entergy Gulf States (now split into Entergy Gulf States Louisiana and Entergy Texas). Such obligations arewere being amortized over a 20-year period that began in 1993.1993 and ended in 2012. For the most part, the Registrant Subsidiaries recover accrued other postretirement benefit costs from customers and are required to contribute the other postretirement benefits collected in rates to an external trust.
Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Texas have received regulatory approval to recover accrued other postretirement benefit costs through rates. Entergy Arkansas began recovery in 1998, pursuant to an APSC order. This order also allowed Entergy Arkansas to amortize a regulatory asset (representing the difference between other postretirement benefit costs and cash expenditures for other postretirement benefits incurred from 1993 through 1997) over a 15-year period that began in January 1998.1998 and ended in December 2012.
The LPSC ordered Entergy Gulf States Louisiana and Entergy Louisiana to continue the use of the pay-as-you-go method for ratemaking purposes for postretirement benefits other than pensions. However, the LPSC retains the flexibility to examine individual companies’ accounting for other postretirement benefits to determine if special exceptions to this order are warranted.
Pursuant to regulatory directives, Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy contribute the other postretirement benefit costs collected in rates into external trusts. System Energy is funding, on behalf of Entergy Operations, other postretirement benefits associated with Grand Gulf.
Trust assets contributed by participating Registrant Subsidiaries are in three bank-administered master trusts, established by Entergy Corporation and maintained by a trustee. Each participating Registrant Subsidiary holds a beneficial interest in the trusts’ assets. The assets in the master trusts are commingled for investment and administrative purposes. Although assets are commingled, the trustee maintains supporting records are maintained for the purpose of allocating the beneficial interest in net earnings/(losses) and the administrative expenses of the investment accounts to the various participating plans and participating Registrant Subsidiaries. Beneficial interest in an investment account’s net income/(loss) is comprised of interest and dividends, realized and unrealized gains and losses, and expenses. Beneficial interest from these investments is allocated monthly to the plans and participating Registrant Subsidiary based on their portion of net assets in the pooled accounts.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost and Other Amounts Recognized as a Regulatory Asset and/or AOCI
Entergy Corporation’s and its subsidiaries’ total 2011, 2010,2014, 2013, and 20092012 other postretirement benefit costs, including amounts capitalized and amounts recognized as a regulatory asset and/or other comprehensive income, included the following components:
| | | 2011 | | 2010 | | 2009 | |
| | | (In Thousands) | | | | | | | |
| Other post retirement costs: | | | | | | | |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| Other postretirement costs: | | | | | | |
| Service cost - benefits earned during the period | | $59,340 | | $52,313 | | $46,765 |
| $43,493 |
| |
| $74,654 |
| |
| $68,883 |
|
| Interest cost on APBO | | 74,522 | | 76,078 | | 75,265 | 71,841 |
| | 79,453 |
| | 82,561 |
|
| Expected return on assets | | (29,477) | | (26,213) | | (23,484) | (44,787 | ) | | (40,323 | ) | | (34,503 | ) |
| Amortization of transition obligation | | 3,183 | | 3,728 | | 3,732 | — |
| | — |
| | 3,177 |
|
| Amortization of prior service credit | | (14,070) | | (12,060) | | (16,096) | (31,590 | ) | | (14,904 | ) | | (18,163 | ) |
| Recognized net loss | | 21,192 | | 17,270 | | 18,970 | 11,143 |
| | 44,178 |
| | 36,448 |
|
| Curtailment loss | | — |
| | 12,729 |
| | — |
|
| Net other postretirement benefit cost | | $114,690 | | $111,116 | | $105,152 |
| $50,100 |
| |
| $155,787 |
| |
| $138,403 |
|
| | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and /or AOCI (before tax) | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | |
| Prior service credit for period | | ($29,507) | | ($50,548) | | $- |
| ($35,864 | ) | |
| ($116,571 | ) | |
| $— |
|
| Net loss | | 236,594 | | 82,189 | | 24,983 | |
| Net loss/(gain) | | 287,313 |
| | (405,976 | ) | | 92,584 |
|
Amounts reclassified from regulatory asset and /or AOCI to net periodic benefit cost in the current year: | | | | | | | | | | | |
| Amortization of transition obligation | | (3,183) | | (3,728) | | (3,732) | — |
| | — |
| | (3,177 | ) |
| Amortization of prior service credit | | 14,070 | | 12,060 | | 16,096 | 31,590 |
| | 14,904 |
| | 18,163 |
|
| Acceleration of prior service credit due to curtailment | | — |
| | 1,989 |
| | — |
|
| Amortization of net loss | | (21,192) | | (17,270) | | (18,970) | (11,143 | ) | | (44,178 | ) | | (36,448 | ) |
| Total | | $196,782 | | $22,703 | | $18,377 |
| $271,896 |
| |
| ($549,832 | ) | |
| $71,122 |
|
Total recognized as net periodic benefit cost, regulatory asset, and/or AOCI (before tax) | | $311,472 | | $133,819 | | $123,529 | |
| | | | | | | | |
Total recognized as net periodic benefit income/(cost), regulatory asset, and/or AOCI (before tax) | |
| $321,996 |
| |
| ($394,045 | ) | |
| $209,525 |
|
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic benefit cost in the following year | | | | | | | | | | | |
| Transition obligation | | $3,177 | | $3,183 | | $3,728 | |
| Prior service credit | | ($18,163) | | ($14,070) | | ($12,060) |
| ($37,280 | ) | |
| ($31,589 | ) | |
| ($13,336 | ) |
| Net loss | | $43,127 | | $21,192 | | $17,270 |
| $31,591 |
| |
| $11,197 |
| |
| $45,217 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total 2011, 2010,2014, 2013, and 20092012 other postretirement benefit costs of the Registrant Subsidiaries, including amounts capitalized and deferred, for their employees included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | |
Entergy
Arkansas | | Entergy
Gulf States
Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Other postretirement costs: | | | | | | | | | | | | | | |
| Service cost - benefits earned during the period | |
| $5,957 |
| |
| $4,896 |
| |
| $4,518 |
| |
| $1,900 |
| |
| $868 |
| |
| $2,378 |
| |
| $2,058 |
|
| Interest cost on APBO | | 12,261 |
| | 8,378 |
| | 8,264 |
| | 3,655 |
| | 2,805 |
| | 5,652 |
| | 2,611 |
|
| Expected return on assets | | (19,135 | ) | | — |
| | — |
| | (5,771 | ) | | (4,475 | ) | | (10,358 | ) | | (3,727 | ) |
| Amortization of prior credit | | (2,441 | ) | | (2,237 | ) | | (3,377 | ) | | (915 | ) | | (709 | ) | | (1,300 | ) | | (824 | ) |
| Recognized net loss | | 1,267 |
| | 1,212 |
| | 1,511 |
| | 149 |
| | 56 |
| | 801 |
| | 443 |
|
| Net other postretirement benefit (income)/cost | |
| ($2,091 | ) | |
| $12,249 |
| |
| $10,916 |
| |
| ($982 | ) | |
| ($1,455 | ) | |
| ($2,827 | ) | |
| $561 |
|
| Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Prior service credit for the period | |
| $— |
| |
| ($12,845 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| ($8,536 | ) | |
| ($3,845 | ) |
| Net loss | |
| $55,642 |
| |
| $36,467 |
| |
| $24,582 |
| |
| $9,525 |
| |
| $6,309 |
| |
| $24,482 |
| |
| $10,596 |
|
| Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | |
| | | | | | | | | | | | |
| Amortization of prior service credit | | 2,441 |
| | 2,237 |
| | 3,377 |
| | 915 |
| | 709 |
| | 1,300 |
| | 824 |
|
| Amortization of net loss | | (1,267 | ) | | (1,212 | ) | | (1,511 | ) | | (149 | ) | | (56 | ) | | (801 | ) | | (443 | ) |
| Total | |
| $56,816 |
| |
| $24,647 |
| |
| $26,448 |
| |
| $10,291 |
| |
| $6,962 |
| |
| $16,445 |
| |
| $7,132 |
|
| Total recognized as net periodic other postretirement income, regulatory asset, and/or AOCI (before tax) | |
| $54,725 |
| |
| $36,896 |
| |
| $37,364 |
| |
| $9,309 |
| |
| $5,507 |
| |
| $13,618 |
| |
| $7,693 |
|
| Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service credit | |
| ($2,441 | ) | |
| ($4,086 | ) | |
| ($3,381 | ) | |
| ($916 | ) | |
| ($709 | ) | |
| ($2,723 | ) | |
| ($1,465 | ) |
| Net loss | |
| $5,356 |
| |
| $3,908 |
| |
| $3,210 |
| |
| $860 |
| |
| $470 |
| |
| $2,740 |
| |
| $1,198 |
|
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Other post retirement costs: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $8,053 | | $6,158 | | $6,540 | | $2,632 | | $1,448 | | $3,074 | | $2,642 |
| Interest cost on APBO | | 13,742 | | 8,298 | | 8,767 | | 4,370 | | 3,225 | | 5,945 | | 2,666 |
| Expected return on assets | | (11,528) | | - | | - | | (3,906) | | (3,200) | | (7,496) | | (2,115) |
Amortization of transition obligation | | 821 | | 239 | | 383 | | 352 | | 1,190 | | 187 | | 9 |
Amortization of prior service cost/(credit) | | (530) | | (824) | | (247) | | (139) | | 38 | | (428) | | (589) |
| Recognized net loss | | 6,436 | | 2,896 | | 2,793 | | 2,160 | | 968 | | 2,803 | | 1,477 |
Net other postretirement benefit cost | | $16,994 | | $16,767 | | $18,236 | | $5,469 | | $3,669 | | $4,085 | | $4,090 |
| | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss | | 32,241 | | 28,721 | | 24,837 | | 12,598 | | 8,946 | | 23,125 | | 8,499 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of transition obligation | | (821) | | (239) | | (383) | | (352) | | (1,190) | | (187) | | (9) |
Amortization of prior service cost/(credit) | | 530 | | 824 | | 247 | | 139 | | (38) | | 428 | | 589 |
| Amortization of net loss | | (6,436) | | (2,896) | | (2,793) | | (2,160) | | (968) | | (2,803) | | (1,477) |
| Total | | $25,514 | | $26,410 | | $21,908 | | $10,225 | | $6,750 | | $20,563 | | $7,602 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $42,508 | | $43,177 | | $40,144 | | $15,694 | | $10,419 | | $24,648 | | $11,692 |
| | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Transition obligation | | $820 | | $238 | | $382 | | $351 | | $1,189 | | $187 | | $8 |
| Prior service cost/(credit) | | ($530) | | ($824) | | ($247) | | ($139) | | $38 | | ($428) | | ($63) |
| Net loss | | $8,365 | | $4,778 | | $4,398 | | $2,926 | | $1,562 | | $4,329 | | $1,994 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Other post retirement costs: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $7,372 | | $5,481 | | $5,483 | | $2,200 | | $1,389 | | $2,789 | | $2,251 |
| Interest cost on APBO | | 14,515 | | 8,574 | | 9,075 | | 4,370 | | 3,598 | | 6,326 | | 2,562 |
| Expected return on assets | | (9,780) | | - | | - | | (3,551) | | (2,899) | | (6,872) | | (1,870) |
Amortization of transition obligation | | 821 | | 238 | | 382 | | 351 | | 1,661 | | 265 | | 8 |
Amortization of prior service cost/(credit) | | (786) | | (306) | | 467 | | (246) | | 361 | | 76 | | (763) |
| Recognized net loss | | 6,758 | | 2,653 | | 2,440 | | 1,903 | | 1,095 | | 3,008 | | 1,301 |
Net other postretirement benefit cost | | $18,900 | | $16,640 | | $17,847 | | $5,027 | | $5,205 | | $5,592 | | $3,489 |
| | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Prior service credit for period | | ($5,023) | | ($3,109) | | ($3,204) | | ($1,529) | | ($1,587) | | ($2,871) | | ($519) |
| Net (gain)/loss | | 4,032 | | 6,583 | | 7,734 | | 5,765 | | (478) | | 922 | | 4,067 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of transition obligation | | (821) | | (238) | | (382) | | (351) | | (1,661) | | (265) | | (8) |
Amortization of prior service cost/(credit) | | 786 | | 306 | | (467) | | 246 | | (361) | | (76) | | 763 |
| Amortization of net loss | | (6,758) | | (2,653) | | (2,440) | | (1,903) | | (1,095) | | (3,008) | | (1,301) |
| Total | | ($7,784) | | $889 | | $1,241 | | $2,228 | | ($5,182) | | ($5,298) | | $3,002 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $11,116 | | $17,529 | | $19,088 | | $7,255 | | $23 | | $294 | | $6,491 |
| | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Transition obligation | | $821 | | $239 | | $383 | | $352 | | $1,190 | | $187 | | $9 |
| Prior service cost/(credit) | | ($530) | | ($824) | | ($247) | | ($139) | | $38 | | ($428) | | ($589) |
| Net loss | | $6,436 | | $2,896 | | $2,793 | | $2,160 | | $968 | | $2,803 | | $1,477 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas |
| Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Other postretirement costs: | | | | | | | | | | | | | | |
| Service cost - benefits earned during the period | |
| $9,619 |
| |
| $7,910 |
| |
| $8,541 |
| |
| $3,246 |
| |
| $1,752 |
| |
| $3,760 |
| |
| $3,580 |
|
| Interest cost on APBO | | 13,545 |
| | 8,964 |
| | 9,410 |
| | 4,289 |
| | 3,135 |
| | 6,076 |
| | 2,945 |
|
| Expected return on assets | | (16,843 | ) | | — |
| | — |
| | (5,335 | ) | | (4,101 | ) | | (9,391 | ) | | (3,350 | ) |
| Amortization of prior credit | | (689 | ) | | (942 | ) | | (508 | ) | | (204 | ) | | (24 | ) | | (501 | ) | | (126 | ) |
| Recognized net loss | | 7,976 |
| | 4,598 |
| | 5,050 |
| | 2,534 |
| | 1,509 |
| | 3,744 |
| | 1,896 |
|
| Curtailment loss | | 4,517 |
| | 1,546 |
| | 1,848 |
| | 596 |
| | 354 |
| | 1,436 |
| | 760 |
|
| Net other postretirement benefit cost | |
| $18,125 |
| |
| $22,076 |
| |
| $24,341 |
| |
| $5,126 |
| |
| $2,625 |
| |
| $5,124 |
| |
| $5,705 |
|
| Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Prior service credit for the period | |
| ($11,617 | ) | |
| ($8,705 | ) | |
| ($18,844 | ) | |
| ($4,714 | ) | |
| ($4,469 | ) | |
| ($5,359 | ) | |
| ($4,591 | ) |
| Net loss | |
| ($81,236 | ) | |
| ($40,938 | ) | |
| ($43,743 | ) | |
| ($30,018 | ) | |
| ($18,508 | ) | |
| ($34,562 | ) | |
| ($17,579 | ) |
| Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
| Amortization of prior service credit | | 689 |
| | 942 |
| | 508 |
| | 204 |
| | 24 |
| | 501 |
| | 126 |
|
| Acceleration of prior service credit/(cost) due to curtailment | | 78 |
| | 91 |
| | 41 |
| | 20 |
| | (4 | ) | | 62 |
| | 9 |
|
| Amortization of net loss | | (7,976 | ) | | (4,598 | ) | | (5,050 | ) | | (2,534 | ) | | (1,509 | ) | | (3,744 | ) | | (1,896 | ) |
| Total | |
| ($100,062 | ) | |
| ($53,208 | ) | |
| ($67,088 | ) | |
| ($37,042 | ) | |
| ($24,466 | ) | |
| ($43,102 | ) | |
| ($23,931 | ) |
| Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | |
| ($81,937 | ) | |
| ($31,132 | ) | |
| ($42,747 | ) | |
| ($31,916 | ) | |
| ($21,841 | ) | |
| ($37,978 | ) | |
| ($18,226 | ) |
| Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service credit | |
| ($2,441 | ) | |
| ($2,236 | ) | |
| ($3,376 | ) | |
| ($918 | ) | |
| ($709 | ) | |
| ($1,301 | ) | |
| ($824 | ) |
| Net loss | |
| $1,267 |
| |
| $1,212 |
| |
| $1,511 |
| |
| $149 |
| |
| $56 |
| |
| $800 |
| |
| $464 |
|
144
178
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Other post retirement costs: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $7,058 | | $4,783 | | $4,589 | | $2,119 | | $1,242 | | $2,475 | | $2,051 |
| Interest cost on APBO | | 15,036 | | 8,020 | | 9,188 | | 4,690 | | 3,869 | | 5,959 | | 2,421 |
| Expected return on assets | | (8,570) | | - | | - | | (3,027) | | (2,734) | | (6,222) | | (1,655) |
Amortization of transition obligation | | 821 | | 239 | | 382 | | 352 | | 1,662 | | 265 | | 9 |
Amortization of prior service cost/(credit) | | (788) | | (306) | | 467 | | (246) | | 361 | | 76 | | (980) |
| Recognized net loss | | 8,347 | | 1,975 | | 2,215 | | 2,629 | | 1,522 | | 3,194 | | 1,277 |
Net other postretirement benefit cost | | $21,904 | | $14,711 | | $16,841 | | $6,517 | | $5,922 | | $5,747 | | $3,123 |
| | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Prior service credit for period | | $- | | $- | | $- | | $- | | $- | | $- | | $- |
| Net (gain)/loss | | (9,364) | | 14,746 | | 6,080 | | (5,919) | | (3,474) | | 2,349 | | 2,166 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of transition obligation | | (821) | | (239) | | (382) | | (352) | | (1,662) | | (265) | | (9) |
Amortization of prior service cost/(credit) | | 788 | | 306 | | (467) | | 246 | | (361) | | (76) | | 980 |
| Amortization of net loss | | (8,347) | | (1,975) | | (2,215) | | (2,629) | | (1,522) | | (3,194) | | (1,277) |
| Total | | ($17,744) | | $12,838 | | $3,016 | | ($8,654) | | ($7,019) | | ($1,186) | | $1,860 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $4,160 | | $27,549 | | $19,857 | | ($2,137) | | ($1,097) | | $4,561 | | $4,983 |
| | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Transition (asset)/obligation | | $821 | | $238 | | $382 | | $351 | | $1,661 | | $265 | | $8 |
| Prior service cost/(credit) | | ($786) | | ($306) | | $467 | | ($246) | | $361 | | $76 | | ($763) |
| Net loss | | $6,758 | | $2,653 | | $2,440 | | $1,903 | | $1,095 | | $3,008 | | $1,301 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Other postretirement costs: | | | | | | | | | | | | | | |
| Service cost - benefits earned during the period | |
| $9,089 |
| |
| $7,521 |
| |
| $7,796 |
| |
| $3,093 |
| |
| $1,689 |
| |
| $3,651 |
| |
| $3,293 |
|
| Interest cost on APBO | | 14,452 |
| | 9,590 |
| | 9,781 |
| | 4,716 |
| | 3,422 |
| | 6,650 |
| | 3,028 |
|
| Expected return on assets | | (14,029 | ) | | — |
| | — |
| | (4,521 | ) | | (3,711 | ) | | (8,415 | ) | | (2,601 | ) |
Amortization of transition obligation | | 820 |
| | 238 |
| | 382 |
| | 351 |
| | 1,189 |
| | 187 |
| | 8 |
|
| Amortization of prior service cost/(credit) | | (530 | ) | | (824 | ) | | (247 | ) | | (139 | ) | | 38 |
| | (428 | ) | | (63 | ) |
| Recognized net loss | | 8,305 |
| | 4,737 |
| | 4,359 |
| | 2,920 |
| | 1,559 |
| | 4,320 |
| | 1,970 |
|
| Net other postretirement benefit cost | |
| $18,107 |
| |
| $21,262 |
| |
| $22,071 |
| |
| $6,420 |
| |
| $4,186 |
| |
| $5,965 |
| |
| $5,635 |
|
| Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
| Arising this period: | | | | | | | | | | | | | | |
| Net loss | |
| $9,066 |
| |
| $5,818 |
| |
| $16,215 |
| |
| $271 |
| |
| $2,260 |
| |
| $191 |
| |
| $2,043 |
|
| Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of transition obligation | | (820 | ) | | (238 | ) | | (382 | ) | | (351 | ) | | (1,189 | ) | | (187 | ) | | (8 | ) |
| Amortization of prior service (cost)/credit | | 530 |
| | 824 |
| | 247 |
| | 139 |
| | (38 | ) | | 428 |
| | 63 |
|
| Amortization of net loss | | (8,305 | ) | | (4,737 | ) | | (4,359 | ) | | (2,920 | ) | | (1,559 | ) | | (4,320 | ) | | (1,970 | ) |
| Total | |
| $471 |
| |
| $1,667 |
| |
| $11,721 |
| |
| ($2,861 | ) | |
| ($526 | ) | |
| ($3,888 | ) | |
| $128 |
|
| Total recognized as net periodic other postretirement income, regulatory asset, and/or AOCI (before tax) | |
| $18,578 |
| |
| $22,929 |
| |
| $33,792 |
| |
| $3,559 |
| |
| $3,660 |
| |
| $2,077 |
| |
| $5,763 |
|
| Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
| Prior service cost/(credit) | |
| ($530 | ) | |
| ($824 | ) | |
| ($247 | ) | |
| ($139 | ) | |
| $38 |
| |
| ($428 | ) | |
| ($62 | ) |
| Net loss | |
| $8,163 |
| |
| $4,693 |
| |
| $5,149 |
| |
| $2,650 |
| |
| $1,587 |
| |
| $3,905 |
| |
| $1,915 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in the Balance Sheet of Entergy Corporation and its Subsidiaries as of December 31, 20112014 and 20102013
|
| | | | | | | |
| | December 31, |
| | 2014 | | 2013 |
| | (In Thousands) |
| Change in APBO | |
| | |
|
| Balance at beginning of year |
| $1,461,910 |
| |
| $1,846,922 |
|
| Service cost | 43,493 |
| | 74,654 |
|
| Interest cost | 71,841 |
| | 79,453 |
|
| Plan amendments | (35,864 | ) | | (116,571 | ) |
| Curtailment | — |
| | 14,718 |
|
| Plan participant contributions | 22,160 |
| | 19,141 |
|
| Actuarial loss/(gain) | 274,061 |
| | (370,004 | ) |
| Benefits paid | (102,439 | ) | | (89,713 | ) |
| Medicare Part D subsidy received | 4,395 |
| | 3,310 |
|
| Balance at end of year |
| $1,739,557 |
| |
| $1,461,910 |
|
| Change in Plan Assets | |
| | |
|
| Fair value of assets at beginning of year |
| $569,850 |
| |
| $488,448 |
|
| Actual return on plan assets | 31,535 |
| | 76,314 |
|
| Employer contributions | 76,521 |
| | 75,660 |
|
| Plan participant contributions | 22,160 |
| | 19,141 |
|
| Benefits paid | (102,439 | ) | | (89,713 | ) |
| Fair value of assets at end of year |
| $597,627 |
| |
| $569,850 |
|
| Funded status |
| ($1,141,930 | ) | |
| ($892,060 | ) |
| Amounts recognized in the balance sheet | | | |
| Current liabilities |
| ($41,821 | ) | |
| ($40,602 | ) |
| Non-current liabilities | (1,100,109 | ) | | (851,458 | ) |
| Total funded status |
| ($1,141,930 | ) | |
| ($892,060 | ) |
| Amounts recognized as a regulatory asset | | | |
| Prior service credit |
| ($54,508 | ) | |
| ($93,332 | ) |
| Net loss | 248,918 |
| | 165,270 |
|
| |
| $194,410 |
| |
| $71,938 |
|
| Amounts recognized as AOCI (before tax) | | | |
| Prior service credit |
| ($104,086 | ) | |
| ($60,988 | ) |
| Net loss | 300,518 |
| | 107,996 |
|
| |
| $196,432 |
| |
| $47,008 |
|
| | | December 31, |
| | | 2011 | | 2010 |
| | | (In Thousands) |
| Change in APBO | | | | |
| Balance at beginning of year | | $1,386,370 | | $1,280,076 |
| Service cost | | 59,340 | | 52,313 |
| Interest cost | | 74,522 | | 76,078 |
| Plan amendments | | (29,507) | | (50,548) |
| Plan participant contributions | | 14,650 | | 14,275 |
| Actuarial (gain)/loss | | 216,549 | | 92,340 |
| Benefits paid | | (77,454) | | (83,613) |
| Medicare Part D subsidy received | | 4,551 | | 5,449 |
| Early Retiree Reinsurance Program proceeds | | 3,348 | | - |
| Balance at end of year | | $1,652,369 | | $1,386,370 |
| | | | | |
| Change in Plan Assets | | | | |
| Fair value of assets at beginning of year | | $404,430 | | $362,399 |
| Actual return on plan assets | | 9,432 | | 36,364 |
| Employer contributions | | 76,114 | | 75,005 |
| Plan participant contributions | | 14,650 | | 14,275 |
| Benefits paid | | (77,454) | | (83,613) |
| Fair value of assets at end of year | | $427,172 | | $404,430 |
| | | | | |
| Funded status | | ($1,225,197) | | ($981,940) |
| | | | | |
| Amounts recognized in the balance sheet | | | | |
| Current liabilities | | ($32,832) | �� | ($30,225) |
| Non-current liabilities | | (1,192,365) | | (951,715) |
| Total funded status | | ($1,225,197) | | ($981,940) |
| | | | | |
| Amounts recognized as a regulatory asset (before tax) | | | | |
| Transition obligation | | $2,557 | | $5,118 |
| Prior service cost/(credit) | | (6,628) | | (8,442) |
| Net loss | | 353,905 | | 253,415 |
| | | $349,834 | | $250,091 |
| Amounts recognized as AOCI (before tax) | | | | |
| Transition obligation | | $620 | | $1,242 |
| Prior service credit | | (66,176) | | (48,925) |
| Net loss | | 313,379 | | 198,466 |
| | | $247,823 | | $150,783 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in the Balance Sheets of the Registrant Subsidiaries as of December 31, 20112014 and 20102013
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in APBO | | | | | | | | | | | | | | |
| Balance at beginning of year | |
| $250,734 |
| |
| $170,302 |
| |
| $168,764 |
| |
| $74,539 |
| |
| $57,874 |
| |
| $115,418 |
| |
| $53,051 |
|
| Service cost | | 5,957 |
| | 4,896 |
| | 4,518 |
| | 1,900 |
| | 868 |
| | 2,378 |
| | 2,058 |
|
| Interest cost | | 12,261 |
| | 8,378 |
| | 8,264 |
| | 3,655 |
| | 2,805 |
| | 5,652 |
| | 2,611 |
|
| Plan amendments | | — |
| | (12,845 | ) | | — |
| | — |
| | — |
| | (8,536 | ) | | (3,845 | ) |
| Plan participant contributions | | 5,195 |
| | 2,304 |
| | 2,767 |
| | 1,396 |
| | 1,044 |
| | 1,655 |
| | 1,061 |
|
| Actuarial loss | | 49,573 |
| | 36,467 |
| | 24,582 |
| | 7,939 |
| | 5,097 |
| | 21,471 |
| | 9,524 |
|
| Benefits paid | | (20,984 | ) | | (10,613 | ) | | (14,012 | ) | | (6,589 | ) | | (4,131 | ) | | (8,333 | ) | | (3,858 | ) |
| Medicare Part D subsidy received | | 980 |
| | 520 |
| | 654 |
| | 322 |
| | 222 |
| | 440 |
| | 152 |
|
| Balance at end of year | |
| $303,716 |
| |
| $199,409 |
| |
| $195,537 |
| |
| $83,162 |
| |
| $63,779 |
| |
| $130,145 |
| |
| $60,754 |
|
| Change in Plan Assets | | | | | | | | | | | | | | |
| Fair value of assets at beginning of year | |
| $231,663 |
| |
| $— |
| |
| $— |
| |
| $73,438 |
| |
| $66,539 |
| |
| $131,618 |
| |
| $48,101 |
|
| Actual return on plan assets | | 13,066 |
| | — |
| | — |
| | 4,185 |
| | 3,263 |
| | 7,347 |
| | 2,655 |
|
| Employer contributions | | 15,251 |
| | 8,309 |
| | 11,245 |
| | 8,505 |
| | 4,289 |
| | 3,446 |
| | 334 |
|
| Plan participant contributions | | 5,195 |
| | 2,304 |
| | 2,767 |
| | 1,396 |
| | 1,044 |
| | 1,655 |
| | 1,061 |
|
| Benefits paid | | (20,984 | ) | | (10,613 | ) | | (14,012 | ) | | (6,589 | ) | | (4,131 | ) | | (8,333 | ) | | (3,858 | ) |
| Fair value of assets at end of year | |
| $244,191 |
| |
| $— |
| |
| $— |
| |
| $80,935 |
| |
| $71,004 |
| |
| $135,733 |
| |
| $48,293 |
|
| Funded status | |
| ($59,525 | ) | |
| ($199,409 | ) | |
| ($195,537 | ) | |
| ($2,227 | ) | |
| $7,225 |
| |
| $5,588 |
| |
| ($12,461 | ) |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | |
| Current liabilities | |
| $— |
| |
| ($8,884 | ) | |
| ($9,840 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| Non-current liabilities | | (59,525 | ) | | (190,525 | ) | | (185,697 | ) | | (2,227 | ) | | 7,225 |
| | 5,588 |
| | (12,461 | ) |
| Total funded status | |
| ($59,525 | ) | |
| ($199,409 | ) | |
| ($195,537 | ) | |
| ($2,227 | ) | |
| $7,225 |
| |
| $5,588 |
| |
| ($12,461 | ) |
Amounts recognized in regulatory asset | | | | | | | | | | | | | | |
| Prior service credit | |
| ($10,555 | ) | |
| $— |
| |
| $— |
| |
| ($4,141 | ) | |
| ($3,626 | ) | |
| ($13,741 | ) | |
| ($7,723 | ) |
| Net loss | | 94,647 |
| | — |
| | — |
| | 18,680 |
| | 12,738 |
| | 46,453 |
| | 20,450 |
|
| | |
| $84,092 |
| |
| $— |
| |
| $— |
| |
| $14,539 |
| |
| $9,112 |
| |
| $32,712 |
| |
| $12,727 |
|
| Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | |
| Prior service credit | |
| $— |
| |
| ($20,967 | ) | |
| ($16,013 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| Net loss | | — |
| | 66,832 |
| | 58,072 |
| | — |
| | — |
| | — |
| | — |
|
| | |
| $— |
| |
| $45,865 |
| |
| $42,059 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in APBO | | | | | | | | | | | | | | |
| Balance at beginning of year | | $256,859 | | $154,466 | | $163,720 | | $81,464 | | $60,735 | | $111,106 | | $49,501 |
| Service cost | | 8,053 | | 6,158 | | 6,540 | | 2,632 | | 1,448 | | 3,074 | | 2,642 |
| Interest cost | | 13,742 | | 8,298 | | 8,767 | | 4,370 | | 3,225 | | 5,945 | | 2,666 |
| Plan participant contributions | | 3,680 | | 1,525 | | 2,218 | | 994 | | 615 | | 1,222 | | 687 |
| Actuarial (gain)/loss | | 23,394 | | 28,721 | | 24,837 | | 9,695 | | 7,974 | | 17,994 | | 7,144 |
| Benefits paid | | (16,850) | | (8,359) | | (10,883) | | (4,986) | | (5,074) | | (6,326) | | (2,513) |
| Medicare Part D subsidy received | | 1,025 | | 585 | | 683 | | 336 | | 358 | | 489 | | 116 |
Early Retiree Reinsurance Program proceeds | | 710 | | 483 | | 470 | | 65 | | 35 | | 98 | | 283 |
| Balance at end of year | | $290,613 | | $191,877 | | $196,352 | | $94,570 | | $69,316 | | $133,602 | | $60,526 |
| | | | | | | | | | | | | | | |
| Change in Plan Assets | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $148,622 | | $ - | | $ - | | $52,064 | | $52,005 | | $103,214 | | $29,347 |
| Actual return on plan assets | | 2,681 | | - | | - | | 1,003 | | 2,228 | | 2,365 | | 760 |
| Employer contributions | | 26,713 | | 6,834 | | 8,665 | | 5,377 | | 3,644 | | 4,706 | | 3,731 |
| Plan participant contributions | | 3,680 | | 1,525 | | 2,218 | | 994 | | 615 | | 1,222 | | 687 |
| Benefits paid | | (16,850) | | (8,359) | | (10,883) | | (4,986) | | (5,074) | | (6,326) | | (2,513) |
| Fair value of assets at end of year | | $164,846 | | $ - | | $ - | | $54,452 | | $53,418 | | $105,181 | | $32,012 |
| | | | | | | | | | | | | | | |
| Funded status | | ($125,767) | | ($191,877) | | ($196,352) | | ($40,118) | | ($15,898) | | ($28,421) | | ($28,514) |
| | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | |
| Current liabilities | | $ - | | ($7,651) | | ($9,143) | | $ - | | $ - | | $ - | | $ - |
| Non-current liabilities | | (125,767) | | (184,226) | | (187,209) | | (40,118) | | (15,898) | | (28,421) | | (28,514) |
| Total funded status | | ($125,767) | | ($191,877) | | ($196,352) | | ($40,118) | | ($15,898) | | ($28,421) | | ($28,514) |
| | | | | | | | | | | | | | | |
Amounts recognized in regulatory asset (before tax) | | | | | | | | | | | | | | |
| Transition obligation | | $820 | | $- | | $- | | $351 | | $1,189 | | $187 | | $8 |
| Prior service cost | | (2,676) | | - | | - | | (705) | | 152 | | (2,137) | | (309) |
| Net loss | | 128,723 | | - | | - | | 44,504 | | 25,801 | | 65,206 | | 29,700 |
| | | $126,867 | | $- | | $- | | $44,150 | | $27,142 | | $63,256 | | $29,399 |
| | | | | | | | | | | | | | | |
Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | |
| Transition obligation | | $- | | $238 | | $382 | | $- | | $- | | $- | | $- |
| Prior service cost | | - | | (3,511) | | (1,342) | | - | | - | | - | | - |
| Net loss | | - | | 76,032 | | 71,939 | | - | | - | | - | | - |
| | | $- | | $72,759 | | $70,979 | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in APBO | | | | | | | | | | | | | | |
| Balance at beginning of year | |
| $315,308 |
| |
| $207,987 |
| |
| $220,017 |
| |
| $100,508 |
| |
| $74,200 |
| |
| $142,114 |
| |
| $67,934 |
|
| Service cost | | 9,619 |
| | 7,910 |
| | 8,541 |
| | 3,246 |
| | 1,752 |
| | 3,760 |
| | 3,580 |
|
| Interest cost | | 13,545 |
| | 8,964 |
| | 9,410 |
| | 4,289 |
| | 3,135 |
| | 6,076 |
| | 2,945 |
|
| Plan amendments | | (11,617 | ) | | (8,705 | ) | | (18,844 | ) | | (4,714 | ) | | (4,469 | ) | | (5,359 | ) | | (4,591 | ) |
| Curtailment | | 4,595 |
| | 1,637 |
| | 1,889 |
| | 616 |
| | 350 |
| | 1,498 |
| | 769 |
|
| Plan participant contributions | | 4,564 |
| | 1,998 |
| | 2,509 |
| | 1,292 |
| | 915 |
| | 1,498 |
| | 860 |
|
| Actuarial gain | | (67,253 | ) | | (40,941 | ) | | (43,747 | ) | | (25,527 | ) | | (13,739 | ) | | (26,048 | ) | | (14,639 | ) |
| Benefits paid | | (18,764 | ) | | (8,958 | ) | | (11,524 | ) | | (5,416 | ) | | (4,464 | ) | | (8,455 | ) | | (3,912 | ) |
| Medicare Part D subsidy received | | 737 |
| | 410 |
| | 513 |
| | 245 |
| | 194 |
| | 334 |
| | 105 |
|
| Balance at end of year | |
| $250,734 |
| |
| $170,302 |
| |
| $168,764 |
| |
| $74,539 |
| |
| $57,874 |
| |
| $115,418 |
| |
| $53,051 |
|
| Change in Plan Assets | | | | | | | | | | | | | | |
| Fair value of assets at beginning of year | |
| $194,018 |
| |
| $— |
| |
| $— |
| |
| $62,951 |
| |
| $58,651 |
| |
| $115,824 |
| |
| $39,474 |
|
| Actual return on plan assets | | 30,830 |
| | — |
| | — |
| | 9,826 |
| | 8,870 |
| | 17,905 |
| | 6,292 |
|
| Employer contributions | | 21,015 |
| | 6,960 |
| | 9,015 |
| | 4,785 |
| | 2,567 |
| | 4,846 |
| | 5,387 |
|
| Plan participant contributions | | 4,564 |
| | 1,998 |
| | 2,509 |
| | 1,292 |
| | 915 |
| | 1,498 |
| | 860 |
|
| Benefits paid | | (18,764 | ) | | (8,958 | ) | | (11,524 | ) | | (5,416 | ) | | (4,464 | ) | | (8,455 | ) | | (3,912 | ) |
| Fair value of assets at end of year | |
| $231,663 |
| |
| $— |
| |
| $— |
| |
| $73,438 |
| |
| $66,539 |
| |
| $131,618 |
| |
| $48,101 |
|
| Funded status | |
| ($19,071 | ) | |
| ($170,302 | ) | |
| ($168,764 | ) | |
| ($1,101 | ) | |
| $8,665 |
| |
| $16,200 |
| |
| ($4,950 | ) |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | |
| Current liabilities | |
| $— |
| |
| ($8,803 | ) | |
| ($10,249 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| Non-current liabilities | | (19,071 | ) | | (161,499 | ) | | (158,515 | ) | | (1,101 | ) | | 8,665 |
| | 16,200 |
| | (4,950 | ) |
| Total funded status | |
| ($19,071 | ) | |
| ($170,302 | ) | |
| ($168,764 | ) | |
| ($1,101 | ) | |
| $8,665 |
| |
| $16,200 |
| |
| ($4,950 | ) |
Amounts recognized in regulatory asset | | | | | | | | | | | | | | |
| Prior service credit | |
| ($12,996 | ) | |
| $— |
| |
| $— |
| |
| ($5,056 | ) | |
| ($4,335 | ) | |
| ($6,505 | ) | |
| ($4,702 | ) |
| Net loss | | 40,272 |
| | — |
| | — |
| | 9,304 |
| | 6,485 |
| | 22,772 |
| | 10,297 |
|
| | |
| $27,276 |
| |
| $— |
| |
| $— |
| |
| $4,248 |
| |
| $2,150 |
| |
| $16,267 |
| |
| $5,595 |
|
| Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | |
| Prior service credit | |
| $— |
| |
| ($10,359 | ) | |
| ($19,390 | ) | |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| Net loss | | — |
| | 31,577 |
| | 35,001 |
| | — |
| | — |
| | — |
| | — |
|
| | |
| $— |
| |
| $21,218 |
| |
| $15,611 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Change in APBO | | | | | | | | | | | | | | |
| Balance at beginning of year | | $245,466 | | $144,438 | | $153,319 | | $73,701 | | $61,311 | | $106,958 | | $42,999 |
| Service cost | | 7,372 | | 5,481 | | 5,483 | | 2,200 | | 1,389 | | 2,789 | | 2,251 |
| Interest cost | | 14,515 | | 8,574 | | 9,075 | | 4,370 | | 3,598 | | 6,326 | | 2,562 |
| Plan amendment | | (5,023) | | (3,109) | | (3,204) | | (1,529) | | (1,587) | | (2,871) | | (519) |
| Plan participant contributions | | 3,440 | | 1,584 | | 2,241 | | 969 | | 668 | | 1,297 | | 548 |
| Actuarial (gain)/loss | | 8,071 | | 6,583 | | 7,734 | | 7,046 | | 655 | | 3,449 | | 4,749 |
| Benefits paid | | (18,217) | | (9,800) | | (11,742) | | (5,713) | | (5,737) | | (7,467) | | (3,229) |
| Medicare Part D subsidy received | | 1,235 | | 715 | | 814 | | 420 | | 438 | | 625 | | 140 |
| Balance at end of year | | $256,859 | | $154,466 | | $163,720 | | $81,464 | | $60,735 | | $111,106 | | $49,501 |
| | | | | | | | | | | | | | | |
| Change in Plan Assets | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $129,676 | | $ - | | $ - | | $46,756 | | $47,410 | | $93,279 | | $25,878 |
| Actual return on plan assets | | 13,819 | | - | | - | | 4,832 | | 4,032 | | 9,399 | | 2,552 |
| Employer contributions | | 19,904 | | 8,216 | | 9,501 | | 5,220 | | 5,632 | | 6,706 | | 3,598 |
| Plan participant contributions | | 3,440 | | 1,584 | | 2,241 | | 969 | | 668 | | 1,297 | | 548 |
| Benefits paid | | (18,217) | | (9,800) | | (11,742) | | (5,713) | | (5,737) | | (7,467) | | (3,229) |
| Fair value of assets at end of year | | $148,622 | | $ - | | $ - | | $52,064 | | $52,005 | | $103,214 | | $29,347 |
| | | | | | | | | | | | | | | |
| Funded status | | ($108,237) | | ($154,466) | | ($163,720) | | ($29,400) | | ($8,730) | | ($7,892) | | ($20,154) |
| | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | |
| Current liabilities | | $ - | | ($7,159) | | ($8,614) | | $ - | | $ - | | $ - | | $ - |
| Non-current liabilities | | (108,237) | | (147,307) | | (155,106) | | (29,400) | | (8,730) | | (7,892) | | (20,154) |
| Total funded status | | ($108,237) | | ($154,466) | | ($163,720) | | ($29,400) | | ($8,730) | | ($7,892) | | ($20,154) |
| | | | | | | | | | | | | | | |
Amounts recognized in regulatory asset (before tax) | | | | | | | | | | | | | | |
| Transition obligation | | $1,641 | | $- | | $- | | $703 | | $2,379 | | $374 | | $17 |
| Prior service cost | | (3,206) | | - | | - | | (844) | | 190 | | (2,565) | | (898) |
| Net loss | | 102,918 | | - | | - | | 34,066 | | 17,823 | | 44,884 | | 22,678 |
| | | $101,353 | | $- | | $- | | $33,925 | | $20,392 | | $42,693 | | $21,797 |
| | | | | | | | | | | | | | | |
Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | |
| Transition obligation | | $- | | $477 | | $765 | | $- | | $- | | $- | | $- |
| Prior service cost | | - | | (4,335) | | (1,589) | | - | | - | | - | | - |
| Net loss | | - | | 50,207 | | 49,895 | | - | | - | | - | | - |
| | | $- | | $46,349 | | $49,071 | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Non-Qualified Pension Plans
Entergy also sponsors non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees. Entergy recognized net periodic pension cost related to these plans of $24$32.4 million in 2011, $27.22014, $54.5 million in 2010,2013, and $23.6$26.5 million in 2009.2012. In 2011, 20102014, 2013, and 20092012 Entergy recognized $4.6$15.1 million, $9.3$33 million, and $6.7$6.3 million, respectively in settlement charges related to the payment of lump sum benefits out of the plan that is included in the non-qualified pension plan cost above. The projected benefit obligation was $164.4$151.8 million and $148.3$154.3 million as of December 31, 20112014 and 2010,2013, respectively. The accumulated benefit obligation was $146.5$130.6 million and $131.6$131.4 million as of December 31, 20112014 and 2010,2013, respectively.
Entergy’s non-qualified, non-current pension liability at December 31, 20112014 and 20102013 was $153.2$135.6 million and $138.7$127.5 million, respectively; and its current liability was $11.2$16.2 million and $9.6$26.8 million, respectively. The unamortized transition asset, prior service cost and net loss are recognized in regulatory assets ($58.960.3 million at December 31, 20112014 and $53.5$59.1 million at December 31, 2010)2013) and accumulated other comprehensive income before taxes ($27.223.5 million at December 31, 20112014 and $24.3$26.1 million at December 31, 2010)2013).
The Registrant Subsidiaries (except System Energy) participate in Entergy’s non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees. The net periodic pension cost for their employees for the non-qualified plans for 2011, 2010,2014, 2013, and 2009,2012, was as follows:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| 2011 | | $498 | | $167 | | $14 | | $190 | | $65 | | $763 |
| 2010 | | $501 | | $162 | | $102 | | $206 | | $26 | | $683 |
| 2009 | | $395 | | $1,245 | | $30 | | $174 | | $84 | | $743 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2014 |
| $754 |
| |
| $130 |
| |
| $5 |
| |
| $190 |
| |
| $95 |
| |
| $491 |
|
| 2013 |
| $448 |
| |
| $151 |
| |
| $12 |
| |
| $192 |
| |
| $92 |
| |
| $1,001 |
|
| 2012 |
| $464 |
| |
| $158 |
| |
| $12 |
| |
| $183 |
| |
| $79 |
| |
| $648 |
|
Included in the 20112014 net periodic pension cost above are settlement charges of $41$337 thousand and $16 thousand for Entergy Arkansas and Entergy Texas, respectively, related to the lump sum benefits paid out of the plan. Included in the 20102013 net periodic pension cost above are settlement charges of $86 thousand for Entergy Arkansas, $80 thousand for Entergy Louisiana, and $5$415 thousand for Entergy Texas related to the lump sum benefits paid out of the plan. Included in Entergy Gulf States Louisiana’s 2009the 2012 net periodic pension cost above is a $947are settlement charges of $38 thousand settlement chargefor Entergy Arkansas related to the payment of lump sum benefits paid out of the plan.
The projected benefit obligation for their employees for the non-qualified plans as of December 31, 20112014 and 20102013 was as follows:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| 2011 | | $4,154 | | $2,781 | | $118 | | $1,681 | | $376 | | $10,103 |
| 2010 | | $3,791 | | $2,717 | | $124 | | $1,561 | | $320 | | $11,136 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2014 |
| $4,495 |
| |
| $2,693 |
| |
| $158 |
| |
| $2,128 |
| |
| $476 |
| |
| $9,567 |
|
| 2013 |
| $4,162 |
| |
| $2,511 |
| |
| $50 |
| |
| $1,752 |
| |
| $434 |
| |
| $7,910 |
|
The accumulated benefit obligation for the non-qualified plans as of December 31, 2011 and 2010 was as follows:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| 2011 | | $3,755 | | $2,768 | | $118 | | $1,460 | | $345 | | $10,030 |
| 2010 | | $3,387 | | $2,691 | | $124 | | $1,335 | | $294 | | $11,030 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The accumulated benefit obligation for their employees for the non-qualified plans as of December 31, 2014 and 2013 was as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2014 |
| $4,086 |
| |
| $2,693 |
| |
| $131 |
| |
| $1,761 |
| |
| $436 |
| |
| $9,215 |
|
| 2013 |
| $3,765 |
| |
| $2,510 |
| |
| $50 |
| |
| $1,528 |
| |
| $387 |
| |
| $7,496 |
|
The following amounts were recorded on the balance sheet as of December 31, 20112014 and 2010:2013:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| Current liabilities | |
| ($347 | ) | |
| ($241 | ) | |
| ($18 | ) | |
| ($119 | ) | |
| ($23 | ) | |
| ($753 | ) |
| Non-current liabilities | | (4,148 | ) | | (2,452 | ) | | (140 | ) | | (2,009 | ) | | (453 | ) | | (8,814 | ) |
| Total funded status | |
| ($4,495 | ) | |
| ($2,693 | ) | |
| ($158 | ) | |
| ($2,128 | ) | |
| ($476 | ) | |
| ($9,567 | ) |
| Regulatory asset/(liability) | |
| $2,368 |
| |
| $659 |
| |
| $37 |
| |
| $942 |
| |
| ($65 | ) | |
| $296 |
|
Accumulated other comprehensive income (before taxes) | |
| $— |
| |
| $98 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
2011 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| | | | | | | | | | | | | |
| Current liabilities | | ($272) | | ($260) | | ($18) | | ($114) | | ($25) | | ($1,029) |
| Non-current liabilities | | (3,881) | | (2,521) | | (100) | | (1,568) | | (351) | | (9,074) |
| Total Funded Status | | ($4,153) | | ($2,781) | | ($118) | | ($1,682) | | ($376) | | ($10,103) |
| | | | | | | | | | | | | |
| Regulatory Asset | | $2,385 | | $445 | | ($36) | | $703 | | $78 | | ($292) |
Accumulated other comprehensive income (before taxes) | | $- | | $104 | | $- | | $- | | $- | | $- |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| Current liabilities | |
| ($367 | ) | |
| ($262 | ) | |
| ($6 | ) | |
| ($118 | ) | |
| ($20 | ) | |
| ($786 | ) |
| Non-current liabilities | | (3,795 | ) | | (2,249 | ) | | (44 | ) | | (1,634 | ) | | (414 | ) | | (7,124 | ) |
| Total funded status | |
| ($4,162 | ) | |
| ($2,511 | ) | |
| ($50 | ) | |
| ($1,752 | ) | |
| ($434 | ) | |
| ($7,910 | ) |
| Regulatory asset/(liability) | |
| $1,979 |
| |
| $422 |
| |
| ($87 | ) | |
| $637 |
| |
| ($18 | ) | |
| ($1,631 | ) |
Accumulated other comprehensive income (before taxes) | |
| $— |
| |
| $57 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reclassification out of Accumulated Other Comprehensive Income
Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) as of December 31, 2014:
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| | | | | | | | | | | | | |
| Current liabilities | | ($207) | | ($256) | | ($18) | | ($107) | | ($25) | | ($1,354) |
| Non-current liabilities | | (3,584) | | (2,461) | | (106) | | (1,454) | | (295) | | (9,782) |
| Total Funded Status | | ($3,791) | | ($2,717) | | ($124) | | ($1,561) | | ($320) | | ($11,136) |
| | | | | | | | | | | | | |
| Regulatory Asset | | $2,207 | | $320 | | ($37) | | $654 | | $82 | | $618 |
Accumulated other comprehensive income (before taxes) | | $- | | $70 | | $- | | $- | | $- | | $- |
|
| | | | | | | | | | | | | | | |
| | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) |
| Entergy | | | | | | | |
| Amortization of prior service cost |
| ($1,559 | ) | |
| $22,280 |
| |
| ($427 | ) | |
| $20,294 |
|
| Amortization of loss | (26,934 | ) | | (6,689 | ) | | (2,213 | ) | | (35,836 | ) |
| Settlement loss | — |
| | — |
| | (3,643 | ) | | (3,643 | ) |
| |
| ($28,493 | ) | |
| $15,591 |
| |
| ($6,283 | ) | |
| ($19,185 | ) |
| Entergy Gulf States Louisiana | | | | | | | |
| Amortization of prior service cost |
| $— |
| |
| $2,237 |
| |
| $— |
| |
| $2,237 |
|
| Amortization of loss | (1,911 | ) | | (1,212 | ) | | (3 | ) | | (3,126 | ) |
| |
| ($1,911 | ) | |
| $1,025 |
| |
| ($3 | ) | |
| ($889 | ) |
| Entergy Louisiana | | | | | | | |
| Amortization of prior service cost |
| $— |
| |
| $3,377 |
| |
| $— |
| |
| $3,377 |
|
| Amortization of loss | — |
| | (1,511 | ) | | — |
| | (1,511 | ) |
| |
| $— |
| |
| $1,866 |
| |
| $— |
| |
| $1,866 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) as of December 31, 2013:
|
| | | | | | | | | | | | | | | |
| | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | (In Thousands) |
| Entergy | | | | | | | |
| Amortization of prior service cost |
| ($1,866 | ) |
|
| $12,925 |
| |
| ($503 | ) | |
| $10,556 |
|
| Acceleration of prior service cost due to curtailment | (1,304 | ) | | 1,797 |
| | (178 | ) | | 315 |
|
| Amortization of loss | (43,971 | ) | | (21,590 | ) | | (2,569 | ) | | (68,130 | ) |
| Settlement loss | — |
| | — |
| | (11,612 | ) | | (11,612 | ) |
| |
| ($47,141 | ) | |
| ($6,868 | ) | |
| ($14,862 | ) | |
| ($68,871 | ) |
| Entergy Gulf States Louisiana | | | | | | | |
| Amortization of prior service cost |
| ($1 | ) |
|
| $942 |
| |
| $— |
| |
| $941 |
|
| Acceleration of prior service cost due to curtailment | — |
| | 91 |
| | — |
| | 91 |
|
| Amortization of loss | (3,039 | ) | | (4,598 | ) | | (7 | ) | | (7,644 | ) |
| |
| ($3,040 | ) | |
| ($3,565 | ) | |
| ($7 | ) | |
| ($6,612 | ) |
| Entergy Louisiana | | | | | | | |
| Amortization of prior service cost |
| $— |
|
|
| $508 |
| |
| $— |
| |
| $508 |
|
| Acceleration of prior service cost due to curtailment | — |
| | 41 |
| | — |
| | 41 |
|
| Amortization of loss | — |
| | (5,050 | ) | | — |
| | (5,050 | ) |
| |
| $— |
| |
| ($4,501 | ) | |
| $— |
| |
| ($4,501 | ) |
Accounting for Pension and Other Postretirement Benefits
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. This is measured as the difference between plan assets at fair value and the benefit obligation. Entergy uses a December 31 measurement date for its pension and other postretirement plans. Employers are to record previously unrecognized gains and losses, prior service costs, and any remaining transition asset or obligation (that resulted from adopting prior pension and other postretirement benefits accounting standards) as comprehensive income and/or as a regulatory asset reflective of the recovery mechanism for pension and other postretirement benefit costs in the Utility’sRegistrant Subsidiaries’ respective regulatory jurisdictions. For the portion of Entergy Gulf States Louisiana that is not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its pension and other postretirement benefit obligations are recorded as other comprehensive income. Entergy Gulf States Louisiana and Entergy Louisiana recover other postretirement benefit costs on a pay as you gopay-as-you-go basis and record the unrecognized prior service cost, gains and losses, and transition obligation for its other postretirement benefit obligation as other comprehensive income. Accounting standards also requiresrequire that changes in the funded status be recorded as other comprehensive income and/or a regulatory asset in the period in which the changes occur.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
With regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long termlong-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension and Other Postretirement Plans’ Assets
The Plan Administrator’s trust asset investment strategy is to invest the assets in a manner whereby long termlong-term earnings on the assets (plus cash contributions) provide adequate funding for retiree benefit payments. The mix of assets is based on an optimization study that identifies asset allocation targets in order to achieve the maximum return for an acceptable level of risk, while minimizing the expected contributions and pension and postretirement expense.
The Plan Administrator approved a new asset allocation and implementation of an optimization study in 2011 for the pension assets. The optimization study recommended that the target asset allocation adjust dynamically based on the funded status of the plan. The study identifies updated asset allocation targets to maximize return on the assets within a prudent level of risk, as mentioned above, and to maintain a level of volatility that is not expected to have material impact on Entergy’s expected contribution and expense. Entergy has begun to adjust its asset allocation, and those adjustments are reflected in the target and actual asset allocations listed below.
Entergy also completed an optimization study in 2011 for the postretirement assets that identifies new asset allocation targets. Entergy plans to adjust to this asset allocation during 2012, and the target asset allocation will be 39% domestic equity securities, 26% international equity securities and 35% fixed income securities for all trusts, taxable and non-taxable.
In the optimization studies, the Plan Administrator formulates assumptions about characteristics, such as expected asset class investment returns, volatility (risk), and correlation coefficients among the various asset classes. The future market assumptions used in the optimization study are determined by examining historical market characteristics of the various asset classes and making adjustments to reflect future conditions expected to prevail over the study period.
The target asset allocation for pension adjusts dynamically based on the pension plans' funded status. The current targets are shown below. The expectation is that the allocation to fixed income securities will increase as the pension plans' funded status increases. The following targets and ranges were established to produce an acceptable, economically efficient plan to manage around the targets. The target asset allocation range below for pension shows the ranges within which the allocation may adjust based on funded status, with the expectation that the allocation to fixed income securities will increase as the pension funded status increases.
The target and range asset allocation for postretirement assets reflects changes made in 2012 as recommended in the latest optimization study.
Entergy’s qualified pension and postretirement weighted-average asset allocations by asset category at December 31, 20112014 and 20102013 and the target asset allocation and ranges for those time periods are as follows:
|
| | | | | | | | | | |
Pension Asset Allocation | | Target | | Range | | Actual 2014 | | Actual 2013 |
| Domestic Equity Securities | | 45% | | 34% | to | 53% | | 45% | | 46% |
| International Equity Securities | | 20% | | 16% | to | 24% | | 19% | | 20% |
| Fixed Income Securities | | 35% | | 31% | to | 41% | | 35% | | 33% |
| Other | | 0% | | 0% | to | 10% | | 1% | | 1% |
Pension Asset Allocation | | Target | Range | 2011 | 2010 |
| | | | | | |
| Domestic Equity Securities | | 45% | 34% to 53% | 44% | 44% |
| International Equity Securities | | 20% | 16% to 24% | 18% | 20% |
| Fixed Income Securities | | 35% | 31% to 41% | 37% | 35% |
| Other | | 0% | 0% to 10% | 1% | 1% |
Postretirement Asset Allocation | Non-Taxable | | Taxable |
| | Target | Range | 2011 | 2010 | | Target | Range | 2011 | 2010 |
| Domestic Equity Securities | 38% | 33% to 43% | 39% | 39% | | 35% | 30% to 40% | 35% | 39% |
| International Equity Securities | 17% | 12% to 22% | 15% | 18% | | 0% | 0% | 0% | 0% |
| Fixed Income Securities | 45% | 40% to 50% | 46% | 43% | | 65% | 60% to 70% | 64% | 60% |
| Other | 0% | 0% to 5% | 0% | 0% | | 0% | 0% to 5% | 1% | 1% |
151 |
| | | | | | |
Postretirement Asset Allocation | Non-Taxable and Taxable |
| |
Target |
Range | Actual 2014 | Actual 2013 |
| Domestic Equity Securities | 39% | 34% | to | 44% | 42% | 40% |
| International Equity Securities | 26% | 21% | to | 31% | 25% | 26% |
| Fixed Income Securities | 35% | 30% | to | 40% | 33% | 34% |
| Other | 0% | 0% | to | 5% | 0% | 0% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In determining its expected long termlong-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviews past performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and some investment managers.
The expected long termlong-term rate of return for the qualified pension plans’ assets is based primarily on the geometric average of the historical annual performance of a representative portfolio weighted by the target asset allocation defined in the table above.above, along with other indications of expected return on assets. The time period reflected is a long dated period spanning several decades.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The expected long termlong-term rate of return for the non-taxable postretirement trust assets is determined using the same methodology described above for pension assets, but the asset allocation specific to the non-taxable postretirement assets is used.
For the taxable postretirement trust assets, the investment allocation includes a high percentage of tax-exempt fixed income securities. This asset allocation in combination with the same methodology employed to determine the expected return for other trust assets (as described above), with a modification to reflect applicable taxes, is used to produce the expected long-term rate of return for taxable postretirement trust assets.
Entergy currently expects long term rates of return higher than last year’s expectation for both the non-taxable and taxable postretirement trusts because of the planned increases to their equity allocations in 2012.
Concentrations of Credit Risk
Entergy’s investment guidelines mandate the avoidance of risk concentrations. Types of concentrations specified to be avoided include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, geographic area and individual security issuance. As of December 31, 20112014, all investment managers and assets were materially in compliance with the approved investment guidelines, therefore there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in Entergy’s pension and other postretirement benefit plan assets.
Fair Value Measurements
Fair Value Measurements
Accounting standards provide the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy are described below:
· | Level 1 - Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan 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 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 an independent party that uses 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 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. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
If an asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
· | Level 3 - Level 3 refers to securities valued based on significant unobservable inputs. |
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth by level within the fair value hierarchy, a summary of the investments held for the qualified pension and other postretirement plans measured at fair value on a recurring basis at December 31, 2011 and December 31, 2010.
Qualified Pension Trust
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Corporate stocks: | | | | | | | | |
| Preferred | | $3,738 | (b) | $8,014 | (a) | $- | | $11,752 |
| Common | | 1,010,491 | (b) | - | | - | | 1,010,491 |
| Common collective trusts | | - | | 1,074,178 | (c) | - | | 1,074,178 |
| Fixed income securities: | | | | | | | | |
| U.S. Government securities | | 142,509 | (b) | 157,737 | (a) | - | | 300,246 |
| Corporate debt instruments: | | - | | 380,558 | (a) | - | | 380,558 |
Registered investment companies | | 53,323 | (d) | 444,275 | (e) | - | | 497,598 |
| Other | | - | | 101,674 | (f) | - | | 101,674 |
| Other: | | | | | | | | |
Insurance company general account (unallocated contracts) | | - | | 34,696 | (g) | - | | 34,696 |
| Total investments | | $1,210,061 | | $2,201,132 | | $- | | $3,411,193 |
| | | | | | | | | |
| Cash | | | | | | | | 75 |
| Other pending transactions | | | | | | | | (9,238) |
Less: Other postretirement assets included in total investments | | | | | | | | (2,114) |
Total fair value of qualified pension assets | | | | | | | | $3,399,916 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Corporate stocks: | | | | | | | | |
| Preferred | | $- | | $8,354 | (a) | $- | | $8,354 |
| Common | | 1,375,531 | (b) | - | | - | | 1,375,531 |
| Common collective trusts | | - | | 657,075 | (c) | - | | 657,075 |
| Fixed income securities: | | | | | | | | |
| Interest-bearing cash | | 103,731 | (d) | - | | - | | 103,731 |
| U.S. Government securities | | 75,124 | (b) | 187,957 | (a) | - | | 263,081 |
| Corporate debt instruments: | | - | | 298,760 | (a) | - | | 298,760 |
Registered investment companies | | - | | 385,020 | (e) | - | | 385,020 |
| Other | | | | 108,305 | (f) | | | 108,305 |
| Other: | | | | | | | | |
Insurance company general account (unallocated contracts) | | - | | 33,439 | (g) | - | | 33,439 |
| Total investments | | $1,554,386 | | $1,678,910 | | $- | | $3,233,296 |
| | | | | | | | | |
| Cash | | | | | | | | 321 |
| Other pending transactions | | | | | | | | (14,954) |
Less: Other postretirement assets included in total investments | | | | | | | | (2,395) |
Total fair value of qualified pension assets | | | | | | | | $3,216,268 |
Other PostretirementQualified Defined Benefit Pension Plan Trusts
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Common collective trust | | $- | | $208,812 | (c) | $- | | $208,812 |
| Fixed income securities: | | | | | | | | |
| U.S. Government securities | | 42,577 | (b) | 57,151 | (a) | - | | 99,728 |
| Corporate debt instruments | | - | | 42,807 | (a) | - | | 42,807 |
Registered investment companies | | 4,659 | (d) | - | | - | | 4,659 |
| Other | | - | | 69,287 | (f) | - | | 69,287 |
| Total investments | | $47,236 | | $378,057 | | $- | | $425,293 |
| | | | | | | | | |
| Other pending transactions | | | | | | | | (235) |
Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | 2,114 |
Total fair value of other postretirement assets | | | | | | | | $427,172 |
154 |
| | | | | | | | | | | | | | | | |
| 2014 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Corporate stocks: | | | | | | | | |
| Preferred | |
| $10,017 |
| (b) |
| $— |
| (a) |
| $— |
| |
| $10,017 |
|
| Common | | 717,685 |
| (b) | 97 |
| | — |
| | 717,782 |
|
| Common collective trusts | | — |
| | 1,886,897 |
| (c) | — |
| | 1,886,897 |
|
| 103-12 investment entities | | — |
| | 259,995 |
| (h) | — |
| | 259,995 |
|
| Fixed income securities: | | | | | | | | |
| U.S. Government securities | | 240 |
| (b) | 400,059 |
| (a) | — |
| | 400,299 |
|
| Corporate debt instruments | | — |
| | 548,788 |
| (a) | — |
| | 548,788 |
|
| Registered investment companies | | 286,534 |
| (d) | 576,641 |
| (e) | — |
| | 863,175 |
|
| Other | | — |
| | 130,295 |
| (f) | — |
| | 130,295 |
|
| Other: | | | | | | | | |
| Insurance company general account (unallocated contracts) | | — |
| | 37,818 |
| (g) | — |
| | 37,818 |
|
| Total investments | |
| $1,014,476 |
| |
| $3,840,590 |
| |
| $— |
| |
| $4,855,066 |
|
| Cash | | | | | | | | 314 |
|
| Other pending transactions | | | | | | | | 7,359 |
|
| Less: Other postretirement assets included in total investments | | | | | | | | (34,954 | ) |
Total fair value of qualified pension assets | | | | | | | |
| $4,827,785 |
|
Cash Balance Pension Plans’ Trust
The Cash Balance pension plans’ trust held $181 thousand of cash as of December 31, 2014.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2013 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) | | (In Thousands) |
| Equity securities: | | | | | | | | | | | | | | | | |
| Common collective trust | | $- | | $211,835 | (c) | $- | | $211,835 | |
| Corporate stocks: | | | | | | | | | |
| Preferred | | |
| $6,847 |
| (b) |
| $6,038 |
| (a) |
| $— |
| |
| $12,885 |
|
| Common | | | 915,996 |
| (b) | — |
| | — |
| | 915,996 |
|
| Common collective trusts | | | — |
| | 1,753,958 |
| (c) | — |
| | 1,753,958 |
|
| Fixed income securities: | | | | | | | | | | | | | | | | |
| Interest-bearing cash | | 4,014 | (d) | - | | - | | 4,014 | |
| U.S. Government securities | | 37,823 | (b) | 52,326 | (a) | - | | 90,149 | | 180,718 |
| (b) | 152,915 |
| (a) | — |
| | 333,633 |
|
| Corporate debt instruments | | - | | 37,128 | (a) | - | | 37,128 | | — |
| | 464,652 |
| (a) | — |
| | 464,652 |
|
| Registered investment companies | | | 316,863 |
| (d) | 486,748 |
| (e) | — |
| | 803,611 |
|
| Other | | - | | 58,716 | (f) | - | | 58,716 | | — |
| | 129,169 |
| (f) | — |
| | 129,169 |
|
| Other: | | | | | | | | | |
| Insurance company general account (unallocated contracts) | | | — |
| | 36,886 |
| (g) | — |
| | 36,886 |
|
| Total investments | | $41,837 | | $360,005 | | $- | | $401,842 | |
| $1,420,424 |
| |
| $3,030,366 |
| |
| $— |
| |
| $4,450,790 |
|
| | | | | | | | | | |
| Cash | | | | | | | | | 280 |
|
| Other pending transactions | | | | | | | | 193 | | | | | | | | 8,081 |
|
Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | 2,395 | |
Total fair value of other postretirement assets | | | | | | | | $404,430 | |
Less: Other postretirement assets included in total investments | | | | | | | | | (29,914 | ) |
Total fair value of qualified pension assets | | | | | | | | |
| $4,429,237 |
|
Other Postretirement Trusts
|
| | | | | | | | | | | | | | | | |
| 2014 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Common collective trust | |
| $— |
| |
| $370,228 |
| (c) |
| $— |
| |
| $370,228 |
|
| Fixed income securities: | | | | | | | | |
|
| U.S. Government securities | | 36,306 |
| (b) | 45,618 |
| (a) | — |
| | 81,924 |
|
| Corporate debt instruments | | — |
| | 57,830 |
| (a) | — |
| | 57,830 |
|
| Registered investment companies | | 5,558 |
| (d) | — |
| | — |
| | 5,558 |
|
| Other | | — |
| | 46,968 |
| (f) | — |
| | 46,968 |
|
| Total investments | |
| $41,864 |
| |
| $520,644 |
| |
| $— |
| |
| $562,508 |
|
| Other pending transactions | | | | | | | | 165 |
|
Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | 34,954 |
|
Total fair value of other postretirement assets | | | | | | | |
| $597,627 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Thousands) |
| Equity securities: | | | | | | | | |
| Common collective trust | |
| $— |
| |
| $356,700 |
| (c) |
| $— |
| |
| $356,700 |
|
| Fixed income securities: | | | | | | | | |
|
| U.S. Government securities | | 40,808 |
| (b) | 43,471 |
| (a) | — |
| | 84,279 |
|
| Corporate debt instruments | | — |
| | 50,563 |
| (a) | — |
| | 50,563 |
|
Registered investment companies | | 4,163 |
| (d) | — |
| | — |
| | 4,163 |
|
| Other | | — |
| | 43,458 |
| (f) | — |
| | 43,458 |
|
| Total investments | |
| $44,971 |
| |
| $494,192 |
| |
| $— |
| |
| $539,163 |
|
| Other pending transactions | | | | | | | | 773 |
|
| Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | 29,914 |
|
Total fair value of other postretirement assets | | | | | | | |
| $569,850 |
|
| |
| (a) | Certain preferred stocks and certain fixed income debt securities (corporate, government, and securitized) are stated at fair value as determined by broker quotes. |
| |
| (b) | Common stocks, treasury notes and bonds, and certain preferred stocks, and certain fixed income debt securities (government) are stated at fair value determined by quoted market prices. |
| |
| (c) | The common collective trusts hold investments in accordance with stated objectives. The investment strategy of the trusts is to capture the growth potential of equity markets by replicating the performance of a specified index. Net asset value per share of the common collective trusts estimate fair value. |
| |
| (d) | The registered investment company is a money market mutual fund with a stable net asset value of one dollar per share. |
| |
| (e) | The registered investment company holds investments in domestic and international bond markets and estimates fair value using net asset value per share. |
| |
| (f) | The other remaining assets are U.S. municipal and foreign government bonds stated at fair value as determined by broker quotesquotes. |
| |
| (g) | The unallocated insurance contract investments are recorded at contract value, which approximates fair value. The contract value represents contributions made under the contract, plus interest, less funds used to pay benefits and contract expenses, and less distributions to the master trust. |
| |
| (h) | 103-12 investment entities hold investments in accordance with stated objectives. The investment strategy of the investment entities is to capture the growth potential of international equity markets by replicating the performance of a specified index. Net asset value per share of the 103-12 investment entities estimate fair value. |
Accumulated Pension Benefit Obligation
The accumulated benefit obligation for Entergy’s qualified pension plans was $4.6$6.6 billion and $3.8$5.2 billion at December 31, 20112014 and 2010,2013, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The qualified pension accumulated benefit obligation for each of the Registrant Subsidiaries for their employees as of December 31, 20112014 and 20102013 was as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | December 31, | | | | | |
| | | 2011 | | 2010 | December 31, |
| | | (In Thousands) | 2014 | | 2013 |
| | | | | | (In Thousands) |
| Entergy Arkansas | | $1,013,605 | | $864,476 |
| $1,379,108 |
| |
| $1,107,023 |
|
| Entergy Gulf States Louisiana | | $459,037 | | $388,292 |
| $649,932 |
| |
| $530,974 |
|
| Entergy Louisiana | | $632,759 | | $537,329 |
| $873,759 |
| |
| $697,945 |
|
| Entergy Mississippi | | $296,259 | | $261,248 |
| $399,300 |
| |
| $318,941 |
|
| Entergy New Orleans | | $136,390 | | $115,223 |
| $186,473 |
| |
| $150,239 |
|
| Entergy Texas | | $308,628 | | $268,350 |
| $391,296 |
| |
| $332,484 |
|
| System Energy | | $227,617 | | $185,904 |
| $305,556 |
| |
| $247,807 |
|
Estimated Future Benefit Payments
Based upon the assumptions used to measure Entergy’s qualified pension and other postretirement benefit obligations at December 31, 2011,2014, and including pension and other postretirement benefits attributable to estimated future employee service, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for Entergy Corporation and its subsidiaries will be as follows:
|
| | | | | | | | | | | | | | | |
| | Estimated Future Benefits Payments | | |
| | Qualified Pension | | Non-Qualified Pension | | Other Postretirement (before Medicare Subsidy) | | Estimated Future Medicare Subsidy Receipts |
| | (In Thousands) |
| Year(s) | | | | | | | |
| 2015 |
| $262,792 |
| |
| $16,173 |
| |
| $78,601 |
| |
| $455 |
|
| 2016 |
| $277,307 |
| |
| $9,976 |
| |
| $80,601 |
| |
| $525 |
|
| 2017 |
| $292,841 |
| |
| $10,774 |
| |
| $83,425 |
| |
| $595 |
|
| 2018 |
| $310,200 |
| |
| $12,598 |
| |
| $88,049 |
| |
| $1,785 |
|
| 2019 |
| $328,533 |
| |
| $11,431 |
| |
| $92,253 |
| |
| $1,984 |
|
| 2020 - 2024 |
| $1,966,776 |
| |
| $70,791 |
| |
| $506,086 |
| |
| $13,539 |
|
| | | Estimated Future Benefits Payments | | |
| | | Qualified Pension | | Non-Qualified Pension | | Other Postretirement (before Medicare Subsidy) | | Estimated Future Medicare Subsidy Receipts |
| | | (In Thousands) |
| Year(s) | | | | | | | | |
| 2012 | | $178,030 | | $11,199 | | $72,685 | | $5,678 |
| 2013 | | $189,881 | | $18,159 | | $76,731 | | $6,374 |
| 2014 | | $204,573 | | $14,942 | | $81,001 | | $7,137 |
| 2015 | | $220,295 | | $15,502 | | $85,780 | | $7,935 |
| 2016 | | $238,242 | | $22,492 | | $90,143 | | $8,828 |
| 2017 - 2021 | | $1,524,241 | | $72,724 | | $523,040 | | $59,306 |
Based upon the same assumptions, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for the Registrant Subsidiaries for their employees will be as follows:
Estimated Future Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | | | |
| 2012 | | $49,373 | | $17,845 | | $29,047 | | $14,367 | | $5,569 | | $15,596 | | $7,280 |
| 2013 | | $50,592 | | $18,860 | | $30,151 | | $15,145 | | $5,879 | | $16,313 | | $7,760 |
| 2014 | | $52,263 | | $20,136 | | $31,471 | | $16,160 | | $6,208 | | $17,007 | | $8,439 |
| 2015 | | $54,616 | | $21,662 | | $32,890 | | $17,120 | | $6,648 | | $17,818 | | $9,096 |
| 2016 | | $57,215 | | $23,372 | | $34,430 | | $18,093 | | $7,141 | | $18,702 | | $9,949 |
| 2017 - 2021 | | $338,476 | | $148,495 | | $203,838 | | $105,637 | | $45,010 | | $108,504 | | $67,858 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated Future Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | | | |
| 2015 | |
| $66,156 |
| |
| $25,450 |
| |
| $37,892 |
| |
| $18,702 |
| |
| $7,397 |
| |
| $19,078 |
| |
| $11,432 |
|
| 2016 | |
| $67,639 |
| |
| $26,805 |
| |
| $39,070 |
| |
| $19,625 |
| |
| $7,836 |
| |
| $19,697 |
| |
| $11,949 |
|
| 2017 | |
| $69,207 |
| |
| $28,340 |
| |
| $40,675 |
| |
| $20,517 |
| |
| $8,304 |
| |
| $20,558 |
| |
| $12,357 |
|
| 2018 | |
| $71,306 |
| |
| $30,279 |
| |
| $42,336 |
| |
| $21,444 |
| |
| $8,895 |
| |
| $21,448 |
| |
| $12,977 |
|
| 2019 | |
| $73,795 |
| |
| $32,445 |
| |
| $44,058 |
| |
| $22,306 |
| |
| $9,368 |
| |
| $22,291 |
| |
| $13,724 |
|
| 2020 - 2024 | |
| $418,009 |
| |
| $196,323 |
| |
| $256,639 |
| |
| $125,761 |
| |
| $56,659 |
| |
| $125,001 |
| |
| $87,663 |
|
156
192
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Estimated Future Non-Qualified Pension Benefits Payments | |
Entergy Arkansas | | Entergy Gulf States Louisiana | |
Entergy Louisiana | |
Entergy Mississippi | |
Entergy New Orleans | |
Entergy Texas |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | |
| 2015 | |
| $347 |
| |
| $241 |
| |
| $18 |
| |
| $119 |
| |
| $23 |
| |
| $753 |
|
| 2016 | |
| $300 |
| |
| $228 |
| |
| $17 |
| |
| $115 |
| |
| $23 |
| |
| $837 |
|
| 2017 | |
| $291 |
| |
| $241 |
| |
| $16 |
| |
| $124 |
| |
| $23 |
| |
| $784 |
|
| 2018 | |
| $282 |
| |
| $205 |
| |
| $15 |
| |
| $114 |
| |
| $23 |
| |
| $749 |
|
| 2019 | |
| $339 |
| |
| $199 |
| |
| $17 |
| |
| $112 |
| |
| $46 |
| |
| $720 |
|
| 2020 - 2024 | |
| $2,684 |
| |
| $924 |
| |
| $90 |
| |
| $825 |
| |
| $199 |
| |
| $3,442 |
|
Estimated Future Non-Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | |
| 2012 | | $272 | | $260 | | $18 | | $114 | | $25 | | $1,029 |
| 2013 | | $237 | | $252 | | $17 | | $172 | | $24 | | $1,004 |
| 2014 | | $405 | | $260 | | $15 | | $137 | | $23 | | $2,063 |
| 2015 | | $378 | | $241 | | $14 | | $132 | | $22 | | $757 |
| 2016 | | $334 | | $234 | | $13 | | $125 | | $22 | | $796 |
| 2017 - 2021 | | $1,993 | | $1,078 | | $44 | | $767 | | $158 | | $3,267 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated Future Other Postretirement Benefits Payments (before Medicare Part D Subsidy) | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | | | |
| 2015 | |
| $15,699 |
| |
| $8,921 |
| |
| $9,885 |
| |
| $3,926 |
| |
| $4,261 |
| |
| $6,617 |
| |
| $2,796 |
|
| 2016 | |
| $15,745 |
| |
| $9,219 |
| |
| $10,016 |
| |
| $4,001 |
| |
| $4,253 |
| |
| $6,785 |
| |
| $2,802 |
|
| 2017 | |
| $15,830 |
| |
| $9,580 |
| |
| $10,148 |
| |
| $4,125 |
| |
| $4,280 |
| |
| $7,012 |
| |
| $2,883 |
|
| 2018 | |
| $16,305 |
| |
| $10,110 |
| |
| $10,654 |
| |
| $4,433 |
| |
| $4,373 |
| |
| $7,438 |
| |
| $2,984 |
|
| 2019 | |
| $16,528 |
| |
| $10,706 |
| |
| $11,048 |
| |
| $4,599 |
| |
| $4,412 |
| |
| $7,771 |
| |
| $3,138 |
|
| 2020 - 2024 | |
| $86,854 |
| |
| $59,199 |
| |
| $60,735 |
| |
| $25,341 |
| |
| $21,584 |
| |
| $41,303 |
| |
| $17,664 |
|
Estimated Future Other Postretirement Benefits Payments (before Medicare Part D Subsidy) | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Year(s) | | | | | | | | | | | | | | |
| 2012 | | $15,836 | | $8,288 | | $9,953 | | $4,708 | | $4,885 | | $7,060 | | $2,390 |
| 2013 | | $16,388 | | $8,871 | | $10,289 | | $4,953 | | $4,944 | | $7,311 | | $2,478 |
| 2014 | | $16,850 | | $9,360 | | $10,747 | | $5,261 | | $5,025 | | $7,602 | | $2,627 |
| 2015 | | $17,536 | | $10,023 | | $11,173 | | $5,590 | | $5,116 | | $7,932 | | $2,813 |
| 2016 | | $18,096 | | $10,572 | | $11,628 | | $5,875 | | $5,181 | | $8,282 | | $2,934 |
| 2017 - 2021 | | $98,651 | | $61,346 | | $64,660 | | $33,394 | | $26,449 | | $46,702 | | $17,398 |
| | Estimated Future Medicare Part D Subsidy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | (In Thousands) |
| Year(s) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2012 | | $1,374 | | $637 | | $810 | | $509 | | $472 | | $624 | | $108 | |
| 2013 | | $1,516 | | $700 | | $895 | | $558 | | $498 | | $684 | | $141 | |
| 2014 | | $1,686 | | $778 | | $975 | | $608 | | $519 | | $741 | | $172 | |
| 2015 | | $1,841 | | $847 | | $1,066 | | $655 | | $535 | | $796 | | $205 | |
| $77 |
| |
| $37 |
| |
| $45 |
| |
| $29 |
| |
| $23 |
| |
| $34 |
| |
| $9 |
|
| 2016 | | $2,017 | | $930 | | $1,155 | | $710 | | $552 | | $848 | | $246 | |
| $87 |
| |
| $41 |
| |
| $50 |
| |
| $32 |
| |
| $24 |
| |
| $37 |
| |
| $11 |
|
| 2017 - 2021 | | $13,058 | | $6,049 | | $7,304 | | $4,428 | | $2,955 | | $4,970 | | $1,927 | |
| 2017 | | |
| $96 |
| |
| $46 |
| |
| $56 |
| |
| $34 |
| |
| $25 |
| |
| $40 |
| |
| $1 |
|
| 2018 | | |
| $358 |
| |
| $168 |
| |
| $204 |
| |
| $125 |
| |
| $87 |
| |
| $142 |
| |
| $52 |
|
| 2019 | | |
| $398 |
| |
| $184 |
| |
| $223 |
| |
| $136 |
| |
| $90 |
| |
| $151 |
| |
| $59 |
|
| 2020 - 2024 | | |
| $2,593 |
| |
| $1,243 |
| |
| $1,434 |
| |
| $839 |
| |
| $506 |
| |
| $922 |
| |
| $456 |
|
Contributions
Entergy currently expects to contribute approximately $163$396 million to its qualified pension plans and approximately $80.4$66.9 million to other postretirement plans in 2012.2015. The expected 20122015 pension and other postretirement plan contributions of the Registrant Subsidiaries for their employees are shown below. The required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012, however Entergy’s preliminary estimates of 2012 funding requirements indicate that the contributions will not exceed historical levels of pension contributions.2015.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries expect to contribute approximately the following to the qualified pension and other postretirement plans for their employees in 2012:2015:
| | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | | | | | | | | | | | | | | | | |
| | | (In Thousands) | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | | (In Thousands) |
| Pension Contributions | | $31,855 | | $10,765 | | $23,774 | | $8,400 | | $4,817 | | $7,653 | | $8,855 |
| $92,523 |
| |
| $32,455 |
| |
| $56,960 |
| |
| $22,472 |
| |
| $10,910 |
| |
| $17,166 |
| |
| $20,778 |
|
| Other Postretirement Contributions | | $26,675 | | $8,288 | | $9,953 | | $5,469 | | $3,669 | | $5,153 | | $4,090 |
| $16,904 |
| |
| $8,921 |
| |
| $9,885 |
| |
| $535 |
| |
| $3,669 |
| |
| $3,231 |
| |
| $475 |
|
Actuarial Assumptions
The significant actuarial assumptions used in determining the pension PBO and the other postretirement benefit APBO as of December 31, 2011,2014, and 20102013 were as follows:
| | | 2011 | | 2010 | | | |
| | | | | 2014 | | 2013 |
| Weighted-average discount rate: | | | | | | |
| Qualified pension | 5.10% - 5.20% | | 5.60% - 5.70% | 4.03% - 4.40% Blended 4.27% | | 5.04% - 5.26% Blended 5.14% |
| Other postretirement | 5.10% | | 5.50% | 4.23% | | 5.05% |
| Non-qualified pension | 4.40% | | 4.90% | 3.61% | | 4.29% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% | 4.23% | | 4.23% |
| Assumed health care trend rate: | | |
| Pre-65 | | 7.10% | | 7.25% |
| Post-65 | | 7.70% | | 7.00% |
| Ultimate rate | | 4.75% | | 4.75% |
| Year ultimate rate is reached and beyond: | |
| |
|
| Pre-65 | | 2023 | | 2022 |
| Post-65 | | 2023 | | 2022 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The significant actuarial assumptions used in determining the net periodic pension and other postretirement benefit costs for 2011, 2010,2014, 2013, and 20092012 were as follows:
|
| | | | | |
| | 2014 | | 2013 | | 2012 |
| Weighted-average discount rate: | | | | | |
| Qualified pension | 5.04%-5.26% Blended 5.14% | | 4.31% - 4.5% Blended 4.36% | | 5.10% - 5.20% Blended 5.11% |
| Other postretirement | 5.05% | | 4.36% | | 5.10% |
| Non-qualified pension | 4.29% | | 3.37% | | 4.40% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% | | 4.23% |
Expected long-term rate of return on plan assets: | | | | | |
| Pension assets | 8.50% | | 8.50% | | 8.50% |
| Other postretirement tax deferred assets | 8.30% | | 8.50% | | 8.50% |
| Other postretirement taxable assets | 6.50% | | 6.50% | | 6.50% |
| Assumed health care trend rate: | | | | | |
| Pre-65 | 7.25% | | 7.50% | | 7.75% |
| Post-65 | 7.00% | | 7.25% | | 7.50% |
| Ultimate rate | 4.75% | | 4.75% | | 4.75% |
| Year ultimate rate is reached and beyond: |
| |
| |
|
| Pre-65 | 2022 | | 2022 | | 2022 |
| Post-65 | 2022 | | 2022 | | 2022 |
| | 2011 | | 2010 | | 2009 |
| | | | | | |
| Weighted-average discount rate: | | | | | |
| Qualified pension | 5.60% - 5.70% | | 6.10% - 6.30% | | 6.75% |
| Other postretirement | 5.50% | | 6.10% | | 6.70% |
| Non-qualified pension | 4.90% | | 5.40% | | 6.75% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% | | 4.23% |
Expected long-term rate of return on plan assets: | | | | | |
| Pension assets | 8.50% | | 8.50% | | 8.50% |
| Other postretirement non-taxable assets | 7.75% | | 7.75% | | 8.50% |
| Other postretirement taxable assets | 5.50% | | 5.50% | | 6.00% |
Entergy’s other postretirement benefit transition obligations are beingwere amortized over 20 years ending in 2012.
With respect to mortality assumptions, Entergy used the RP-2014 Employee and Health Annuitant Tables, with a fully generational MP-2014 projection scale, in determining its December 31, 2014 pension plans’ PBOs and other postretirement benefit APBO. The assumed health care cost trend ratemortality assumptions used in measuringdetermining Entergy’s December 31, 20112013 pension plans’ PBOs were the 1994 Group Annuity Mortality Table and RP 2000 Combined Health Mortality, with generational (using Scale AA) projected mortality improvement. The mortality assumption used in determining the December 31, 2013 other postretirement APBO was 7.75% for pre-65 retirees and 7.5% for post-65 retirees for 2012, gradually decreasing each successive year until it reaches 4.75% in 2022 and beyond for both pre-65 and post-65 retirees. The assumed health care cost trend rate used in measuring Entergy’s 2011 Net Other Postretirement Benefit Cost was 8.5% for pre-65 retirees and 8.0% for post-65 retirees for 2011, gradually decreasing each successive year until it reaches 4.75% in 2019 and beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees. A one percentage point change in the assumed health care cost trend rate for 2011 would have the following effects:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
2011 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | | Increase /(Decrease) (In Thousands) |
| | | | | | | | | |
Entergy Corporation and its subsidiaries | | $218,138 | | $23,318 | | ($183,492) | | ($18,721) |
A one percentage point change in the assumed health care cost trend rate for 20112014 would have the following effects for the Registrant Subsidiaries:effects:
|
| | | | | | | | | | | | | | | | |
| | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
| 2014 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | | Increase /(Decrease) (In Thousands) |
Entergy Corporation and its subsidiaries | |
| $234,971 |
| |
| $16,769 |
| |
| ($190,996 | ) | |
| ($13,566 | ) |
| | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
| 2011 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | | Increase/(Decrease) (In Thousands) |
| | | | | | | | | |
| Entergy Arkansas | | $34,824 | | $3,427 | | ($28,552) | | ($2,723) |
| Entergy Gulf States Louisiana | | $26,263 | | $2,576 | | ($21,412) | | ($2,034) |
| Entergy Louisiana | | $23,274 | | $2,558 | | ($20,827) | | ($2,097) |
| Entergy Mississippi | | $11,603 | | $1,113 | | ($9,529) | | ($884) |
| Entergy New Orleans | | $6,509 | | $628 | | ($6,229) | | ($541) |
| Entergy Texas | | $16,598 | | $1,454 | | ($13,689) | | ($1,159) |
| System Energy | | $9,029 | | $999 | | ($7,294) | | ($785) |
Medicare Prescription Drug, Improvement and Modernization Act of 2003
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 became law. The Act introduces a prescription drug benefit cost under Medicare (Part D), which started in 2006, as well as a federal subsidy to employers who provide a retiree prescription drug benefit that is at least actuarially equivalent to Medicare Part D.
The actuarially estimated effect of future Medicare subsidies reduced the December 31, 2011 and 2010 Accumulated Postretirement Benefit Obligation by $274 million and $267 million, respectively, and reduced the 2011, 2010, and 2009 other postretirement benefit cost by $33.0 million, $26.6 million, and $24.0 million, respectively. In 2011, Entergy received $4.6 million in Medicare subsidies for prescription drug claims.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The actuarially estimated effect of future Medicare subsidies andA one percentage point change in the actual subsidies receivedassumed health care cost trend rate for 2014 would have the following effects for the Registrant Subsidiaries was as follows:for their employees:
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | Increase/(Decrease) In Thousands |
| Impact on 12/31/2011 APBO | | ($55,684) | | ($27,834) | | ($31,693) | | ($17,687) | | ($10,500) | | ($19,346) | | ($11,036) |
| Impact on 12/31/2010 APBO | | ($55,459) | | ($27,330) | | ($31,259) | | ($17,998) | | ($11,073) | | ($19,830) | | ($10,431) |
| | | | | | | | | | | | | | | |
Impact on 2011 other postretirement benefit cost | | ($6,309) | | ($3,923) | | ($3,889) | | ($2,016) | | ($1,170) | | ($1,528) | | ($1,403) |
Impact on 2010 other postretirement benefit cost | | ($5,254) | | ($3,401) | | ($3,143) | | ($1,649) | | ($1,070) | | ($1,109) | | ($1,068) |
| | | | | | | | | | | | | | | |
Medicare subsidies received in 2011 | | $1,025 | | $585 | | $683 | | $336 | | $358 | | $489 | | $116 |
|
| | | | | | | | | | | | | | | | |
| | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
| 2014 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | | Increase/(Decrease) (In Thousands) |
| Entergy Arkansas | |
| $39,286 |
| |
| $2,448 |
| |
| ($31,753 | ) | |
| ($1,971 | ) |
| Entergy Gulf States Louisiana | |
| $27,929 |
| |
| $2,092 |
| |
| ($22,591 | ) | |
| ($1,671 | ) |
| Entergy Louisiana | |
| $23,779 |
| |
| $1,681 |
| |
| ($19,452 | ) | |
| ($1,366 | ) |
| Entergy Mississippi | |
| $10,596 |
| |
| $754 |
| |
| ($8,596 | ) | |
| ($606 | ) |
| Entergy New Orleans | |
| $6,373 |
| |
| $386 |
| |
| ($5,317 | ) | |
| ($321 | ) |
| Entergy Texas | |
| $16,246 |
| |
| $1,148 |
| |
| ($13,397 | ) | |
| ($927 | ) |
| System Energy | |
| $8,716 |
| |
| $734 |
| |
| ($7,044 | ) | |
| ($586 | ) |
Defined Contribution Plans
Entergy sponsors the Savings Plan of Entergy Corporation and Subsidiaries (System Savings Plan). The System Savings Plan is a defined contribution plan covering eligible employees of Entergy and certain of its subsidiaries. The participating employing Entergy subsidiary makes matching contributions for all non-bargaining and certain bargaining employees to the System Savings Plan for all eligible participating employees in an amount equal to either 70% or 100% of the participants’ basic contributions, up to 6% of their eligible earnings per pay period. The 70% matchmatching contribution is allocated to investments as directed by the employee.
Entergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries IV (established in March 2002), the Savings Plan of Entergy Corporation and Subsidiaries VI (established in April 2007), and the Savings Plan of Entergy Corporation and Subsidiaries VII (established in April 2007) to which matching contributions are also made. The plans are defined contribution plans that cover eligible employees, as defined by each plan, of Entergy and certain of its subsidiaries. Effective June 3, 2010, employees participating in the Savings Plan of Entergy Corporation and Subsidiaries II (Savings Plan II) were transferred into the System Savings Plan when Savings Plan II merged into the System Savings Plan.
Entergy’s subsidiaries’ contributions to defined contribution plans collectively were $42.6$43.3 million in 2011, $41.82014, $44.5 million in 2010,2013, and $41.9$43.7 million in 2009.2012. The majority of the contributions were to the System Savings Plan.
The Registrant Subsidiaries’ 2011, 2010,2014, 2013, and 20092012 contributions to defined contribution plans for their employees were as follows:
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| | | | | | | | | | | | | |
| 2011 | | $3,183 | | $1,804 | | $2,260 | | $1,894 | | $725 | | $1,613 |
| 2010 | | $3,177 | | $1,792 | | $2,289 | | $1,886 | | $683 | | $1,626 |
| 2009 | | $3,197 | | $1,828 | | $2,356 | | $1,906 | | $732 | | $1,712 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| 2014 | |
| $3,044 |
| |
| $1,867 |
| |
| $2,266 |
| |
| $1,855 |
| |
| $710 |
| |
| $1,563 |
|
| 2013 | |
| $3,351 |
| |
| $1,906 |
| |
| $2,393 |
| |
| $1,954 |
| |
| $769 |
| |
| $1,616 |
|
| 2012 | |
| $3,223 |
| |
| $1,842 |
| |
| $2,327 |
| |
| $1,875 |
| |
| $740 |
| |
| $1,601 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 12. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock options, and long-term incentiverestricted stock, performance units, and restricted liabilityunit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans which are shareholder-approved stock-based compensation
Entergy Corporation and Subsidiaries
Notes to Financial Statements
plans. The Equity Ownership Plan, as restated in February 2003 (2003 Plan), had 722,251885,200 authorized shares remaining for long-term incentive and restricted liabilityunit awards as of December 31, 2011.2014. Effective January 1, 2007, Entergy’s shareholders approved the 2007 Equity Ownership and Long-Term Cash Incentive Plan (2007 Plan). The maximum aggregate number of common shares that can be issued from the 2007 Plan for stock-based awards is 7,000,000 with no more than 2,000,000 available for non-option grants. The 2007 Plan, which only applies to awards made on or after January 1, 2007, will expire after 10 years. As of December 31, 2011,2014, there were 1,052,0351,104,547 authorized shares remaining for stock-based awards, all of which are available for non-option grants. Effective May 6, 2011, Entergy’s shareholders approved the 2011 Equity Ownership and Long-Term Cash Incentive Plan (2011 Plan). The maximum number of common shares that can be issued from the 2011 Plan for stock-based awards is 5,500,000 with no more than 2,000,000 available for incentive stock option grants. The 2011 Plan, which only applies to awards made on or after May 6, 2011, will expire after 10 years. As of December 31, 2011,2014, there were 5,495,2761,579,563 authorized shares remaining for stock-based awards, including 2,000,000 for incentive stock option grants.
Stock Options
Stock options are granted at exercise prices that equal the closing market price of Entergy Corporation common stock on the date of grant. Generally, stock options granted will become exercisable in equal amounts on each of the first three anniversaries of the date of grant. Unless they are forfeited previously under the terms of the grant, options expire ten years after the date of the grant if they are not exercised.
The following table includes financial information for stock options for each of the years presented:
| | | 2011 | | 2010 | | 2009 | | | | | |
| | (In Millions) | 2014 | | 2013 | | 2012 |
| | | | | | | (In Millions) |
| Compensation expense included in Entergy’s Consolidated Net Income | $10.4 | | $15.0 | | $16.8 | $4.1 | | $4.1 | | $7.7 |
| Tax benefit recognized in Entergy’s Consolidated Net Income | $4.0 | | $5.8 | | $6.5 | $1.6 | | $1.6 | | $3.0 |
| Compensation cost capitalized as part of fixed assets and inventory | $2.0 | | $2.9 | | $3.2 | $0.7 | | $0.7 | | $1.5 |
Entergy determines the fair value of the stock option grants by considering factors such as lack of marketability, stock retention requirements, and regulatory restrictions on exercisability in accordance with accounting standards. The stock option weighted-average assumptions used in determining the fair values are as follows:
| | | 2011 | | 2010 | | 2009 | | | | | |
| | | | | | | 2014 | | 2013 | | 2012 |
| Stock price volatility | 24.25% | | 25.73% | | 24.39% | 24.67% | | 24.61% | | 25.11% |
| Expected term in years | 6.64 | | 5.46 | | 5.33 | 6.95 | | 6.69 | | 6.55 |
| Risk-free interest rate | 2.70% | | 2.57% | | 2.22% | 2.16% | | 1.31% | | 1.22% |
| Dividend yield | 4.20% | | 3.74% | | 3.50% | 4.75% | | 4.75% | | 4.50% |
| Dividend payment per share | $3.32 | | $3.24 | | $3.00 | $3.32 | | $3.32 | | $3.32 |
Stock price volatility is calculated based upon the weeklydaily public stock price volatility of Entergy Corporation common stock over a period equal to the last four to five years.expected term of the award. The expected term of the options is based upon historical option exercises and the weighted average life of options when exercised and the estimated weighted average life of all vested but unexercised options. In 2008, Entergy implemented stock ownership guidelines for its senior executive officers. These
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A summary of stock option activity for the year ended December 31, 20112014 and changes during the year are presented below:
| | | Number of Options | | Weighted- Average Exercise Price | | Aggregate Intrinsic Value | | Weighted- Average Contractual Life |
| | | | | | | | | |
| Options outstanding as of January 1, 2011 | | 11,225,725 | | $72.45 | | | | |
| | | | | | | | | |
| Options granted | | 388,200 | | $72.79 | | | | |
| Options exercised | | (1,079,008) | | $42.43 | | | | |
| Options forfeited/expired | | (75,499) | | $86.62 | | | | |
| Options outstanding as of December 31, 2011 | | 10,459,418 | | $75.46 | | $- | | 4.7 years |
| | | | | | | | | |
| Options exercisable as of December 31, 2011 | | 9,011,257 | | $75.36 | | $- | | 4.1 years |
Weighted-average grant-date fair value of options granted during 2011 | | $11.48 | | | | | | |
|
| | | | | | | | |
| | Number of Options | | Weighted- Average Exercise Price | | Aggregate Intrinsic Value | | Weighted- Average Contractual Life |
| Options outstanding as of January 1, 2014 | 9,639,849 |
| | $80.06 | | | | |
| Options granted | 611,700 |
| | $63.17 | | | | |
| Options exercised | (2,852,350 | ) | | $68.19 | | | | |
| Options forfeited/expired | (117,803 | ) | | $82.48 | | | | |
| Options outstanding as of December 31, 2014 | 7,281,396 |
| | $83.25 | | $30,830,809 | | 4.3 years |
| Options exercisable as of December 31, 2014 | 6,232,998 |
| | $86.41 | | $6,657,504 | | 3.6 years |
Weighted-average grant-date fair value of options granted during 2014 | $8.71 | | | | | | |
The weighted-average grant-date fair value of options granted during the year was $13.18$8.00 for 20102013 and $12.47$9.42 for 2009.2012. The total intrinsic value of stock options exercised was $29.6$25.5 million during 2011, $36.62014, $5.7 million during 2010,2013, and $35.6$39.8 million during 2009.2012. The intrinsic value, which has no effect on net income, of the stock options exercised is calculated by the difference in Entergy Corporation’s common stock price on the date of exercise and the exercise price of the stock options granted. Because Entergy’s year-end stock price is less than the weighted average exercise price, theThe aggregate intrinsic value of outstandingthe stock options outstanding as of December 31, 20112014 was zero. The intrinsic value of “in the money” stock options is $67 million as of December 31, 2011.$30.8 million. Entergy recognizes compensation cost over the vesting period of the options based on their grant-date fair value. The total fair value of options that vested was approximately $16$4 million during 2011, $212014, $11 million during 2010,2013, and $22$11 million during 2009.2012.
The following table summarizes information about stock options outstanding as of December 31, 2011:2014:
|
| | | | | | | | | | | | | | | |
| | | | Options Outstanding | | Options Exercisable |
| Range of | | As of | | Weighted-Avg. Remaining Contractual Life-Yrs. | | Weighted Avg. Exercise Price | | Number Exercisable as of | | Weighted Avg. Exercise Price |
| Exercise Prices | | 12/31/2014 | | | | 12/31/2014 | |
| $51 | - | $64.99 | | 1,138,602 |
| | 8.6 | | $63.84 | | 192,152 |
| | $64.60 |
| $65 | - | $78.99 | | 3,095,377 |
| | 4.4 | | $74.31 | | 2,993,429 |
| | $74.41 |
| $79 | - | $91.99 | | 1,604,717 |
| | 2.1 | | $91.82 | | 1,604,717 |
| | $91.82 |
| $92 | - | $108.20 | | 1,442,700 |
| | 3.1 | | $108.20 | | 1,442,700 |
| | $108.20 |
| $51 | - | $108.20 | | 7,281,396 |
| | 4.3 | | $83.25 | | 6,232,998 |
| | $86.41 |
| | | Options Outstanding | | Options Exercisable |
Range of Exercise Prices | | As of 12/31/2011 | | Weighted-Avg. Remaining Contractual Life-Yrs. | | Weighted- Avg. Exercise Price | | Number Exercisable as of 12/31/2011 | | Weighted- Avg. Exercise Price |
| | | | | | | | | | | |
| $37 - $50.99 | | 1,468,761 | | 0.6 | | $43.22 | | 1,468,761 | | $43.22 |
| $51 - $64.99 | | 966,155 | | 2.2 | | $58.58 | | 966,155 | | $58.58 |
| $65 - $78.99 | | 4,911,618 | | 5.8 | | $73.09 | | 3,463,457 | | $71.86 |
| $79 - $91.99 | | 1,627,384 | | 5.1 | | $91.82 | | 1,627,384 | | $91.82 |
| $92 - $108.20 | | 1,485,500 | | 6.1 | | $108.20 | | 1,485,500 | | $108.20 |
| $37 - $108.20 | | 10,459,418 | | 4.7 | | $75.46 | | 9,011,257 | | $75.36 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Stock-based compensation cost related to non-vested stock options outstanding as of December 31, 20112014 not yet recognized is approximately $10$5.4 million and is expected to be recognized onover a weighted-average period of 1.31.7 years.
Restricted Stock Awards
In January 2011,2014 the Board approved and Entergy granted 166,800352,600 restricted stock awards under the 20072011 Equity Ownership and Long-term Cash Incentive Plan. The grantsrestricted stock awards were made effective as of January 27, 201130, 2014 and were valued at $72.79$63.17 per share, which was the closing price of Entergy’sEntergy Corporation’s common stock on that date. One-third of the restricted stock awards will vest upon each anniversary of the grant date and are expensed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
ratably over the three year vesting period. Shares of restricted stock have the same dividend and voting rights as other common stock and are considered issued and outstanding shares of Entergy upon vesting.
The following table includes financial information for restricted stock for each of the years presented:
| | | 2011 | | 2010 | | 2009 | | | | | |
| | (In Millions) | 2014 | | 2013 | | 2012 |
| | | | | | | (In Millions) |
| Compensation expense included in Entergy’s Consolidated Net Income | $3.9 | | $- | | $- | $19.3 | | $16.4 | | $11.4 |
| Tax benefit recognized in Entergy’s Consolidated Net Income | $1.5 | | $- | | $- | $7.5 | | $6.3 | | $4.4 |
| Compensation cost capitalized as part of fixed assets and inventory | $0.7 | | $- | | $- | $3.1 | | $2.6 | | $2.0 |
Long-Term Incentive AwardsPerformance Unit Program
Entergy grants long-term incentive awards earned under its stock benefit plans in the form of performance units, which are equal to the cash value of shares of Entergy Corporation common stock at the end of the performance period, which is the last trading day of the year. Performance units will pay out to the extent that the performance conditions are satisfied. In addition to the potential for equivalent share appreciation or depreciation, performance units will earn the cash equivalent of the dividends paid during the three-year3-year performance period applicable to each plan. The costs of incentive awards are charged to income over the three-year3-year period. Beginning with the 2012-2014 performance period, upon vesting, the performance units granted under the Long-Term Performance Unit Program will be settled in shares of Entergy common stock rather than cash. In January 2014 the Board approved and Entergy granted 226,792 performance units under the 2011 Equity Ownership and Long-Term Cash Incentive Plan. The performance units were made effective as of January 30, 2014, and were valued at $67.16 per share. Entergy considers factors, primarily market conditions, in determining the value of the performance units. Shares of the performance units have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.
The following table includes financial information for the long-term incentive awardsperformance units for each of the years presented:
|
| | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Millions) |
| Fair value of long-term performance units as of December 31, | $23.4 | |
| $11.1 |
| |
| $4.3 |
|
| Compensation expense included in Entergy’s Consolidated Net Income | $10.7 | |
| $6.0 |
| |
| ($5.0 | ) |
| Tax benefit (expense) recognized in Entergy’s Consolidated Net Income | $4.1 | |
| $2.3 |
| |
| ($1.9 | ) |
| Compensation cost capitalized as part of fixed assets and inventory | $1.5 | |
| $0.9 |
| |
| ($0.9 | ) |
| | 2011 | | 2010 | | 2009 |
| | (In Millions) |
| | | | | | |
| Fair value of long-term incentive awards as of December 31, | $7.3 | | $10.1 | | $17.2 |
Compensation expense included in Entergy’s Consolidated Net Income for the year | $0.7 | | ($0.9) | | $5.6 |
| Tax benefit (expense) recognized in Entergy’s Consolidated Net Income for the year | $0.3 | | ($0.4) | | $2.2 |
| Compensation cost capitalized as part of fixed assets and inventory | $0.1 | | $0.1 | | $1.0 |
Entergy paid $0.7 millionThere was no payout in 20112014 for awards earned under the Long-Term Incentive Plan. The distribution isperformance units granted in 2011 applicable to the 20082011 – 20102013 performance period.
Restricted Unit Awards
Entergy grants restricted unit awards earned under its stock benefit plans in the form of stock units that are subject to time-based restrictions. The restricted units are equal to the cash value of shares of Entergy Corporation common stock at the time of vesting. The costs of restricted unit awards are charged to income over the restricted period, which varies from grant to grant. The average vesting period for restricted unit awards granted is 36 months. As of December 31, 2011,2014, there were 138,96598,334 unvested restricted units that are expected to vest over an average period of 1021 months.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for restricted unit awards for each of the years presented:
| | | 2011 | | 2010 | | 2009 | | | | | |
| | (In Millions) | 2014 | | 2013 | | 2012 |
| | | | | | | (In Millions) |
| Fair value of restricted awards as of December 31, | $6.6 | | $8.3 | | $4.6 | $3.3 | | $2.5 | | $3.0 |
Compensation expense included in Entergy’s Consolidated Net Income for the year | $3.7 | | $3.9 | | $2.0 | |
| Tax benefit recognized in Entergy’s Consolidated Net Income for the year | $1.4 | | $1.5 | | $0.8 | |
| Compensation expense included in Entergy’s Consolidated Net Income | | $2.2 | | $1.4 | | $1.3 |
| Tax benefit recognized in Entergy’s Consolidated Net Income | | $0.9 | | $0.6 | | $0.5 |
| Compensation cost capitalized as part of fixed assets and inventory | $0.7 | | $0.9 | | $0.5 | $0.3 | | $0.2 | | $0.2 |
Entergy paid $5.9$1.7 million in 20112014 for awards under the Restricted Units Awards Plan.
NOTE 13. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy’s reportable segments as of December 31, 20112014 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 operationdecommissioning of six nuclear power plants located in the northern United States and the sale of the electric power produced by thoseits 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, including the earnings on the proceeds of sales of previously-owned businesses.activity.
Entergy’s segment financial information is as follows:
2011 | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | | | | | | | |
| 2014 | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| | | | (In Thousands) |
| Operating revenues | | $8,841,827 | | $2,413,773 | | $4,157 | | ($30,684) | | $11,229,073 | |
| $9,773,822 |
| |
| $2,719,404 |
| |
| $1,821 |
| |
| ($126 | ) | |
| $12,494,921 |
|
| Deprec., amort. & decomm. | | $1,027,597 | | $260,638 | | $4,562 | | $- | | $1,292,797 | |
| Depreciation, amortization, & decommissioning | | |
| $1,170,122 |
| |
| $417,435 |
| |
| $3,702 |
| |
| $— |
| |
| $1,591,259 |
|
| Interest and investment income | | $158,737 | | $136,492 | | $28,830 | | ($194,925) | | $129,134 | |
| $171,217 |
| |
| $113,959 |
| |
| $22,159 |
| |
| ($159,649 | ) | |
| $147,686 |
|
| Interest expense | | $455,739 | | $20,634 | | $121,599 | | ($84,345) | | $513,627 | |
| $531,729 |
| |
| $16,646 |
| |
| $120,908 |
| |
| ($41,776 | ) | |
| $627,507 |
|
| Income taxes | | $27,311 | | $225,456 | | $33,496 | | $- | | $286,263 | |
| $472,148 |
| |
| $176,988 |
| |
| ($59,539 | ) | |
| $— |
| |
| $589,597 |
|
| Consolidated net income (loss) | | $1,123,866 | | $491,841 | | ($137,755) | | ($110,580) | | $1,367,372 | |
| $846,496 |
| |
| $294,521 |
| |
| ($62,887 | ) | |
| ($117,873 | ) | |
| $960,257 |
|
| Total assets | | $32,734,549 | | $10,533,080 | | ($507,860) | | ($2,058,070) | | $40,701,699 | |
| $38,295,309 |
| |
| $10,279,500 |
| |
| ($654,831 | ) | |
| ($1,392,124 | ) | |
| $46,527,854 |
|
| Investment in affiliates - at equity | | $199 | | $44,677 | | $- | | $- | | $44,876 | |
| $199 |
| |
| $36,035 |
| |
| $— |
| |
| $— |
| |
| $36,234 |
|
Cash paid for long-lived asset additions | | $2,351,913 | | $1,048,146 | | ($402) | | $- | | $3,399,657 | |
| $2,113,631 |
| |
| $615,021 |
| |
| $87 |
| |
| $— |
| |
| $2,728,739 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2010 | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| | | | (In Thousands) |
| Operating revenues | | $8,941,332 | | $2,566,156 | | $7,442 | | ($27,353) | | $11,487,577 | |
| $9,101,786 |
| |
| $2,312,758 |
| |
| $3,558 |
| |
| ($27,155 | ) | |
| $11,390,947 |
|
| Deprec., amort. & decomm. | | $1,006,385 | | $270,658 | | $4,587 | | $- | | $1,281,630 | |
| Depreciation, amortization, & decommissioning | | |
| $1,157,843 |
| |
| $341,163 |
| |
| $4,142 |
| |
| $— |
| |
| $1,503,148 |
|
| Interest and investment income | | $182,493 | | $171,158 | | $44,757 | | ($212,953) | | $185,455 | |
| $186,724 |
| |
| $137,727 |
| |
| $24,179 |
| |
| ($149,330 | ) | |
| $199,300 |
|
| Interest expense | | $493,241 | | $71,817 | | $129,505 | | ($119,396) | | $575,167 | |
| $509,173 |
| |
| $16,323 |
| |
| $122,291 |
| |
| ($43,750 | ) | |
| $604,037 |
|
| Income taxes (benefits) | | $454,227 | | $268,649 | | ($105,637) | | $- | | $617,239 | |
| Consolidated net income | | $829,719 | | $489,422 | | $44,721 | | ($93,557) | | $1,270,305 | |
| Income taxes | | |
| $365,917 |
| |
| ($77,471 | ) | |
| ($62,465 | ) | |
| $— |
| |
| $225,981 |
|
| Consolidated net income (loss) | | |
| $846,215 |
| |
| $42,976 |
| |
| ($53,039 | ) | |
| ($105,580 | ) | |
| $730,572 |
|
| Total assets | | $31,080,240 | | $10,102,817 | | ($714,968) | | ($1,782,813) | | $38,685,276 | |
| $35,539,585 |
| |
| $9,696,705 |
| |
| ($486,438 | ) | |
| ($1,343,406 | ) | |
| $43,406,446 |
|
| Investment in affiliates - at equity | | $199 | | $59,456 | | ($18,958) | | $- | | $40,697 | |
| $199 |
| |
| $40,151 |
| |
| $— |
| |
| $— |
| |
| $40,350 |
|
Cash paid for long-lived asset additions | | $1,766,609 | | $687,313 | | $75 | | $- | | $2,453,997 | |
| $2,268,083 |
| |
| $626,322 |
| |
| $49 |
| |
| $— |
| |
| $2,894,454 |
|
2009 | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| | | (In Thousands) |
| | | | | | | | | | | |
| Operating revenues | | $8,055,353 | | $2,711,078 | | $5,682 | | ($26,463) | | $10,745,650 |
| Deprec., amort. & decomm. | | $1,025,922 | | $251,147 | | $4,769 | | $- | | $1,281,838 |
| Interest and investment income (loss) | | $180,505 | | $196,492 | | ($10,470) | | ($129,899) | | $236,628 |
| Interest expense | | $462,206 | | $78,278 | | $86,420 | | ($56,460) | | $570,444 |
| Income taxes (benefits) | | $388,682 | | $322,255 | | ($78,197) | | $- | | $632,740 |
| Consolidated net income (loss) | | $708,905 | | $641,094 | | ($25,511) | | ($73,438) | | $1,251,050 |
| Total assets | | $29,892,088 | | $11,134,791 | | ($646,756) | | ($2,818,170) | | $37,561,953 |
| Investment in affiliates - at equity | | $200 | | $- | | $39,380 | | $- | | $39,580 |
Cash paid for long-lived asset additions | | $1,872,997 | | $661,596 | | ($5,874) | | $- | | $2,528,719 |
|
| | | | | | | | | | | | | | | | | | | | |
| 2012 | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| | | (In Thousands) |
| Operating revenues | |
| $8,005,091 |
| |
| $2,326,309 |
| |
| $4,048 |
| |
| ($33,369 | ) | |
| $10,302,079 |
|
| Depreciation, amortization, & decommissioning | |
| $1,076,845 |
| |
| $248,143 |
| |
| $4,357 |
| |
| $— |
| |
| $1,329,345 |
|
| Interest and investment income | |
| $150,292 |
| |
| $105,062 |
| |
| $30,656 |
| |
| ($158,234 | ) | |
| $127,776 |
|
| Interest expense | |
| $476,485 |
| |
| $17,900 |
| |
| $126,913 |
| |
| ($52,014 | ) | |
| $569,284 |
|
| Income taxes | |
| $49,340 |
| |
| $61,329 |
| |
| ($79,814 | ) | |
| $— |
| |
| $30,855 |
|
| Consolidated net income (loss) | |
| $960,322 |
| |
| $40,427 |
| |
| ($26,167 | ) | |
| ($106,219 | ) | |
| $868,363 |
|
| Total assets | |
| $35,438,130 |
| |
| $9,623,345 |
| |
| ($509,985 | ) | |
| ($1,348,988 | ) | |
| $43,202,502 |
|
| Investment in affiliates - at equity | |
| $199 |
| |
| $46,539 |
| |
| $— |
| |
| $— |
| |
| $46,738 |
|
Cash paid for long-lived asset additions | |
| $3,182,695 |
| |
| $577,652 |
| |
| $619 |
| |
| $— |
| |
| $3,760,966 |
|
Businesses marked with * are sometimes referred to as the “competitive businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.
On April 5, 2010, Entergy announced that, effective immediately, it planned to unwind the business infrastructure associated with its proposed plan to spin-off its non-utility nuclear business. As a result of the plan to unwind the business infrastructure, Entergy recordedEarnings were negatively affected by expenses in the2013 of approximately $110 million ($70 million after-tax), including approximately $85 million ($55 million after-tax) for Utility and $25 million ($15 million after-tax) for Entergy Wholesale Commodities, segment. Other operating and maintenance expense includes the write-offexpenses in 2014 of $64approximately $20 million of capital costs, primarily($12 million after-tax), including approximately $15 million ($9 million after-tax) for software that will not be utilized. Interest charges include the write-off of $39Utility and $5 million of debt financing costs, primarily incurred($3 million after-tax) for the $1.2 billion credit facility related to the planned spin-off of Entergy’s non-utility nuclear business that will not be used. Approximately $16 million of other costs were incurred in 2010Entergy Wholesale Commodities, recorded in connection with unwindinga strategic imperative intended to optimize the planned non-utility nuclear spin-off transaction.organization through a process known as human capital management. In July 2013 management completed a comprehensive review of Entergy’s organization design and processes. This effort resulted in a new internal organization structure, which resulted in the elimination of approximately 800 employee positions. The restructuring costs associated with this phase of human capital management included implementation costs, severance expenses, benefits-related costs, including pension curtailment losses and special termination benefits, and impairments of corporate property, plant, and equipment. The implementation costs, severance costs, and benefits-related costs are included in “Other operation and maintenance” in the consolidated income statements. The property, plant, and equipment impairments are included in “Asset write-offs, impairments, and related charges” in the consolidated income statements. Total restructuring charges were comprised of the following:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | 2014 | | Remaining Accrual as of December 31, 2014 |
| | Restructuring Costs | | Paid In Cash | | Non-Cash Portion | | Restructuring Costs | | Paid In Cash | | Non-Cash Portion | |
| | (In Millions) |
| Implementation costs |
| $19 |
| |
| $19 |
| |
| $— |
| |
| $9 |
| |
| $9 |
| |
| $— |
| |
| $— |
|
| Severance costs | 45 |
| | 6 |
| | — |
| | 11 |
| | 44 |
| | — |
| | 6 |
|
| Benefits-related costs | 26 |
| | — |
| | 26 |
| | — |
| | — |
| | — |
| | — |
|
| Property, plant, and equipment impairments | 20 |
| | — |
| | 20 |
| | — |
| | — |
| | — |
| | — |
|
| Total |
| $110 |
| |
| $25 |
| |
| $46 |
| |
| $20 |
| |
| $53 |
| |
| $— |
| |
| $6 |
|
Geographic Areas
For the years ended December 31, 20112014, 2013, and 2010,2012, the amount of revenue Entergy derived from outside of the United States was insignificant. As of December 31, 20112014 and 2010,2013, Entergy had no long-lived assets located outside of the United States.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 14. EQUITY METHOD INVESTMENTS (Entergy Corporation)
As of December 31, 2011,2014, Entergy owns investments in the following companies that it accounts for under the equity method of accounting:
|
| | | | | | |
| Investment | | Ownership | | Description |
| | | | | |
Entergy-Koch | | 50% partnership interest | | Entergy-Koch was in the energy commodity marketing and trading business and gas transportation and storage business until the fourth quarter 2004 when these businesses were sold. |
| | | | |
| RS Cogen LLC | | 50% 50 | % | member interest | | Co-generation project that produces power and steam on an industrial and merchant basis in the Lake Charles, Louisiana area. |
| | | | | | |
| Top Deer | | 50% 50 | % | member interest | | Wind-powered electric generation joint venture. |
Following is a reconciliation of Entergy’s investments in equity affiliates:
| | | | 2011 | | 2010 | | 2009 | | | | | | | |
| | | (In Thousands) | 2014 | | 2013 | | 2012 |
| | | | | | | | (In Thousands) |
| Beginning of year | | $40,697 | | $39,580 | | $66,247 |
| $40,350 |
| |
| $46,738 |
| |
| $44,876 |
|
| Loss from the investments | | (88) | | (2,469) | | (7,793) | |
| Income (loss) from the investments | | (5,169 | ) | | (1,702 | ) | | 1,162 |
|
| Dispositions and other adjustments | | 4,267 | | 3,586 | | (18,874) | 1,053 |
| | (4,686 | ) | | 700 |
|
| End of year | | $44,876 | | $40,697 | | $39,580 |
| $36,234 |
| |
| $40,350 |
| |
| $46,738 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Transactions with equity method investees
Entergy Gulf States Louisiana purchased approximately $41.1$3.2 million $50.8in 2013 and $2.8 million and $49.3 millionin 2012 of electricity generated from Entergy’s share of RS CogenCogen. Entergy Gulf States Louisiana made no purchases in 2011, 2010, and 2009, respectively.2014 of electricity generated from Entergy’s share of RS Cogen. Entergy’s operating transactions with its other equity method investees were not significant in 2011, 2010,2014, 2013, or 2009.2012.
NOTE 15. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and Entergy Louisiana)Mississippi)
Acquisitions
AcadiaHot Spring Energy Facility
In April 2011,November 2012, Entergy LouisianaArkansas purchased Unit 2 of the AcadiaHot Spring Energy Center,Facility, a 580620 MW generatingcombined-cycle natural gas turbine unit located near Eunice, Louisiana,in Malvern, Arkansas, from an independent power producer. The Acadia Energy Center, which entered commercial service in 2002, consists of two combined-cycle gas-fired generating units, each nominally rated at 580 MW. Entergy Louisiana purchased 100 percent of Acadia Unit 2 and a 50 percent ownership interest in the facility’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
common assetsKGen Hot Spring LLC for approximately $300$253 million. In a separate transaction, Cleco Power acquired Acadia Unit 1 and the other 50 percent interest in the facility’s common assets. Cleco Power will serve as operator for the entire facility. The FERC and the LPSCAPSC approved the transaction.
Rhode Island StateHinds Energy CenterFacility
In December 2011 a subsidiary in theNovember 2012, Entergy Wholesale Commodities business segmentMississippi purchased the Rhode Island StateHinds Energy Center,Facility, a 583450 MW combined-cycle natural gas-fired combined-cycle generating plantgas turbine unit located in Johnston, Rhode Island,Jackson, Mississippi, from a subsidiary of NextEra Energy Resources,KGen Hinds LLC for approximately $346$206 million. The Rhode Island State Energy Center began commercial operation in 2002.FERC and the MPSC approved the transaction.
Palisades Purchased Power Agreement
Entergy’s purchase of the Palisades plant in 2007 included a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant’s output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. For the PPA, which was at below-market prices at the time of the acquisition, Entergy will amortize a liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the difference between the present value calculated at the date of acquisition of each year’s difference between revenue under the agreement and revenue based on estimated market prices. Amounts amortized to revenue were $43$16 million in 2011, $462014, $18 million in 2010,2013, and $53$17 million in 2009.2012. The amounts to be amortized to revenue for the next five years will be $17$15 million in 2012, $182015, $13 million for 2013, $162016, $12 million for 2014, $152017, $8 million for 2015,2018, and $13 million for 2016.2019.
NYPA Value Sharing Agreements
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, Entergy subsidiaries and NYPA amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, Entergy subsidiaries will makemade annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will paypaid NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million. The annual payment for each year’s output iswas due by January 15 of the following year. Entergy will recordrecorded the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. An amount equal to the liability will bewas recorded to the plant asset account as contingent purchase price consideration for the plants. In 2011, 2010,2014, 2013, and 2009,2012, Entergy Wholesale Commodities recorded approximately $72 million as plant for generation during each of those years. This amount will bewas depreciated over the expected remaining useful life of the plants.
Dispositions
Harrison County
In the fourth quarter 2010, an Entergy Wholesale Commodities subsidiary sold its ownership interest in the Harrison County Power Project 550 MW combined-cycle plant to two Texas electric cooperatives that owned a minority share of the Marshall, Texas unit. Entergy sold its 61 percent share of the plant for $219 million and realized a gain of $44.2 million ($27.2 million net-of-tax) on the sale.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Dispositions
In November 2013, Entergy sold Entergy Solutions District Energy, a business wholly-owned by Entergy in the Entergy Wholesale Commodities segment that owns and operates district energy assets serving the business districts in Houston and New Orleans. Entergy sold Entergy Solutions District Energy for $140 million and realized a pre-tax gain of $44 million on the sale.
NOTE 16. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market and Commodity RisksRisk
In the normal course of business, Entergy is exposed to a number of market and commodity 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 instrumentcommodity or commodity.instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk. Entergy is subject to a number ofrisk including commodity and market risks, including:
Type of Risk | | Affected Businesses |
| | |
Powerprice risk, equity price, risk | | Utility, Entergy Wholesale Commodities |
Fuel price risk | | Utility, Entergy Wholesale Commodities |
Foreign currency exchange rate risk | | Entergy Wholesale Commodities |
Equity price and interest rate risk - investments | | Utility, Entergy Wholesale Commodities |
Entergy manages a portion of these risks using derivative instruments, some of which are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sales 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 futures, forwards, swaps, and options; and interest rate swaps.risk. Entergy will occasionally enter into financially settled option contractsuses derivatives primarily to managemitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under certain hedging transactions which may or may not be designated as hedging instruments.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 derivatives onlyforward contracts with its customers and also sells energy and capacity in the day ahead or spot markets. In addition to manage natural risks inherentits forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price falls, the combination of instruments is expected to settle in its physical or financial assets or liabilities.
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi primarily through the purchase of short-term natural gas swaps. These swaps are marked-to-market with offsetting regulatory assets or liabilities. The notional volumes of these swaps are based ongains that offset lower revenue from generation, which results in a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Derivativesnatural 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.
The fair values of Entergy’s derivative instruments on the consolidated balance sheets as of December 31, 2011 are as follows:
Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (a) | | Business |
| | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity forwards, swaps and options | | Prepayments and other (current portion) | | $197 million | | ($25) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other deferred debits and other assets (non-current portion) | | $112 million | | ($1) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity forwards, swaps and options | | Other current liabilities (current portion) | | $- | | ($-) | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other non-current liabilities (non-current portion) | | $1 million | | ($1) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity forwards, swaps and options | | Prepayments and other (current portion) | | $37 million | | ($8) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other deferred debits and other assets (non-current portion) | | $- | | ($-) | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity forwards, swaps and options | | Other current liabilities (current portion) | | $33 million | | ($33) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other non-current liabilities (non-current portion) | | $- | | ($-) | | Entergy Wholesale Commodities |
Natural gas swaps | | Other current liabilities | | $30 million | | ($-) | | Utility |
Entergy Corporation and Subsidiaries
Notesenters into derivatives to Financial Statements
The fair values of Entergy’s derivative instruments on the consolidated balance sheets as of December 31, 2010 are as follows:
Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (a) | | Business |
| | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity forwards, swaps and options | | Prepayments and other (current portion) | | $160 million | | ($7) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other deferred debits and other assets (non-current portion) | | $82 million | | ($29) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity forwards, swaps and options | | Other current liabilities (current portion) | | $5 million | | ($5) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other non-current liabilities (non-current portion) | | $47 million | | ($30) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity forwards, swaps and options | | Prepayments and other (current portion) | | $2 million | | ($-) | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other deferred debits and other assets (non-current portion) | | $14 million | | ($8) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity forwards, swaps and options | | Other current liabilities (current portion) | | $2 million | | ($2) million | | Entergy Wholesale Commodities |
Electricity forwards, swaps and options | | Other non-current liabilities (non-current portion) | | $7 million | | ($7) million | | Entergy Wholesale Commodities |
Natural gas swaps | | Other current liabilities | | $2 million | | ($-) | | Utility |
(a) | The balances of derivative assets and liabilities in these tables are presented gross. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented on the Entergy Consolidated Balance Sheets on a net basis in accordance with accounting guidance for Derivatives and Hedging. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the years ended December 31, 2011, 2010, and 2009 is as follows:
Instrument
| | Amount of gain
recognized in AOCI
(effective portion)
| | Income Statement location
| | Amount of gain
reclassified from
accumulated OCI into
income (effective portion)
|
| | | | | | |
2011 | | | | | | |
Electricity forwards, swaps and options | | $296 million | | Competitive businesses operating revenues | | $168 million |
| | | | | | |
2010 | | | | | | |
Electricity forwards, swaps and options | | $206 million | | Competitive businesses operating revenues | | $220 million |
| | | | | | |
2009 | | | | | | |
Electricity forwards, swaps, and options | | $315 million | | Competitive businesses operating revenues | | $322 million |
manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. Based on market prices as of December 31, 2011, cash flow hedges relating to power sales totaled $310 million of net unrealized gains. Approximately $197 million is expected to be reclassified from accumulated other comprehensive income (OCI) to operating revenues in the next twelve months. The actual amount reclassified from accumulated OCI, however, could vary due to future changes in market prices. Gains totaling approximately $168 million, $220 million, and $322 million were realized on the maturity of cash flow hedges, before taxes of $59 million, $77 million, and $113 million for the years ended December 31, 2011, 2010, and 2009, respectively. Unrealized gains or losses recorded in OCI result from hedging power output at the Entergy Wholesale Commodities power plants. The related gains or losses from hedging power are included in operating revenues when realized. The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at December 31, 20112014 is approximately three3 years. Planned generation currently sold forwardunder contract from Entergy Wholesale Commodities nuclear power plants is 88%86% for 20122015, of which approximately 47%62% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for 2015 is 35 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 changecollateral agreements require a counterparty to post cash or letters of credit in the valueevent an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of Entergy’s cash flow hedges dueall positions in the event of a failure or inability to ineffectiveness was $6.1 million forpost collateral.
Certain of the year ended December 31, 2011 and was insignificant for the year ended December 31, 2010. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. Certain agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations when the current market prices exceed the contracted power prices. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.guarantee. As of December 31, 2011, there were no hedge2014, derivative contracts with counterparties1 counterparty were in a liability position. position (approximately $1 million total). As of December 31, 2013, derivative contracts with 9 counterparties were in a liability position (approximately $187 million total). In addition to the corporate guarantee, $47 million in cash collateral was required to be posted. If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is typically ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures. These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans. The total volume of natural gas swaps outstanding as of December 31, 2014 is 21,475,000 MMBtu for Entergy, including 8,740,000 MMBtu for Entergy Gulf States Louisiana, 8,810,000 MMBtu for Entergy Louisiana, 3,230,000 MMBtu for Entergy Mississippi, and 695,000 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.
During the second quarter 2014, Entergy participated in the annual FTR auction process for the MISO planning year of June 1, 2014 through May 31, 2015. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records FTRs at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on FTRs held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on FTRs. The total volume of FTRs outstanding as of December 31, 2014 is 45,196 GWh for Entergy, including 9,844 GWh for Entergy Arkansas, 9,881 GWh for Entergy Gulf States Louisiana, 10,691 GWh for Entergy Louisiana, 5,403 GWh for Entergy Mississippi, 3,633 GWh for Entergy New Orleans, and 5,669 GWh for Entergy Texas. Credit support for FTRs held by the Utility operating
Entergy Corporation and Subsidiaries
Notes to Financial Statements
companies is covered by cash or letters of credit issued by each Utility operating company as required by MISO. Credit support for FTRs held by Entergy Wholesale Commodities is covered by cash. As of December 31, 2014, letters of credit posted with MISO covered the FTR exposure for Entergy Arkansas and Entergy Mississippi. No cash collateral was required to be posted for FTR exposure for the Utility operating companies or Entergy Wholesale Commodities.
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2014 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) | | $149 | | ($53) | | $96 | | Entergy Wholesale Commodities |
| Electricity swaps and options |
| Other deferred debits and other assets (non-current portion) | | $48 | | $— | | $48 | | Entergy Wholesale Commodities |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $24 | | ($24) | | $— | | Entergy Wholesale Commodities |
|
| | | | | | | | | | |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $97 | | ($25) | | $72 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $9 | | ($8) | | $1 | | Entergy Wholesale Commodities |
| FTRs | | Prepayments and other | | $50 | | ($3) | | $47 | | Utility and Entergy Wholesale Commodities |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $57 | | ($55) | | $2 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $8 | | ($8) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $20 | | $— | | $20 | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2013 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting 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) | | $118 | | ($99) | | $19 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $17 | | ($17) | | $— | | Entergy Wholesale Commodities |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $197 | | ($131) | | $66 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $46 | | ($17) | | $29 | | Entergy Wholesale Commodities |
|
| | | | | | | | | | |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $177 | | ($122) | | $55 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Prepayments and other | | $6 | | $— | | $6 | | Utility |
| FTRs | | Prepayments and other | | $36 | | ($2) | | $34 | | Utility and Entergy Wholesale Commodities |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $201 | | ($89) | | $112 | | Entergy Wholesale Commodities |
| |
| (a) | Represents the gross amounts of recognized assets/liabilities |
| |
| (b) | Represents the netting of fair value balances with the same counterparty |
| |
| (c) | Represents the net amounts of assets/liabilities presented on the Entergy Consolidated Balance Sheets |
| |
| (d) | Excludes cash collateral in the amounts of $25 million held as of December 31, 2014 and $47 million posted and $4 million held as of December 31, 2013, respectively |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the years ended December 31, 2014, 2013, and 2012 are as follows:
|
| | | | | | |
Instrument | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain (loss) reclassified from AOCI into income (a) |
| | | (In Millions) | | | | (In Millions) |
| 2014 | | | | | | |
| Electricity swaps and options | | $81 | | Competitive business operating revenues | | ($193) |
| | | | | | | |
| 2013 | | | | | | |
| Electricity swaps and options | | ($190) | | Competitive business operating revenues | | $47 |
| | | | | | | |
| 2012 | | | | | | |
| Electricity swaps and options | | $111 | | Competitive business operating revenues | | $268 |
| |
| (a) | Before taxes of ($68) million, $18 million, and $94 million, for the years ended December 31, 2014, 2013, and 2012, respectively |
At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive businesses operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness was $7 million, ($6) million, and ($14) million for the years ended December 31, 2014, 2013, and 2012, respectively.
Based on market prices as of December 31, 2014, unrealized gains recorded in AOCI on cash flow hedges relating to power sales totaled $156 million of net unrealized gains. Approximately $109 million is expected to be reclassified from AOCI to operating revenues in the next twelve months. The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.
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. Inhedge in this situation, gainssituation. Gains or losses accumulated in OCIother comprehensive income prior to de-designation continue to be deferred in OCIother 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.
Natural gas over-the-counter swaps that financially settle against NYMEX futures are used to manage fuel price volatility for the Utility’s Louisiana and Mississippi customers. All benefits or costs of the program are recorded in fuel costs. The total volume of natural gas swaps outstanding as of December 31, 2011 is 37,980,000 MMBtu for Entergy, 10,890,000 MMBtu for Entergy Gulf States Louisiana, 15,730,000 MMBtu for Entergy Louisiana,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
10,360,000 MMBtu for Entergy Mississippi, and 1,000,000 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.
The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 is as follows:
|
| | | | | | |
Instrument | | Amount of gain (loss) recognized in AOCI | | Income Statement location | | Amount of gain (loss) recorded in the income statement |
| | | (In Millions) | | | | (In Millions) |
| 2014 | | | | | | |
| Natural gas swaps | | — | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($8) |
| FTRs | | — | | Purchased power expense | (b) | $229 |
| Electricity swaps and options | | ($13) | | Competitive business operating revenues | | $56 |
| | | | | | | |
| 2013 | | | | | | |
| Natural gas swaps | | — | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $13 |
| FTRs | | — | | Purchased power | (b) | $3 |
| Electricity swaps and options | | $1 | | Competitive business operating revenues | | ($50) |
| | | | | | | |
| 2012 | | | | | | |
| Natural gas swaps | | — | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($42) |
| Electricity swaps and options | | $1 | | Competitive business operating revenues | | $1 |
Instrument
| | Amount of gain
recognized in AOCI
| | Income Statement location | | Amount of gain (loss)
recorded in income
|
| (a) | | | | | | |
2011 | | | | | | |
NaturalDue to regulatory treatment, the natural gas swaps | | $ - | | Fuel, are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms. |
| | ($62) million |
Electricity forwards, swaps(b) | Due to regulatory treatment, the changes in the estimated fair value of FTRs for the Utility operating companies are recorded through purchased power expense and options de-designatedthen such amounts are simultaneously reversed and recorded as hedged items | | $1 million | | Competitive businessan offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the FTRs for the Utility operating revenues | | $11 million |
| | | | | | |
2010 | | | | | | |
Natural gas swaps | | $ - | | Fuel, fuel-related expenses, and gas purchased for resale | | ($95) million |
Electricity forwards, swaps and options de-designated as hedged items | | $15 million | | Competitive business operating revenues | | $ - |
| | | | | | |
2009 | | | | | | |
Natural gas swaps | | $ - | | Fuel, fuel-related expenses, and gas purchased for resale | | ($160) millioncompanies are settled are recovered or refunded through fuel cost recovery mechanisms. |
Due to regulatory treatment, the natural gas swaps are marked to market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms.
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, 20112014 and 20102013 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | | (In Millions) | | |
Derivatives not designated as hedging instruments | | | | |
| | | | | | |
2011 | | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Gas hedge contracts | | $8.6 million | | Entergy Gulf States Louisiana |
Natural gas swaps | | Gas hedge contracts | | $12.4 million | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $7.8 million | | Entergy Mississippi |
Natural gas swaps | | Other current liabilities | | $1.5 million | | Entergy New Orleans |
| | | | | | |
20102014 | | | | | | |
| Assets: | | | | | | |
Natural gas swapsFTRs | | Prepayments and other | | $0.3 million0.7 | | Entergy Arkansas |
| FTRs | | Prepayments and other | | $14.4 | | Entergy Gulf States Louisiana |
| FTRs | | Prepayments and other | | $11.1 | | Entergy Louisiana |
| FTRs | | Prepayments and other | | $3.4 | | Entergy Mississippi |
| FTRs | | Prepayments and other | | $4.1 | | Entergy New Orleans |
| FTRs | | Prepayments and other | | $12.3 | | Entergy Texas |
| | | | | | | |
| Liabilities: | | | | | | |
| Natural gas swaps | | Other current liabilities | | $8.2 | | Entergy Gulf States Louisiana |
| Natural gas swaps | | Other current liabilities | | $7.6 | | Entergy Louisiana |
| Natural gas swaps | | Other current liabilities | | $2.8 | | Entergy Mississippi |
| Natural gas swaps | | Other current liabilities | | $0.9 | | Entergy New Orleans |
| | | | | | |
| 2013 | | | | | | |
| Assets: | | | | | | |
| Natural gas swaps | | Gas hedge contracts | | $1.0 million2.2 | | Entergy Gulf States Louisiana |
| Natural gas swaps | | Gas hedge contracts | | $0.4 million2.9 | | Entergy Louisiana |
| Natural gas swaps | | Other current liabilitiesPrepayments and other | | $0.5 million0.7 | | Entergy Mississippi |
| Natural gas swaps | | Prepayments and other | | $0.1 | | Entergy New Orleans |
| | | | | | |
| FTRs | | Prepayments and other | | $6.7 | | Entergy Gulf States Louisiana |
| FTRs | | Prepayments and other | | $5.7 | | Entergy Louisiana |
| FTRs | | Prepayments and other | | $1.0 | | Entergy Mississippi |
| FTRs | | Prepayments and other | | $2.0 | | Entergy New Orleans |
| FTRs | | Prepayments and other | | $18.4 | | Entergy Texas |
| |
| (a) | No cash collateral was required to be posted as of December 31, 2014 and 2013, respectively. |
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 of income for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 are as follows:
|
| | | | | | |
Instrument | | Income Statement of Income Location | | Amount of lossgain (loss) recorded in the income statement | | Registrant |
| | | | | (In Millions) | | |
20112014 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($17.9) million3.9) | | Entergy Gulf States Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($25.6) million1.6) | | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($15.0) million2.5) | | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($3.2) million0.2) | | Entergy New Orleans |
| | | | | | | |
2010FTRs | | Purchased power | | $21.6 | | Entergy Arkansas |
| FTRs | | Purchased power | | $56.3 | | Entergy Gulf States Louisiana |
| FTRs | | Purchased power | | $47.2 | | Entergy Louisiana |
| FTRs | | Purchased power | | $19.0 | | Entergy Mississippi |
| FTRs | | Purchased power | | $16.5 | | Entergy New Orleans |
| FTRs | | Purchased power | | $65.8 | | Entergy Texas |
| | | | | | |
| 2013 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $4.5 | | Entergy Gulf States Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $6.0 | | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $2.5 | | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.1 | | Entergy New Orleans |
| | | | | | |
| FTRs | | Purchased power | | ($0.1) | | Entergy Arkansas |
| FTRs | | Purchased power | | $0.3 | | Entergy Gulf States Louisiana |
| FTRs | | Purchased power | | $0.2 | | Entergy Louisiana |
| FTRs | | Purchased power | | $1.0 | | Entergy Mississippi |
| FTRs | | Purchased power | | $1.2 | | Entergy New Orleans |
| FTRs | | Purchased power | | $0.8 | | Entergy Texas |
| | | | | | |
| 2012 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($25.0) million12.9) | | Entergy Gulf States Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($40.5) million16.2) | | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($27.5) million11.2) | | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($1.7) million1.5) | | Entergy New Orleans |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Instrument
| | Statement of Income Location
| | Amount of loss
recorded
in income
| | Registrant
|
| | | | | | |
2009 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($42.0) million | | Entergy Gulf States Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($66.4) million | | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($40.7) million | | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($10.5) million | | Entergy New Orleans |
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than forward energy contractsthose instruments held by competitive businessesthe Entergy Wholesale Commodities business are reflected in future rates and therefore do not accrue to the benefit or detriment of shareholders.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, debt instruments, and gas hedge contracts. |
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas hedge contracts. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.
· | Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: |
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability; or
- | 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. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Level 2 consists primarily of individually ownedindividually-owned debt instruments or shares in common trusts. Common trust funds are stated at estimated fair value based on the fair market value of the underlying investments.
· | Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of FTRs and derivative power contracts used as cash flow hedges of power sales at merchant power plants. |
The values for the cash flow hedges that are recorded as derivativepower contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as model-generated prices for longer-term marketsimplied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The
Entergy Corporation and Subsidiaries
Notes to Financial Statements
valuations of these assets and liabilities are performed by the Entergy Wholesale Commodities Risk Control group and the Entergy Wholesale Commodities Accounting Policy and External Reporting group. The primary functions of the Entergy Wholesale Commodities Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting Policy and External Reporting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Entergy Wholesale Commodities Risk Control group reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting Policy and External Reporting group reports to the Vice President, Accounting Policy and External Reporting.
The amounts reflected as the fair value of derivative assets or liabilitieselectricity 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 Entergy’sthe 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 and estimates regarding the costs associated with the transportation of the power from the plants’ bus bar to the contract’s point of delivery, generally a power market hub, for the period thereafter.prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and US Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of December 31, 2011,fair value.
On a daily basis, Entergy had in-the-moneyWholesale Commodities Risk Control group calculates the mark-to-market for electricity swaps and options. Entergy Wholesale Commodities Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available, and uses multiple sources of market implied volatilities. Moreover, on at least a monthly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis. The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative contractstransactions, 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 FTRs are based on unobservable inputs, including estimates of future congestion costs in MISO between applicable generation and load pricing nodes based on prices published by MISO. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Entergy Wholesale Commodities Risk Control group for the unregulated business and by the System Planning and Operations Risk Control group for the Utility operating companies. Entergy’s Accounting Policy group reviews these valuations for reasonableness, with a fair valuethe assistance of $312 millionothers within the organization with counterparties or their guarantor who are all currently investment grade. Asknowledge of December 31, 2011 there are no out-of-the-money contracts supported by corporate guarantees, which would require additional cash or lettersthe various inputs and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
assumptions used in the event of a decrease in Entergy Corporation’s credit ratingvaluation. The System Planning and Operations Risk Control group reports to below investment grade.the Vice President and Treasurer. The Accounting Policy group reports to the Vice President, Accounting Policy and External Reporting.
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 December 31, 20112014 and December 31, 2010.2013. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.
|
| | | | | | | | | | | | | | | | |
| 2014 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $1,291 |
| |
| $— |
| |
| $— |
| |
| $1,291 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 452 |
| | 2,834 |
| (b) | — |
| | 3,286 |
|
| Debt securities | | 880 |
| | 1,205 |
| | — |
| | 2,085 |
|
| Power contracts | | — |
| | — |
| | 217 |
| | 217 |
|
| Securitization recovery trust account | | 44 |
| | — |
| | — |
| | 44 |
|
| Escrow accounts | | 362 |
| | — |
| | — |
| | 362 |
|
| FTRs | | — |
| | — |
| | 47 |
| | 47 |
|
| | |
| $3,029 |
| |
| $4,039 |
| |
| $264 |
| |
| $7,332 |
|
| Liabilities: | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $2 |
| |
| $2 |
|
| Gas hedge contracts | | 20 |
| | — |
| | — |
| | 20 |
|
| | |
| $20 |
| |
| $— |
| |
| $2 |
| |
| $22 |
|
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $613 | | $- | | $- | | $613 |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 397 | | 1,732 | | - | | 2,129 |
| Debt securities | | 639 | | 1,020 | | - | | 1,659 |
| Power contracts | | - | | - | | 312 | | 312 |
| Securitization recovery trust account | | 50 | | - | | - | | 50 |
| Storm reserve escrow account | | 335 | | - | | - | | 335 |
| | | $2,034 | | $2,752 | | $312 | | $5,098 |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $30 | | $- | | $- | | $30 |
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $609 |
| |
| $— |
| |
| $— |
| |
| $609 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 472 |
| | 2,601 |
| (b) | — |
| | 3,073 |
|
| Debt securities | | 783 |
| | 1,047 |
| | — |
| | 1,830 |
|
| Power contracts | | — |
| | — |
| | 74 |
| | 74 |
|
| Securitization recovery trust account | | 46 |
| | — |
| | — |
| | 46 |
|
| Escrow accounts | | 115 |
| | — |
| | — |
| | 115 |
|
| Gas hedge contracts | | 6 |
| | — |
| | — |
| | 6 |
|
| FTRs | | — |
| | — |
| | 34 |
| | 34 |
|
| | |
| $2,031 |
| |
| $3,648 |
| |
| $108 |
| |
| $5,787 |
|
| Liabilities: | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $207 |
| |
| $207 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $1,218 | | $- | | $- | | $1,218 |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 387 | | 1,689 | | - | | 2,076 |
| Debt securities | | 497 | | 1,023 | | - | | 1,520 |
| Power contracts | | - | | - | | 214 | | 214 |
| Securitization recovery trust account | | 43 | | - | | - | | 43 |
| Storm reserve escrow account | | 329 | | - | | - | | 329 |
| | | $2,474 | | $2,712 | | $214 | | $5,400 |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Power contracts | | $- | | $- | | $17 | | $17 |
| Gas hedge contracts | | 2 | | - | | - | | 2 |
| | | $2 | | $- | | $17 | | $19 |
| |
| (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 17 to the financial statements for additional information on the investment portfolios. |
| |
| (b) | Commingled equity funds may be redeemed semi-monthly. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the years ended December 31, 2011, 2010,2014, 2013, and 2009:2012:
|
| | | | | | | | | | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs | | Power Contracts |
| | (In Millions) |
| Balance as of January 1, |
| ($133 | ) | |
| $34 |
| |
| $178 |
| |
| $— |
| |
| $312 |
|
| Realized losses included in earnings | (65 | ) | | — |
| | (38 | ) | | — |
| | (11 | ) |
| Unrealized gains (losses) included in earnings | 120 |
| | 2 |
| | (35 | ) | | — |
| | (4 | ) |
| Unrealized gains (losses) included in OCI | 131 |
| | — |
| | (204 | ) | | — |
| | 140 |
|
| Unrealized gains included as a regulatory liability / asset | — |
| | 119 |
| | — |
| | — |
| | — |
|
| Issuances of FTRs | — |
| | 121 |
| | — |
| | 37 |
| | — |
|
| Purchases | 17 |
| | — |
| | 14 |
| | — |
| | 9 |
|
| Settlements | 145 |
| | (229 | ) | | (48 | ) | | (3 | ) | | (268 | ) |
| Balance as of December 31, |
| $215 |
| |
| $47 |
| |
| ($133 | ) | |
| $34 |
| |
| $178 |
|
| | | 2011 | | 2010 | | 2009 |
| | | (In Millions) |
| | | | | | | |
| Balance as of January 1, | | $197 | | $200 | | $207 |
| | | | | | | |
| Unrealized gains from price changes | | 268 | | 221 | | 310 |
| Unrealized gains/(losses) on originations | | 15 | | (4) | | 5 |
| Realized gains on settlements | | (168) | | (220) | | (322) |
| | | | | | | |
| Balance as of December 31, | | $312 | | $197 | | $200 |
|
| | | | | | | | |
| Transaction Type | | Fair Value as of December 31, 2014 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | | | | | (In Millions) |
| Electricity swaps | | $165 | | Unit contingent discount | | +/-3% | | $10 |
| Electricity options | | $50 | | Implied volatility | | +/-130% | | $43 |
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
|
| | | | | | | | |
Significant Unobservable Input | | Transaction Type | | Position | | Change to Input | | Effect on Fair Value |
| | | | | | | | |
| Unit contingent discount | | Electricity swaps | | Sell | | Increase (Decrease) | | Decrease (Increase) |
| Implied volatility | | Electricity options | | Sell | | Increase (Decrease) | | Increase (Decrease) |
| Implied volatility | | Electricity options | | Buy | | Increase (Decrease) | | Increase (Decrease) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following tables settable sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of December 31, 20112014 and December 31, 2010.2013. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Arkansas
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2014 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | $17.9 | | $- | | $- | | $17.9 | |
| $208.0 |
| |
| $— |
| |
| $— |
| |
| $208.0 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 6.3 | | 323.1 | | - | | 329.4 | | 7.2 |
| | 480.1 |
| (b) | — |
| | 487.3 |
|
| Debt securities | | 82.8 | | 129.5 | | - | | 212.3 | | 72.2 |
| | 210.4 |
| | — |
| | 282.6 |
|
| Securitization recovery trust account | | 3.9 | | - | | - | | 3.9 | | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Escrow accounts | | | 12.2 |
| | — |
| | — |
| | 12.2 |
|
| FTRs | | | — |
| | — |
| | 0.7 |
| | 0.7 |
|
| | | $110.9 | | $452.6 | | $- | | $563.5 | |
| $303.7 |
| |
| $690.5 |
| |
| $0.7 |
| |
| $994.9 |
|
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $101.9 | | $- | | $- | | $101.9 |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 3.4 | | 316.3 | | - | | 319.7 |
| Debt securities | | 41.4 | | 159.7 | | - | | 201.1 |
| Securitization recovery trust account | | 2.4 | | - | | - | | 2.4 |
| | | $149.1 | | $476.0 | | $- | | $625.1 |
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $122.8 |
| |
| $— |
| |
| $— |
| |
| $122.8 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 13.6 |
| | 449.7 |
| (b) | — |
| | 463.3 |
|
| Debt securities | | 58.6 |
| | 189.0 |
| | — |
| | 247.6 |
|
| Securitization recovery trust account | | 3.8 |
| | — |
| | — |
| | 3.8 |
|
| Escrow accounts | | 26.0 |
| | — |
| | — |
| | 26.0 |
|
| | |
| $224.8 |
| |
| $638.7 |
| |
| $— |
| |
| $863.5 |
|
Entergy Gulf States Louisiana
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2014 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | $24.6 | | $- | | $- | | $24.6 | |
| $109.6 |
| |
| $— |
| |
| $— |
| |
| $109.6 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 5.1 | | 233.6 | | - | | 238.7 | | 10.5 |
| | 385.4 |
| (b) | — |
| | 395.9 |
|
| Debt securities | | 39.5 | | 142.7 | | - | | 182.2 | | 81.9 |
| | 159.9 |
| | — |
| | 241.8 |
|
| Storm reserve escrow account | | 90.2 | | - | | - | | 90.2 | |
| Escrow accounts | | | 90.1 |
| | — |
| | — |
| | 90.1 |
|
| FTRs | | | — |
| | — |
| | 14.4 |
| | 14.4 |
|
| | | $159.4 | | $376.3 | | $- | | $535.7 | |
| $292.1 |
| |
| $545.3 |
| |
| $14.4 |
| |
| $851.8 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | | $8.6 | | $- | | $- | | $8.6 | |
| $8.2 |
| |
| $— |
| |
| $— |
| |
| $8.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2013 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | $154.9 | | $- | | $- | | $154.9 | |
| $13.8 |
| |
| $— |
| |
| $— |
| |
| $13.8 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 3.8 | | 231.1 | | - | | 234.9 | | 27.6 |
| | 343.2 |
| (b) | — |
| | 370.8 |
|
| Debt securities | | 32.2 | | 126.5 | | - | | 158.7 | | 71.7 |
| | 131.2 |
| | — |
| | 202.9 |
|
| Storm reserve escrow account | | 90.1 | | - | | - | | 90.1 | |
| Escrow accounts | | | 21.5 |
| | — |
| | — |
| | 21.5 |
|
| Gas hedge contracts | | | 2.2 |
| | — |
| | — |
| | 2.2 |
|
| FTRs | | | — |
| | — |
| | 6.7 |
| | 6.7 |
|
| | | $281.0 | | $357.6 | | $- | | $638.6 | |
| $136.8 |
| |
| $474.4 |
| |
| $6.7 |
| |
| $617.9 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | | $1.0 | | $- | | $- | | $1.0 | |
Entergy Louisiana
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2014 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | |
| $157.1 |
| |
| $— |
| |
| $— |
| |
| $157.1 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | $2.9 | | $146.3 | | $- | | $149.2 | | 4.8 |
| | 234.8 |
| (b) | — |
| | 239.6 |
|
| Debt securities | | 51.6 | | 53.2 | | - | | 104.8 | | 68.7 |
| | 75.3 |
| | — |
| | 144.0 |
|
| Securitization recovery trust account | | 5.2 | | - | | - | | 5.2 | | 3.1 |
| | — |
| | — |
| | 3.1 |
|
| Storm reserve escrow account | | 201.2 | | - | | - | | 201.2 | |
| Escrow accounts | | | 200.1 |
| | — |
| | — |
| | 200.1 |
|
| FTRs | | | — |
| | — |
| | 11.1 |
| | 11.1 |
|
| | | $260.9 | | $199.5 | | $- | | $460.4 | |
| $433.8 |
| |
| $310.1 |
| |
| $11.1 |
| |
| $755.0 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | | $12.4 | | $- | | $- | | $12.4 | |
| $7.6 |
| |
| $— |
| |
| $— |
| |
| $7.6 |
|
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $122.5 | | $- | | $- | | $122.5 |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 1.3 | | 142.6 | | - | | 143.9 |
| Debt securities | | 45.7 | | 50.9 | | - | | 96.6 |
| Storm reserve escrow account | | 201.0 | | - | | - | | 201.0 |
| | | $370.5 | | $193.5 | | $- | | $564.0 |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $0.4 | | $- | | $- | | $0.4 |
Entergy Mississippi
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Storm reserve escrow account | | $31.8 | | $- | | $- | | $31.8 |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $7.8 | | $- | | $- | | $7.8 |
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $123.6 |
| |
| $— |
| |
| $— |
| |
| $123.6 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 13.5 |
| | 210.7 |
| (b) | — |
| | 224.2 |
|
| Debt securities | | 61.7 |
| | 61.4 |
| | — |
| | 123.1 |
|
| Securitization recovery trust account | | 4.5 |
| | — |
| | — |
| | 4.5 |
|
| Gas hedge contracts | | 2.9 |
| | — |
| | — |
| | 2.9 |
|
| FTRs | | — |
| | — |
| | 5.7 |
| | 5.7 |
|
| | |
| $206.2 |
| |
| $272.1 |
| |
| $5.7 |
| |
| $484.0 |
|
178
217
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
|
| | | | | | | | | | | | | | | | |
| 2014 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $60.4 |
| |
| $— |
| |
| $— |
| |
| $60.4 |
|
| Escrow accounts | | 41.8 |
| | — |
| | — |
| | 41.8 |
|
| FTRs | | — |
| | — |
| | 3.4 |
| | 3.4 |
|
| | |
| $102.2 |
| |
| $— |
| |
| $3.4 |
| |
| $105.6 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $2.8 |
| |
| $— |
| |
| $— |
| |
| $2.8 |
|
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Gas hedge contracts | | $0.3 | | $- | | $- | | $0.3 |
| Storm reserve escrow account | | 31.9 | | - | | - | | 31.9 |
| | | $32.2 | | $- | | $- | | $32.2 |
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Escrow accounts | |
| $51.8 |
| |
| $— |
| |
| $— |
| |
| $51.8 |
|
| Gas hedge contracts | | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| FTRs | | — |
| | — |
| | 1.0 |
| | 1.0 |
|
| | |
| $52.5 |
| |
| $— |
| |
| $1.0 |
| |
| $53.5 |
|
Entergy New Orleans
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2014 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | $9.3 | | $- | | $- | | $9.3 | |
| $41.4 |
| |
| $— |
| |
| $— |
| |
| $41.4 |
|
| Storm reserve escrow account | | 12.0 | | - | | - | | 12.0 | |
| Escrow accounts | | | 18.0 |
| | — |
| | — |
| | 18.0 |
|
| FTRs | | | — |
| | — |
| | 4.1 |
| | 4.1 |
|
| | | $21.3 | | $- | | $- | | $21.3 | |
| $59.4 |
| |
| $— |
| |
| $4.1 |
| |
| $63.5 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | | $1.5 | | $- | | $- | | $1.5 | |
| $0.9 |
| |
| $— |
| |
| $— |
| |
| $0.9 |
|
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $53.6 | | $- | | $- | | $53.6 |
| Storm reserve escrow account | | 6.0 | | - | | - | | 6.0 |
| | | $59.6 | | $- | | $- | | $59.6 |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | | $0.5 | | $- | | $- | | $0.5 |
Entergy Texas
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | | $65.1 | | $- | | $- | | $65.1 |
| Securitization recovery trust account | | 41.2 | | - | | - | | 41.2 |
| | | $106.3 | | $- | | $- | | $106.3 |
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | (In Millions) | |
Assets: | | | | | | | | | |
| | 2013 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | (In Millions) |
| Assets: | | | | | | | | | |
| Temporary cash investments | | $33.6 | | $- | | $- | | $33.6 | |
| $33.2 |
| |
| $— |
| |
| $— |
| |
| $33.2 |
|
| Securitization recovery trust account | | 40.6 | | - | | - | | 40.6 | |
| Escrow accounts | | | 10.5 |
| | — |
| | — |
| | 10.5 |
|
| Gas hedge contracts | | | 0.1 |
| | — |
| | — |
| | 0.1 |
|
| FTRs | | | — |
| | — |
| | 2.0 |
| | 2.0 |
|
| | | $74.2 | | $- | | $- | | $74.2 | |
| $43.8 |
| |
| $— |
| |
| $2.0 |
| |
| $45.8 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
|
| | | | | | | | | | | | | | | | |
| 2014 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $28.7 |
| |
| $— |
| |
| $— |
| |
| $28.7 |
|
| Securitization recovery trust account | | 37.2 |
| | — |
| | — |
| | 37.2 |
|
| FTRs | | — |
| | — |
| | 12.3 |
| | 12.3 |
|
| | |
| $65.9 |
| |
| $— |
| |
| $12.3 |
| |
| $78.2 |
|
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $44.1 |
| |
| $— |
| |
| $— |
| |
| $44.1 |
|
| Securitization recovery trust account | | 37.5 |
| | — |
| | — |
| | 37.5 |
|
| FTRs | | — |
| | — |
| | 18.4 |
| | 18.4 |
|
| | |
| $81.6 |
| |
| $— |
| |
| $18.4 |
| |
| $100.0 |
|
System Energy
| 2011 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| | | 2014 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | $154.2 | | $- | | $- | | $154.2 | |
| $222.4 |
| |
| $— |
| |
| $— |
| |
| $222.4 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 2.7 | | 234.5 | | - | | 237.2 | | 2.0 |
| | 422.5 |
| (b) | — |
| | 424.5 |
|
| Debt securities | | 123.2 | | 63.0 | | - | | 186.2 | | 194.2 |
| | 61.1 |
| | — |
| | 255.3 |
|
| | | $280.1 | | $297.5 | | $- | | $577.6 | |
| $418.6 |
| |
| $483.6 |
| |
| $— |
| |
| $902.2 |
|
| 2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | | $262.9 | | $- | | $- | | $262.9 |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 3.1 | | 220.9 | | - | | 224.0 |
| Debt securities | | 95.7 | | 68.2 | | - | | 163.9 |
| | | $361.7 | | $289.1 | | $- | | $650.8 |
|
| | | | | | | | | | | | | | | | |
| 2013 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $64.6 |
| |
| $— |
| |
| $— |
| |
| $64.6 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 2.2 |
| | 377.8 |
| (b) | — |
| | 380.0 |
|
| Debt securities | | 152.9 |
| | 71.0 |
| | — |
| | 223.9 |
|
| | |
| $219.7 |
| |
| $448.8 |
| |
| $— |
| |
| $668.5 |
|
| |
| (a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 17 to the financial statements for additional information on the investment portfolios. |
| |
| (b) | Commingled equity funds may be redeemed semi-monthly. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the year ended December 31, 2014.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Gulf States Louisiana |
| Entergy Louisiana |
| Entergy Mississippi |
| Entergy New Orleans |
| Entergy Texas |
| | (In Millions) |
| | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as of January 1, |
| $— |
| |
| $6.7 |
| |
| $5.7 |
| |
| $1.0 |
| |
| $2.0 |
| |
| $18.4 |
|
| Issuances of FTRs | 4.2 |
| | 37.3 |
| | 21.5 |
| | 15.2 |
| | 8.3 |
| | 33.2 |
|
| Unrealized gains (losses) included as a regulatory liability / asset | 18.1 |
| | 26.7 |
| | 31.1 |
| | 6.2 |
| | 10.3 |
| | 26.5 |
|
| Settlements | (21.6 | ) | | (56.3 | ) | | (47.2 | ) | | (19.0 | ) | | (16.5 | ) | | (65.8 | ) |
| Balance as of December 31, |
| $0.7 |
| |
| $14.4 |
| |
| $11.1 |
| |
| $3.4 |
| |
| $4.1 |
| |
| $12.3 |
|
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 year ended December 31, 2013.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| | | | | | | | | | | | |
| Balance as of January 1, |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| Issuances of FTRs | — |
| | 7.2 |
| | 6.2 |
| | 1.1 |
| | 2.2 |
| | 20.0 |
|
| Unrealized gains (losses) included as a regulatory liability / asset | (0.1 | ) | | (0.2 | ) | | (0.3 | ) | | 0.9 |
| | 1.0 |
| | (0.8 | ) |
| Settlements | 0.1 |
| | (0.3 | ) | | (0.2 | ) | | (1.0 | ) | | (1.2 | ) | | (0.8 | ) |
| Balance as of December 31, |
| $— |
| |
| $6.7 |
| |
| $5.7 |
| |
| $1.0 |
| |
| $2.0 |
| |
| $18.4 |
|
NOTE 17. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick). The funds are invested primarily in equity securities;securities, fixed-rate fixed-income securities;debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of30% interest in River Bend formerly owned by Cajun, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Generally, Entergy records
Entergy Corporation and Subsidiaries
Notes to Financial Statements
realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The securities held as of December 31, 20112014 and 20102013 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | |
| | | (In Millions) | | | | | | | |
| | | | | | | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| 2011 | | | | | | | |
| | | | (In Millions) |
| 2014 | | | |
| | |
| | |
|
| Equity Securities | | $2,129 | | $423 | | $14 | |
| $3,286 |
| |
| $1,513 |
| |
| $1 |
|
| Debt Securities | | 1,659 | | 115 | | 5 | | 2,085 |
| | 76 |
| | 6 |
|
| Total | | $3,788 | | $538 | | $19 | |
| $5,371 |
| |
| $1,589 |
| |
| $7 |
|
| | | | | | | | |
| 2010 | | | | | | | |
| Equity Securities | | $2,076 | | $436 | | $9 | |
| Debt Securities | | 1,520 | | 67 | | 12 | |
| Total | | $3,596 | | $503 | | $21 | |
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2013 | | |
| | |
| | |
|
| Equity Securities | |
| $3,073 |
| |
| $1,260 |
| |
| $— |
|
| Debt Securities | | 1,830 |
| | 47 |
| | 29 |
|
| Total | |
| $4,903 |
| |
| $1,307 |
| |
| $29 |
|
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $149$396 million and $130$329 million as of December 31, 20112014 and 2010,2013, respectively. The amortized cost of debt securities was $1,530$2,019 million as of December 31, 20112014 and $1,475$1,843 million as of December 31, 2010.2013. As of December 31, 2011,2014, the debt securities have an average coupon rate of approximately 4.15%3.31%, an average duration of approximately 5.405.65 years, and an average maturity of approximately 8.538.45 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2011:2014:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $9 |
| |
| $1 |
| |
| $277 |
| |
| $2 |
|
| More than 12 months | — |
| | — |
| | 163 |
| | 4 |
|
| Total |
| $9 |
| |
| $1 |
| |
| $440 |
| |
| $6 |
|
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $130 | | $9 | | $123 | | $3 |
| More than 12 months | | 43 | | 5 | | 60 | | 2 |
| Total | | $173 | | $14 | | $183 | | $5 |
221
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:2013:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Equity Securities | | Debt Securities | | | | | | | | | |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Equity Securities | | Debt Securities |
| | | (In Millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | | | | | | | | (In Millions) |
| Less than 12 months | | $15 | | $1 | | $474 | | $11 |
| $— |
| |
| $— |
| |
| $892 |
| |
| $24 |
|
| More than 12 months | | 105 | | 8 | | 4 | | 1 | — |
| | — |
| | 60 |
| | 5 |
|
| Total | | $120 | | $9 | | $478 | | $12 |
| $— |
| |
| $— |
| |
| $952 |
| |
| $29 |
|
The unrealized losses in excess of twelve months on equity securities above relate to Entergy’s Utility operating companies and System Energy.
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20112014 and 20102013 are as follows:
| | | | | 2011 | | 2010 | 2014 | | 2013 |
| | | (In Millions) | (In Millions) |
| less than 1 year | | $69 | | $37 |
| $94 |
| |
| $83 |
|
| 1 year - 5 years | | 566 | | 557 | 783 |
| | 752 |
|
| 5 years - 10 years | | 583 | | 512 | 681 |
| | 620 |
|
| 10 years - 15 years | | 187 | | 163 | 173 |
| | 169 |
|
| 15 years - 20 years | | 42 | | 47 | 79 |
| | 52 |
|
| 20 years+ | | 212 | | 204 | 275 |
| | 154 |
|
| Total | | $1,659 | | $1,520 |
| $2,085 |
| |
| $1,830 |
|
During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, proceeds from the dispositions of securities amounted to $1,360$1,872 million, $2,606$2,032 million, and $2,571$2,074 million, respectively. During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, gross gains of $29$39 million, $69$91 million, and $80$39 million, respectively, and gross losses of $8 million, $11 million, $9 million, and $30$7 million, respectively, were reclassified out of other comprehensive income into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20112014 and 20102013 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2011 | | | | | | |
| Equity Securities | | $329.4 | | $70.9 | | $0.4 |
| Debt Securities | | 212.3 | | 15.2 | | 0.4 |
Total | | $541.7 | | $86.1 | | $0.8 |
| | | | | | | |
| 2010 | | | | | | |
| Equity Securities | | $319.7 | | $74.2 | | $0.3 |
| Debt Securities | | 201.1 | | 11.0 | | 1.0 |
Total | | $520.8 | | $85.2 | | $1.3 |
182 |
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2014 | | | | | | |
| Equity Securities | |
| $487.3 |
| |
| $248.9 |
| |
| $— |
|
| Debt Securities | | 282.6 |
| | 6.2 |
| | 1.1 |
|
| Total | |
| $769.9 |
| |
| $255.1 |
| |
| $1.1 |
|
| 2013 | | | | | | |
| Equity Securities | |
| $463.3 |
| |
| $214.0 |
| |
| $— |
|
| Debt Securities | | 247.6 |
| | 5.3 |
| | 5.2 |
|
| Total | |
| $710.9 |
| |
| $219.3 |
| |
| $5.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amortized cost of debt securities was $197.5$277.4 million as of December 31, 20112014 and $191.2$248.9 million as of December 31, 2010.2013. As of December 31, 2011,2014, the debt securities have an average coupon rate of approximately 3.61%2.55%, an average duration of approximately 4.864.68 years, and an average maturity of approximately 5.585.32 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2011:2014:
| | | | Equity Securities | | Debt Securities | | | | | | | | | |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Equity Securities | | Debt Securities |
| | | (In Millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | | | | | | | | (In Millions) |
| Less than 12 months | | $13.7 | | $0.4 | | $14.3 | | $0.4 |
| $0.1 |
| |
| $— |
| |
| $56.5 |
| |
| $0.3 |
|
| More than 12 months | | - | | - | | 1.0 | | - | — |
| | — |
| | 34.8 |
| | 0.8 |
|
Total | | $13.7 | | $0.4 | | $15.3 | | $0.4 |
| $0.1 |
| |
| $— |
| |
| $91.3 |
| |
| $1.1 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:2013:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $153.2 |
| |
| $4.8 |
|
| More than 12 months | — |
| | — |
| | 6.9 |
| | 0.4 |
|
| Total |
| $— |
| |
| $— |
| |
| $160.1 |
| |
| $5.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $- | | $- | | $44.3 | | $1.0 |
| More than 12 months | | 6.6 | | 0.3 | | - | | - |
Total | | $6.6 | | $0.3 | | $44.3 | | $1.0 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20112014 and 20102013 are as follows:
| | | | 2011 | | 2010 | | | | | | | |
| | | (In Millions) | 2014 | | 2013 |
| | | | | | (In Millions) |
| less than 1 year | | $7.8 | | $5.3 |
| $14.9 |
| |
| $8.1 |
|
| 1 year - 5 years | | 86.5 | | 100.1 | 127.3 |
| | 110.9 |
|
| 5 years - 10 years | | 109.1 | | 85.2 | 128.2 |
| | 118.0 |
|
| 10 years - 15 years | | 2.7 | | 4.5 | 1.7 |
| | 3.9 |
|
| 15 years - 20 years | | - | | - | 1.0 |
| | 0.9 |
|
| 20 years+ | | 6.2 | | 6.0 | 9.5 |
| | 5.8 |
|
Total | | $212.3 | | $201.1 |
| $282.6 |
| |
| $247.6 |
|
During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, proceeds from the dispositions of securities amounted to $125.4$181.5 million, $367.3$266.4 million, and $154.6$144.3 million, respectively. During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, gross gains of $3.9$8.7 million, $29.2$16.8 million, and $2.6$3.4 million, respectively, and gross losses of $0.2$0.3 million, $0.8$0.6 million, and $1.4$0.1 million, respectively, were recorded in earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20112014 and 20102013 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | |
| | | (In Millions) | | | | | | | |
| 2011 | | | | | | | |
| | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | | (In Millions) |
| 2014 | | | | | | | |
| Equity Securities | | $238.7 | | $40.9 | | $0.8 | |
| $395.9 |
| |
| $177.6 |
| |
| $— |
|
| Debt Securities | | 182.2 | | 15.2 | | 0.3 | | 241.8 |
| | 11.9 |
| | 0.3 |
|
Total | | $420.9 | | $56.1 | | $1.1 | |
| $637.7 |
| |
| $189.5 |
| |
| $0.3 |
|
| | | | | | | | |
| 2010 | | | | | | | |
| 2013 | | | | | | | |
| Equity Securities | | $234.9 | | $41.7 | | $1.4 | |
| $370.8 |
| |
| $141.8 |
| |
| $— |
|
| Debt Securities | | 158.7 | | 8.8 | | 0.8 | | 202.9 |
| | 7.4 |
| | 3.5 |
|
Total | | $393.6 | | $50.5 | | $2.2 | |
| $573.7 |
| |
| $149.2 |
| |
| $3.5 |
|
| | | | | | | | |
The amortized cost of debt securities was $166.9$231.5 million as of December 31, 20112014 and $150.0$199.1 million as of December 31, 2010.2013. As of December 31, 2011,2014, the debt securities have an average coupon rate of approximately 4.74%4.40%, an average duration of approximately 5.945.87 years, and an average maturity of approximately 9.2011.13 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $0.1 |
| |
| $— |
| |
| $14.0 |
| |
| $0.1 |
|
| More than 12 months | — |
| | — |
| | 15.0 |
| | 0.2 |
|
| Total |
| $0.1 |
| |
| $— |
| |
| $29.0 |
| |
| $0.3 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2013:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $91.9 |
| |
| $3.1 |
|
| More than 12 months | — |
| | — |
| | 4.6 |
| | 0.4 |
|
| Total |
| $— |
| |
| $— |
| |
| $96.5 |
| |
| $3.5 |
|
The fair value of debt securities, summarized by contractual maturities, as of December 31, 2014 and 2013 are as follows:
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
| less than 1 year |
| $6.4 |
| |
| $7.9 |
|
| 1 year - 5 years | 59.8 |
| | 51.2 |
|
| 5 years - 10 years | 68.3 |
| | 75.5 |
|
| 10 years - 15 years | 43.6 |
| | 55.8 |
|
| 15 years - 20 years | 14.8 |
| | 4.6 |
|
| 20 years+ | 48.9 |
| | 7.9 |
|
| Total |
| $241.8 |
| |
| $202.9 |
|
During the years ended December 31, 2014, 2013, and 2012, proceeds from the dispositions of securities amounted to $173.5 million, $193.8 million, and $131.0 million, respectively. During the years ended December 31, 2014, 2013, and 2012, gross gains of $1.9 million, $16.0 million, and $6.7 million, respectively, and gross losses of $0.3 million, $0.1 million, and $0.04 million, respectively, were recorded in earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 2014 and 2013 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2014 | | | | | | |
| Equity Securities | |
| $239.6 |
| |
| $116.7 |
| |
| $— |
|
| Debt Securities | | 144.0 |
| | 6.9 |
| | 0.4 |
|
| Total | |
| $383.6 |
| |
| $123.6 |
| |
| $0.4 |
|
| 2013 | | | | | | |
| Equity Securities | |
| $224.2 |
| |
| $96.1 |
| |
| $— |
|
| Debt Securities | | 123.1 |
| | 4.7 |
| | 1.9 |
|
| Total | |
| $347.3 |
| |
| $100.8 |
| |
| $1.9 |
|
The amortized cost of debt securities was $137.9 million as of December 31, 2014 and $120.6 million as of December 31, 2013. As of December 31, 2014, the debt securities have an average coupon rate of approximately 3.05%, an average duration of approximately 5.39 years, and an average maturity of approximately 8.39 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2011:2014:
| | | | Equity Securities | | Debt Securities | | | | | | | | | |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Equity Securities | | Debt Securities |
| | | (In Millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | | | | | | | | (In Millions) |
| Less than 12 months | | $14.0 | | $0.5 | | $9.3 | | $0.2 |
| $0.1 |
| |
| $— |
| |
| $19.1 |
| |
| $0.1 |
|
| More than 12 months | | 2.7 | | 0.3 | | 1.1 | | 0.1 | — |
| | — |
| | 12.1 |
| | 0.3 |
|
| Total | | $16.7 | | $0.8 | | $10.4 | | $0.3 |
| $0.1 |
| |
| $— |
| |
| $31.2 |
| |
| $0.4 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:2013:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $38.3 |
| |
| $1.7 |
|
| More than 12 months | — |
| | — |
| | 1.7 |
| | 0.2 |
|
| Total |
| $— |
| |
| $— |
| |
| $40.0 |
| |
| $1.9 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $- | | $- | | $22.6 | | $0.6 |
| More than 12 months | | 18.6 | | 1.4 | | 0.9 | | 0.2 |
| Total | | $18.6 | | $1.4 | | $23.5 | | $0.8 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20112014 and 20102013 are as follows:
| | | | 2011 | | 2010 | | | | | | | |
| | | (In Millions) | 2014 | | 2013 |
| | | | | | (In Millions) |
| less than 1 year | | $7.1 | | $4.7 |
| $5.6 |
| |
| $14.8 |
|
| 1 year - 5 years | | 40.8 | | 35.0 | 58.2 |
| | 41.9 |
|
| 5 years - 10 years | | 53.5 | | 54.2 | 44.2 |
| | 37.0 |
|
| 10 years - 15 years | | 62.9 | | 48.1 | 7.3 |
| | 6.6 |
|
| 15 years - 20 years | | 3.2 | | 3.7 | 9.4 |
| | 6.2 |
|
| 20 years+ | | 14.7 | | 13.0 | 19.3 |
| | 16.6 |
|
| Total | | $182.2 | | $158.7 |
| $144.0 |
| |
| $123.1 |
|
During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, proceeds from the dispositions of securities amounted to $76.8$43.2 million, $100.8$109.9 million, and $95.2$27.6 million, respectively. During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, gross gains of $2.8$0.3 million, $2.0$6.0 million, and $2.4$0.2 million, respectively, and gross losses of $0.5$0.02 million, $0.4$0.1 million, and $0.6$0.04 million, respectively, were recorded in earnings.
Entergy LouisianaSystem Energy
Entergy LouisianaSystem Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20112014 and 20102013 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2011 | | | | | | |
| Equity Securities | | $149.2 | | $29.7 | | $1.6 |
| Debt Securities | | 104.8 | | 8.8 | | 0.2 |
Total | | $254.0 | | $38.5 | | $1.8 |
| | | | | | | |
| 2010 | | | | | | |
| Equity Securities | | $143.9 | | $31.0 | | $1.7 |
| Debt Securities | | 96.6 | | 5.3 | | 0.1 |
Total | | $240.5 | | $36.3 | | $1.8 |
185 |
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2014 | | | | | | |
| Equity Securities | |
| $424.5 |
| |
| $188.0 |
| |
| $— |
|
| Debt Securities | | 255.3 |
| | 5.9 |
| | 0.3 |
|
| Total | |
| $679.8 |
| |
| $193.9 |
| |
| $0.3 |
|
| 2013 | | | | | | |
| Equity Securities | |
| $380.0 |
| |
| $150.8 |
| |
| $— |
|
| Debt Securities | | 223.9 |
| | 3.5 |
| | 1.8 |
|
| Total | |
| $603.9 |
| |
| $154.3 |
| |
| $1.8 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amortized cost of debt securities was $91.9$251 million as of December 31, 20112014 and $91.0$223.4 million as of December 31, 2010.2013. As of December 31, 2011,2014, the debt securities have an average coupon rate of approximately 3.81%2.23%, an average duration of approximately 4.944.48 years, and an average maturity of approximately 8.965.95 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $0.1 |
| |
| $— |
| |
| $51.6 |
| |
| $0.2 |
|
| More than 12 months | — |
| | — |
| | 6.5 |
| | 0.1 |
|
| Total |
| $0.1 |
| |
| $— |
| |
| $58.1 |
| |
| $0.3 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2011:2013:
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $11.6 | | $0.3 | | $5.5 | | $0.2 |
| More than 12 months | | 10.0 | | 1.3 | | 0.2 | | - |
| Total | | $21.6 | | $1.6 | | $5.7 | | $0.2 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
| | | | Equity Securities | | Debt Securities | | | | | | | | | |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Equity Securities | | Debt Securities |
| | | (In Millions) | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | | | | | | | | (In Millions) |
| Less than 12 months | | $- | | $- | | $4.8 | | $0.1 |
| $— |
| |
| $— |
| |
| $121.7 |
| |
| $1.7 |
|
| More than 12 months | | 18.9 | | 1.7 | | 0.2 | | - | — |
| | — |
| | 0.9 |
| | 0.1 |
|
| Total | | $18.9 | | $1.7 | | $5.0 | | $0.1 |
| $— |
| |
| $— |
| |
| $122.6 |
| |
| $1.8 |
|
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20112014 and 20102013 are as follows:
| | | | 2011 | | 2010 | | | | | | | |
| | | (In Millions) | 2014 | | 2013 |
| | | | | | (In Millions) |
| less than 1 year | | $3.9 | | $5.3 |
| $33.5 |
| |
| $5.5 |
|
| 1 year - 5 years | | 39.8 | | 28.1 | 139.7 |
| | 144.9 |
|
| 5 years - 10 years | | 22.2 | | 31.5 | 53.5 |
| | 44.3 |
|
| 10 years - 15 years | | 18.9 | | 14.1 | 3.4 |
| | 9.3 |
|
| 15 years - 20 years | | 2.2 | | 2.9 | 3.2 |
| | 1.6 |
|
| 20 years+ | | 17.8 | | 14.7 | 22.0 |
| | 18.3 |
|
| Total | | $104.8 | | $96.6 |
| $255.3 |
| |
| $223.9 |
|
During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, proceeds from the dispositions of securities amounted to $19.9$392.9 million, $44.5$215.5 million, and $47.5$349.4 million, respectively. During the years ended December 31, 2011, 2010,2014, 2013, and 2009,2012, gross gains of $0.3$1.8 million, $0.7$1.5 million, and $1.7$3.6 million, respectively, and gross losses of $0.2$0.9 million, $0.3$1.3 million, and $1.1 million, respectively, were recorded in earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 2011 and 2010 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2011 | | | | | | |
| Equity Securities | | $237.2 | | $35.4 | | $5.4 |
| Debt Securities | | 186.2 | | 9.5 | | 0.1 |
Total | | $423.4 | | $44.9 | | $5.5 |
| | | | | | | |
| 2010 | | | | | | |
| Equity Securities | | $224.0 | | $37.3 | | $5.2 |
| Debt Securities | | 163.9 | | 4.4 | | 1.5 |
Total | | $387.9 | | $41.7 | | $6.7 |
The amortized cost of debt securities was $175.1 million as of December 31, 2011 and $159.3 million as of December 31, 2010. As of December 31, 2011, the debt securities have an average coupon rate of approximately 3.46%, an average duration of approximately 4.89 years, and an average maturity of approximately 6.91 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2011:
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $41.3 | | $1.8 | | $10.5 | | $0.1 |
| More than 12 months | | 30.0 | | 3.6 | | - | | - |
| Total | | $71.3 | | $5.4 | | $10.5 | | $0.1 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | Equity Securities | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| | | | | | | | | |
| Less than 12 months | | $- | | $- | | $63.0 | | $1.5 |
| More than 12 months | | 61.1 | | 5.2 | | - | | - |
| Total | | $61.1 | | $5.2 | | $63.0 | | $1.5 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 2011 and 2010 are as follows:
| | | 2011 | | 2010 |
| | | (In Millions) |
| | | | | |
| less than 1 year | | $10.2 | | $1.8 |
| 1 year - 5 years | | 94.6 | | 79.8 |
| 5 years - 10 years | | 57.9 | | 52.3 |
| 10 years - 15 years | | 2.6 | | 2.5 |
| 15 years - 20 years | | 2.9 | | 3.8 |
| 20 years+ | | 18.0 | | 23.7 |
| Total | | $186.2 | | $163.9 |
During the years ended December 31, 2011, 2010, and 2009, proceeds from the dispositions of securities amounted to $203.4 million, $322.8 million, and $393.0 million, respectively. During the years ended December 31, 2011, 2010, and 2009, gross gains of $2.7 million, $4.4 million, and $4.4 million, respectively, and gross losses of $1.2 million, $0.6 million, and $6.5$0.3 million, respectively, were recorded in earnings.
Other-than-temporary impairments and unrealized gains and losses
Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy evaluate unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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). For debt securities held as of January 1, 2009 for which an other-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the years ended December 31, 20112014, 2013, and 2010.2012. The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. Entergy recordeddid not record material charges to other income of $0.1 million in 2011, $1 million in 2010,2014, 2013, and $86 million in 2009,2012, respectively, resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 18. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Under applicable authoritative accounting guidance, a variable interest entity (VIE) is an entity that conducts a business or holds property that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or where equity holders do not receive expected losses or returns. An entity may have an interest in a VIE through ownership or other contractual rights or obligations, and is required to consolidate a VIE if it is the VIE’s primary beneficiary.
The FASB issued authoritative accounting guidance that became effective in the first quarter 2010 that revised the manner in which entities evaluate whether consolidation is required for VIEs. Under the revised guidance, the primary beneficiary of a VIE is the entity that has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and has the obligation to absorb losses or has the right to residual returns that would potentially be significant to the entity. In conjunction with the adoption of the new guidance, Entergy updated reviews of its contracts and arrangements to determine whether Entergy is the primary beneficiary of a VIE based on the revisions to the previous consolidation model and other provisions of this standard. Based on this review Entergy determined that
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy should consolidate the respective companies from which they lease nuclear fuel, usually in a sale and leaseback transaction. This determination is because Entergy directs the nuclear fuel companies with respect to nuclear fuel purchases, assists the nuclear fuel companies in obtaining financing, and, if financing cannot be arranged, the lessee (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or System Energy) is responsible to repurchase nuclear fuel to allow the nuclear fuel company (the VIE) to meet its obligations. Under the previous guidance, the determination of the primary beneficiary of a VIE was based on ownership interests and the risks and rewards in the entity attributable to the variable interest holders. Therefore, the Entergy companies did not previously consolidate the nuclear fuel companies. Because Entergy has historically accounted for the leases with the nuclear fuel companies as capital lease obligations, the effect of consolidating the nuclear fuel companies did not materially affect Entergy’s financial statements. During the term of the arrangements, none of the Entergy operating companies have been required to provide financial support apart from their scheduled lease payments. See Note 4 to the financial statements for details of the nuclear fuel companies’ credit facility and commercial paper borrowings and long-term debt that are reported by Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy. These amounts also represent Entergy’s and the respective Registrant Subsidiary’s maximum exposure to losses associated with their respective interests in the nuclear fuel companies.
Entergy Texas determined that Entergy Gulf States Reconstruction Funding I, LLC, and Entergy Texas Restoration Funding, LLC, companies wholly-owned and consolidated by Entergy Texas, are variable interest entities and that Entergy Texas is the primary beneficiary. In June 2007, Entergy Gulf States Reconstruction Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Rita reconstruction costs. In November 2009, Entergy Texas Restoration Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs. With the proceeds, the variable interest entities purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of the variable interest entities, including the transition property, and the creditors of the variable interest entities do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to the variable interest entities except to remit transition charge collections. See Note 5 to the financial statements for additional details regarding the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, is a variable interest entity and Entergy Arkansas is the primary beneficiary. In August 2010, Entergy Arkansas Restoration Funding issued storm cost recovery bonds to finance Entergy Arkansas’s January 2009 ice storm damage restoration costs. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas. Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections. See Note 5 to the financial statements for additional details regarding the storm cost recovery bonds.
Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, is a variable interest entity and Entergy Louisiana is the primary beneficiary. In September 2011, Entergy Louisiana Investment Recovery Funding issued investment recovery bonds to recover Entergy Louisiana’s investment recovery costs associated with the cancelledcanceled Little Gypsy repowering project. With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficient to service the bonds. The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet. The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana. Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recovery charge collections. See Note 5 to the financial statements for additional details regarding the investment recovery bonds.
Entergy Louisiana and System Energy are also considered to each hold a variable interest in the lessors from which they lease undivided interests representing approximately 9.3% ofin the Waterford 3 and 11.5% of the Grand Gulf nuclear plants, respectively. Entergy Louisiana and System Energy are the lessees under these arrangements, which are described in more detail in Note 10 to the financial statements. Entergy Louisiana made payments on its lease, including interest, of $50.4$31.0 million in 2011, $35.12014, $26.3 million in 2010,2013, and $32.5$39.1 million in 2009.2012. System Energy made payments on its lease, including interest, of $49.4$51.6 million in 2011, $48.62014, $50.5 million in 2010,2013, and $47.8$50.0 million in 2009.2012. The lessors are banks acting in the capacity of owner trustee for the benefit of equity investors in the transactions pursuant to trust agreements entered solely for the purpose of facilitating the lease transactions. It is possible that Entergy Louisiana and System Energy may be considered as the primary beneficiary of the lessors, but Entergy is unable to apply the revised authoritative accounting guidance with respect to these VIEs because the lessors are not required to, and could not, provide the necessary financial information to consolidate the lessors. Because Entergy accounts for these leasing arrangements as capital financings, however, Entergy believes that consolidating the lessors would not materially affect the financial statements. In the unlikely event of default under a lease, remedies available to the lessor include payment by the lessee of the fair value of the undivided interest in the plant, payment of the present value of the basic rent payments, or payment of a predetermined casualty value. Entergy believes, however, that the obligations recorded on the balance sheets materially represent each company’s potential exposure to loss.
Entergy has also reviewed various lease arrangements, power purchase agreements, and other agreements in which it holds a variable interest. In these cases, Entergy has determined that it is not the primary beneficiary of the related VIE because it does not have the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, or it does not have the obligation to absorb losses or the right to residual returns that would potentially be significant to the entity, or both.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 19. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Each Registrant Subsidiary purchases electricity from or sells electricity to the other Registrant Subsidiaries, or both, under rate schedules filed with FERC. The Registrant Subsidiaries receive management, technical, advisory, operating, and administrative services from Entergy Services; and receive management, technical, and operating services from Entergy Operations; and until the first quarter 2011 purchased fuel from System Fuels.Operations. These transactions are on an “at cost” basis. In addition, Entergy Power sellssold electricity to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans.Orleans prior to the expiration of the contract in 2013. RS Cogen sells electricity to Entergy Gulf States Louisiana.
As described in Note 1 to the financial statements, all of System Energy’s operating revenues consist of billings to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
As described in Note 4 to the financial statements, the Registrant Subsidiaries participate in Entergy’s money pool and earn interest income from the money pool. Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans also received interest income from System Fuels until the first quarter 2011, when System Fuels repaid each company’s investment in System Fuels. As described in Note 2 to the financial statements, Entergy Gulf States Louisiana and Entergy Louisiana receive preferred membership distributions from Entergy Holdings Company.
The tables below contain the various affiliate transactions of the Utility operating companies, System Energy, and other Entergy affiliates.
Intercompany Revenues
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| | | | | | | | | | | | | | | |
| 2011 | | $293.8 | | $574.5 | | $139.0 | | $125.1 | | $96.9 | | $264.1 | | $563.4 |
| 2010 | | $307.1 | | $462.9 | | $228.0 | | $59.4 | | $56.0 | | $372.8 | | $558.6 |
| 2009 | | $354.5 | | $475.5 | | $260.2 | | $56.2 | | $87.6 | | $295.0 | | $554.0 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
| 2014 |
| $131.2 |
| |
| $418.0 |
| |
| $258.5 |
| |
| $169.8 |
| |
| $76.8 |
| |
| $316.1 |
| |
| $664.4 |
|
| 2013 |
| $349.9 |
| |
| $383.1 |
| |
| $114.9 |
| |
| $107.3 |
| |
| $27.0 |
| |
| $369.4 |
| |
| $735.1 |
|
| 2012 |
| $324.0 |
| |
| $380.6 |
| |
| $138.2 |
| |
| $36.1 |
| |
| $43.9 |
| |
| $313.2 |
| |
| $622.1 |
|
Intercompany Operating Expenses
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| | | | | | | | | | | | | | | |
| | | (1) | | (2) | | (3) | | | | (4) | | | | |
| 2011 | | $752.7 | | $563.1 | | $574.0 | | $337.2 | | $226.6 | | $486.6 | | $131.5 |
| 2010 | | $545.6 | | $602.7 | | $483.0 | | $372.9 | | $235.8 | | $519.0 | | $122.7 |
| 2009 | | $844.5 | | $547.6 | | $496.6 | | $353.1 | | $213.5 | | $417.6 | | $136.3 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy
Gulf States
Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
| | (a) | | (b) | | (c) | | | | (d) | | | | |
| 2014 |
| $596.6 |
| |
| $773.1 |
| |
| $490.9 |
| |
| $367.6 |
| |
| $241.5 |
| |
| $445.3 |
| |
| $156.7 |
|
| 2013 |
| $656.1 |
| |
| $672.8 |
| |
| $667.6 |
| |
| $399.0 |
| |
| $279.6 |
| |
| $418.1 |
| |
| $175.2 |
|
| 2012 |
| $580.7 |
| |
| $532.3 |
| |
| $597.4 |
| |
| $352.7 |
| |
| $247.2 |
| |
| $386.1 |
| |
| $147.4 |
|
(1) | |
| (a) | Includes $1.2 million in 2011, $0.1 million in 2010, and $0.1 million in 2009 for power purchased from Entergy Power.Power of $3.3 million in 2013 and $1.4 million in 2012. The contract with Entergy Power expired in May 2013. |
| |
(2)(b) | Includes power purchased from RS Cogen of $41.1$3.2 million in 2011, $50.82013 and $2.8 million in 2010, and $49.3 million in 2009.2012. |
| |
(3)(c) | Includes power purchased from Entergy Power of $14.5$8.1 million in 2011, $12.02013 and $14.3 million in 2010, and $11.6 million2012. The contract with Entergy Power expired in 2009.May 2013. |
| |
(4)(d) | Includes power purchased from Entergy Power of $14.2$8 million in 2011, $11.82013 and $14.1 million in 2010, and $11.3 million2012. The contract with Entergy Power expired in 2009.May 2013. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Intercompany Interest and Investment Income
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Millions) |
| | | | | | | | | | | | | | | |
| 2011 | | $0.1 | | $32.5 | | $78.1 | | $0.1 | | $0.1 | | $0.0 | | $0.6 |
| 2010 | | $0.6 | | $26.5 | | $67.6 | | $0.3 | | $0.2 | | $0.1 | | $0.7 |
| 2009 | | $0.9 | | $19.5 | | $55.5 | | $0.8 | | $0.7 | | $0.4 | | $1.9 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
| 2014 |
| $— |
| |
| $30.3 |
| |
| $87.6 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| 2013 |
| $— |
| |
| $27.5 |
| |
| $78.2 |
| |
| $— |
| |
| $— |
| |
| $— |
| |
| $— |
|
| 2012 |
| $— |
| |
| $28.2 |
| |
| $78.2 |
| |
| $— |
| |
| $— |
| |
| $0.1 |
| |
| $— |
|
NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Operating results for the four quarters of 20112014 and 20102013 for Entergy Corporation and subsidiaries were:
| | Operating Revenues | | Operating Income | | Consolidated Net Income | | Net Income Attributable to Entergy Corporation | |
| | (In Thousands) | | | | | | | | | |
| 2011: | | | | |
| | | Operating Revenues | | Operating Income | | Consolidated Net Income | | Net Income Attributable to Entergy Corporation |
| | | (In Thousands) |
| 2014: | | | | |
First Quarter | $2,541,208 | | $510,891 | | $253,678 | | $248,663 |
| $3,208,843 |
| |
| $739,877 |
| |
| $406,053 |
| |
| $401,174 |
|
Second Quarter | $2,803,279 | | $558,738 | | $320,598 | | $315,583 |
| $2,996,650 |
| |
| $454,477 |
| |
| $194,281 |
| |
| $189,383 |
|
Third Quarter | $3,395,553 | | $600,909 | | $633,069 | | $628,054 |
| $3,458,110 |
| |
| $492,859 |
| |
| $234,916 |
| |
| $230,037 |
|
Fourth Quarter | $2,489,033 | | $342,696 | | $160,027 | | $154,139 |
| $2,831,318 |
| |
| $319,674 |
| |
| $125,006 |
| |
| $120,127 |
|
2010: | | | | |
| 2013: | | | | |
First Quarter | $2,759,347 | | $476,714 | | $218,814 | | $213,799 |
| $2,608,874 |
| |
| $394,045 |
| |
| $166,982 |
| |
| $161,400 |
|
Second Quarter | $2,862,950 | | $626,241 | | $320,283 | | $315,266 |
| $2,738,208 |
| |
| $346,512 |
| |
| $168,055 |
| |
| $163,723 |
|
Third Quarter | $3,332,176 | | $770,642 | | $497,901 | | $492,886 |
| $3,351,959 |
| |
| $388,894 |
| |
| $244,182 |
| |
| $239,850 |
|
Fourth Quarter | $2,533,104 | | $393,780 | | $233,307 | | $228,291 |
| $2,691,906 |
| |
| $225,548 |
| |
| $151,353 |
| |
| $146,929 |
|
Earnings per Average Common Share
| | | 2011 | | 2010 | | | | | | | | | | | | | | | |
| | Basic | | Diluted | | Basic | | Diluted | 2014 | | 2013 |
| | | | | | | | | Basic | | Diluted | | Basic | | Diluted |
| First Quarter | $1.39 | | $1.38 | | $1.13 | | $1.12 |
| $2.24 |
| |
| $2.24 |
| |
| $0.91 |
| |
| $0.90 |
|
| Second Quarter | $1.77 | | $1.76 | | $1.67 | | $1.65 |
| $1.06 |
| |
| $1.05 |
| |
| $0.92 |
| |
| $0.92 |
|
| Third Quarter | $3.55 | | $3.53 | | $2.65 | | $2.62 |
| $1.28 |
| |
| $1.27 |
| |
| $1.35 |
| |
| $1.34 |
|
| Fourth Quarter | $0.88 | | $0.88 | | $1.27 | | $1.26 |
| $0.67 |
| |
| $0.66 |
| |
| $0.82 |
| |
| $0.82 |
|
As discussed in more detail in Note 1 to the financial statements, operating results for 2014 include $154 million ($100 million after-tax) of charges related to Vermont Yankee primarily resulting from the effects of an updated decommissioning cost study completed in the third quarter 2014 along with reassessment of assumptions regarding the timing of decommissioning cash flows and severance and employee retention costs. Results of operations for 2014 also include the $56.2 million ($36.7 million after-tax) write-off of Entergy Mississippi’s regulatory asset associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff, subsequently approved by the MPSC, in which Entergy Mississippi agreed not to pursue recovery of
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements for further discussion of the new nuclear generation development costs and the joint stipulation.
Results of operations for 2013 include $322 million ($202 million after-tax) of impairment and other related charges primarily to write down the carrying value of Vermont Yankee and related assets to their fair values. See Note 1 to the financial statements for further discussion of the charges. Also, as discussed in more detail in Note 13 to the financial statements, operating results include approximately $110 million ($70 million after-tax) in costs in 2013 associated with the human capital management strategic imperative, primarily implementation costs, severance expenses, pension curtailment losses, and special termination benefits expense. In December 2013, Entergy deferred for future recovery approximately $45 million ($30 million after-tax) of these costs in the Arkansas and Louisiana jurisdictions, as approved by the APSC and the LPSC, respectively.
The business of the Utility operating companies is subject to seasonal fluctuations with the peak periods occurring during the third quarter. Operating results for the Registrant Subsidiaries for the four quarters of 20112014 and 20102013 were:
Operating RevenueRevenues
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | (In Thousands) | | | | | | | | | | | | | | | |
| 2011: | | | | | | | | | | | | | | | |
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| 2014: | | | | | | | | | | | | | | |
First Quarter | | $443,498 | | $495,898 | | $515,434 | | $288,983 | | $158,256 | | $348,884 | | $128,395 |
| $514,981 |
| |
| $513,295 |
| |
| $623,494 |
| |
| $348,196 |
| |
| $186,567 |
| |
| $440,256 |
| |
| $157,667 |
|
Second Quarter | | $516,833 | | $522,562 | | $651,847 | | $302,194 | | $150,498 | | $444,423 | | $129,120 |
| $511,522 |
| |
| $554,034 |
| |
| $736,408 |
| |
| $370,638 |
| |
| $169,989 |
| |
| $482,932 |
| |
| $163,830 |
|
Third Quarter | | $658,356 | | $596,948 | | $786,814 | | $365,569 | | $182,032 | | $556,955 | | $152,431 |
| $627,153 |
| |
| $610,493 |
| |
| $870,181 |
| |
| $425,341 |
| |
| $182,971 |
| |
| $528,508 |
| |
| $172,151 |
|
Fourth Quarter | | $465,623 | | $519,001 | | $554,820 | | $309,724 | | $139,399 | | $406,937 | | $153,465 |
| $518,735 |
| |
| $473,104 |
| |
| $595,798 |
| |
| $380,018 |
| |
| $150,558 |
| |
| $400,286 |
| |
| $170,716 |
|
| 2010: | | | | | | | | | | | | | | | |
| 2013: | | | | | | | | | | | | | | |
First Quarter | | $531,894 | | $498,675 | | $611,524 | | $244,135 | | $180,026 | | $336,206 | | $128,584 |
| $542,392 |
| |
| $419,955 |
| |
| $606,085 |
| |
| $291,641 |
| |
| $146,466 |
| |
| $306,173 |
| |
| $168,578 |
|
Second Quarter | | $540,535 | | $509,225 | | $619,473 | | $309,261 | | $138,685 | | $471,153 | | $124,419 |
| $508,653 |
| |
| $492,361 |
| |
| $635,805 |
| |
| $326,039 |
| |
| $142,841 |
| |
| $455,100 |
| |
| $172,177 |
|
Third Quarter | | $575,062 | | $632,772 | | $768,190 | | $408,692 | | $189,698 | | $514,786 | | $151,781 |
| $647,671 |
| |
| $558,331 |
| |
| $782,789 |
| |
| $397,833 |
| |
| $178,641 |
| |
| $526,978 |
| |
| $192,679 |
|
Fourth Quarter | | $434,956 | | $456,349 | | $539,579 | | $270,834 | | $151,040 | | $368,286 | | $153,800 |
| $491,443 |
| |
| $470,486 |
| |
| $602,256 |
| |
| $319,027 |
| |
| $152,208 |
| |
| $440,548 |
| |
| $201,655 |
|
Operating Income (Loss)
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | (In Thousands) | | | | | | | | | | | | | | | |
| 2011: | | | | | | | | | | | | | | | |
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| 2014: | | | | | | | | | | | | | | |
First Quarter | | $60,905 | | $83,069 | | $47,561 | | $37,286 | | $16,933 | | $45,593 | | $36,387 |
| $66,360 |
| |
| $82,576 |
| |
| $85,057 |
| |
| $57,132 |
| |
| $15,281 |
| |
| $43,056 |
| |
| $52,029 |
|
Second Quarter | | $99,072 | | $89,860 | | $96,648 | | $50,280 | | $15,710 | | $57,682 | | $33,996 |
| $68,970 |
| |
| $70,350 |
| |
| $100,176 |
| |
| $59,063 |
| |
| $12,862 |
| |
| $53,158 |
| |
| $56,547 |
|
Third Quarter | | $164,822 | | $100,276 | | ($61,706) | | $60,885 | | $36,603 | | $86,810 | | $38,520 |
| $115,357 |
| |
| $96,698 |
| |
| $160,595 |
| |
| $9,403 |
| |
| $24,866 |
| |
| $82,911 |
| |
| $58,484 |
|
Fourth Quarter | | $33,555 | | $57,506 | | $3,606 | | $32,938 | | ($6,118) | | $24,935 | | $41,699 |
| $19,317 |
| |
| $43,766 |
| |
| $38,615 |
| |
| $61,162 |
| |
| ($539 | ) | |
| $29,590 |
| |
| $54,056 |
|
| 2010: | | | | | | | | | | | | | | | |
| 2013: | | | | | | | | | | | | | | |
First Quarter | | $41,917 | | $75,702 | | $56,328 | | $27,501 | | $21,479 | | $42,083 | | $38,396 |
| $43,314 |
| |
| $52,083 |
| |
| $64,728 |
| |
| $37,123 |
| |
| $4,272 |
| |
| $26,277 |
| |
| $52,052 |
|
Second Quarter | | $108,793 | | $82,594 | | $90,115 | | $64,573 | | $10,027 | | $53,615 | | $42,292 |
| $80,942 |
| |
| $53,856 |
| |
| $88,691 |
| |
| $46,809 |
| |
| $3,627 |
| |
| $38,355 |
| |
| $51,632 |
|
Third Quarter | | $166,575 | | $127,825 | | $120,872 | | $62,488 | | $26,356 | | $72,496 | | $42,033 |
| $157,681 |
| |
| $85,284 |
| |
| $145,847 |
| |
| $70,186 |
| |
| $15,895 |
| |
| $79,430 |
| |
| $52,029 |
|
Fourth Quarter | | $8,731 | | $38,486 | | $29,359 | | $26,714 | | $3,970 | | $22,380 | | $42,426 |
| $23,123 |
| |
| $56,114 |
| |
| $56,128 |
| |
| $36,112 |
| |
| $3,070 |
| |
| $30,071 |
| |
| $47,367 |
|
Net Income (Loss)
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| 2011: | | | | | | | | | | | | | | |
First Quarter | | $25,608 | | $45,670 | | $40,298 | | $17,314 | | $8,927 | | $15,726 | | $19,336 |
Second Quarter | | $50,298 | | $49,310 | | $75,103 | | $23,829 | | $8,207 | | $23,097 | | $21,986 |
Third Quarter | | $80,945 | | $51,946 | | $337,722 | | $33,169 | | $18,943 | | $40,875 | | $14,263 |
Fourth Quarter | | $8,040 | | $56,101 | | $20,800 | | $34,417 | | ($101) | | $1,147 | | $8,612 |
| 2010: | | | | | | | | | | | | | | |
First Quarter | | $15,253 | | $38,083 | | $36,833 | | $11,550 | | $11,517 | | $12,418 | | $20,613 |
Second Quarter | | $55,401 | | $32,154 | | $61,259 | | $34,744 | | $5,529 | | $22,333 | | $20,442 |
Third Quarter | | $93,290 | | $76,939 | | $94,320 | | $34,499 | | $15,540 | | $31,132 | | $22,299 |
Fourth Quarter | | $8,674 | | $43,562 | | $39,023 | | $4,584 | | ($1,472) | | $317 | | $19,270 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Net Income (Loss)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| 2014: | | | | | | | | | | | | | |
| First Quarter |
| $28,370 |
| |
| $46,472 |
| |
| $58,378 |
| |
| $25,839 |
| |
| $8,294 |
| |
| $13,165 |
| |
| $24,619 |
|
| Second Quarter |
| $29,005 |
| |
| $36,171 |
| |
| $69,667 |
| |
| $26,564 |
| |
| $6,374 |
| |
| $18,585 |
| |
| $25,931 |
|
| Third Quarter |
| $62,980 |
| |
| $55,535 |
| |
| $123,821 |
| |
| ($6,464 | ) | |
| $13,932 |
| |
| $39,559 |
| |
| $26,730 |
|
| Fourth Quarter |
| $1,037 |
| |
| $24,313 |
| |
| $31,665 |
| |
| $28,882 |
| |
| $107 |
| |
| $3,495 |
| |
| $19,054 |
|
| 2013: | | | | | | | | | | | | | |
| First Quarter |
| $14,719 |
| |
| $27,165 |
| |
| $45,376 |
| |
| $13,934 |
| |
| $1,307 |
| |
| $922 |
| |
| $28,006 |
|
| Second Quarter |
| $40,483 |
| |
| $29,720 |
| |
| $61,377 |
| |
| $18,954 |
| |
| $598 |
| |
| $10,953 |
| |
| $27,734 |
|
| Third Quarter |
| $82,577 |
| |
| $62,642 |
| |
| $100,597 |
| |
| $33,813 |
| |
| $8,086 |
| |
| $35,801 |
| |
| $35,105 |
|
| Fourth Quarter |
| $24,169 |
| |
| $42,135 |
| |
| $45,114 |
| |
| $15,458 |
| |
| $1,692 |
| |
| $10,205 |
| |
| $22,819 |
|
Earnings (Loss) Applicable to Common Equity
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | |
| | | (In Thousands) | | | | | | | | | | | |
| 2011: | | | | | | | | | | | |
| | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans |
| | | (In Thousands) |
| 2014: | | | | | | | | | | |
First Quarter | | $23,890 | | $45,464 | | $38,560 | | $16,607 | | $8,686 |
| $26,652 |
| |
| $46,266 |
| |
| $56,640 |
| |
| $25,132 |
| |
| $8,053 |
|
Second Quarter | | $48,580 | | $49,104 | | $73,365 | | $23,122 | | $7,966 |
| $27,287 |
| |
| $35,962 |
| |
| $67,910 |
| |
| $25,857 |
| |
| $6,133 |
|
Third Quarter | | $79,227 | | $51,740 | | $335,984 | | $32,462 | | $18,702 |
| $61,262 |
| |
| $55,329 |
| |
| $122,083 |
| |
| ($7,171 | ) | |
| $13,691 |
|
Fourth Quarter | | $6,321 | | $55,894 | | $19,064 | | $33,710 | | ($343) |
| ($682 | ) | |
| $24,107 |
| |
| $29,929 |
| |
| $28,175 |
| |
| ($135 | ) |
| 2010: | | | | | | | | | | | |
| 2013: | | | | | | | | | | |
First Quarter | | $13,535 | | $37,877 | | $35,095 | | $10,843 | | $11,276 |
| $13,001 |
| |
| $26,959 |
| |
| $43,638 |
| |
| $13,227 |
| |
| $1,066 |
|
Second Quarter | | $53,683 | | $31,946 | | $59,521 | | $34,037 | | $5,288 |
| $38,765 |
| |
| $29,514 |
| |
| $59,639 |
| |
| $18,247 |
| |
| $357 |
|
Third Quarter | | $91,572 | | $76,733 | | $92,582 | | $33,792 | | $15,298 |
| $80,859 |
| |
| $62,436 |
| |
| $98,859 |
| |
| $33,106 |
| |
| $7,845 |
|
Fourth Quarter | | $6,955 | | $43,355 | | $37,287 | | $3,877 | | ($1,713) |
| $22,450 |
| |
| $41,928 |
| |
| $43,378 |
| |
| $14,751 |
| |
| $1,450 |
|
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy is an integrated energy company engaged primarily in electric power production and retail electric distribution operations. Entergy owns and operates power plants with approximately 30,000 MW of aggregate electric generating capacity, including overnearly 10,000 MW of nuclear-fueled capacity. Entergy’s Utility business delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy generated annual revenues of $11.2$12.5 billion in 20112014 and had approximately 15,00013,000 employees as of December 31, 2011.2014.
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
· | The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business. As discussed in more detail in “Plan to Spin Off the Utility’s Transmission Business” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in December 2011, Entergy entered into an agreement to spin off its transmission business and merge it with a newly-formed subsidiary of ITC Holdings Corp. |
· | The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers. This business also provides services to other nuclear power plant owners.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. In August 2013, Entergy announced plans to close and decommission Vermont Yankee. On December 29, 2014 the Vermont Yankee plant ceased power production and has entered its decommissioning phase. 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 Note 13 to the financial statements for financial information regarding Entergy’s business segments.
Strategy
Entergy’s mission is to operate a world-class energy business that creates sustainable value for its owners, customers, employees, and communities. Entergy aspires to achieve industry-leadingtop quartile total shareholder returns in ana socially and environmentally responsible fashion by leveraging the scale and expertise inherent in its core nuclearutility and utilitynuclear operations. Entergy’s current scope includes electricity generation, transmission, and distribution as well as natural gas transportation and distribution. Entergy focuses on operational excellence with an emphasis on safety, reliability, customer service, sustainability, cost efficiency, risk management, and risk management.engaged employees. Entergy also focuses oncontinually seeks opportunities to grow its utility business to benefit all stakeholders and to optimize its portfolio management to makeof assets in an ever-dynamic market through periodic buy, build, hold, or sell decisions based upon its analytically-derived pointsdisposal decisions. To accomplish this, Entergy has established strategic imperatives for each business segment. For the Utility, the strategic imperative is to grow the business by leveraging the industrial expansion underway in the Gulf region of view, which are updated as market conditions evolve.the United States, and for Entergy Wholesale Commodities, the strategic imperative is to manage the risk and preserve value in the business.
The Utility business segment includes six wholly-owned retail electric utility subsidiaries: Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. These companies generate, transmit, distribute and sell electric power to retail and wholesale customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy Gulf States Louisiana and Entergy New Orleans also provide natural gas utility services to customers in and around Baton Rouge, Louisiana, and New Orleans, Louisiana, respectively. Also included in the Utility is System Energy, a wholly-owned subsidiary of Entergy Corporation that owns or leases 90 percent of Grand Gulf. System Energy sells its power and capacity from Grand Gulf at wholesale to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
The six retail utility subsidiaries are each regulated by the FERC and by state utility commissions, or, in the case of Entergy New Orleans, the City Council. System Energy is regulated by the FERC because all of its transactions are at wholesale. The Utility continues to operate as a rate-regulated business as efforts toward deregulation have been abandoned or have not been initiated in its service territories. The overall generation portfolio of the Utility, which relies heavily on natural gas and nuclear generation, is consistent with Entergy’s strong support for the environment.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Customers
As of December 31, 2011,2014, the Utility operating companies provided retail electric and gas service to customers in Arkansas, Louisiana, Mississippi, and Texas, as follows:
| | | | | Electric Customers | | Gas Customers | | | | | | | | | | |
| | Area Served | | (In Thousands) | | (%) | | (In Thousands) | | (%) | | | Electric Customers | | Gas Customers |
| | | | | | | | | | | Area Served | | (In Thousands) | | (%) | | (In Thousands) | | (%) |
| Entergy Arkansas | Portions of Arkansas | | 693 | | 25% | | | | | Portions of Arkansas | | 702 |
| | 25 | % | | | | |
Entergy Gulf States Louisiana | Portions of Louisiana | | 384 | | 14% | | 92 | | 48% | Portions of Louisiana | | 396 |
| | 14 | % | | 93 |
| | 47 | % |
| Entergy Louisiana | Portions of Louisiana | | 669 | | 24% | | | | | Portions of Louisiana | | 680 |
| | 24 | % | | | | |
| Entergy Mississippi | Portions of Mississippi | | 437 | | 16% | | | | | Portions of Mississippi | | 442 |
| | 16 | % | | | | |
| Entergy New Orleans | City of New Orleans* | | 161 | | 6% | | 101 | | 52% | City of New Orleans (a) | | 171 |
| | 6 | % | | 105 |
| | 53 | % |
| Entergy Texas | Portions of Texas | | 413 | | 15% | | | | | Portions of Texas | | 427 |
| | 15 | % | | | | |
| Total customers | | | 2,757 | | 100% | | 193 | | 100% | | | 2,818 |
| | 100 | % | | 198 |
| | 100 | % |
* | |
| (a) | Excludes the Algiers area of the city, where Entergy Louisiana provides electric service. |
Electric Energy Sales
The electric energy sales of the Utility operating companies are subject to seasonal fluctuations, with the peak sales period normally occurring during the third quarter of each year. On August 3, 2011,22, 2014, Entergy reached a 20112014 peak demand of 22,38720,472 MWh, compared to the 20102013 peak of 21,79921,581 MWh recorded on August 2, 2010.8, 2013. Selected electric energy sales data is shown in the table below:
Selected 20112014 Electric Energy Sales Data
| | | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy (a) | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy (a) |
| | | (In GWh) | (In GWh) |
Sales to retail customers | | 21,584 | | 19,885 | | 31,744 | | 13,574 | | 5,120 | | 16,863 | | - | | 108,688 | 21,050 |
| | 20,823 |
| | 32,904 |
| | 13,204 |
| | 5,229 |
| | 17,698 |
| | — |
| | 110,910 |
|
| Sales for resale: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Affiliates | | 6,893 | | 8,595 | | 2,145 | | 431 | | 1,167 | | 4,158 | | 9,293 | | - | 2,299 |
| | 6,966 |
| | 4,450 |
| | 2,657 |
| | 1,322 |
| | 4,763 |
| | 9,219 |
| | — |
|
Others | | 1,304 | | 1,013 | | 185 | | 332 | | 19 | | 1,258 | | - | | 4,111 | 8,003 |
| | 925 |
| | 126 |
| | 193 |
| | 16 |
| | 200 |
| | — |
| | 9,462 |
|
Total | | 29,781 | | 29,493 | | 34,074 | | 14,337 | | 6,306 | | 22,279 | | 9,293 | | 112,799 | 31,352 |
| | 28,714 |
| | 37,480 |
| | 16,054 |
| | 6,567 |
| | 22,661 |
| | 9,219 |
| | 120,372 |
|
| | | | | | | | | | | | | | | | | | |
Average use per residential customer (kWh) | | 14,119 | | 16,376 | | 16,022 | | 15,948 | | 13,231 | | 16,719 | | - | | 15,528 | 13,774 |
| | 15,865 |
| | 15,355 |
| | 15,319 |
| | 12,870 |
| | 15,560 |
| | — |
| | 14,911 |
|
| |
| (a) | Includes the effect of intercompany eliminations. |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
The following table illustrates the Utility operating companies’ 20112014 combined electric sales volume as a percentage of total electric sales volume, and 20112014 combined electric revenues as a percentage of total 20112014 electric revenue, each by customer class.
|
| | | | |
| Customer Class | | % of Sales Volume | | % of Revenue |
| Residential | | 29.9 | | 37.1 |
| Commercial | | 23.9 | | 26.6 |
| Industrial (a) | | 36.3 | | 27.3 |
| Governmental | | 2.0 | | 2.4 |
| Wholesale/Other | | 7.9 | | 6.6 |
| Customer Class | | % of Sales Volume | | % of Revenue |
| | | | | |
| Residential | | 32.5 | | 38.8 |
| Commercial | | 25.5 | | 26.9 |
| Industrial (a) | | 36.2 | | 26.6 |
| Governmental | | 2.2 | | 2.4 |
| Wholesale/Other | | 3.6 | | 5.3 |
| |
| (a) | Major industrial customers are in the chemical, petroleum refining, and pulp and paper industries. |
See “Selected Financial Data” for each of the Utility operating companies for the detail of their sales by customer class for 2007-2011.2010-2014.
Selected 20112014 Natural Gas Sales Data
Entergy New Orleans and Entergy Gulf States Louisiana provide both electric power and natural gas to retail customers. Entergy New Orleans and Entergy Gulf States Louisiana sold 10,074,75411,296,179 and 7,005,0747,933,968 Mcf, respectively, of natural gas to retail customers in 2011.2014. In 2011,2014, 97% of Entergy Gulf States Louisiana’s operating revenue was derived from the electric utility business, and only 3% from the natural gas distribution business. For Entergy New Orleans, 84% of operating revenue was derived from the electric utility business and 16% from the natural gas distribution business in 2011. 2014.
Following is data concerning Entergy New Orleans’s 20112014 retail operating revenue sources.
| | Customer Class | | Electric Operating Revenue | | Natural Gas Revenue | | Electric Operating Revenue | | Natural Gas Revenue |
| | | | | | |
| Residential | | 42% | | 52% | | 42% | | 51% |
| Commercial | | 37% | | 24% | | 38% | | 26% |
| Industrial | | 7% | | 8% | | 7% | | 8% |
| Governmental/Municipal | | 14% | | 16% | | 13% | | 15% |
Retail Rate Regulation
General (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Each Utility operating company regularly participates in retail rate proceedings. The status of material retail rate proceedings is described in Note 2 to the financial statements. Certain aspects of the Utility operating companies’ retail rate mechanisms are discussed below.
Entergy Arkansas
Fuel and Purchased Power Cost Recovery
Entergy Arkansas’s rate schedules include an energy cost recovery rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
upon the level of over- or under-recovery of fuel and purchased energy costs. In December 2007 the APSC issued an order stating that Entergy Arkansas’s energy cost recovery rider will remain in effect, and any future termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Arkansas’s storm restoration costs.
Entergy Gulf States Louisiana
Fuel Recovery
Entergy Gulf States Louisiana’s electric rates include a fuel adjustment clause designed to recover the cost of fuel and purchased power costs. The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from the monthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges. See Note 2 to the financial statements for a discussion of proceedings related to audits of Entergy Gulf States Louisiana’s fuel adjustment clause filings.
To help stabilize electricity costs, Entergy Gulf States Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Gulf States Louisiana hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Entergy Gulf States Louisiana’s gas rates include a purchased gas adjustment clause based on estimated gas costs for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
To help stabilize retail gas costs, Entergy Gulf States Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility for its gas purchased for resale through the use of financial instruments. Entergy Gulf States Louisiana hedges approximately one-half of the projected natural gas volumes used to serve its natural gas customers for November through March. The hedge quantity is reviewed on an annual basis.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy Gulf States Louisiana’s filings to recover storm-related costs.
Entergy Louisiana
Fuel Recovery
Entergy Louisiana’s rate schedules include a fuel adjustment clause designed to recover the cost of fuel and purchased power costs. The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from the monthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In See Note 2 to the Delaney vs.financial statements for a discussion of proceedings related to audits of Entergy Louisiana proceeding, the LPSC ordered Entergy Louisiana, beginning with the May 2000Louisiana’s fuel adjustment clause filing, to re-price costs flowed through its fuel adjustment clause related to the Evangeline gas contract so that the price included for fuel adjustment clause recovery shall thereafter be at the rate of the Henry Hub first of the month cash market price (as reported by the publication Inside FERC) plus $0.24 per mmBtu for the month for which the fuel adjustment clause is calculated, irrespective of the actual cost for the Evangeline contract quantity reflected in that month’s fuel adjustment clause. The Evangeline gas contract expires on January 1, 2013.filings.
To help stabilize electricity costs, Entergy Louisiana received approval from the LPSC in 2001 to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Louisiana hedges approximately one-
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy Louisiana’s filings to recover storm-related costs.
Entergy Mississippi
Fuel Recovery
Entergy Mississippi’s rate schedules include energy cost recovery riders to recover fuel and purchased energy costs. The energy cost rate for each calendar year is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery of the energy costs as of the 12-month period ended September 30. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
Power Management Rider
In November 2005 the MPSC approved the purchase of the Attala power plant and recovery of the investment cost through Entergy Mississippi’s power management rider. Entergy Mississippi recovered the annual ownership costs of the Attala plant through the power management rider until resolution of its general rate case. In 2012 the MPSC approved the purchase of the Hinds power plant recovery of the investment cost through Entergy Mississippi’s power management rider. Entergy Mississippi recovered the annual ownership costs of the Hinds plant through the power management rider until resolution of its general rate case. See Note 2 to the financial statements for a discussion of Entergy Mississippi’s 2014 general rate case. Included in the rate changes and revenue adjustments effective with February 2015 bills was the realignment of the annual ownership costs associated with the Attala plant and the Hinds plant from the power management rider to base rates.
To help stabilize electricity costs, Entergy Mississippi received approval from the MPSC to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Mississippi hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Storm Cost Recovery
Entergy Mississippi maintains a storm damage provision pursuant to orders of the MPSC and consistent with regulatory accounting requirements. Entergy Mississippi’s storm damage provision is funded through its storm damage rider schedule. In two orders issued in July 2012, the MPSC temporarily increased Entergy Mississippi’s storm damage provision monthly accrual from $750,000 to $2 million for bills rendered during the billing months of August 2012 through December 2012, and approved recovery of $14.9 million in prudently incurred storm costs to be amortized over five months, beginning with August 2012 bills. Beginning with January 2013 bills, the monthly accrual to the storm damage provision reverted back to $750,000. On July 1, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, in which both parties agreed that approximately $32 million in storm restoration costs incurred in 2011 and 2012 were prudently incurred and chargeable to storm damages, while approximately $700,000 in prudently incurred costs were more properly recoverable through the formula rate plan. Entergy Mississippi and the Mississippi Public Utilities Staff also agreed that the storm damage accrual should be increased from $750,000 per month to $1.75 million per month. In September 2013 the MPSC approved the joint stipulation with the increase in the storm damage accrual effective with October 2013 bills. In February 2015, Entergy Mississippi provided notice to the Mississippi Public Utilities Staff that the storm damage accrual would be set to zero effective with the March 2015 billing cycle as a result of Entergy Mississippi's storm damage accrual balance exceeding
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
In September 2002, Entergy Louisiana settled a proceeding that concerned a contract entered into by Entergy Louisiana to purchase, through 2031, energy generated by a hydroelectric facility known as the Vidalia project. In the settlement, the LPSC approved Entergy Louisiana’s proposed treatment of the regulatory effect of the benefit from a tax accounting election related to that project. In general, the settlement permitted Entergy Louisiana to keep a portion of the tax benefit in exchange for bearing the risk associated with sustaining the tax treatment. See Note 8 to the financial statements for additional discussion of the obligations related to the Vidalia project and the sharing of tax benefits with customers.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy Louisiana’s filings to recover storm-related costs.
Entergy Mississippi
Fuel Recovery
Entergy Mississippi’s rate schedules include energy cost recovery riders to recover fuel and purchased energy costs. The rider utilizes projected energy costs filed quarterly by Entergy Mississippi to develop an energy cost rate. The energy cost rate is redetermined each calendar quarter and includes a true-up adjustment reflecting the over-recovery or under-recovery of the energy cost$15 million as of January 31, 2015, but will return to its current level when the second quarter preceding the redetermination. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
Power Management Riderstorm damage accrual balance becomes less than $10 million.
The MPSC approved the purchase of the Attala power plant in November 2005. In December 2005, the MPSC issued an order approving the investment cost recovery through its power management rider and limited the recovery to a periodhas also ordered that begins with the closing date of the purchase and ends the earlier of the date costs are incorporated into base rates or December 31, 2006. As a consequence of the events surrounding Entergy Mississippi’s ongoing efforts to recover storm restoration costs associated with Hurricane Katrina, in October 2006, the MPSC approved a revision to Entergy Mississippi’s power management rider. The revision has the effect of allowing Entergy Mississippi to recover the annual ownership costs of the Attala plant until such time as a general rate case is filed.
To help stabilize electricity costs, Entergy Mississippi received approval from the MPSC to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Mississippi hedges approximately one-half of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Storm Cost Recovery
Entergy Mississippi maintains a storm damage reserve pursuant to orders of the MPSC and consistent with the regulatory accounting requirements. Entergy Mississippi's storm damage reserve is funded throughwill annually submit its storm damage rider schedule. In August 2011, Entergy Mississippi filed with the MPSC a notice of its intent to revise the storm damage rider schedule to recover over a 36-month period approximately $30 million and to increase the level of monthly accruals to the storm damage reserve from the current level of $750,000 per month to $1.75 million per month, and to increase the current level of the storm reserve cap during which funds will accrue from $15 million to $25 million. The cap is the level of the storm reserve balance at which monthly accruals would temporarily cease. The amounts of the monthly accruals and the cap have not been revised since 2001 and the current amounts do not reflect the costs of current storm restoration activities. Consideration of Entergy Mississippi’s notice is pending.for audit.
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Entergy New Orleans
Fuel Recovery
Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges. In October 2005 the City Council approved modification of the current gas cost collection mechanism effective November 2005 in order to address concerns regarding its fluctuations, particularly during the winter heating season. The modifications are intended to minimize fluctuations in gas rates during the winter months.
To help stabilize retail gas costs, Entergy New Orleans receivedseeks approval annually from the City Council to continue implementation of its natural gas hedging program consistent with the City Council’s stated policy objectives. The program uses financial instruments to hedge its exposure to volatility in the wholesale price of natural gas price volatility for itspurchased to serve Entergy New Orleans gas purchased for resale through the use of financial instruments.customers. Entergy New Orleans hedges approximately one-halfup to 25% of actual gas sales made during the projected natural gas volumes used to serve its natural gas customers for November through March. The hedge quantity is reviewed on an annual basis.winter months.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy New Orleans’s efforts to recover storm-related costs.
Entergy Texas
Fuel Recovery
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges,interest, that are not included in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT. The PUCT fuel cost reviewsproceedings are discussed in Note 2 to the financial statements.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Texas’s storm restoration costs.
Electric Industry Restructuring
In June 2009, a law was enacted in Texas that requiresrequired Entergy Texas to cease all activities relating to Entergy Texas’s transition to competition. The law allows Entergy Texas to remain a part of the SERC Region, although it does not prevent Entergy Texas from joining another power region. The law provides that proceedings to certify a power region that Entergy Texas belongs to as a qualified power region can be initiated by the PUCT, or on motion by another party, when the conditions supporting such a proceeding exist. Under the new law, the PUCT may not approve a transition to competition plan for Entergy Texas until the expiration of four years from the PUCT’s certification of Entergy Texas’s power region. In response to the new law, Entergy Texas in June 2009 gave notice to the PUCT of the withdrawal of its previously filed transition to competition plan, and requested that its transition to competition proceeding be dismissed. In July 2009 the ALJ dismissed the proceeding.
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The new law also contains provisions that allow Entergy Texas to take advantage of a cost recovery mechanism that permits annual filings for the recovery of reasonable and necessary expenditures for transmission infrastructure improvement and changes in wholesale transmission charges. This mechanism was previously available to other non-ERCOT Texas utility companies, but not to Entergy Texas.
InIn September 2011 the PUCT adopted a proposed rule implementing a Distribution Cost Recovery Factor to recover capital and capital-related costs related to distribution infrastructure. The Distribution Cost Recovery Factor permits utilities once per year to implement an increase or decrease in rates above or below amounts reflected in base rates to reflect depreciation expense, federal income tax and other taxes, and return on investment. The Distribution Cost Recovery Factor rider may be changed a maximum of four times between base rate cases, and expires in January 2017, unless otherwise extended by the Texas Legislature.
The new law further amendsamended already existing law that had required Entergy Texas to propose for PUCT approval a tariff to allow eligible customers the ability to contract for competitive generation. The amending language in the new law provides, among other things, that: 1) the tariff shall not be implemented in a manner that harms the sustainability or competitiveness of manufacturers who choose not to participate in the tariff; 2) Entergy Texas shall “purchase competitive generation service, selected by the customer, and provide the generation at retail to the customer”; and 3) Entergy Texas shall provide and price transmission service and ancillary services under that tariff at a rate that is unbundled from its cost of service. The new law directs that the PUCT may not issue an order on the tariff that is contrary to an applicable decision, rule, or policy statement of a federal regulatory agency having jurisdiction.
Entergy Texas and the other parties to the PUCT proceeding to determine the design of the competitive generation tariff were involved in negotiations throughout 2011 and 2012 with the objective of resolving as many disputed issues as possible regarding the tariff. While theseThe PUCT determined that unrecovered costs that could be recovered through the rider consist only of those costs necessary to implement and administer the competitive generation program and do not include lost revenues or embedded generation costs. The PUCT also ruled that the amount of customer load that may be included in the competitive generation service program is limited to 115 MW. After additional negotiations, remain pending,and ultimately the scheduling of a hearing to resolve remaining contested issues, the PUCT issued the order approving the competitive generation service rider in July 2013. Entergy Texas filed for rehearing of the PUCT’s July 2013 order, which the PUCT denied. Entergy Texas has directed the parties to file testimony allowing it to consider and resolve certain threshold issues relatedsince filed its appeal of that PUCT order to the designTravis County District Court, which found in favor of the program, including: 1) the definition and calculation of any cost unrecovered byPUCT in an order issued in October 2014. In November 2014, Entergy Texas as a resultappealed the District Court’s order which moves the appeal to the Third Court of the tariff; 2) who should be eligible to take service under the tariff; and 3) what ratepayers should be responsible for paying any unrecovered costs experienced by Entergy Texas. Testimony addressing these issues has been submitted and a hearing is scheduled for April 2012.Appeals. The appeal remains pending.
Franchises
Entergy Arkansas holds exclusive franchises to provide electric service in approximately 307308 incorporated cities and towns in Arkansas. These franchises are unlimited in duration and continue unless the municipalities purchase the utility property. In Arkansas franchises are considered to be contracts and, therefore, are terminable pursuant to the terms of the franchise agreement and applicable statutes.
Entergy Gulf States Louisiana holds non-exclusive franchises to provide electric service in approximately 5659 incorporated municipalities and the unincorporated areas of approximately 1822 parishes, and to provide gas service in the City of Baton Rouge and the unincorporated areas of two parishes. Most of Entergy Gulf States Louisiana’s franchises have a term of 60 years. Entergy Gulf States Louisiana’s current electric and gas franchises expire during 2015-2046.2015-2055.
Entergy Louisiana holds non-exclusive franchises to provide electric service in approximately 116117 incorporated Louisiana municipalities. Most of these franchises have 25-year terms. Entergy Louisiana also supplies electric service in approximately 4552 Louisiana parishes in which it holds non-exclusive franchises. Entergy Louisiana’s electric franchises expire during 2015-2036.2015-2039.
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Entergy Mississippi has received from the MPSC certificates of public convenience and necessity to provide electric service to areas within 45 counties, including a number of municipalities, in western Mississippi. Under Mississippi statutory law, such certificates are exclusive. Entergy Mississippi may continue to serve in such municipalities upon payment of a statutory franchise fee, regardless of whether an original municipal franchise is still in existence.
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Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to indeterminate permits set forth in city ordinances (except electric service in Algiers, which is provided by Entergy Louisiana). These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans’s electric and gas utility properties.
Entergy Texas holds a certificate of convenience and necessity from the PUCT to provide electric service to areas within approximately 27 counties in eastern Texas, and holds non-exclusive franchises to provide electric service in approximately 68 incorporated municipalities. Entergy Texas was typically granted 50-year franchises, but recently has been receivingobtains 25-year franchises.franchise agreements as existing agreements expire. Entergy Texas’s electric franchises expire during 2013-2058.2016-2058.
The business of System Energy is limited to wholesale power sales. It has no distribution franchises.
Property and Other Generation Resources
Generating Stations
The total capability of the generating stations owned and leased by the Utility operating companies and System Energy as of December 31, 2011,2014, is indicated below:
|
| | | | | | | | | | | | | | | |
| | | Owned and Leased Capability MW(a) |
| Company | | Total | | Gas/Oil | | Nuclear | | Coal | | Hydro |
| Entergy Arkansas | | 4,721 |
| | 1,630 |
| | 1,820 |
| | 1,198 |
| | 73 |
|
| Entergy Gulf States Louisiana | | 2,963 |
| | 1,630 |
| | 973 |
| | 360 |
| | — |
|
| Entergy Louisiana | | 6,321 |
| | 5,157 |
| | 1,164 |
| | — |
| | — |
|
| Entergy Mississippi | | 3,495 |
| | 3,075 |
| | — |
| | 420 |
| | — |
|
| Entergy New Orleans | | 782 |
| | 782 |
| | — |
| | — |
| | — |
|
| Entergy Texas | | 2,553 |
| | 2,287 |
| | — |
| | 266 |
| | — |
|
| System Energy | | 1,268 |
| | — |
| | 1,268 |
| | — |
| | — |
|
| Total | | 22,103 |
| | 14,561 |
| | 5,225 |
| | 2,244 |
| | 73 |
|
| | | Owned and Leased Capability MW(1) |
| Company | | Total | | Gas/Oil | | Nuclear | | Coal | | Hydro |
| | | | | | | | | | | |
| Entergy Arkansas | | 4,774 | | 1,668 | | 1,823 | | 1,209 | | 74 |
| Entergy Gulf States Louisiana | | 3,317 | | 1,980 | | 974 | | 363 | | - |
| Entergy Louisiana | | 5,424 | | 4,265 | | 1,159 | | - | | - |
| Entergy Mississippi | | 3,229 | | 2,809 | | - | | 420 | | - |
| Entergy New Orleans | | 764 | | 764 | | - | | - | | - |
| Entergy Texas | | 2,538 | | 2,269 | | - | | 269 | | - |
| System Energy | | 1,071 | | - | | 1,071 | | - | | - |
| Total | | 21,117 | | 13,755 | | 5,027 | | 2,261 | | 74 |
(1) | |
| (a) | “Owned and Leased Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
Summer peak load for the Utility has averaged 23,269 MW over the previous decade. The Utility operating companies, in aggregate, are projected to have approximately 224 MW more than their minimum capacity requirements needed to meet MISO Resource Adequacy for 2015.
The Entergy System'sUtility operating companies’ load and capacity projections are reviewed periodically to assess the need and timing for additional generating capacity and interconnections. These reviews consider existing and projected demand, and the availability and price of power, the location of new load, the economy, and the economy. Summer peak load inage and condition of Entergy’s existing infrastructure. The resource planning processes also consider the Entergy Arkansas exit from the System service territory has averaged 21,246 MWAgreement on December 18, 2013, and Entergy Mississippi’s (in November 2015), Entergy Texas’s, Entergy Louisiana’s, and Entergy Gulf States Louisiana’s notices of their future withdrawal from 2002-2011. In the 2002 time period, the System Agreement.
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Entergy System's long-term capacity resources, allowing for an adequate reserve margin, were approximately 3,000 MW less than the total capacity required for peak period demands. In this time period the Entergy System met its capacity shortages almost entirely through short-term power purchases in the wholesale spot market. In the fall of 2002, the Entergy System began a program to add new resources to its existing generation portfolio and began a process of issuing requests for proposals (RFP) to procure supply-side resources from sources other than the spot market to meet the unique regional needs of theCorporation, Utility operating companies. companies, and System Energy
The Entergy System has adopted aUtility operating companies’ long-term resource strategy, thatthe “Portfolio Transformation Strategy,” calls for the bulk of capacity needs to be met through long-term resources, whether owned or contracted. Entergy refers to this strategy as the "Portfolio Transformation Strategy". Over the past nine years,decade, the Portfolio Transformation Strategy has resulted in the addition of about 4,5006,500 MW of new long-term resources. These figures do not include transactions currently pending as a result of the Summer 2009 RFP. When the Summer 2009 RFP transactions are included in
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Entergy Corporation, Utility operating companies, and System Energy
the Entergy System portfolio of long-term resources and adjusting for unit deactivations of older generation, the Entergy System is approximately 500 MW short of its projected 2012 peak load plus reserve margin. This remaining need is expected to be met through a nuclear uprate at Grand Gulf and limited-term resources. The Entergy System will continue to access the spot powerAs MISO market to economically purchase energy in order to minimize customer cost. In addition, Entergy considers in its planning processes the notices from Entergy Arkansas and Entergy Mississippi regarding their future withdrawal from the System Agreement. Furthermore, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies' transmission system that limits the ability ofparticipants, the Utility operating companies as well as other partiesalso participate in MISO’s Day Ahead and Real Time Energy and Ancillary Services markets to fully utilizeeconomically dispatch generation and purchase energy to serve customers reliably and at the generating resources that have been granted transmission service.lowest reasonable cost.
RFP Procurements
The Utility operating companies from time to time issue requests for proposals (RFP) to procure supply-side resources from sources other than the spot market to meet the unique regional needs of the Utility operating companies. The RFPs issued by the Entergy System since the fall of 2002Utility operating companies have sought resources needed to meet near-term summer reliability requirements as well as longer-term resourcesrequirements through a broad range of wholesale power products, including limited-term (1 to 3 years) and long-term contractual products and asset acquisitions. Detailed evaluation processes have been developed to analyze submitted proposals, and, with the exceptionThe RFP process resulted, among other things, in:
Entergy Louisiana’s June 2005 purchase of the January 2008 RFP and the 2008 Western Region RFP, each RFP has been overseen by an independent monitor. The following table illustrates the results718 MW, gas-fired Perryville plant, of which a total of 75% of the output is sold to Entergy Gulf States Louisiana and Entergy Texas;
Entergy Arkansas’s September 2008 purchase of the 789 MW, combined-cycle, gas-fired Ouachita Generating Facility. Entergy Gulf States Louisiana purchased one-third of the facility from Entergy Arkansas in November 2009;
Entergy Arkansas’s November 2012 purchase of the 620 MW, combined-cycle, gas-fired Hot Spring Energy facility;
Entergy Mississippi’s November 2012 purchase of the 450 MW, combined-cycle, gas-fired Hinds Energy facility; and
Entergy Louisiana’s construction of the 560 MW, combined-cycle, gas turbine Ninemile 6 generating facility at its existing Ninemile Point electric generating station. The facility reached commercial operation in December 2014. For additional discussion of the Ninemile 6 project see “Capital Expenditure Plans and Other Uses of Capital” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
The RFP process for resources acquired sincehas also resulted in the Fall 2002 RFP. The contracts below were primarily with non-affiliated suppliers, withselection, or confirmation of the exceptioneconomic merits of, contracts with EWO Marketing forlong-term purchased power agreements (PPAs), including, among others:
River Bend 30% life-of-unit PPAs totaling approximately 300 MW between Entergy Gulf States Louisiana and Entergy Louisiana (200 MW), and between Entergy Gulf States Louisiana and Entergy New Orleans (100 MW) related to Entergy Gulf States Louisiana’s unregulated portion of the River Bend nuclear station, which portion was formerly owned by Cajun;
Entergy Arkansas wholesale base load capacity life-of-unit PPAs executed in 2003 totaling approximately 220 MW between Entergy Arkansas and Entergy Louisiana (110 MW) and between Entergy Arkansas and Entergy New Orleans (110 MW) related to the sale of 185 MWa portion of Entergy Arkansas’s coal and nuclear base load resources (which had not been included in Entergy Arkansas’s retail rates);
12-month agreements originally executed in 2005 and which are renewed annually between Entergy Arkansas and Entergy Gulf States Louisiana and Entergy Texas, and between Entergy Arkansas and Entergy Mississippi, relating to 206the sale of a portion of Entergy Arkansas’s coal and nuclear base load resources (which had not been included in Entergy Arkansas’s retail rates);
In December 2009, Entergy Texas and Exelon Generation Company, LLC executed a 10-year agreement for 150-300 MW from the RS Cogen plantFrontier Generating Station located in Grimes County, Texas;
In May 2011, Entergy Texas and contracts with Entergy PowerCalpine Energy Services, L.P. executed a 10-year agreement for the sale of approximately 100485 MW from the Independence plant.
RFP
| | Short-
term 3rd
party
| | Limited-term
affiliate
| | Limited-
term 3rd
party
| | Long-term
affiliate
| | Long-term
3rd party
| | Total
|
| | | | | | | | | | | | |
Fall 2002 | | - | | 185-206 MW (a) | | 231 MW | | 101-121 MW (b) | | 718 MW (d) | | 1,235-1,276 MW |
January 2003 supplemental | | 222 MW | | | | - | | - | | - | | 222 MW |
Spring 2003 | | - | | - | | 381 MW | | (c) | | - | | 381 MW |
Fall 2003 | | - | | - | | 390 MW | | - | | - | | 390 MW |
Fall 2004 | | - | | - | | 1,250 MW | | - | | - | | 1,250 MW |
2006 Long-Term | | - | | - | | - | | 538 MW (e) | | 789 MW (f) | | 1,327 MW |
Fall 2006 | | - | | - | | 780 MW | | - | | - | | 780 MW |
January 2008 (g) | | - | | - | | - | | - | | - | | - |
2008 Western Region | | - | | - | | 300 MW | | - | | - | | 300 MW |
Summer 2008 (h) | | - | | - | | 200 MW | | - | | - | | 200 MW |
January 2009 Western Region | | - | | - | | - | | - | | 150-300 MW | | 150-300 MW |
July 2009 Baseload | | - | | 336 MW (i) | | - | | - | | - | | 336 MW |
Summer 2009 Long-Term (j) | | - | | - | | - | | 551 MW | | 1555 MW | | 2106 MW |
(a) | Includes a conditional option to increase the capacity up to the upper bound of the range. |
(b) | The contracted capacity increased from 101 MW to 121 MW in 2010. |
(c) | This table does not reflect (i) the River Bend 30% life-of-unit purchased power agreements totaling approximately 300 MW between Entergy Gulf States Louisiana and Entergy Louisiana (200 MW), and between Entergy Gulf States Louisiana and Entergy New Orleans (100 MW) related to Entergy Gulf States Louisiana's unregulated portion of the River Bend nuclear station, which portion was formerly owned by Cajun Electric Power Cooperative, Inc. or (ii) the Entergy Arkansas wholesale base load capacity life-of-unit purchased power agreements executed in 2003 totaling approximately 220 MW between Entergy Arkansas and Entergy Louisiana (110 MW) and between Entergy Arkansas and Entergy New Orleans (110 MW) related to the sale of a portion of Entergy Arkansas’s coal and nuclear base load resources (which were not included in retail rates); or (iii) 12-month agreements originally executed in 2005 and which are renewed annually between Entergy Arkansas and Entergy Gulf States Louisiana and Entergy Texas, and between Entergy Arkansas and Entergy Mississippi, relating to the sale of a portion of Entergy Arkansas’s coal and nuclear base load resources (which were not included in retail rates) to those companies. These resources were identified outside of the formal RFP process but were submitted as formal proposals in response to the Spring 2003 RFP, which confirmed the economic merits of these resources. |
(d) | Entergy Louisiana's June 2005 purchase of the 718 MW, gas-fired Perryville plant, of which a total of 75% of the output is sold to Entergy Gulf States Louisiana and Entergy Texas. |
Carville Energy Center located in St. Gabriel, Louisiana. Entergy Gulf States Louisiana purchases 50% of the facility's capacity and energy from Entergy Texas;
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In October 2012, Entergy Arkansas and Union Power Partners, L.P. executed a 3 ½-year agreement for 495 MW from the Union Power Station located in El Dorado, Arkansas. Cost recovery for this agreement was approved within Entergy Arkansas’s general rate case filed in March 2013; and
(e) | In 2011 the LPSC approved Entergy Louisiana’s cancellation of the Little Gypsy Unit 3 re-powering project selected from the 2006 Long-Term RFP. |
(f) | Entergy Arkansas’s September 2008 purchase of the 789 MW, combined-cycle, gas-fired Ouachita Generating Facility, of which one-third of the output was sold to Entergy Gulf States Louisiana prior to the purchase of one-third of the facility by Entergy Gulf States Louisiana in November 2009. |
(g) | At the direction of the LPSC, but with full reservation of all legal rights, Entergy Services issued the January 2008 RFP for Supply-Side Resources seeking fixed price unit contingent products. Although the LPSC request was directed to Entergy Gulf States Louisiana and Entergy Louisiana, Entergy Services issued the RFP on behalf of all of the Utility operating companies. No proposals were selected from this RFP. |
(h) | In October 2008, in response to the U.S. financial crisis, Entergy Services on behalf of the Utility operating companies terminated all long-term procurement efforts, including the long-term portion of the Summer 2008 RFP. |
(i) | Represents the self-supply alternative considered in the RFP, consisting of a cost-based purchase by Entergy Texas, Entergy Louisiana, and Entergy Mississippi of wholesale baseload capacity from Entergy Arkansas. |
(j) | Includes the Ninemile self-build option, acquisitions from KGen of its Hinds and Hot Spring facilities and a long-term PPA with Calpine Carville. Contracts from the Summer 2009 Long-Term RFP have been executed but are still pending regulatory approvals. |
Entergy Mississippi’s cost-based purchase, beginning in January 2013, of 90 MW from Entergy Arkansas’s share of Grand Gulf (only 60 MW of this PPA came through the RFP process). Cost recovery for the 90 MW was approved by the MPSC in January 2013.
Entergy Louisiana and Entergy New Orleans currently purchase, pursuant to ten-year purchased power agreements that expire in 2013, 121 MW of capacity and energy from Entergy Power sourced from Independence Steam Electric Station Unit 2. The transaction, which originated from the Fall 2002 RFP, included an option for Entergy Louisiana and Entergy New Orleans to acquire an ownership interest in the unit for a total price of $80 million, subject to various adjustments. In March 2008, Entergy Louisiana and Entergy New Orleans provided notice of their intent to exercise the option. Entergy Louisiana and Entergy New Orleans continue to evaluate the economics of proceeding with this option. Based upon changes in the long-term economics of the resource relative to current options, in August 2011, Entergy Louisiana made a filing with the LPSC seeking relief from the prior directive to exercise the option to purchase an ownership interest in the Independence unit. The LPSC staff filed testimony suggesting that the option should be exercised but noting that this is largely a policy decision for the LPSC.
In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a nominally-sized 550 MW combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station that was selected in the Summer 2009 Long-Term RFP. For additional discussion of the Ninemile 6 project see Capital Expenditure Plans and Other uses of Capital in Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
In December 2010 on behalf of Entergy Gulf States Louisiana and Entergy Louisiana, Entergy Services issued the 2010 RFP for Long-Term Renewable Energy Resources seeking up to 233 MW of renewable generation resources to meet the requirements of an LPSC general order issued inon December 9, 2010. In November 2011,September 2012, Entergy Services selected five resourcesGulf States Louisiana executed a 20-year contract for 28 MW, with the potential to purchase an additional 9 megawatts when available, from Rain CII Carbon LLC’s pet coke calcining facility in Sulphur, Louisiana. The facility began commercial operation in May 2013. In March 2013, Entergy Gulf States Louisiana executed a total20-year contract for 8.5 MW from Agrilectric Power Partners, LP’s refurbished rice hull-fueled electric generation facility located in Lake Charles, Louisiana. In September 2013, Entergy Louisiana executed a 10-year contract with TX LFG Energy, LP, a wholly-owned subsidiary of 143Montauk Energy Holdings, LLC, to purchase approximately 3 MW for the primary selection list and two additional proposals, representing 103 MW for the secondary selection list. The seven proposals collectively represent a mixturefrom its landfill gas-fueled power generation facility located in Cleveland, Texas. LPSC certification of as-available and baseload products, technologies, and geographic locations.these three contracts has been received.
In June 2011,May 2014, Entergy Arkansas issued the 2014 Entergy Arkansas RFP for Long-Term, Supply-Side and Renewable Generation Resources. This RFP is seeking between 200 to 600 MW of capacity, capacity-related benefits, energy, other electric products, and environmental attributes from traditional resources (CT, CCTG or solid fuel) for deliveries beginning in 2017 and approximately 200 MW of the same products from renewable resources (wind, solar, biomass and hydro) for deliveries starting as early as 2015.
In September 2014, on behalf of one or more of Entergy Arkansas,Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans, Entergy Services issued the 2011 RFP for Transition Plan Resources. The RFP sought up to 750 MW of flexible generation resources through one or more purchased power agreements to address Entergy Arkansas’s requirements for its 2014-2016 time frame. Entergy Arkansas concluded its review and evaluation of the proposals submitted in response to the RFP in November 2011 and selected two proposals totaling approximately 795 MW for negotiation of definitive agreements.
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In December 2011, on behalf of Entergy Texas, Entergy Services issued the 2011 Western Region2014 Amite South RFP for Long-Term Supply Side Resources.Developmental Resources to be constructed in the Amite South planning region. This RFP is seeking approximately 300between 650 and 1000 MW of baseload or flexible capacity, energy, and other electricrelated products and environmental attributes from a new, single integrated generation resource located in Amite South, preferably in close proximity to meet the long-term reliability needsDownstream of the Western Region beginning in 2017.Gypsy region. This RFP includes a self-build option at Entergy Texas’s Lewis CreekLouisiana’s Little Gypsy site.
Other Procurements From Third Parties
The above table does not includeUtility operating companies have also made resource acquisitions made outside of the RFP process, including Entergy Mississippi'sMississippi’s January 2006 acquisition of the 480 MW, combined-cycle, gas-fired Attala power plant; Entergy Gulf States Louisiana'sLouisiana’s March 2008 acquisition of the 322 MW, simple-cycle, gas-fired Calcasieu Generating Facility; and Entergy Louisiana’s April 2011 acquisition of the 580 MW, combined-cycle, gas-fired Acadia Energy Center Unit 2. The above tableUtility operating companies have also does not reflectentered into various limited- and long-term contracts that have been entered into in recent years by the Utility operating companies as a result of bilateral negotiations.
In December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Pursuant to the agreement, Entergy Gulf States Louisiana will acquire two of the power blocks and a 50% undivided ownership interest in certain assets related to the facility, and Entergy Arkansas and Entergy Texas will each acquire one power block and a 25% undivided ownership interest in the related assets. If Entergy Arkansas or Entergy Texas do not obtain approval for the purchase of their power blocks, Entergy Gulf States Louisiana will seek to purchase the power blocks not approved. The base purchase price is expected to be approximately $948 million (approximately $237 million for each power block) subject to adjustments. In addition, Entergy Gulf States Louisiana anticipates selling 20% of the capacity and energy associated with its two power blocks to Entergy New Orleans through a cost-based, life-of-unit power purchase
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agreement. The purchase is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In December 2014, Entergy Texas filed its application with the PUCT for approval of the acquisition. The PUCT has indicated that it will convene the hearing on the merits of this case in June 2015. Entergy Texas intends to file a rate application to seek cost recovery later in 2015. In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery. Closing is targeted to occur in late-2015.
Interconnections
The Entergy System'sUtility operating companies’ generating units are interconnected by a transmission system operating at various voltages up to 500 kV. These generating units consist primarily of steam-electric production facilities and are centrally dispatched and operated. Entergy'sprovided dispatch instructions by MISO. Entergy’s Utility operating companies are MISO market participants and are interconnected with many neighboring utilities. MISO is an essential link in the safe, cost-effective delivery of electric power across all or parts of 15 U.S. states and the Canadian province of Manitoba. As a Regional Transmission Organization, MISO assures consumers of unbiased regional grid management and open access to the transmission facilities under MISO’s functional supervision. In addition, the Utility operating companies are members of the SERC Reliability Corporation. The primary purpose ofCorporation (SERC). SERC is to ensurea nonprofit corporation responsible for promoting and improving the reliability, adequacy, and adequacycritical infrastructure of the electric bulk power supply systems in the southeast regionall or portions of the United States. 16 central and southeastern states.SERC isserves as a member ofregional entity with delegated authority from the North American Electric Reliability Corporation.Corporation (NERC) for the purpose of proposing and enforcing reliability standards within the SERC Region.
Gas Property
As of December 31, 2011,2014, Entergy New Orleans distributed and transported natural gas for distribution within Algiers and New Orleans, Louisiana, through approximately 2,500 miles of gas pipeline. As of December 31, 2011,2014, the gas properties of Entergy Gulf States Louisiana, which are located in and around Baton Rouge, Louisiana, were not material to Entergy Gulf States Louisiana'sLouisiana’s financial position.
Title
The Entergy System'sUtility operating companies’ generating stations are generally located on properties owned in fee simple. Most of the substations and transmission and distribution lines are constructed on private property or public rights-of-way pursuant to easements, servitudes, or appropriate franchises. Some substation properties are owned in fee simple. The Utility operating companies generally have the right of eminent domain, whereby they may perfect title to, or secure easements or servitudes on, private property for their utility operations.
Substantially all of the physical properties and assets owned by Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are subject to the liens of mortgages securing bonds issued by those companies. The Lewis Creek generating station is owned by GSG&T, Inc., a subsidiary of Entergy Texas, and is not subject to its mortgage lien. Lewis Creek is leased to and operated by Entergy Texas.
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Fuel Supply
The sources of generation and average fuel cost per kWh for the Utility operating companies and System Energy for the years 2009-20112012-2014 were:
| | | Natural Gas | | Nuclear | | Coal | | Purchased Power |
Year | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh |
| | | | | | | | | | | | | | | | | |
| 2011 | | 25 | | 4.85 | | 34 | | .81 | | 13 | | 2.31 | | 28 | | 4.59 |
| 2010 | | 22 | | 5.39 | | 36 | | .78 | | 13 | | 2.00 | | 29 | | 5.28 |
| 2009 | | 19 | | 5.64 | | 34 | | .66 | | 12 | | 2.04 | | 35 | | 5.29 |
|
| | | | | | | | | | | | | | | | | | | | |
| | | Natural Gas | | Nuclear | | Coal | | Purchased Power |
Year | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh |
| 2014 | | 28 | | 4.36 |
| | 33 | | 0.89 |
| | 11 | | 2.63 |
| | 28 | | 5.14 |
|
| 2013 | | 26 | | 4.12 |
| | 39 | | 0.92 |
| | 10 | | 2.70 |
| | 25 | | 4.32 |
|
| 2012 | | 27 | | 3.15 |
| | 33 | | 0.85 |
| | 11 | | 2.60 |
| | 29 | | 3.58 |
|
Actual 20112014 and projected 20122015 sources of generation for the Utility operating companies and System Energy, including certain power purchases from affiliates under life of unit power purchase agreements, including the Unit Power Sales Agreement, are:
| | | | Natural Gas | | Nuclear | | Coal | | Purchased Power | | | | | | | | | | | | | | | | |
| | | 2011 | | 2012 | | 2011 | | 2012 | | 2011 | | 2012 | | 2011 | | 2012 | Natural Gas | | Nuclear | | Coal | | Purchased Power |
| | | | | | | | | | | | | | | | | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 | | 2015 | | 2014 | | 2015 |
| Entergy Arkansas (a) | | 3% | | 11% | | 57% | | 52% | | 24% | | 23% | | 16% | | 14% | 12 | % | | 13 | % | | 53 | % | | 58 | % | | 24 | % | | 23 | % | | 11 | % | | 5 | % |
| Entergy Gulf States Louisiana | | 29% | | 31% | | 27% | | 19% | | 10% | | 11% | | 34% | | 39% | 43 | % | | 30 | % | | 15 | % | | 15 | % | | 9 | % | | 12 | % | | 33 | % | | 43 | % |
| Entergy Louisiana | | 29% | | 27% | | 36% | | 40% | | 2% | | 2% | | 33% | | 31% | 26 | % | | 25 | % | | 36 | % | | 35 | % | | 1 | % | | 1 | % | | 37 | % | | 39 | % |
| Entergy Mississippi | | 39% | | 40% | | 23% | | 23% | | 19% | | 20% | | 19% | | 17% | 37 | % | | 32 | % | | 22 | % | | 25 | % | | 16 | % | | 16 | % | | 25 | % | | 27 | % |
| Entergy New Orleans | | 37% | | 34% | | 45% | | 45% | | 9% | | 9% | | 9% | | 12% | 30 | % | | 31 | % | | 45 | % | | 43 | % | | 3 | % | | 3 | % | | 22 | % | | 23 | % |
| Entergy Texas | | 37% | | 19% | | 12% | | 16% | | 9% | | 11% | | 42% | | 54% | 19 | % | | 14 | % | | 13 | % | | 13 | % | | 8 | % | | 10 | % | | 60 | % | | 63 | % |
| System Energy (b) | | - | | - | | 100% | | 100% | | - | | - | | - | | - | — |
| | — |
| | 100 | % | | 100 | % | | — |
| | — |
| | — |
| | — |
|
| Utility (a) | | 25% | | 23% | | 34% | | 34% | | 13% | | 13% | | 28% | | 30% | 28 | % | | 23 | % | | 33 | % | | 33 | % | | 11 | % | | 11 | % | | 28 | % | | 33 | % |
| |
| (a) | Hydroelectric power provided less than 1% of Entergy Arkansas’s generation in 20112014 and is expected to provide less than 1% of its generation in 2012.2015. |
| |
| (b) | Capacity and energy from System Energy’s interest in Grand Gulf is allocated as follows under the Unit Power Sales Agreement: Entergy Arkansas - 36%; Entergy Louisiana - 14%; Entergy Mississippi - 33%; and Entergy New Orleans - 17%. Pursuant to purchased power agreements, Entergy Arkansas is selling a portion of its owned capacity and energy from Grand Gulf to Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. |
Some of the Utility’s gas-fired plants are capable of also using fuel oil, if necessary. Although based on current economics the Utility does not expect fuelIn addition, two small peaking units burn only oil. Any oil use is included in 2012, it is possible that various operational events including weather or pipeline maintenance may require the use of fuel oil.total for gas.
Natural Gas
The Utility operating companies have long-term firm and short-term interruptible gas contracts for both supply and transportation. Long-term firm contracts for power plants comprise less than 25% of the Utility operating companies'companies’ total requirements. Short-term contracts and spot-market purchases satisfy additional gas requirements. Entergy Texas owns a gas storage facility that provides reliable and flexible natural gas service to certain generating stations.
Entergy Louisiana has a long-term natural gas supply contract, which expires January 1, 2013, in which Entergy Louisiana agreed to purchase natural gas in annual amounts equal to approximately one-third of its projected annual fuel requirements for certain generating units. Annual demand charges associated with this contract are estimated to be $6.6 million. Entergy Louisiana conducted an RFP to obtain a replacement supplier for this contract and is in negotiations with the prevailing bidder.
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Many factors, including wellhead deliverability, storage, and pipeline capacity, and demand requirements of end users, influence the availability and price of natural gas supplies for power plants. Demand is tied to weather conditions as well as to the prices and availability of other energy sources. Pursuant to federal and state regulations, gas supplies
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to power plants may be interrupted during periods of shortage. To the extent natural gas supplies are disrupted or natural gas prices significantly increase, the Utility operating companies will use alternate fuels, such as oil, or rely to a larger extent on coal, nuclear generation, and purchased power.
Coal
Entergy Arkansas has committed to foureight one- to three-year contracts that will supply approximately 90%87% of the total coal supply needs in 2012.2015. These contracts are staggered in term so that not all contracts have to be renewed the same year. The remaining 10%13% of total coal requirements will be satisfied by contracts with a term of less than one year. Based on greatercontinued improved Powder River Basin (PRB) coal deliveries by rail and the high cost of foreign coal,alternate sources and modes of transportation, no alternative coal consumption is expected at Entergy Arkansas during 2012.2015. Entergy Arkansas has an existing long-term railroad transportation contractis currently negotiating a new rail agreement that will provide up to approximately 85%all of Entergy Arkansas’s coal transportation requirements for 2012. An RFP for Entergy Arkansas’ open rail transportation position was issued in 2011 and a definitivethrough 2015. The current agreement is expected by mid-2012.set to expire June 30, 2015.
Entergy Gulf States Louisiana has executed threecommitted to four one- to three-year contracts that will supply approximately 90%79% of Nelson Unit 6 coal needs in 2012.2015. Additional PRB coal will be purchased through contracts with a term of less than one year to provide the remaining supply needs. For the same reasons as for Entergy Arkansas’s plants, no alternative coal consumption is expected at Nelson Unit 6 during 2012.2015. Coal will be transported to Nelson via a newan existing transportation agreement beginning January 1, 2012 that willis expected to provide approximately 90% to 100%all of Entergy Gulf States Louisiana’s rail transportation requirements for 2012.2015.
For the year 2011,2014, coal transportation delivery to Entergy Arkansas operatedArkansas- and Entergy Gulf States Louisiana-operated coal-fired units met coal demand at the plants and it is expected that delivery times experienced in 2010 and 20112014 will continue to improve through 2012. In the fourth quarter 2011, Entergy Gulf States Louisiana experienced significant delivery shortfalls as the result of flood-related disruptions on the BNSF Railway. Inventory levels recovered by year end and improved transportation times are expected under the new transportation agreement beginning in 2012.2015. Both Entergy Arkansas and Entergy Gulf States Louisiana control a sufficient number of railcars to satisfy the rail transportation requirement.
The operator of Big Cajun 2 - Unit 3, Louisiana Generating, LLC, has advised Entergy Gulf States Louisiana and Entergy Texas that it has adequate rail car and barge capacity to meet the volumes of low-sulfur PRB coal requested for 2012.2015. Entergy Gulf States Louisiana’s and Entergy Texas’s coal nomination requests to Big Cajun 2 - Unit 3 are made on an annual basis.
Nuclear Fuel
The nuclear fuel cycle consists of the following:
· | mining and milling of uranium ore to produce a concentrate; |
· | conversion of the concentrate to uranium hexafluoride gas; |
· | enrichment of the uranium hexafluoride gas; |
· | fabrication of nuclear fuel assemblies for use in fueling nuclear reactors; and |
· | disposal of spent fuel. |
The Registrant Subsidiaries that own nuclear plants (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy), are responsible through a shared regulated uranium pool for contracts to acquire nuclear material to be used in fueling Entergy'sEntergy’s Utility nuclear units. These companies own the materials and services in this shared regulated uranium pool on a pro rata fractional basis determined by the nuclear generation capability of each company. Any liabilities for obligations of the pooled contracts are on a several but not joint basis. The shared regulated uranium pool maintains inventories of nuclear materials during the various stages of
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processing. The Registrant Subsidiaries purchase enriched uranium hexafluoride for their nuclear plant reload requirements at the average inventory cost from the shared regulated uranium pool. Entergy Operations Inc. contracts separately for the fabrication of nuclear fuel as agent on behalf of each of the Registrant Subsidiaries that owns a nuclear plant. All contracts for the disposal of spent nuclear fuel are between the Department of Energy (DOE)DOE and the owner of a nuclear power plant.
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Based upon currently planned fuel cycles, the nuclear units in both the Utility and Entergy Wholesale Commodities segments have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable or fixed prices through most of 2012.2015. Entergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the performance reliability of uranium miners. There are a number of possible alternate supplierssupply alternatives that may be accessed to mitigate any supplier performance failure, including potentially drawing upon Entergy’s inventory intended for later generation periods depending upon its risk management strategy at that time, although the pricing of any alternate uranium supply from the market will be dependent upon the market for uranium supply at that time. In addition, some nuclear fuel contracts are on a non-fixed price basis subject to prevailing prices at the time of delivery.
The effects of market price changes may be reduced and deferred by risk management strategies, such as negotiation of floor and ceiling amounts for long-term contracts, buying for inventory or entering into forward physical contracts at fixed prices when Entergy believes it is appropriate and useful. Entergy buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S.
Entergy’s ability to assure nuclear fuel supply also depends upon the performance reliability of conversion, enrichment, and fabrication services providers. There are fewer of these providers than for uranium. For conversion and enrichment services, like uranium, Entergy diversifies its supply by supplier and country and may take special measures as needed to ensure supply of enriched uranium for the reliable fabrication of nuclear fuel. For fabrication services, each plant is dependent upon the effective performance of the fabricator of that plant’s nuclear fuel, therefore, Entergy provides additional monitoring, inspection, and oversight for the fabrication process to assure reliability and quality.
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have made arrangements to lease nuclear fuel and related equipment and services. The lessors, which are consolidated in the financial statements of Entergy and the applicable Registrant Subsidiary, finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes. These arrangementscredit facilities are subject to periodic renewal.renewal, and the notes are issued periodically, typically for terms between three and ten years.
Natural Gas Purchased for Resale
Entergy New Orleans has several suppliers of natural gas. Its system is interconnected with three interstate and three intrastate pipelines. Entergy New Orleans has a "no-notice"“no-notice” service gas purchase contract with Atmos Energy which guarantees Entergy New Orleans gas delivery at specific delivery points and at any volume within the minimum and maximum set forth in the contract amounts. The Atmos Energy gas supply is transported to Entergy New Orleans pursuant to a transportation service agreement with Gulf South Pipeline Co. This service is subject to FERC-approved rates. Entergy New Orleans also makes interruptible spot market purchases. In recent years, natural gas deliveries to Entergy New Orleans have been subject primarily to weather-related curtailments.
As a result of the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments of interstate gas supply could occur if Entergy New Orleans's suppliers failed to perform their obligations to deliver gas under their supply agreements. Gulf South Pipeline Co. could curtail transportation capacity only in the event of pipeline system constraints.
Entergy Gulf States Louisiana purchases natural gas for resale under a firm contract from Enbridge Marketing (U.S.) Inc. The gas is delivered through a combination of intrastate and interstate pipelines.
As a result of the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments of interstate gas supply could occur if Entergy Gulf States Louisiana’s or Entergy New Orleans’s suppliers failed to perform their obligations to deliver gas under their supply agreements. Gulf South Pipeline Co. could curtail transportation capacity only in the event of pipeline system constraints.
Federal Regulation of the Utility
State or local regulatory authorities, as described above, regulate the retail rates of the Utility operating companies. The FERC regulates wholesale rates (including intrasystem sales pursuant to the System Agreement) and
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interstate transmission of electricity, as well as rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement.
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System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Under the terms of the System Agreement, generating capacity and other power resources are jointly operated by the Utility operating companies.companies that are participating in the System Agreement. The System Agreement provides, among other things, that parties having generating reserves greater than their allocated share of reserves (long companies) shall receive payments from those parties having generating reserves that are less than their allocated share of reserves (short companies). Such payments are at amounts sufficient to cover certain of the long companies’ costs for intermediate and peaking oil/gas-fired generation, including operating expenses, fixed charges on debt, dividend requirements on preferred equity, and a fair rate of return on common equity investment. Under the System Agreement, the rates used to compensate long companies are based on costs associated with the long companies’ steam electric generating units fueled by oil or gas and having an annual average heat rate above 10,000 Btu/kWh. In addition, for all energy exchanged among the Utility operating companies under the System Agreement, the companies purchasing exchange energy are required to pay the cost of fuel consumed in generating such energy plus a charge to cover other associated costs.
Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminateterminated its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC. In November 2007, pursuant to the provisions of the System Agreement,in December 2013. Entergy Mississippi provided its written notice towill terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC. In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or being required to otherwise compensate the remaining Utility operating companies as a result of withdrawal. In February 2011 the FERC denied the LPSC’s and the City Council’s rehearing requests. The LPSC has appealed the FERC’s decision to the U.S. Court of Appeals for the District of Columbia, and oral argument was held in the case in January 2012.2015.
See “System Agreement” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for additional discussion of the System Agreement, including other Utility operating companies’ notices to terminate participation in the future. See Note 2 to the financial statements for discussion of legal proceedings at the FERC involving the System Agreement and other related proceedings.Agreement.
Transmission
See “Entergy’s Integration into the “Plan to Spin Off the Utility’sMISO Regional Transmission BusinessOrganization” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
See “Independent Coordinator of Transmission” in the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
System Energy and Related Agreements
System Energy recovers costs related to its interest in Grand Gulf through rates charged to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans for capacity and energy under the Unit Power Sales Agreement (described below). In December 1995, System Energy commenced a rate proceeding at the FERC. In July 2001 the rate proceeding became final, with the FERC approving a prospective 10.94% return on equity. The
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FERC’s decision also affected other aspects of System Energy’s charges to the Utility operating companies that it supplies with power. In 1998 the FERC approved requests by Entergy Arkansas and Entergy Mississippi to accelerate a portion of their Grand Gulf purchased power obligations. Entergy Arkansas’s and Entergy Mississippi’s acceleration of Grand Gulf purchased power obligations ceased effective July 2001 and July 2003, respectively, as approved by the FERC.
Unit Power Sales Agreement
The Unit Power Sales Agreement allocates capacity, energy, and the related costs from System Energy’s ownership and leasehold interests in Grand Gulf to Entergy Arkansas (36%), Entergy Louisiana (14%), Entergy Mississippi (33%), and Entergy New Orleans (17%). Each of these companies is obligated to make payments to System Energy for its entitlement of capacity and energy on a full cost-of-service basis regardless of the quantity of energy
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delivered. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenue. The financial condition of System Energy depends upon the continued commercial operation of Grand Gulf and the receipt of such payments. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans generally recover payments made under the Unit Power Sales Agreement through rates charged to their customers.
In the case of Entergy Arkansas and Entergy Louisiana, payments are also recovered through sales of electricity from their respective retained shares of Grand Gulf. Under a settlement agreement entered into with the APSC in 1985 and amended in 1988, Entergy Arkansas retains 22% of its 36% share of Grand Gulf-related costs and recovers the remaining 78% of its share in rates. In the event that Entergy Arkansas is not able to sell its retained share to third parties, it may sell such energy to its retail customers at a price equal to its avoided cost, which is currently less than Entergy Arkansas’s cost from its retained share. Entergy Arkansas has life-of-resources purchased power agreements with Entergy Louisiana and Entergy New Orleans that sell a portion of the output of Entergy Arkansas’s retained share of Grand Gulf to those companies.companies, with the remainder of the retained share being sold to Entergy Mississippi through a separate life-of-resources purchased power agreement. In a series of LPSC orders, court decisions, and agreements from late 1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to costs associated with Entergy Louisiana’s share of capacity and energy from Grand Gulf, subject to certain terms and conditions. Entergy Louisiana retains and does not recover from retail ratepayers 18% of its 14% share of the costs of Grand Gulf capacity and energy and recovers the remaining 82% of its share in rates. Entergy Louisiana is allowed to recover through the fuel adjustment clause at 4.6 cents per kWh for the energy related to its retained portion of these costs. Alternatively, Entergy Louisiana may sell such energy to non-affiliated parties at prices above the fuel adjustment clause recovery amount, subject to the LPSC’s approval. Entergy Arkansas also has a life-of-resources purchased power agreement with Entergy Mississippi to sell a portion of the output of Entergy Arkansas’s non-retained share of Grand Gulf. Entergy Mississippi was granted rate relief for those purchases by the MPSC through its annual rate mechanism.
Availability Agreement
The Availability Agreement among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans was entered into in 1974 in connection with the financing by System Energy of Grand Gulf. The Availability Agreement provides that System Energy make available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans all capacity and energy available from System Energy’s share of Grand Gulf.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans also agreed severally to pay System Energy monthly for the right to receive capacity and energy from Grand Gulf in amounts that (when added to any amounts received by System Energy under the Unit Power Sales Agreement) would at least equal System Energy’s total operating expenses for Grand Gulf (including depreciation at a specified rate and expenses incurred in a permanent shutdown of Grand Gulf) and interest charges. The September 1989 write-off of System Energy’s investment in Grand Gulf 2, amounting to approximately $900 million, is being amortized for Availability Agreement purposes over 27 years.
The allocation percentages under the Availability Agreement are fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana - 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%. The allocation percentages under the Availability Agreement would remain in effect and would govern payments made under such agreement in the event of a shortfall of funds available to System Energy from other sources, including payments under the Unit Power Sales Agreement.
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System Energy has assigned its rights to payments and advances from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under the Availability Agreement as security for its first mortgage bonds and reimbursement obligations to certain banks providing letters of credit in connection with the equity funding of the sale and leaseback transactions described in Note 10 to the financial statements under “Sale and Leaseback Transactions - Grand Gulf Lease Obligations.Obligations.” In these assignments, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further agreed that, in the event they were prohibited by governmental action from making
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payments under the Availability Agreement (for example, if the FERC reduced or disallowed such payments as constituting excessive rates), they would then make subordinated advances to System Energy in the same amounts and at the same times as the prohibited payments. System Energy would not be allowed to repay these subordinated advances so long as it remained in default under the related indebtedness or in other similar circumstances.
Each of the assignment agreements relating to the Availability Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans will make payments directly to System Energy. However, if there is an event of default, those payments must be made directly to the holders of indebtedness that are the beneficiaries of such assignment agreements. The payments must be made pro rata according to the amount of the respective obligations secured.
The obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make payments under the Availability Agreement are subject to the receipt and continued effectiveness of all necessary regulatory approvals. Sales of capacity and energy under the Availability Agreement would require that the Availability Agreement be submitted to the FERC for approval with respect to the terms of such sale. No such filing with the FERC has been made because sales of capacity and energy from Grand Gulf are being made pursuant to the Unit Power Sales Agreement. If, for any reason, sales of capacity and energy are made in the future pursuant to the Availability Agreement, the jurisdictional portions of the Availability Agreement would be submitted to the FERC for approval.
Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement to System Energy have exceeded the amounts payable under the Availability Agreement. Therefore,Agreement and, therefore, no payments under the Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments because their Availability Agreement obligations exceed their Unit Power Sales Agreement obligations.
The Availability Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, without further consent of any assignees or other creditors.
Capital Funds Agreement
System Energy and Entergy Corporation have entered into the Capital Funds Agreement, whereby Entergy Corporation has agreed to supply System Energy with sufficient capital to (i) maintain System Energy’s equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt) and (ii) permit the continued commercial operation of Grand Gulf and pay in full all indebtedness for borrowed money of System Energy when due.
Entergy Corporation has entered into various supplements to the Capital Funds Agreement. System Energy has assigned its rights under such supplements as security for its first mortgage bonds and for reimbursement obligations to certain banks providing letters of credit in connection with the equity funding of the sale and leaseback transactions described in Note 10 to the financial statements under “Sale and Leaseback Transactions - Grand Gulf Lease Obligations.Obligations.” Each such supplement provides that permitted indebtedness for borrowed money incurred by System Energy in connection with the financing of Grand Gulf may be secured by System Energy’s rights under
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the Capital Funds Agreement on a pro rata basis (except for the Specific Payments, as defined below). In addition, in the supplements to the Capital Funds Agreement relating to the specific indebtedness being secured, Entergy Corporation has agreed to make cash capital contributions directly to System Energy sufficient to enable System Energy to make payments when due on such indebtedness (Specific Payments). However, if there is an event of default, Entergy Corporation must make those payments directly to the holders of indebtedness benefiting from the supplemental agreements. The payments (other than the Specific Payments) must be made pro rata according to the amount of the respective obligations benefiting from the supplemental agreements.
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The Capital Funds Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, upon obtaining the consent, if required, of those holders of System Energy’s indebtedness then outstanding who have received the assignments of the Capital Funds Agreement.
Service Companies
Entergy Services, a corporation wholly-owned by Entergy Corporation, provides management, administrative, accounting, legal, engineering, and other services primarily to the Utility operating companies.companies, but also provides services to Entergy Wholesale Commodities. Entergy Operations is also wholly-owned by Entergy Corporation and provides nuclear management, operations and maintenance services under contract for ANO, River Bend, Waterford 3, and Grand Gulf, subject to the owner oversight of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy, respectively. Entergy Services and Entergy Operations provide their services to the Utility operating companies and System Energy on an “at cost” basis, pursuant to cost allocation methodologies for these service agreements that were approved by the FERC.
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas
Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana. Management believes that the jurisdictional separation better aligns Entergy Gulf States, Inc.’s Louisiana and Texas operations to serve customers in those states and to operate consistent with state-specific regulatory requirements as the utility regulatory environments in those jurisdictions evolve. The jurisdictional separation provides for regulation of each separated company by a single retail regulator, which should reduce regulatory complexity.
Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.’s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
Entergy Gulf States Louisiana remained primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed its pro rata share of this long-term debt, which was $1.079 billion, or approximately 46%, which had been entirely paid-off as of December 31, 2010. The pro rata share of the long-term debt assumed by Entergy Texas was determined by first determining the net assets for each company on a book value basis, and then calculating a debt assumption ratio that resulted in the common equity ratios for each company being approximately the same as the Entergy Gulf States, Inc. common equity ratio immediately prior to the jurisdictional separation.
Entergy Texas purchases from Entergy Gulf States Louisiana pursuant to a life-of-unit purchased power agreement (PPA) a 42.5% share of capacity and energy from the 70% of River Bend subject to retail regulation. Entergy Texas was allocated a share of River Bend’s nuclear and environmental liabilities that is identical to the share of the plant’s output purchased by Entergy Texas under the PPA.purchased power agreement. Entergy Gulf States Louisiana purchases a 57.5% share
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of capacity and energy from the gas-fired generating plants owned by Entergy Texas, and Entergy Texas purchases a 42.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Gulf States Louisiana. The PPAspurchased power agreements associated with the gas-fired generating plants will terminate when the unit(s) is/are no longer dispatched by theremoved from Entergy System.System dispatch. The dispatch and operation of the generating plants willdid not change as a result of the jurisdictional separation. The LPSC staff has asserted that the purchased power agreements would terminate if Entergy Texas and Entergy Gulf States Louisiana join MISO. Entergy Gulf States Louisiana filed testimony opposing that position. The LPSC stayed consideration of this issue until December 31, 2013. No further action has been taken regarding this matter. See additional discussion of the purchased power agreements in the “Federal Regulation - Entergy’s Integration Into the MISO Regional Transmission Organization” section in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
The jurisdictional separation occurred through completionEntergy Louisiana and Entergy Gulf States Louisiana Business Combination
See Note 2 to the financial statements for a discussion of the following steps:planned Entergy Louisiana and Entergy Gulf States Louisiana business combination.
· | Through a Texas statutory merger-by-division, Entergy Gulf States, Inc. was renamed as Entergy Gulf States Louisiana, Inc., a Texas corporation, and the new Texas business corporation Entergy Texas, Inc. was formed. |
252
· | Entergy Gulf States, Inc. allocated the assets described above to Entergy Texas, and all of the capital stock of Entergy Texas was issued directly to Entergy Gulf States, Inc.’s parent company, Entergy Corporation. |
Part I Item 1· | Entergy Corporation formed EGS Holdings, Inc., a Texas corporation, and contributed all of the common stock of Entergy Gulf States Louisiana, Inc. to EGS Holdings, Inc. |
· | EGS Holdings, Inc. formed the Louisiana limited liability company Entergy Gulf States Louisiana, L.L.C. and then owned all of the issued and outstanding membership interests of Entergy Gulf States Louisiana, L.L.C. |
· | Entergy Gulf States Louisiana, Inc. then merged into Entergy Gulf States Louisiana, L.L.C., with Entergy Gulf States Louisiana, L.L.C. being the surviving entity. |
· | Entergy Corporation now owns EGS Holdings, Inc. and Entergy Texas in their entirety, and EGS Holdings, Inc. now owns Entergy Gulf States Louisiana’s common membership interests in their entirety. |
Entergy Corporation, Utility operating companies, and System Energy
Earnings Ratios of Registrant Subsidiaries
The Registrant Subsidiaries’ ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends or distributions pursuant to Item 503 of SEC Regulation S-K are as follows:
|
| | | | | | | | | |
| | Ratios of Earnings to Fixed Charges Years Ended December 31, |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| Entergy Arkansas | 3.08 | | 3.62 | | 3.79 | | 4.31 | | 3.91 |
| Entergy Gulf States Louisiana | 3.84 | | 3.63 | | 3.48 | | 4.36 | | 3.58 |
| Entergy Louisiana | 3.23 | | 3.13 | | 2.08 | | 1.86 | | 3.41 |
| Entergy Mississippi | 3.23 | | 3.19 | | 2.79 | | 3.55 | | 3.35 |
| Entergy New Orleans | 3.96 | | 1.93 | | 3.02 | | 5.37 | | 4.43 |
| Entergy Texas | 2.39 | | 1.94 | | 1.76 | | 2.34 | | 2.10 |
| System Energy | 4.04 | | 5.66 | | 5.12 | | 3.85 | | 3.64 |
| | | Ratios of Earnings to Fixed Charges Years Ended December 31, |
| | | 2011 | | 2010 | | 2009 | | 2008 | | 2007 |
| | | | | | | | | | | |
| Entergy Arkansas | | 4.31 | | 3.91 | | 2.39 | | 2.33 | | 3.19 |
| Entergy Gulf States Louisiana | | 4.36 | | 3.58 | | 2.99 | | 2.44 | | 2.84 |
| Entergy Louisiana | | 1.86 | | 3.41 | | 3.52 | | 3.14 | | 3.44 |
| Entergy Mississippi | | 3.55 | | 3.35 | | 3.31 | | 2.92 | | 3.22 |
| Entergy New Orleans | | 5.37 | | 4.43 | | 3.61 | | 3.71 | | 2.74 |
| Entergy Texas | | 2.34 | | 2.10 | | 1.92 | | 2.04 | | 2.07 |
| System Energy | | 3.85 | | 3.64 | | 3.73 | | 3.29 | | 3.95 |
| | | | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends or Distributions Years Ended December 31, | | | | | | | | | |
| | | 2011 | | 2010 | | 2009 | | 2008 | | 2007 | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends or Distributions Years Ended December 31, |
| | | | | | | | | | | | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| Entergy Arkansas | | 3.83 | | 3.60 | | 2.09 | | 1.95 | | 2.88 | 2.76 | | 3.25 | | 3.36 | | 3.83 | | 3.60 |
| Entergy Gulf States Louisiana | | 4.30 | | 3.54 | | 2.95 | | 2.42 | | 2.73 | 3.78 | | 3.57 | | 3.43 | | 4.30 | | 3.54 |
| Entergy Louisiana | | 1.70 | | 3.19 | | 3.27 | | 2.87 | | 3.08 | 3.03 | | 2.92 | | 1.93 | | 1.70 | | 3.19 |
| Entergy Mississippi | | 3.27 | | 3.16 | | 3.06 | | 2.67 | | 2.97 | 3.00 | | 2.97 | | 2.59 | | 3.27 | | 3.16 |
| Entergy New Orleans | | 4.74 | | 4.08 | | 3.33 | | 3.45 | | 2.54 | 3.56 | | 1.74 | | 2.67 | | 4.74 | | 4.08 |
The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
During 2010 Entergy integrated its non-utility nuclear and its non-nuclear wholesale assets businesses into a new organization called Entergy Wholesale Commodities.
Entergy Wholesale Commodities includes the ownership, operation, and operationdecommissioning of six nuclear power plants, five of which are located in the Northeastnorthern United States withand the sixth located in Michigan, and is primarily focused on sellingsale of the electric power produced by thoseits operating plants to wholesale customers. Entergy Wholesale Commodities’Commodities revenues are primarily derived from sales of energy and generation capacity from these plants. Entergy Wholesale Commodities also provides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities in the United States.
Entergy Wholesale Commodities also includes the ownership of, or participation in joint ventures that own, non-nuclear power plants and the sale to wholesale customers of the electric power produced by these plants.
On December 29, 2014, Entergy Wholesale Commodities Vermont Yankee plant was removed from the grid, after 42 years of operations. The decision to close and decommission Vermont Yankee was announced in August 2013, as a result of numerous issues including sustained low natural gas and wholesale energy prices, the high cost structure of the plant, and lack of a market structure that adequately compensates merchant nuclear plants for their environmental and fuel diversity benefits in the Northeast region.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Property
Nuclear Generating Stations
Entergy Wholesale Commodities includes the ownership of the following nuclear power plants:
|
| | | | | | | | | | | | |
Power Plant | | Market | | In Service Year | | Acquired | | Location | | Capacity- Reactor Type | | License Expiration Date |
| Pilgrim | | IS0-NE | | 1972 | | July 1999 | | Plymouth, MA | | 688 MW - Boiling Water | | 2032 |
| FitzPatrick | | NYISO | | 1975 | | Nov. 2000 | | Oswego, NY | | 838 MW - Boiling Water | | 2034 |
| Indian Point 3 | | NYISO | | 1976 | | Nov. 2000 | | Buchanan, NY | | 1,041 MW - Pressurized Water | | 2015 |
| Indian Point 2 | | NYISO | | 1974 | | Sept. 2001 | | Buchanan, NY | | 1,028 MW - Pressurized Water | | 2013 (b) |
| Vermont Yankee (a) | | IS0-NE | | 1972 | | July 2002 | | Vernon, VT | | 605 MW - Boiling Water | | 2032 |
| Palisades | | MISO | | 1971 | | Apr. 2007 | | Covert, MI | | 811 MW - Pressurized Water | | 2031 |
Power Plant | | Market | | In Service Year | | Acquired | | Location | | Capacity- Reactor Type | | License Expiration Date |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Pilgrim | | IS0-NE | | 1972 | | July 1999 | | Plymouth, MA | | 688 MW - Boiling Water | | 2012 |
| FitzPatrick | | NYISO | | 1975 | | Nov. 2000 | | Oswego, NY | | 838 MW - Boiling Water | | 2034 |
| Indian Point 3 | | NYISO | | 1976 | | Nov. 2000 | | Buchanan, NY | | 1,041 MW - Pressurized Water | | 2015 |
| Indian Point 2 | | NYISO | | 1974 | | Sept. 2001 | | Buchanan, NY | | 1,028 MW - Pressurized Water | | 2013 |
| Vermont Yankee | | IS0-NE | | 1972 | | July 2002 | | Vernon, VT | | 605 MW - Boiling Water | | 2032 |
| Palisades | | MISO | | 1971 | | Apr. 2007 | | South Haven, MI | | 811 MW - Pressurized Water | | 2031 |
| |
| (a) | On December 29, 2014, the Vermont Yankee plant ceased power production. |
| |
| (b) | The original expiration date of the NRC operating license for Indian Point 2 was September 28, 2013. Indian Point 2 has now entered its “period of extended operation” after expiration of the plant’s initial license term under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been timely filed with the licensing agency. The Indian Point license renewal application qualifies for timely renewal protection because it met NRC regulatory standards for timely filing. |
Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants, respectively. These facilities are in various stages of the decommissioning process.
The NRC operating license for Vermont Yankee was to expire in March 2012. In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032. For additional discussion regarding the continued operation of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 1 to the financial statements.
The operating licenses for Pilgrim, Indian Point 2, and Indian Point 3 expire between 2012 and 2015. Under federal law, nuclear power plants may continue to operate beyond their license expiration dates while their renewal applications are pending NRC approval. Various parties have expressed opposition to renewal of the licenses. With respect to the Pilgrim license renewal, the Atomic Safety and Licensing Board (ASLB) of the NRC, after issuing an order denying a new hearing request, terminated its proceeding on Pilgrim’s license renewal application. With the ASLB process concluded the proceeding, including appeals of certain ASLB decisions, is now before the NRC.
In April 2007, Entergy submitted an application to the NRC a joint application to renew the operating licenses for Indian Point 2 and Indian Point 3 for an additional 20 years. The ASLB has admitted 21 contentions raised by the State of New York or other parties, which were combined into 16 discrete issues. Twooriginal expiration date of the issues haveNRC operating license for Indian Point 2 was in September 2013 and the original expiration date of the NRC operating license for Indian Point 3 is in December 2015. Authorization to operate Indian Point 2 rests, and for Indian Point 3 will likely rest, on Entergy’s having timely filed a license renewal application that remains pending before the NRC. Indian Point 2 has now entered its “period of extended operation” after expiration of the plant’s initial license term under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been resolved, leaving 14 issues that are currentlytimely filed with the licensing agency. Indian Point 3 is expected to reach the same milestone, and to become subject to ASLB hearings. In July 2011, the ASLB grantedsame statutorily prescribed extension of its license expiration date, in December 2015. The license renewal application for Indian Point 2 and Indian Point 3 qualifies for timely renewal protection because it met NRC regulatory standards for timely filing. For additional discussion of the State of New York’s motion for summarylicense renewal applications, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Plants” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
disposition of an admitted contention challenging the adequacy of a section of Indian Point’s environmental analysis as incorporated in the FSEIS (discussed below). That section provided cost estimates for Severe Accident Mitigation Alternatives (SAMAs), which are hardware and procedural changes that could be implemented to mitigate estimated impacts of off-site radiological releases in case of a hypothesized severe accident. In addition to finding that the SAMA cost analysis was insufficient, the ASLB directed the NRC staff to explain why cost-beneficial SAMAs should not be required to be implemented. Entergy appealed the ASLB’s decision to the NRC and the NRC staff supported Entergy’s appeal, while the State of New York opposed it. In December 2011 the NRC denied Entergy’s appeal as premature, stating that the appeal could be renewed at the conclusion of the ASLB proceedings.
In November 2011 the ASLB issued an order establishing deadlines for the submission of several rounds of testimony on most of the contentions pending before the ASLB and for the filing of motions to limit or exclude testimony. Initial hearings before the ASLB on the contentions for which testimony is submitted are expected to begin by the end of 2012. Filing deadlines for testimony on certain admitted contentions remain to be set by the ASLB.
The NRC staff currently is also performing its technical and environmental reviews of the application. The NRC staff issued a Final Safety Evaluation Report (FSER) in August 2009, a supplement to the FSER in August 2011, and a Final Supplemental Environmental Impact Statement (FSEIS) in December 2010. The NRC staff has stated its intent to file a supplemental FSEIS in May 2012. The New York State Department of Environmental Conservation has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. In addition, the consistency of Indian Point’s operations with New York State’s coastal management policies must be resolved as required by the Coastal Zone Management Act. Entergy Wholesale Commodities’ efforts to obtain these certifications and determinations continue in 2012.
The hearing process is an integral component of the NRC’s regulatory framework, and evidentiary hearings on license renewal applications are not uncommon. Entergy intends to participate fully in the hearing process as permitted by the NRC’s hearing rules. As noted in Entergy’s responses to the various intervenor filings, Entergy believes the contentions proposed by the intervenors are unsupported and without merit. Entergy will continue to work with the NRC staff as it completes its technical and environmental reviews of the license renewal application.
Non-nuclear Generating Stations
Entergy Wholesale Commodities includes the ownership, or interests in joint ventures that own, the following non-nuclear power plants:
|
| | | | | | | | |
Plant | | Location | | Ownership | | Net Owned Capacity(1)Capacity(a)
| | Type |
| | | | | | | | |
| Rhode Island State Energy Center; 583 MW | | Johnston, RI | | 100% | | 583 MW | | Gas |
Ritchie Unit 2; 544 MW | | Helena, AR | | 100% | | 544 MW | | Gas/Oil |
Independence Unit 2; 842 MW (2) | | Newark, AR | | 14% | | 121 MW(3)MW(b) | | Coal |
Top of Iowa; 80 MW (4)(c) | | Worth County, IA | | 50% | | 40 MW | | Wind |
White Deer; 80 MW (4)(c) | | Amarillo, TX | | 50% | | 40 MW | | Wind |
RS Cogen; 425 MW (4)(c) | | Lake Charles, LA | | 50% | | 213 MW | | Gas/Steam |
| Nelson 6; 550 MW | | Westlake, LA | | 11% | | 60 MW(3)MW(b) | | GasCoal |
(1) | |
| (a) | “Net Owned Capacity” refers to the nameplate rating on the generating unit. |
(2) | Entergy Louisiana and Entergy New Orleans currently purchase 101 MW of capacity and energy from Independence Unit 2. The transaction included an option for Entergy Louisiana and Entergy New Orleans to acquire an ownership interest in the unit for a total price of $80 million, subject to various adjustments. In March 2008, Entergy Louisiana and Entergy New Orleans provided notice of their intent to exercise the option. Entergy Louisiana and Entergy New Orleans continue to evaluate the economics of proceeding with this option. Based upon changes in the long-term economics of the resource relative to current options, in August 2011, Entergy Louisiana made a filing with the LPSC seeking relief from the prior directive to exercise the option to purchase an ownership interest in the Independence unit. The LPSC staff filed testimony suggesting that the option should be exercised but noting that this is largely a policy decision for the LPSC. |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
(3) | |
| (b) | The owned MW capacity is the portion of the plant capacity owned by Entergy Wholesale Commodities. For a complete listing of Entergy’s jointly-owned generating stations, refer to “Jointly-Owned Generating Stations” in Note 1 to the financial statements. |
(4) | |
| (c) | Indirectly owned through interests in unconsolidated joint ventures. |
In the fourth quarter 2010, Entergy sold its 61 percent share of the Harrison County 550 MW combined cycle gas-fired power plant.
Independent System Operators
The Pilgrim and Vermont Yankee and Rhode Island plants fall under the authority of the Independent System Operator (ISO) New England and the FitzPatrick and Indian Point plants fall under the authority of the New York Independent System Operator (NYISO). The Palisades plant falls under the authority of the MISO. The primary purpose of ISO New England, NYISO, and MISO is to direct the operations of the major generation and transmission facilities in their respective regions; ensure grid reliability; administer and monitor wholesale electricity markets; and plan for their respective region’s energy needs.
Energy and Capacity Sales
As a wholesale generator, Entergy Wholesale CommoditiesCommodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward fixed price 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. See “Commodity PriceMarket and Credit Risk Sensitive Instruments - Power Generation”” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for additional information regarding these contracts.
In addition to the contracts discussed in “Commodity Price Risk - Power Generation,” Entergy’s purchase of the Vermont Yankee plant included a value sharing agreement providing for payments to the seller in the event that the plant operates beyond March 2012 pursuant to a renewed NRC operating license. Under the value sharing agreement, to the extent that the average annual price of the energy sales from the plant exceeds the specified strike price, initially $61/MWh and then adjusted annually based on three indices, Vermont Yankee will pay 50% of the amount exceeding the strike prices to the seller. These payments, if required, will be recorded as adjustments to the purchase price of the plants. The value sharing would begin in 2012 and extend into 2022.
As part of the purchase of the Palisades plant in 2007, Entergy executed a 15-year PPA with the seller, Consumers Energy, for 100% of the plant’s output, excluding any future uprates. Under the purchased power agreement, Consumers Energy will receive the value of any new environmental credits for the first ten years of the agreement. Palisades and Consumers Energy will share on a 50/50 basis the value of any new environmental credits for years 11 through 15 of the agreement. The environmental credits are defined as benefits from a change in law that causes capability of the plant as of the purchase date to become a tradable attribute (e.g., emission credit, renewable energy credit, environmental credit, “green” credit, etc.) or otherwise to have a market value.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Customers
Entergy Wholesale Commodities’ customers for the sale of both energy and capacity from its nuclear plants include retail power providers, utilities, electric power co-operatives, power trading organizations and other power generation companies. These customers include Consolidated Edison NYPA, and Consumers Energy, companies from which Entergy purchased plants, and ISO New England, NYISO, and NYISO.MISO. Substantially all of the counterparties or their guarantors for the planned energy output under contract for Entergy Wholesale Commodities nuclear plants have public investment grade credit ratings or are load-serving entities without public credit ratings.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Competition
The ISO New England and NYISO markets are highly competitive. Entergy Wholesale Commodities has numerous competitors in New England and New York, including generation companies affiliated with regulated utilities, other independent power producers, municipal and co-operative generators, owners of co-generation plants and wholesale power marketers. Entergy Wholesale Commodities is an independent power producer, which means it generates power for sale to third parties at day ahead or spot market prices to the extent that the power is not sold under a fixed price contract. Municipal and co-operative generators also generate power but use most of it to deliver power to their municipal or co-operative power customers. Owners of co-generation plants produce power primarily for their own consumption. Wholesale power marketers do not own generation; rather they buy power from generators or other market participants and resell it to retail providers or other market participants. Competition in the New England and New York power markets is affected by, among other factors, the amount of generation and transmission capacity in these markets. MISO does not have a formal, centralized forwardclearing capacity market, but load serving entities do transactmeet the majority of their capacity needs through bilateral contracts.contracts and self-supply with a smaller portion coming through voluntary MISO auctions. The majority of Palisades’s current output is contracted to Consumers Energy through 2022 and, therefore, Entergy Wholesale Commodities does not expect to be materially affected by competition in the MISO market in the near term.
Seasonality
Entergy Wholesale Commodities’ revenues and operating income are subject to fluctuations during the year due to seasonal factors, weather conditions, and contract pricing. Refueling outages are generally scheduled for the spring and the fall, and cause volumetric decreases during those seasons. When outdoor and cooling water temperatures are lower, generally during colder months, Entergy Wholesale Commodities’Commodities nuclear power plants operate more efficiently, and consequently, generate more electricity. Many of Entergy Wholesale Commodities’ contracts provide for shaped pricing over the course of the year. As a result of these factors, Entergy Wholesale Commodities’ revenues are typically higher in the first and third quarters than in the second and fourth quarters.
Fuel Supply
Nuclear Fuel
See “Fuel Supply, - Nuclear Fuel” in the Utility portion of Part I, Item 1 for a discussion of the nuclear fuel cycle and markets. Entergy Nuclear Fuels Company, a wholly-owned subsidiary, is responsible for contracts to acquire nuclear materials, except for fuel fabrication, for Entergy Wholesale Commodities’Commodities nuclear power plants, while Entergy Nuclear Operations, Inc. acts as the agent for the purchase of nuclear fuel assembly fabrication services. All contracts for the disposal of spent nuclear fuel are between the DOE and each of the nuclear power plants.
Other Business Activities
Entergy Nuclear Power Marketing, LLC (ENPM) was formed in 2005 to centralize the power marketing function for Entergy Wholesale Commodities nuclear plants. Upon its formation, ENPM entered into long-term power purchase agreements with the Entergy Wholesale Commodities subsidiaries that own nuclear power plants (generating
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
subsidiaries). As part of a series of agreements, ENPM agreed to assume and/or otherwise service the existing power purchase agreements that were in effect between the generating subsidiaries and their customers. ENPM functions include origination of new energy and capacity transactions and generation scheduling, contract management (including billing and settlements), and market and credit risk mitigation.scheduling.
Entergy Nuclear, Inc. pursues service agreements with other nuclear power plant owners who seek the advantages of Entergy’s scale and expertise but do not necessarily want to sell their assets. Services provided by either Entergy Nuclear, Inc. or other Entergy Wholesale Commodities subsidiaries include engineering, operations and maintenance, fuel procurement, management and supervision, technical support and training, administrative support, and other managerial or technical services required to operate, maintain, and decommission nuclear electric power facilities. Entergy Nuclear, Inc. provided decommissioning services for the Maine Yankee nuclear power plant and continues to pursue opportunities for Entergy Wholesale Commodities with other nuclear plant owners through operating agreements or innovative arrangements such as structured leases.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy Nuclear, Inc. also offers operating license renewal and life extension services to nuclear power plant owners. TLG Services, a subsidiary of Entergy Nuclear Inc., offers decommissioning, engineering, and related services to nuclear power plant owners. In April 2009, Entergy announced that it will team with energy firm ENERCON to offer nuclear development services ranging from plant relicensing to full-service, new plant deployment. ENERCON has experience in engineering, environmental, technical and management services.
In September 2003, Entergy agreed to provide plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska. The original contract was to expire in 2014 corresponding to the original operating license life of the plant. In 2006 an Entergy subsidiary signed an agreement to provide license renewal services for the Cooper Nuclear Station. The Cooper Nuclear Station received its license renewal from the NRC onin November 29, 2010. Entergy continues to provide implementation services for the renewed license. In 2010 an Entergy subsidiary signed an agreement to extend the management support services to Cooper Nuclear Station by 15 years, through January 2029.
Entergy-Koch is a joint venture owned 50% each by subsidiaries of Entergy and Koch Industries, Inc, and is no longer an operating entity. Entergy-Koch began operations on February 1, 2001. Entergy contributed most of the assets and trading contracts of its power marketing and trading business and $414 million cash to the venture and Koch contributed its approximately 8,000-mile Koch Gateway Pipeline (renamed Gulf South Pipeline), gas storage facilities, and Koch Energy Trading, which marketed and traded electricity, gas, weather derivatives, and other energy-related commodities and services. In the fourth quarter 2004, Entergy-Koch sold its energy trading and pipeline businesses to third parties. Entergy received $862 million of cash distributions in 2004 from Entergy-Koch after the business sales. Due to the November 2006 expiration of contingencies on the sale of Entergy-Koch’s trading business, and the corresponding release to Entergy-Koch of sales proceeds held in escrow, Entergy received additional cash distributions of approximately $163 million during the fourth quarter of 2006 and recorded a gain of approximately $55 million (net-of-tax). In December 2009, Entergy reorganized its investment in Entergy-Koch, received a $25.6 million cash distribution, and received a distribution of certain software owned by the joint venture.
Federal Power Act
The Federal Power Act provides the FERC the authority to regulate:
· | the transmission and wholesale sale of electric energy in interstate commerce; |
· | salessale or acquisition of certain assets; |
· | the licensing of certain hydroelectric projects; |
· | certain other activities, including accounting policies and practices of electric and gas utilities; and |
· | changes in control of FERC jurisdictional entities or rate schedules. |
The Federal Power Act gives the FERC jurisdiction over the rates charged by System Energy for Grand Gulf capacity and energy provided to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans and over some of the rates charged by Entergy Arkansas and Entergy Gulf States Louisiana. The FERC also regulates the provisions of the System Agreement, including the rates, and the provision of transmission service to wholesale market participants. The FERC also regulates the MISO RTO, an independent entity that maintains functional control over the combined transmission systems of its members and administers wholesale energy, capacity, and ancillary services markets for market participants in the MISO region, including the Utility operating companies. FERC regulation of the MISO RTO includes regulation of the design and implementation of the wholesale markets administered by the MISO RTO, as well as the rates, terms, and conditions of open access transmission service over the member systems and the allocation of costs associated with transmission upgrades.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy Arkansas holds a FERC license that expires in 2053 for two hydroelectric projects totaling 70 MW of capacity.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
State Regulation
Utility
Entergy Arkansas is subject to regulation by the APSC, which includes the authority to:
· | oversee utility service; |
· | determine reasonable and adequate service; |
· | control the acquisition or sale of any public utility plant or property constituting an operating unit or system; |
· | set rates of depreciation; |
· | issue certificates of convenience and necessity and certificates of environmental compatibility and public need; and |
· | regulate the issuance and sale of certain securities. |
Additionally, Entergy Arkansas serves a limited number of retail customers in Tennessee and as a result, may be required to submit certain matters approved by the APSC for consideration by the Tennessee Regulatory Authority. Additionally, Entergy Arkansas maintains limited facilities in Missouri but does not provide retail electric service to customers in Missouri. Although Entergy Arkansas obtained a certificate with respect to its Missouri facilities, Entergy Arkansas is not subject to the retail rate or regulatory scheme in Missouri.
Entergy Gulf States Louisiana’s electric and gas business and Entergy Louisiana are subject to regulation by the LPSC as to:
· | retail rates and charges; |
· | certification of generating facilities; |
· | certification of power or capacity purchase contracts; |
· | audit of the fuel adjustment charge, environmental adjustment charge, and avoided cost payment to Qualifying Facilities; |
· | integrated resource planning; |
· | issuanceutility mergers and acquisitions and other changes of control; and sale of certain securities; |
· | utility mergers and acquisitions and other changes of control; |
· | depreciation and other matters. |
Entergy Louisiana is also subject to the jurisdiction of the City Council with respect to such matters within Algiers in Orleans Parish, although the precise scope of that jurisdiction differs from that of the LPSC.
Entergy Mississippi is subject to regulation by the MPSC as to the following:
· | certification of certain transmission projects; and |
utility service;
service areas;
facilities;
certification of generating facilities and certain transmission projects;
retail rates;
fuel cost recovery;
depreciation rates; and
mergers and changes of control.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy Mississippi is also subject to regulation by the APSC as to the certificate of environmental compatibility and public need for the Independence Station, which is located in Arkansas.
Entergy New Orleans is subject to regulation by the City Council as to the following:
· | retail rates and charges; |
· | issuance and sale of certain securities; and |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
To the extent authorized by governing legislation, Entergy Texas is subject to the original jurisdiction of the municipal authorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT. Entergy Texas is also subject to regulation by the PUCT as to:
· | retail rates and service in unincorporated areas of its service territory, and in municipalities that have ceded jurisdiction to the PUCT; |
· | customer service standards; |
· | certification of certain transmission and generation projects; and |
· | extensions of service into new areas. |
Regulation of the Nuclear Power Industry
Atomic Energy Act of 1954 and Energy Reorganization Act of 1974
Under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974, the operation of nuclear plants is heavily regulated by the NRC, which has broad power to impose licensing and safety-related requirements. The NRC has broad authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy, as owners of all or portions of ANO, River Bend, Waterford 3, and Grand Gulf, respectively, and Entergy Operations, as the licensee and operator of these units, are subject to the jurisdiction of the NRC. Entergy subsidiaries in the Entergy Wholesale Commodities segment are subject to the NRC’s jurisdiction as the owners and operator of Pilgrim, Indian Point Energy Center, FitzPatrick, Vermont Yankee, and Palisades. Substantial capital expenditures at Entergy’s nuclear plants because of revised safety requirements of the NRC could be required in the future.
Nuclear Waste Policy Act of 1982
Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. Entergy’s nuclear owner/licensee subsidiaries providehave been charged fees for the estimated future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE is to furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generation prior to that date. Entergy Arkansas is the only one of the Utility operating companies that generated electric power with nuclear fuel prior to that date and has a recorded liability as of December 31, 20112014 of $181.0$181.3 million for the one-time fee. Entergy accepted assignment of the Pilgrim, FitzPatrick and Indian Point 3, Indian Point 1 and 2, Vermont Yankee, Palisades, and Big Rock Point spent fuel disposal contracts with the DOE held by their previous owners. The previous owners have paid or retained liability for the fees for all generation prior to the purchase dates of those plants. The fees payable to the
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DOE may be adjusted in the future to assure full recovery. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper components of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to regulatory authorities for the Utility plants. Entergy’s total spent fuel fees to date, including the one-time fee liability of Entergy Arkansas, have almost reached $1.5 billion.surpassed $1.6 billion (exclusive of amounts relating to Entergy plants that were paid or are owed by prior owners of those plants).
The permanent spent fuel repository in the U.S. has been legislated to be Yucca Mountain, Nevada. The DOE is required by law to proceed with the licensing (the DOE filed the license application in June 2008) and, after the license is granted by the NRC, proceed with the repository construction and commencement of receipt of spent fuel. Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. The DOE continues to delay meeting its obligation. Moreover, the Obamacurrent Presidential administration has expressed its intention and taken specific steps to discontinue the Yucca
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Mountain project and study a new spent fuel strategy. Such actions includeincluded a motion to the NRC to withdraw the license application with prejudice and the establishment of a commission to develop recommendations for alternative spent fuel storage solutions. On June 29, 2010, however, a panelIn August 2013 the U.S. Court of Appeals for the D.C. Circuit ordered the NRC to continue with the Yucca Mountain license review, but only to the extent of funds previously appropriated by Congress for that purpose and not yet used. This amount of money is not expected to be sufficient to complete the review. The government has taken no effective action to date related to the recommendations of the NRC’s Atomic Safety and Licensing Board denied the administration’s motion to withdraw the application. In November 2011 the NRC Commissioners issued an order effectively affirming the ASLB’s denial of the withdrawal, but the order also shut down the continued adjudication of the license application.appointed spent fuel study commission. Accordingly, large uncertainty remains regarding the time frame under which the DOE will begin to accept spent fuel from Entergy'sEntergy’s facilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity at Entergy'sEntergy’s nuclear sites.
Following the current Presidential administration’s defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.
As a result of the DOE'sDOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy'sEntergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. In November 2003 these subsidiaries, except for the owner of Palisades, began litigation to recover the damages caused by the DOE'sDOE’s delay in performance. In October 2007, the U.S. CourtThrough 2014, Entergy’s subsidiaries have won and collected on judgments in excess of Federal Claims awarded $48.7$200 million jointly to System Fuels and, including approximately $48 million collected by Entergy Arkansas in 2013, against the U.S. for damages related tocaused by the DOE'sDOE’s breach of its obligations.the contract. First round or second round damages cases are in progress covering each of the nuclear plants owned by Entergy subsidiaries. In a revised decision2014 trials were held in three additional cases (second round ANO case, second round Grand Gulf case, and first round Waterford 3 case) but judgments have not yet been issued in March 2010, the court awarded $9.7 million jointly to System Fuels, System Energy, and SMEPA. Also in March 2010, in two separate decisions, the court awarded $106.1 million to Entergy Nuclear Indian Point 2, and $4.2 million to Entergy Nuclear Generation Company (the ownerany of Pilgrim). In September 2010 the court awarded $46.6 million to Entergy Nuclear Vermont Yankee. All of these decisions were appealed by the DOE to the U.S. Court of Appealsthose cases. A second round case was filed for the Federal Circuit. In September 2011,Vermont Yankee plant in April 2014 and a second round case was filed for the appeals court affirmed most of the Entergy Nuclear Generation Company award, but remanded to the trial court for recalculation of certain damages. In January 2012 the appeals court affirmed the System Fuels and Entergy Arkansas awardPilgrim plant in large part, and reversed the trial court’s denial of certain damages sought, but remanded to the trial court for recalculation of certain damages. Also in January 2012, the appeals court affirmed the System Fuels, System Energy and SMEPA award, and reversed the trial court’s denial of certain damages, raising the final award to $10.2 million.December 2014. Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.
Pending DOE acceptance and disposal of spent nuclear fuel, the owners of nuclear plants are providing their own spent fuel storage. Storage capability additions using dry casks began operations at Palisades in 1993, at ANO in 1996, at FitzPatrick in 2002, at River Bend in 2005, at Grand Gulf in 2006, at Indian Point and Vermont Yankee in 2008, and at Waterford 3 in 2011.2011, and at Pilgrim in 2015. These facilities will be expanded as needed. Current on-site spent fuel storage capacity at Pilgrim is estimated to be sufficient until approximately 2014, by which time dry cask storage facilities are planned to be placed into service at that unit.
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Nuclear Plant Decommissioning
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Texas, and System Energy are entitled to recover from customers through electric rates the estimated decommissioning costs for ANO, the portion of River Bend subject to retail rate regulation, Waterford 3, and Grand Gulf, respectively. These amountsThe collections are deposited in trust funds that can only be used for future decommissioning costs. Entergy periodically reviews and updates the estimated decommissioning costs to reflect inflation and changes in regulatory requirements and technology, and then makes applications to the regulatory authorities to reflect, in rates, the changes in projected decommissioning costs.
In 2008, Entergy experienced declines in the market value of assets held in the trust funds for meeting the decommissioning funding assurance obligations for the nuclear plants. This decline adversely affected certain Entergy subsidiaries’ abilities to demonstrate compliance with the NRC’s requirements for providing financial assurance for decommissioning funding for some of its plants. Following a review in 2009, Entergy concluded that there was a funding shortfall for Vermont Yankee of approximately $40 million, which it satisfied with a $40 million guarantee from Entergy Corporation that was effective asis still in place subject to a 120-day notice of cancellation sent to the NRC in December 31, 2009. For Waterford 3 and River Bend, Entergy subsidiaries made appropriate filings by December 31, 2009 with their retail regulators that requested decommissioning funding from customers to address the shortfalls identified by the NRC. On2014. In July 28, 2010 the LPSC approved increased decommissioning collections for Waterford 3 and the Louisiana regulated share of River Bend. OnBend and in December 13, 2010 the PUCT approved increased decommissioning collections for the Texas share of River Bend.Bend to address previously identified funding shortfalls. Entergy currently believes its decommissioning funding will be sufficient for its nuclear plants subject to address the identified shortfalls,retail rate regulation, although decommissioning cost inflation and trust fund performance will ultimately determine the adequacy of the funding amounts.
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For the Indian Point 3 and FitzPatrick plants purchased in 2000, NYPA retained the decommissioning trusts and the decommissioning liability.liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specify their decommissioning obligations. NYPA has the right to require the Entergy subsidiaries to assume each of the decommissioning liabilityliabilities provided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. If the decommissioning liability isliabilities are retained by NYPA, the responsible Entergy subsidiary will perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts.
In March 2014, Entergy Nuclear Operations made filings with the NRC reporting on decommissioning funding for certain of Entergy’s nuclear plants. Those reports all showed that decommissioning funding for those nuclear plants met the NRC’s financial assurance requirements.
Additional information with respect to Entergy’s decommissioning costs and decommissioning trust funds is found in Note 9 and Note 17 to the financial statements.
Price-Anderson Act
The Price-Anderson Act requires that reactor licensees purchase and maintain the maximum amount of nuclear liability insurance available and participate in a secondary insurance pool that provides insurance coverage foran industry assessment program called Secondary Financial Protection in order to protect the public in the event of a nuclear power plant accident. The costs of this insurance are borne by the nuclear power industry. Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act limits the contingent liability for a single nuclear incident to a maximum assessment of approximately $117.5$127.318 million per reactor (with 104 nuclear industry reactors currently participating). In the case of a nuclear event in which Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, System Energy, andor an Entergy Wholesale Commodities havecompany is liable, protection with respect to this liabilityis afforded through a combination of private insurance and an industry assessment program, as well asthe Secondary Financial Protection program. In addition to this, insurance for property damage, costs of replacement power, and other risks relating to nuclear generating units.units is also purchased. The Price-Anderson Act and insurance applicable to the nuclear programs of Entergy are discussed in more detail in Note 8 to the financial statements.
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Environmental Regulation
Entergy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy’s businesses are in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance requirements and costs cannot be precisely estimated. Except to the extent discussed below, at this time compliance with federal, state, and local provisions regulating the discharge of materials into the environment, or otherwise protecting the environment, is incorporated into the routine cost structure of Entergy’s businesses and is not expected to have a material effect on their competitive position, results of operations, cash flows, or financial position.
Clean Air Act and Subsequent Amendments
The Clean Air Act and its amendments establish several programs that currently or in the future may affect Entergy’s fossil-fueled generation facilities and, to a much lesser extent, certain operations at nuclear and other facilities. Individual states also operate similar independent state programs or delegated federal programs that may include requirements more stringent than federal regulatory requirements. These programs include:
New source review and preconstruction permits for new sources of criteria air pollutants, new and existing sources of greenhouse gases, and significant modifications to existing facilities;
· | New source review and preconstruction permits for new sources of criteria air pollutants and significant modifications to existing facilities; |
· • | Acid rain program for control of sulfur dioxide (SO2) and nitrogen oxides (NOx); |
Nonattainment area programs for control of criteria air pollutants, which could include fee assessments for air pollutant emission sources under Section 185 of the Clean Air Act if attainment is not reached in a timely manner;
· | Nonattainment area programs for control of criteria air pollutants; |
Hazardous air pollutant emissions reduction programs;· | Hazardous air pollutant emissions reduction programs; |
Interstate Air Transport;· | Interstate Air Transport; |
Operating permits program for administration and enforcement of these and other Clean Air Act programs;· | Operating permits program for administration and enforcement of these and other Clean Air ActRegional Haze and Best Available Retrofit Technology programs; and |
· | Regional Haze and Best Available Retrofit Technology programs. |
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New Source Review (NSR)
Preconstruction permits are required for new facilities and for existing facilities that undergo a modification that results in a significant net emissions increase and is not classified as routine repair, maintenance, or replacement. Units that undergo acertain non-routine modificationmodifications must obtain a permit modification and may be required to install additional air pollution control technologies. Entergy has an established process for identifying modifications requiring additional permitting approval and has followed the regulations and associated guidance provided by the states and the federal government with regard to the determination of routine repair, maintenance, and replacement. In recent years, however, the EPA has begun an enforcement initiative, aimed primarily at coal plants, to identify modifications that it does not consider routine for which the unit did not obtain a modified permit. Various courts and the EPA have been inconsistent in their judgments regarding modifications that are considered routine.
In September 2010 the owner of a minority interest in Entergy’s White Bluff and Independence facilities, both located in Arkansas,February 2011, Entergy received a request from the EPA for several categories of information concerning capital and maintenance projects at the White Bluff and Independence facilities, both located in Arkansas, in order to determine compliance with the Clean Air Act. The EPA request for information does not allege that either facility violated the law. In February 2011, Entergy received a similar request from the EPA and has responded to it. In August 2011, Entergy’s Nelson facility, located in Louisiana, received a similar request for information from the EPA. Entergy responded to this request.both requests. Neither EPA request for information alleged that the facilities are in violation of law.
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Acid Rain Program
The Clean Air Act provides SO2allowances to most of the affected Entergy generating units for emissions based upon past emission levels and operating characteristics. Each allowance is an entitlement to emit one ton of SO2 per year. Plant owners are required to possess allowances for SO2 emissions from affected generating units. Virtually all Entergy fossil-fueled generating units are subject to SO2 allowance requirements. Entergy could be required to purchase additional allowances when it generates power using fuel oil. Fuel oil usage is determined by economic dispatch and influenced by the price and availability of natural gas, incremental emission allowance costs, and the availability and cost of purchased power.
Ozone Nonattainment
Entergy Texas operates one fossil-fueled generating unit (Lewis Creek) in a geographic area that is not in attainment of the currently-enforced national ambient air quality standards (NAAQS) for ozone. The nonattainment area that affects Entergy Texas is the Houston-Galveston-Brazoria area. Areas in nonattainment are classified as "marginal," "moderate," "serious,"“marginal,” “moderate,” “serious,” or "severe."“severe.” When an area fails to meet the ambient air standard, the EPA requires state regulatory authorities to prepare state implementation plans meant to cause progress toward bringing the area into attainment with applicable standards.
The Houston-Galveston-Brazoria area was originally classified as "moderate"“moderate” nonattainment under the 8-hour ozone standard with an attainment date of June 15, 2010. OnIn June 15, 2007 the Texas governor petitioned the EPA to reclassify Houston-Galveston-Brazoria from "moderate"“moderate” to "severe." On October 1, 2008,“severe” and the EPA granted the request by the Texas governor to voluntarily reclassify the Houston-Galveston-Brazoria area from a "moderate" 8-hour ozone nonattainment area to a "severe" 8-hour ozone nonattainment area.in October 2008. The EPA also set April 15, 2010, as the date for the State of Texas to submit a revised state implementation plan (SIP) addressing the "severe" ozone nonattainment area requirements of the Clean Air Act. In March 2010 the Texas commission adopted the Houston-Galveston-Brazoria Attainment Demonstration SIP Revision and the Houston-Galveston-Brazoria Reasonable Further Progress SIP Revision for the 1997 eight-hour ozone standard and associated rules. EPA approval is pending. The area'sarea’s new attainment date for the 8-hour ozone standard is as expeditiously as practicable, but no later than June 15, 2019.
Entergy Gulf States Louisiana operates two fossil-fueled generating facilities in the Baton Rouge metropolitan area which was previously classified as a non-attainment area for the 1997 eight-hour ozone standard. However, in November 2011, the EPA finalized approval of Louisiana’s request to redesignate the Baton Rouge area to attainment for this standard. Louisiana has demonstrated that the five parish area (East Baton Rouge, Ascension, Iberville, Livingston and West Baton Rouge parishes) will be able to maintain compliance with the ozone standard for the next ten years.
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In December 2006, the EPA's revocation of the 1-hour ozone standard was rejected in a judicial proceeding. As a result, numerous requirements can return for areas that had been designated as nonattainment for this standard. These requirements include the potential to increase emission fees significantly for plants operating in these areas pursuant to Section 185 of the Clean Air Act. In addition, it is possible that new emission controls may be required. Specific costs of compliance cannot be estimated at this time, but Entergy is monitoring development of the respective state implementation plans and will develop specific compliance strategies as the plans move through the adoption process. (The Houston-Galveston-Brazoria area was classified as “severe” nonattainment for 1-hour ozone.)
In March 2008, the EPA revised the National Ambient Air Quality StandardNAAQS for ozone, creating the potential for additional counties and parishes in which Entergy operates to be placed in nonattainment status. The LDEQ recommended that eleven parishes be designated as nonattainment for the 75 parts per billion ozone standard. Entergy Gulf States Louisiana owns and operates two fossil plants and Entergy Louisiana owns and operates one fossil plant affected by this recommendation. In Arkansas, the governor recommended that Pulaski County be designated in nonattainment with the new ozone standard, where two of Entergy Arkansas’s smaller facilities are located. These initial recommendations were not approved byApril 2012 the EPA however, due to various procedural delays. In September 2011, the EPA announced that it will begin implementingreleased its final non-attainment designations for the 2008 ozone standards by requiring that states resubmit recommendations for nonattainment status.NAAQS. In Entergy’s utility service area, EPA predicts that the Houston-Galveston-Brazoria, Texas; Baton Rouge, Louisiana; and Memphis, Tennessee/Mississippi/Arkansas areas were designated as in “marginal” nonattainment.
For these marginal areas attainment must be demonstrated no later than July 20, 2015 (with EPA evaluating whether the area attained the standard based on monitored ozone data from 2013-2015). In the final designation rule, EPA states that it anticipates the marginal areas will be in non-attainment. Nonattainment designations are expectedable to be final in mid-2012.
Following nonattainment designation, states will be required to develop state implementation plansattain by that outline control requirements that will enabledate based upon reductions attendant with other rules and programs such as the affected counties and parishes to reach attainment status.interstate transport rules. Entergy facilities in these areas may be subject to installation of NOxNOx controls, but the degree of control will remain unknown until the statestates are further along in implementation plans are developed.in the marginal areas. Entergy will continue to monitor and engage in the statestate’s implementation plan development process in Entergy states.
In December 2014 the EPA published a proposed rule to lower the primary and secondary NAAQS for ozone to a level within a range of 65 to 75 parts per billion (ppb). The agency also is asking for comment on the potential for leaving the standard at its current level of 75 ppb, or lowering the standard to 60 ppb. Entergy is analyzing the proposal and is engaged with industry groups, regulators, and lawmakers. If the standard is lowered, this may result in additional counties/parishes in which Entergy operates being designated as nonattainment and potentially requiring further emission reductions. Comments are due in March 2015, and a final rule is anticipated in late-2015 according to the EPA’s regulatory agenda.
Potential SO2 Nonattainment
The EPA issued a final rule in June 2010 adopting an SO2 1-hour national ambient air quality standard of 75 ppb.parts per billion. The EPA designations for counties in attainment and nonattainment are expectedwere originally due in June 2012. Analysis2012, but the EPA has indicated that it will be required delay designations except for those areas with existing monitoring data from 2009
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to determine whether emissions from Entergy facilities contribute significantly to any violation2011 indicating violations of thisthe new standard. If violations exist,In July 2013 EPA issued final designations for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for the SO2 1-hour national ambient air quality standard of 75 parts per billion. Entergy does not have a generation asset in that parish. In all other areas, analysis is required once EPA issues additional final regulations and guidance. Additional capital projects or operational changes may be required.required for Entergy facilities in these areas.
Hazardous Air Pollutants
The EPA has been in the process of developing a Maximum Achievable Control Technology (MACT) retrofit standard for new and existing coal and oil-fired units. The EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011.2011 and the rule became effective in April 2012. Entergy currently is reviewingon schedule to have the rule and developingrequired controls in place for compliance plans to meet requirements of the rule, which could result in significant capital expenditures forat Entergy’s coal-fired units. Compliance with MATS is required by the Clean Air Act within three years, or by 2015, although certain extensions of this deadline are available from state permit authorities and the EPA. Entergy has applied for and received a one-year extension, as allowed by the Clean Air Act, for its affected facilities in Arkansas and Louisiana.
InterstateCross-State Air TransportPollution
In March 2005, the EPA finalized the Clean Air Interstate Rule (CAIR), which was intended to reduce SO2 and NOx emissions from electric generation plants in order to improve air quality in twenty-nine eastern states. The rule required a combination of capital investment of capital to install pollution control equipment and increased operating costs through the purchase of emission allowances. Entergy began implementation in 2007, including installation of controls at several facilities and the development of an emission allowance procurement strategy.
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Based on several court challenges, the CAIR was vacated and remanded to the EPA by the D.C. Circuit in 2008. The court allowed the CAIR to become effective in January 2009, while the EPA revised the rule. OnIn July 7, 2011 the EPA released its final Cross-State Air Pollution Rule (CSAPR, which previously was referred to as the Transport Rule). The rule iswas directed at limiting the interstate transport of emissions of NOx and SO2 as precursors to ozone and fine particulate matter. The final rule providesprovided a significantly lower number of allowances to Entergy’s Utility states than did the draft rule. Entergy’s capital investment and annual allowance purchase costs under the CSAPR willwould depend on the economic assessment of NOx and SO2 allowance markets, the cost of control technologies, generation unit utilization, and the availability and cost of purchased power.
Entergy filed a petition for review with the United States Court of Appeals for the D.C. Circuit and a petition with the EPA for reconsideration of the rule and stay of its effectiveness. Several other parties filed similar petitions. OnIn December 30, 2011 the Court of Appeals for the D.C. Circuit Court of Appeals stayed CSAPR and instructed the EPA to continue administering CAIR, pending further judicial review. Oral argumentIn August 2012 the court issued a decision vacating CSAPR and leaving CAIR in place pending the promulgation of a lawful replacement for both rules. In January 2013 the court denied petitions for reconsideration filed by the EPA and certain states and intervenors. In March 2013 the EPA and other parties filed petitions for certiorari with the U.S. Supreme Court. The U.S. Supreme Court issued an order in June 2013 granting the EPA’s and environmental groups’ petitions for review of the D.C. Circuit’s decision vacating CSAPR. In April 2014 the U.S. Supreme Court reversed the D.C. Circuit and remanded the case to the D.C. Circuit for further proceedings. In June 2014 the EPA filed a motion with the D.C. Circuit Court requesting that the court lift the stay and extend CSAPR’s deadlines by three years so that the Phase 1 emissions budgets apply in 2015 and 2016 and the Phase 2 emissions budgets apply in 2017 and beyond. In October 2014 the D.C. Circuit granted EPA’s motion to lift the stay. Accordingly, CSAPR Phase 1 implementation became effective January 1, 2015. Entergy is developing a compliance plan that could include installation of controls at certain facilities and an emission allowance procurement strategy. Litigation concerning several issues not determined by the U.S. Supreme Court continues in the case is scheduled for April 2012. The court of appeals may reverse or remand the rule in whole or in part, or may affirm the rule. This uncertainty makes it impossible to predict costs of compliance. In the interim, Entergy is taking measures to prepare for compliance with either CAIR as it continues to be implemented or CSAPR, if it is affirmed in whole or in part or eventually reissued.
In October 2011 the EPA released a proposed rule increasing the emission allocation budgets for some states and moving the limited trading period back to 2014. This proposal also increased the Louisiana, Mississippi, and Texas NOx allocation budgets. The EPA has not finalized this proposal.D.C. Circuit.
Regional Haze
In June 2005, the EPA issued its final Best Available Retrofit Control Technology (BART)Clean Air Visibility Rule (CAVR) regulations that could potentially result in a requirement to install SO2 and NOx pollution control technology as Best Available Retrofit Control Technology
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(BART) on certain of Entergy’s coal and oil generation units. The rule leaves certain BARTCAVR determinations to the states. The Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the Clean Air Visibility Rule.CAVR. The ADEQ determined that Entergy Arkansas’s White Bluff power plant affects a Class I Area’s visibility and will be subject to the EPA’s presumptive BART limits, which likely would require the installation of scrubbers and low NOx burners. Under then-current state regulations, the scrubbers would have had to be operational by October 2013. Entergy Arkansas filed a petition in December 2009 with the Arkansas Pollution Control and Ecology Commission requesting a variance from this deadline however, because the EPA hashad expressed concerns about Arkansas’s Regional Haze SIP and questioned the appropriateness of issuing an air permit prior to that approval. EAI’sEntergy Arkansas’s petition requested that, consistent with federal law, the compliance deadline be changed to as expeditiously as practicable, but in no event later than five years after EPA approval of the Arkansas Regional Haze SIP. The Arkansas Pollution Control and Ecology Commission approved the variance in March 2010. In October 2011 the EPA released a proposed rule addressing the Arkansas Regional Haze SIP. In the proposal the EPA disapprovesdisapproved a large portion of the Arkansas Regional Haze SIP, including the emission limits for NOx and SO2 at White Bluff. The EPA did not issue a Federal Implementation Plan for regional haze requirements because Arkansas has indicated it wishes to correct its SIPfinal rule was published, mostly unchanged, in March 2012 and resubmit it. Due to an extensionbecame final in the comment period for the proposed rule, EPA has yet to issue a final rule. It is expected that after the EPA’s proposed rule becomes final, there will beApril 2012. This triggered a two-year timeframe in which the EPA mustwas required to either approve a revised SIP issued by Arkansas or issue a Federal Implementation Plan.Plan (FIP). This two-year time frame expired in April 2014. In December 2014 a draft consent decree between the Sierra Club and the EPA was filed with the U.S. District Court for the Eastern District of Arkansas. This consent decree states that the EPA is to issue a draft FIP addressing Regional Haze requirements in Arkansas by no later than March 6, 2015 and a final FIP for these same requirements by no later than December 15, 2015. The consent decree has not been finalized. These decisions could impact the timing and level of control installation at Entergy's units in Arkansas.
Fine Particle (PM2.5) National Ambient Air Quality Standard
In December 2012 the EPA released regulations that lowered the NAAQS for fine particle pollution or PM2.5. In December 2014 the EPA issued final area designations for this standard. All areas in Entergy’s service territory were designated as “Unclassifiable/Attainment” for this standard. Entergy will continue to monitor and engage in the state’s implementation process in Entergy states.
Potential Legislative, Regulatory, and Judicial Developments (Air)
In addition to the specific instances described above, there are a number of legislative and regulatory initiatives relating to the reduction ofconcerning air emissions, as well as other media, that are under consideration at the federal, state, and local level. Because of the nature of Entergy’s business, the imposition of any of these initiatives could affect Entergy’s operations. Entergy continues to monitor these initiatives and activities in order to analyze their potential operational and cost implications. These initiatives include:
designation by the EPA and state environmental agencies of areas that are not in attainment with national ambient air quality standards;
· | designation by the EPA and state environmental agencies of areas that are not in attainment with national ambient air quality standards; |
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· • | introduction of bills in Congress and development of regulations by the EPA proposing further limits on NOx, SO2, mercury, and carbon dioxide and other gasair emissions. New legislation or regulations applicable to stationary sources could take the form of market-based cap-and-trade programs, direct requirements for the installation of air emission controls onto air emission sources, or other or combined regulatory programs. Entergy cannot estimate the effect of any future legislation at this time due to the uncertainty of the regulatory format;programs; |
efforts in Congress or at the EPA to establish a mandatory federal carbon dioxide emission control structure or unit performance standards;
· | efforts to implement a voluntary program intended to reduce carbon dioxide emissions and efforts in Congress to establish a mandatory federal carbon dioxide emission control structure; |
revisions to the estimates of the Social Cost of Carbon used for regulatory impact analysis of Federal laws and regulations;· | passage and implementation of the Regional Greenhouse Gas Initiative by several states in the northeastern United States and similar actions in other regions of the United States; |
· | efforts on the state and federal level to codify renewable portfolio standards requiring utilities to produce or purchase a certain percentage of their power from defined renewable energy sources; |
· | efforts to develop more stringent state water quality standards, effluent limitations for Entergy’s industry sector, stormwater runoff control regulations, and cooling water intake structure requirements; and |
· | efforts by certain external groups to encourage reporting and disclosure of carbon dioxide emissions and risk. Entergy has prepared responses for the Carbon Disclosure Project’s (CDP) annual questionnaire for the past several years and has given permission for those responses to be posted to CDP’s website. |
In addition to these initiatives, certain states and environmental advocacy groups sought judicial action to require the EPA to promulgate regulations under existing provisions of the Clean Air Act to control carbon dioxide emissions from power plants. In April 2007 the U.S. Supreme Court held that the EPA is authorized by the current provisions of the Clean Air Act to regulate emissions of carbon dioxide and other “greenhouse gases” as “pollutants” (Massachusetts v. EPA) and that the EPA is required to regulate these emissions from motor vehicles if the emissions are anticipated to endanger public health or welfare. The Supreme Court directed the EPA to make further findings in this regard. Entergy participated as a friend of the court in Massachusetts v. EPA. Entergy will continue to advocate in support of reasonable market-based regulation of carbon dioxide. Entergy has also supported the comments of various industry groups advocating national legislation to address carbon dioxide emissions instead of attempting to regulate under the provisions of the Clean Air Act. Entergy continues to monitor these and similar actions in order to analyze their potential operational and cost implications and benefits.
In 2009 the EPA published an “endangerment finding” stating that the emission of “greenhouse” gases “may reasonably be anticipated to endanger public health or welfare” and that the emission of these pollutants from mobile sources (such as cars and trucks) contributes to this endangerment. The EPA issued final mobile source emission regulations on April 1, 2010. On April 2, 2010, the EPA issued a policy stating that the regulation of greenhouse gas emissions from mobile sources would, as of January 2, 2011 (the date that the mobile source rule “takes effect”), trigger the regulation of greenhouse gases from stationary sources under the Prevention of Significant Deterioration (PSD) and Title V programsother regions of the Clean Air Act.United States;
In June 2010 the EPA published the final Tailoring Rule outlining the applicability criteria that determine which stationary sources and modification projects become subject to permitting requirements for greenhouse gas emissions under the Clean Air Act. The Tailoring Rule establishes a two-step process for implementing regulation of greenhouse gas emissions under the PSD and Title V programs. The first step, which began on January 2, 2011, limits the applicability of the PSD and Title V requirements for greenhouse gas emissions to sources that are already subject to PSD and Title V basedefforts on the emissionstate and federal level to codify renewable portfolio standards, a clean energy standard, or a similar mechanism requiring utilities to produce or purchase a certain percentage of non-greenhouse gas pollutants. Specifically, projects undertaken at stationarytheir power from defined renewable energy sources will trigger PSD permitting requirements if the project increases net greenhouse gas emissions by at least 75,000 tons per year carbon dioxide equivalent and significantly increases emissions of at least one non-greenhouse gas pollutant. During step one, onlyor energy sources subject to Title V based on their emission of non-greenhouse gas pollutants were required to address greenhouse gas emissions in their Title V permit.with lower emissions;
The second step of the Tailoring Rule, which began on July 1, 2011, subjects to Title V requirements any new or existing source not already subject to Title V that emits, or has the potential to emit, at least 100,000 tons per year carbon dioxide equivalent. In addition, new sources that have the potential to emit at least 100,000 tons per year carbon dioxide equivalent and significantly modified existing sources that emit or have the potential to emit at least 75,000 tons per year carbon dioxide equivalent are subject to PSD requirements.
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efforts to develop more stringent state water quality standards, effluent limitations for Entergy’s industry sector, stormwater runoff control regulations, and cooling water intake structure requirements;
Bothefforts to restrict the Endangerment Findingpreviously-approved continued use of oil-filled equipment containing certain levels of PCBs; and
efforts by certain external groups to encourage reporting and disclosure of carbon dioxide emissions and risk. Entergy has prepared responses for the Tailoring Rule are subjectCarbon Disclosure Project’s (CDP) annual questionnaire for the past several years and has given permission for those responses to pending judicial review. The rules have not been stayed by the court and are in effect pending review.be posted to CDP’s website.
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. By virtue of its proportionally large investment in low- or non-emittinglow-emitting gas-fired and nuclear generation technologies, Entergy has a low overall carbon dioxide emission “intensity,” or rate of carbon dioxide emitted per kilowatt-hour of electricity generated. In anticipation of the potential imposition of carbon dioxide emission limits on the electric industry in the future, Entergy initiated actions designed to reduce its exposure to potential new governmental requirements related to carbon dioxide emissions. These voluntary actions included establishment of a formal program to stabilize power plant carbon dioxide emissions at 2000 levels through 2005, and Entergy succeeded in actually reducing emissions below 2000 levels. Total carbon dioxide emissions representing Entergy’s ownership share of power plants in the United States were approximately 53.2 million tons in 2000 and 35.6 million tons in 2005. In 2006, Entergy changed its method of calculating emissions and now includes emissions from controllable power purchases as well as its ownership share of generation. Entergy established a second formal voluntary program to stabilize power plant carbon dioxide emissions and emissions from controllable power purchases at 20% below 2000 levels through 2010. In 2011, Entergy has extended this commitment through 2020. Total carbon dioxide emissions representing Entergy’s ownership share of power plants and controllable power purchases in the United States were approximately 44.946.1 million tons in 2010 and2011, approximately 46.345.5 million tons in 2011.2012, approximately 46.2 million tons in 2013, and approximately 41.8 million tons in 2014. The decrease in this number in 2014 is largely attributable to the impact on the calculation methodology of the Utility operating companies’ transition into the MISO system. Participation in this system resulted in fewer power purchases being classified as "controllable" and thus included in the calculation of the emissions total.
Greenhouse Gas Reporting
In September 2009, the EPA finalized a rule to require reporting of several greenhouse gases. This rule will requirerequires Entergy to report annually greenhouse gas emissions from operating power plants, various combustion sources, certain transmission and distribution equipment, and natural gas distribution operations. Entergy developed compliance plans, collected the necessary data, and reported as required in 2011.
New and Existing Source Performance Standards for Greenhouse Gas Emissions
The EPAAs a part of a climate plan announced a schedule for establishing new source performance standards (NSPS) for greenhouse gas (GHG) emissions from power plants and refineries. Under the schedule,in June 2013, President Obama directed the EPA would have issuedto (i) reissue proposed regulationscarbon pollution standards for new power plants by July 26, 2011September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and final regulationsexisting power plants no later than May 26, 2012. However,June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA has not yetthe implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016. In September 2013 the EPA issued the proposed regulations. These regulations would establish GHG NSPSNew Source Performance Standards rule for new and significantly modified sources, and possibly emission guidelinessources. The rule was published in the Federal Register in January 2014. In June 2014 the EPA issued proposed standards for existing sources.power plants. Entergy will continue to monitor and beis actively engaged in the rulemaking process.process, having submitted comments to the EPA in December 2014. Cost and methods of compliance remain unknown at this time.
Nelson Unit 6 (Entergy Gulf States Louisiana)
Entergy Gulf States Louisiana has self-reported to the Louisiana Department of Environmental Quality (LDEQ) potential exceedances ofLDEQ an annual carbon monoxide (CO) emission limitslimit deviation at the Nelson Unit 6 coal-fired facility for the years 2006-2010 and the failure to report these potential exceedancesdeviations in semi-annual reporting and in annual Title V compliance certifications. Entergy Gulf States Louisiana is not required
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to monitor carbon monoxide emissions from Nelson Unit 6 onusing a regular or continuous schedule.emissions monitoring system (CEMS). Stack tests performed in 2010 appear to indicate carbon monoxideCO emissions in excess of the maximum hourly limit for three 1-hour- 1 hour test runs and the annual limit. Comparisonruns; however, comparison of the 2010 stack tests with the most recent previous tests, from 2006, however, appear to indicate that the permit limits were calculated incorrectly in the Title V Permit application and should have been higher.higher using the 2006 stack test as the basis. The 2010 test emission levels did not cause a violation of National Ambient Air Quality Standards.NAAQS. Additionally, the 2010 stack testing, which was performed in compliance with an EPA data request connected to the EPA’sagency’s development of a new air emissions rule, was not taken during a period of normal and representative operations for Nelson Unit 6. Entergy Gulf States Louisiana continues to develop data regarding this matter in coordinationSettlement negotiations continue with the LDEQ. In December 2011, the LDEQ issued a compliance order setting limits for the unit until and if the permit is modified and issued a notice of potential penalty requiring the submission of additional information.
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Clean Water Act
The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States. The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted. Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.
NPDES Permits and Section 401 Water Quality Certifications
NPDES permits are subject to renewal every five years. Consequently, Entergy is currently in various stages of the data evaluation and discharge permitting process for its power plants. Additionally, the State of New York (and more recently, Vermont) has taken the position that a new state-issued water quality certification is required as part of the NRC license renewal process. Entergy Wholesale Commodities’ Indian Point nuclear facility in New York is seeking a new sectionSection 401 certification prior to license renewal under full reservation of rights.
Indian Point
Entergy is involved in an administrative permitting process with the New York State Department of Environmental Conservation (NYSDEC) for renewal of the Indian Point 2 and Indian Point 3 discharge permits.permit. In November 2003 the NYSDEC issued a draft permit indicating that closed cycle cooling would be considered the “best technology available” for minimizing alleged adverse environmental effects attributable to the intake of cooling water at Indian Point, subject to a feasibility determination and alternatives analysis for that technology, if Entergy applied for and received NRC license renewal for Indian Point 2 and Indian Point 3. Upon becoming effective, the draft permit also would have required payment of approximately $24 million annually, and an annual 42 unit-day outage period, until closed cycle cooling is implemented. Entergy is participating in the administrative process to request that the draft permit be modified prior to final issuance, and opposes any requirement to install cooling towers at Indian Point.
An August 2008 ruling by the NYSDEC’s Assistant Commissioner has restructured the permitting and administrative process, including the application of a new economic test designed to implement the U.S. Second Circuit Court of Appeals standard in that court’s review of the EPA’s cooling water intake structure rules, which is discussed in the 316(b) Cooling Water Intake Structures section below. The NYSDEC has directed Entergy to develop detailed feasibility information regarding the construction and operation of cooling towers, and alternatives to closed cycle cooling, prior to the issuance of a new draft permit by the NYSDEC staff and commencement of the adjudicatory proceeding. The reports include a visual impact and aesthetics report filed in June 2009, a plume and emissions report filed in September 2009, a technical feasibility report and alternatives analysis filed in February 2010, and an economic report to establish whether the technology, if feasible, satisfies the economic test that is part of the New York standard. Entergy has also requested that the NYSDEC Assistant Commissioner reconsider the New York standard in light of the U.S. Supreme Court decision reversing the Second Circuit’s alternative economic test adopted in the August 2008 ruling. In November 2012 the NYSDEC Assistant Commissioner’s delegate issued a decision overturning the alternative economic test adopted in the August 2008 ruling and reestablishing the “wholly disproportionate” test
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derived from previous New York precedent. The wholly disproportionate test considers whether the costs of a technology are wholly disproportionate to the environmental benefits gained from the technology.
In February 2010, Entergy provided to the NYSDEC an updated estimate of the capital cost to retrofit Indian Point 2 and Indian Point 3 with cooling towers. Construction costs for retrofitting with cooling towers are estimated to be at least $1.19 billion, in addition to lost generation of approximately 14.5 terawatt-hours (TWh) during the forced outage of both units that is estimated to take at least 42 weeks. Entergy also proposed an alternative to the cooling towers, the use of cylindrical wedgewire screens, the capitalconstruction costs of which are currentlynow expected to be approximately $200 million to $250 million to install.$300 million. Because a cooling tower retrofitting of this size and complexity
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has never been undertaken at an operating nuclear facility, significant uncertainties exist in the capital cost estimates and, therefore, the actual capital costs could be materially higher than estimated. Moreover, construction outage-related costs to Entergy have not been calculated because of the significant variability in power pricing at any given time, but they are expected to be significant and may exceed the capital costs. The capital cost estimate for the wedgewire screen construction is also subject to uncertainty. Hearings on certain issues began in 2011 in consolidation with certain issues in the water quality certification matter that is discussed further below. The NYSDEC is expected to consider the information submitted and issue another draft permit with a new best technology available determination, which could still be cooling towers. A new comment period and further contested proceedings likely would follow.matter.
Entergy submitted its application for a water quality certification to the NYSDECHearings were held in April 2009, with a reservation of rights regarding the applicability of Section 401 in this case. After Entergy submitted certain additional information in response to NYSDEC requests for additional information, in February 2010 the NYSDEC staff determined that Entergy’s water quality certification application was complete. In April 2010 the NYSDEC staff issued a proposed notice of denial of Entergy’s water quality certification application (the Notice). NYSDEC staff’s Notice triggered an administrative adjudicatory hearingJuly 2013 before NYSDEC ALJs on environmental issues related to Indian Point’s wedgewire screen proposal for “best technology available.” In 2014, hearings were held on NYSDEC’s proposed best technology available, closed cycle cooling. NYSDEC also has proposed annual fish protection outages of 42, 62, or 92 days at both units or at one unit with closed cycle cooling at the proposed Notice.other. The ALJs held a further legislative hearing and issues conference on this NYSDEC staff decision does not restrictproposal in July 2014. In January 2015, Entergy wrote NYSDEC leadership requesting an explanation of the delay in release of the ruling following an ALJ's on-record statement that the ALJ's draft ruling was under "executive review." In February 2015 the ALJs issued a ruling scheduling hearings on the outage proposals and other pending issues in September and October 2015, with post-hearing briefing to follow in December 2015. For additional discussion of this and other proceedings related to Indian Point, operations, but the issuance of a certification is potentially required priorsee “Entergy Wholesale Commodities Authorizations to NRC issuance of renewed unit licenses.Operate Its Nuclear Plants” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Pilgrim Nuclear Power Station
In June 2011,October 2012, EcoLaw, a coalition of several environmental groups, served Entergy filedNuclear Generating Company and Entergy Nuclear Operations, Inc. with a notice with the NRC that the NYSDEC, the agency that would issue or deny a water quality certification for the Indian Point license renewal process, has taken longer than one yearof intent (NOI) to take final action on Entergy’s application for a water quality certification and, therefore, has waived its opportunity to require a certificationsue under the provisions of Section 401 of the Clean Water Act.Act for alleged violations at the Pilgrim Nuclear Power Station. The NYSDEC has notifiedNOI alleges 33,253 discharge permit violations since 1994 (including alleged violations prior to Entergy’s ownership; Entergy purchased the NRCplant in 1999) and seeks $25,000 per violation for a total of $831,325,000. The Clean Water Act states that it disagreesan alleged violator must be given 60 days notice prior to a citizen’s suit being filed. Review of the NOI indicates that many of the alleged violations were discharges in compliance with Entergy’s position and does not believe that it has waived the right to require a certification. The NYSDEC ALJs overseeingcurrent EPA facility discharge permit, which the agency’s certification adjudicatory process stated in a rulingputative plaintiff alleges was improperly issued in July 2011 that while the waiver issue is pending before the NRC, the NYSDEC hearing process will continue on selected issues. The judge held a Legislative Hearing (agency public comment session) and an Issues Conference (pre-trial conference) in July 2010 and set certain issues for trial in October 2011, which is continuing into 2012. After the full hearing on the merits, the ALJs will issue a recommended decisionor modified. An additional NOI was served by EcoLaw to the Commissioner who will then issuesame Entergy parties and the final agency decision. A partyMassachusetts Department of Environmental Protection alleging violations of state water quality standards and requesting revocation of the state-issued Section 401 Water Quality Certification associated with the plant’s water discharge permit. In November and December 2012, Entergy filed responses to the proceeding can appeal the decisionstate and federal notices of the Commissionerintent to state court.sue. To date, Pilgrim has not received notice that EcoLaw has initiated any lawsuits against Pilgrim.
316(b) Cooling Water Intake Structures
The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule. In January 2007 the U.S. Second Circuit Court of Appeals remanded the rule to the EPA for reconsideration. The court instructed the EPA to reconsider several aspects of the rule that were beneficial to businesses affected by the rule after finding that these provisions of the rule were contrary to the language of the Clean Water Act or were not sufficiently explained in
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the rule. In April 2008 the U.S. Supreme Court agreed to review the Second Circuit decision on the question of whether the EPA may take into consideration a cost-benefit analysis in developing these regulations, a consideration of potential benefit to businesses affected by the rule that the Second Circuit disallowed. In March 2009 the Supreme Court ruled in favor of the petitioners that cost-benefit analysis may be taken into consideration. The EPA reissued the proposed rule in April 2011, with finalization anticipated by July 27, 2012.2011. Entergy filed comments with the EPA on the proposed rule. The EPA further extended the finalization deadline to November 2013, then to January 2014, and then to April 2014. In May 2014 the EPA issued the final 316(b) rule, followed by publication in the Federal Register in August 2014, with the final rule effective in October 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.
AtEntergy filed as a co-petitioner with the requestUtility Water Act Group a petition for review of the EPA Region 1 (Boston), Entergy submitted extensive data to the agency in July 2008 concerning cooling water intake impacts at the Pilgrim nuclear power plant.final rule. The Engineering Study, included as part of the July 2008 submittal, concluded that cooling towers are not feasible due to restrictionscase will be heard in the plant's condenser design and capacity. Other technologies, such as variable speed pumps andU.S. Second Circuit Court of Appeals. Entergy expects briefing on the relocation of the cooling water intake, were also analyzed as part of that submittal. EPA has not yet respondedcase to the July 2008 submittal.
Entergy will continue to review the revised proposed rule and monitor the activities of the EPA and the states toward the implementation of section 316(b) of the Clean Water Act. Until analysis of this revised proposed rule is complete, deadlines for determining compliance with Section 316(b) and for any required capital or operational expenditures are unknown at this time. As a result, management cannot predict the amounts Entergy will ultimately be required to spend to comply with Section 316(b) and any related state regulations, although such amounts could be significant.
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Coastal Zone Management Act
TheBefore a federal licensing agency (such as the NRC) may issue a major license or permit for an activity within the federally designated coastal zone, the agency must be satisfied that the requirements of the Coastal Zone Management Act (CZMA) requires federally-permitted activities within, as applicable, have been met. In many cases, CZMA requirements are satisfied by the state’s written concurrence with a coastal zone“consistency determination” filed by the federal license applicant explaining why the activity proposed to be federally licensed is consistent with the state’s federally-approved coastal zone management program. Accordingly,The CZMA gives the state six months to act once the consistency determination is deemed complete; failure to act is treated as a deemed concurrence. Entergy mustis pursuing three independent paths to ensure that theCZMA requirements for Indian Point license renewal are met. For additional discussion of the CZMA which is administered in New York primarily by the New York Department of State, are satisfied before the NRC may issue renewed licenses forproceedings related to Indian Point 2license renewal see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Plants” in Entergy Corporation and 3. Indian Point expectsSubsidiaries Management’s Financial Discussion and Analysis.
Effluent Limitation Guidelines
In April 2013 the EPA issued proposed effluent limitation guidelines that, if adopted as final, would apply to file its consistency determination applicationdischarges from Entergy’s generating facilities that hold national pollutant discharge elimination system permits under the Clean Water Act. The limitations proposed primarily affect coal units. The proposal includes several options for public consideration. Entergy submitted comments on the proposed rule and will continue to engage in the public comment process as appropriate. The EPA announced that the final rule will be issued no later than September 30, 2015.
Federal Jurisdiction of Waters of the United States
In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the New York DepartmentEPA’s release of Statea draft scientific report on the “connectivity” of waters that the agency says will inform the rulemaking. The proposed rule was published in 2012. When the applicationFederal Register in April 2014. The initial 90-day public comment period was extended until November 2014. Preliminary review indicates that this proposal could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. Entergy is deemed complete,actively engaged in the New York Departmentrulemaking process and anticipates a final rule in April 2015.
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Groundwater at Certain Nuclear Sites
The NRC requires nuclear power plants to regularly monitor and report the presence of radioactive material in the environment. Entergy joined other nuclear utilities and the Nuclear Energy Institute in 2006 to develop a voluntary groundwater monitoring and protection program. This initiative began after detection of very low levels of radioactive material, primarily tritium, in groundwater at several plants in the United States. Tritium is a radioactive form of hydrogen that occurs naturally and is also a byproduct of nuclear plant operations. In addition to tritium, other radionuclides have been found in on site ground watergroundwater at nuclear plants.
As part of the groundwater monitoring and protection program, Entergy has: (1) performed reviews of plant groundwater characteristics (hydrology) and historical records of past events on site that may have potentially impacted groundwater; (2) implemented fleet procedures on how to handle events that could impact groundwater; and (3) installed groundwater monitoring wells and began periodic sampling. The program also includes protocols for notifying local officials if contamination is found. To date, radionuclides such as tritium have been detected at Entergy’sArkansas Nuclear One, FitzPatrick, Indian Point, Palisades, Pilgrim, Grand Gulf, Vermont Yankee, and River Bend plants.Bend. Each of these sites has installed groundwater monitoring wells and implemented a program for testing groundwater at the sites for the presence of tritium and other radionuclides. Based on current information, the concentrations and locations of tritiumradionuclides detected at these plants pose no threat to public health or safety.safety, but each site continues to evaluate the results from its groundwater monitoring program.
At FitzPatrick, twenty-one (21) monitoring wells are installed and being routinely monitored for tritium and other radioisotopes. Tritium and Strontium-90 have been detected in several of these wells at trace concentrations well below the EPA drinking water standard. A more significant concentration of tritium was identified in the reactor building perimeter drain piping and associated collection sump. The site identified the sources as a piping leak that subsequently migrated to the environment via a failed concrete expansion joint. Repairs to the piping system were completed in September 2010. There are no drinking water wells on-site.
Entergy identified and addressed two sources of the contamination at Indian Point: the Unit 1 and 2 spent fuel pools. In October 2007, the EPA announced that it was consulting with the NRC and the NYSDEC regarding Indian Point. The EPA stated that after reviewing data it confirmed with New York State that there have been no violations of federal drinking water standards for radionuclides in drinking water supplies. Indian Point has implemented an extensive groundwater monitoring and protection program, including installing approximately 35 monitoring wells. Entergy has been working cooperatively with the NRC and the NYSDEC in a split sample program to independently analyze test samples.
At Palisades, Entergy identified tritium in two groundwater monitoring wells in December 2007 caused by leakage from the buried piping for a recirculation line. Following investigation and repair work on this line, the decision was made to abandon the line and install new, replacement buried pipe for this system. This effort was completed in December 2009. Groundwater from three site monitoring wells continued to show positive detections of tritium resulting in renewed investigation and subsequent piping repair during May 2011. Monitoring wells are being sampled and analyzed on a bi-weekly basis and remaining site monitoring wells are being sampled and analyzed quarterly.
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At Pilgrim, 18 monitoring wells are being sampled and analyzed on a routine basis. Results continue to show low levels of tritium. A hydrogeological analysis was performed in 2009 to pinpoint locations for additional evaluation wells, and these wells were installed in 2010. Tritium was discovered in two onsite wells. Investigations are underway to determine the source of the tritium, and split sampling is being performed routinely with the State of Massachusetts. In order to further its tritium investigations, Pilgrim added two more groundwater monitoring wells in December 2011, bringing the total number of monitoring wells to 20. The Pilgrim tritium technical team meets twice per week to discuss investigative options and weekly update calls are held with the Massachusetts Department of Public Health.
At Grand Gulf, groundwater samples collected in June 2010 and thereafter have revealed the presence of low-level tritium. These groundwater detections are believed to be from a leak of a temporary chiller unit that occurred in 1997. The leak was detected and halted in 1997, but approximately 1,200 gallons of water spilled from the temporary chiller unit. In addition to these groundwater samples, certain surface water samples at Grand Gulf also have detected the presence of low-level tritium. These surface water detections are believed to be from tritium recapture from atmospheric deposition; however, further analysis and investigation are taking place to determine the cause of all the tritium detections.
In January 2010, Vermont Yankee was notified by its off-site analytical laboratory that a sample collected from a groundwater monitoring well in mid-November 2009 showed elevated levels of tritium. In March 2010, Vermont Yankee announced that it had identified the source of the tritium leakage at the plant, and that it had stopped the leakage. Remediation of the soil is complete and groundwater remediation is ongoing. In September 2011 the NRC concluded that Vermont Yankee had complied with all applicable regulatory requirements and standards pertaining to radiological effluent monitoring, dose and assessment and radiological evaluation. It also found that there has been no impact on public health and safety due to the groundwater contamination event that led to the detection of tritium in groundwater samples in January 2010.
In February 2010 the Vermont Public Service Board (VPSB) began a proceeding to conduct an investigation into whether Vermont Yankee should be required to cease operations, or take other ameliorative actions, pending completion of repairs to stop releases of tritium or other radionuclides into the environment. This investigation will also consider whether good cause exists to modify or revoke the Vermont Yankee certificate of public good that the VPSB issued in 2002 and whether any penalties should be imposed on Vermont Yankee for any identified violations of Vermont statutes or VPSB orders related to those releases. The proceeding and VPSB investigation were opened prior to Vermont Yankee locating the source and beginning the remediation of the tritium leaking into groundwater at the site. The VPSB conceded in its order that its jurisdiction to impose some or all of the relief requested may be preempted by federal law or regulation, and the parties were asked to brief preemption issues during the initial phase of the proceeding. Initial and reply briefs on the issue of the VPSB’s jurisdiction were filed by the parties, including Vermont Yankee, in August and September 2010. The VPSB held evidentiary hearings in January 2011 on the facts of the tritium leakage and remediation and on various parties’ requests for relief. There is no schedule for decision by the VPSB on jurisdiction or other issues.
In December 2011, River Bend sampled a groundwater well previously installed for the purpose of collecting groundwater elevation measurements. The sample revealed the presence of tritium above the drinking water threshold set by the EPA. No groundwater wells are used for drinking on-site and tritium was not detected in any wells downgradient or surrounding this well. Notification was made to the NRC, as well as to state and local agencies. Entergy is performing an evaluation and review of this condition.
Indian Point Units 1 and 2 Hazardous Waste Remediation
As part of the effort to terminate the current Indian Point 2 mixed waste storage permit, Entergy was required to perform groundwater and soil sampling for metals, PCBs and other non-radiological contaminants on plant property, regardless of whether these contaminants stem from onsite activities or were related to the waste stored on-site pursuant to the permit. Entergy believes this permit is no longer necessary for the facility due to an exemption for mixed wastes (hazardous waste that is also radioactive) promulgated as part of the EPA’s hazardous waste regulations. This exemption allows mixed waste to be regulated through the NRC license instead of through a separate
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EPA or state hazardous waste permit. In February 2008, Entergy submitted its report on this sampling effort to the NYSDEC. The report indicated the presence of various metals in soils and groundwater at levels above the NYSDEC cleanup objectives. It does not appear that these metals are connected to operation of the nuclear facility. At the request of the NYSDEC, Entergy submitted a plan in August 2008 for a study that identified the sources of the metals. The NYSDEC approved the work plan with some conditions related to the need to study whether the soil impact observed may have originated from plant construction materials. Entergy has conducted additional sampling and currently is evaluating the results in order to provide additional information to the NYSDEC. Entergy is unable to determine what the extent or cost of required remediation, if any, will be at this time.
Prior to Entergy’s purchase of Indian Point Unit 1, the previous owner completed the cleanup and desludging of the Unit 1 water storage pool, generating mixed waste. The existing mixed waste currentlystorage permit and an associated order on consent were transferred to Entergy upon purchasing the unit. The waste is stored in the Unit 1 containment building in accordance with NRC regulations controlling low level radioactive waste. The waste is also regulated by the NYSDEC. TheAn order on consent with NYSDEC requires a quarterly survey of the availability of any commercial facility capable of treating, processing, and disposing of this waste in a commercially reasonable manner. However, in 2005, NYSDEC revised its regulations to conditionally exempt the storage and disposal of mixed waste that is regulated by the NRC. Thus, in October 2005 and again in January 2013, Entergy requested that NYSDEC terminate the mixed waste permit and order on consent because the waste falls within the mixed waste exemption. In April 2013, NYSDEC agreed with Entergy’s request to terminate the permit finding that as long as the facility continues to meet the exemption, the mixed waste permit is not required. NYSDEC denied the request to terminate the consent order, however, reasoning that it contains provisions for storage and reporting that are still applicable. Entergy continues to review this matter andmanage the waste according to conduct its quarterly searches for a commercially reasonable vendor that is acceptable both to the NRC and the NYSDEC. The cost of this disposal cannot be estimated at this time due to the many variables existing in the type and manner of disposal.applicable regulatory requirements.
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), authorizes the EPA to mandate clean-up by, or to collect reimbursement of clean-up costs from, owners or operators of sites at which hazardous substances may be or have been released. Certain private parties also may use CERCLA to recover response costs. Parties that transported hazardous substances to these sites or arranged for the disposal of the substances are also deemed liable by CERCLA. CERCLA has been interpreted to impose strict, joint and several liability on responsible parties. Many states have adopted programs similar to CERCLA. Entergy subsidiaries in the Utility and Entergy Wholesale Commodities businesses have sent waste materials to various disposal sites over the years, and releases have occurred at Entergy facilities. In addition, environmental laws now regulate certain of Entergy’s operating procedures and maintenance practices that historically were not subject to regulation. Some disposal sites used by Entergy subsidiaries have been the subject of governmental action under CERCLA or similar state programs, resulting in site clean-up activities. Entergy subsidiaries have participated to various degrees in accordance with their respective potential liabilities in such site clean-ups and have developed experience with clean-up costs. The affected Entergy subsidiaries have established provisions for the liabilities for
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such environmental clean-up and restoration activities. Details of CERCLA and similar state program liabilities that are not de minimis are discussed in the “Other Environmental Matters” section below.
Coal Combustion Residuals
In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that containscontained two primary regulatory options: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called “special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes under Subtitle D of RCRA. Under both options, CCRs that are beneficially used in certain processes would remain excluded from hazardous waste regulation. In December 2014 the EPA issued the final CCR rule with the material being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D.
The proposedfinal regulations would create new compliance requirements including modified storage, new notification and reporting practices, new financial assurance requirements, and product disposal considerations. According to EPA estimates, the annualized cost ofconsiderations, and CCR unit closure criteria. Entergy believes that on-site disposal underoptions will be available at its facilities, to the two proposals wouldextent needed for CCR that cannot be $3.6 million to $9 milliontransferred for the White Bluff and Independence facilities and $1.7 million to $3.3 million for the Nelson Unit 6 facility. If Entergy utilized off-site disposal, which it would not plan to do, the EPA’s total cost estimates for disposal of CCRs under Subtitle C regulation ranges from $250 to $350 million per year.beneficial reuse.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Other Environmental Matters
Entergy Gulf States Louisiana and Entergy Texas
Several class action and other suits have been filed in state and federal courts seeking relief from Entergy Gulf States, Inc. and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.’s premises (see “Litigation”“Litigation” below).
Entergy Gulf States Louisiana is currently involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana. A manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931. Coal tar, a by-product of the distillation process employed at MGPs, was apparently routed to a portion of the property for disposal. The same area has also been used as a landfill. In 1999, Entergy Gulf States, Inc. signed a second administrative consent order with the EPA to perform a removal action at the site. In 2002 approximately 7,400 tons of contaminated soil and debris were excavated and disposed of from an area within the service center. In 2003 a cap was constructed over the remedial area to prevent the migration of contamination to the surface. In August 2005 an administrative order was issued by the EPA requiring that a 10-year groundwater study be conducted at this site. The groundwater monitoring study commenced in January 2006 and is continuing. In 2010 the EPA conducted a Five Year Review (FYR) of the 10-year groundwater monitoring program at Lake Charles. Negotiations are on-going regarding whether additional actions will be necessary at the site. If additional actions are necessary, site expenditures will increase commensurate with the additional chosen site remedies. Entergy does not have sufficient information at this time to estimate additional site costs, if any. Entergy also has made a payment to the EPA of $275,000 for past agency oversight costs. Entergy Gulf States Louisiana and Entergy Texas each believe that its remaining responsibility for this site will not materially exceed the existing clean-up provisions of $0.5$0.3 million for Entergy Gulf States Louisiana and $0.4$0.2 million for Entergy Texas.
In 1994, Entergy Gulf States, Inc. performed a site assessment Meetings to discuss the status of this project with the EPA are scheduled in conjunction with a construction project at the Louisiana Station Generating Plant (Louisiana Station). In 1995, a further assessment confirmed subsurface soil and groundwater impact to three areas on the plant site. After validation, a notification was made to the LDEQ and a phased process was executed to remediate each area of concern. The final phase of groundwater clean-up and monitoring at Louisiana Station is expected to continue for several more years. Future costs are not expected to exceed Entergy Gulf States Louisiana’s existing provision of $0.7 million.2015.
Entergy Louisiana, and Entergy New Orleans
Several class action and other suits have been filed in state and federal courts seeking relief from Entergy Louisiana and Entergy New Orleans and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Louisiana’s and Entergy New Orleans’s premises (see “Litigation” below).
During 1993, the LDEQ issued new rules for solid waste regulation, including regulation271
Part I Item 1
Entergy Louisiana has determined that some of its power plant wastewater impoundments were affected by these regulationsCorporation, Utility operating companies, and may require remediation, repair, or closure. Completion of this work is dependent on pending LDEQ approval of submitted solid waste permit applications. As a result, a recorded liability in the amount of $1.9 million for Entergy Louisiana existed at December 31, 2011 for ongoing wastewater remediation and repairs and closures. Management believes this reserve to be adequate based on current estimates.System Energy
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas
The Texas Commission on Environmental Quality (TCEQ) notified Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas that the TCEQ believes those entities are PRPspotentially responsible parties (PRPs) concerning contamination existing at the San Angelo Electric Service Company (SESCO) facility in San Angelo, Texas. The facility operated as a transformer repair and scrapping facility from the 1930s until 2003. Both soil and groundwater contamination exists at the site. Entergy Gulf States, Inc. and Entergy Louisianasubsidiaries sent transformers to this facility during the 1980s.facility. Entergy Gulf States Louisiana, Entergy Texas, Entergy Louisiana, and Entergy Arkansas responded to an information request from the TCEQ and continue to cooperate in this investigation. Entergy Gulf States Louisiana, Entergy Texas, and Entergy Louisiana joined a group of PRPs responding to site conditions in
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
and Entergy New Orleans likely will pay a de minimis amounts.amount. Current estimates, although preliminary and variable depending on the level of third-party cost contributions, indicate that Entergy’s total share of remediation costs likely will be less than $1in the range of $1.5 million to $2 million. The TCEQ approved an agreed administrative order in September 2006 that allows the implementation of a Remedial Investigation/Feasibility StudyRemediation activities continue at the SESCO site; with the ultimate disposition being a remedial action to remove contaminants of concern. The TCEQ approved the Remedial Investigation Work Plan in May 2007 and field sampling began in July 2007. Off-site removal of certain PCB-impacted soil and debris were completed at the site in December 2010. The Remedial Investigation report was submitted in February 2011 to the TCEQ and was approved on April 15, 2011. The PRP working group prepared a Feasibility Study and description of proposed site remediation and management actions for TCEQ’s review. This information was submitted to the TCEQ in June 2011.site.
Entergy Mississippi, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas
The EPA notified Entergy Mississippi, Entergy Gulf States Louisiana, Entergy Texas, and Entergy New Orleans that the EPA believes those entities are PRPs concerning contamination of an area known as “Devil’s Swamp Lake” near the Port of Baton Rouge, Louisiana. The area allegedly was contaminated by the operations of Rollins Environmental (LA), Inc, which operated a disposal facility to which many companies contributed waste. Documents provided by the EPA indicate that Entergy Louisiana may also be a PRP. Entergy continues to monitor this developing situation.
Litigation
Entergy
In November 2010 a transformer at the Indian Point facility failed, resulting in a fire and the release of non-PCB oil to the ground surface. The fire was extinguished by the facility’s fire deluge system. No injuries occurred due to the transformer failure or company response. Non-PCB oil and deluge water were released into the facility’s discharge canal and the environment surrounding the transformer and discharge canal, including the Hudson River, as a result of the failure, fire, and fire suppression. Once the fire was extinguished, Indian Point personnel and contractors began recovering the oil from the damaged transformer, the transformer containment moat, and the area surrounding the transformer. The State of New York has indicated its intention to assess a penalty due to the release of oil to waters of the state and the failure of the transformer containment moat to prevent this release of oil. Discussions with the state continue.
Entergy uses legal and appropriate means to contest litigation threatened or filed against it, but certain states in which Entergy operates have proven to be unusually litigious environments. Judges and juries in Louisiana, Mississippi, and Texas have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases. The litigation environment in these states poses a significant business risk to Entergy.
Ratepayer and Fuel Cost Recovery Lawsuits (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Texas Power Price Lawsuit
In August 2003, a lawsuit was filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class apparently of the Texas retail customers of Entergy Gulf States, Inc. who were billed and paid for electric power from January 1, 1994See Note 2 to the present. The named defendants include Entergy Corporation, Entergy Services, Entergy Power, Entergy Power Marketing Corp., and Entergy Arkansas. Entergy Gulf States, Inc. was notfinancial statements for a named defendant, but is alleged to be a co-conspirator. The court granted the requestdiscussion of Entergy Gulf States, Inc. to intervene in the lawsuit to protect its interests.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Plaintiffs allege that the defendants implemented a “price gouging accounting scheme” to sell to plaintiffs and similarly situated utility customers higher priced power generated by the defendants while rejecting and/or reselling to off-system utilities less expensive power offered and/or purchased from off-system suppliers and/or generated by the Entergy system. In particular, plaintiffs allege that the defendants manipulated and continue to manipulate the dispatch of generation so that power is purchased from affiliated expensive resources instead of buying cheaper off-system power.
Plaintiffs stated in their pleadings that customers in Texas were charged at least $57 million above prevailing market prices for power. Plaintiffs seek actual, consequential and exemplary damages, costs and attorneys’ fees, and disgorgement of profits. The plaintiffs’ experts have tendered a report calculating damages in a large range, from $153 million to $972 million in present value, under various scenarios. The Entergy defendants have tendered expert reports challenging the assumptions, methodologies, and conclusions of the plaintiffs’ expert reports.
The case is pending in state district court, and a class certification hearing was held in August 2011. The decision of the court on class certification is pending.this proceeding.
Mississippi Attorney General Complaint
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 litigation is wide ranging and relatesSee Note 2 to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of federal issues raised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint.
In July 2011, the attorney general requested a status conference regarding its motion to remand. The court granted the attorney general’s requestfinancial statements for a status conference, which was held in September 2011. Consistent with the court’s instructions, both parties submitted letters to the court in September 2011 providing updates on the facts of the case and the law, and the court has now taken the parties’ arguments under advisement.
Fiber Optic Cable Litigation (Entergy Corporation and Entergy Louisiana)
Several property owners have filed a class action suit against Entergy Louisiana, Entergy Services, ETHC, and Entergy Technology Company in state court in St. James Parish, Louisiana purportedly on behalf of all property owners in Louisiana who have conveyed easements to the defendants. The lawsuit alleges that Entergy installed fiber optic cable across the plaintiffs’ property without obtaining appropriate easements. The plaintiffs seek damages equal to the fair market value of the surplus fiber optic cable capacity, including a share of the profits made through use of the fiber optic cables, and punitive damages. Entergy removed the case to federal court in New Orleans; however, the district court remanded the case back to state court. In February 2004, the state court entered an order certifying this matter as a class action. Entergy’s appealsdiscussion of this ruling were denied. The parties have entered into a term sheet establishing basic terms for a settlement that must be approved by the court.proceeding.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Asbestos Litigation (Entergy(Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Numerous lawsuits have been filed in federal and state courts primarily in Texas and Louisiana, primarily by contractor employees who worked inSee Note 8 to the 1940-1980s timeframe, against financial statements for a discussion of this litigation.
Part I Item 1
Entergy Gulf States Louisiana and Entergy Texas, and to a lesser extent the otherCorporation, Utility operating companies, as premises owners of power plants, for damages caused by alleged exposure to asbestos. Many other defendants are named in these lawsuits as well. Currently, there are approximately 500 lawsuits involving approximately 5,000 claimants. Management believes that adequate provisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recover reimbursements. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position or results of operation of the Utility operating companies.System Energy
Employment and Labor-related Proceedings (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees. Generally, the amount of damages being sought is not specified in these proceedings. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans. Entergy and the Registrant Subsidiaries are responding to these suits and proceedings and deny liabilitySee Note 8 to the claimants.financial statements for a discussion of these proceedings.
Employees
Employees are an integral part of Entergy’s commitment to serving customers. As of December 31, 2011,2014, Entergy subsidiaries employed 14,68213,393 people.
|
| | |
| Utility: | |
|
| Entergy Arkansas | 1,160 | 1,357
|
| Entergy Gulf States Louisiana | 729 | 805
|
| Entergy Louisiana | 890 | 937
|
| Entergy Mississippi | 673 | 736
|
| Entergy New Orleans | 298 | 342
|
| Entergy Texas | 596 | 674
|
| System Energy | — | -
|
| Entergy Operations | 2,764 | 2,867
|
| Entergy Services | 2,852 | 3,138
|
| Entergy Nuclear Operations | 3,376 | 3,709
|
| Other subsidiaries | 55 | 117
|
| Total Entergy | 13,393 | 14,682
|
Approximately 5,3005,200 employees are represented by the International Brotherhood of Electrical Workers, the Utility Workers Union of America, the International Brotherhood of Teamsters, the United Government Security Officers of America, and the International Union, Security, Police, Fire Professionals of America.
Entergy electronically files reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxies, and amendments to such reports. The public may read and copy any materials that Entergy files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy uses its website, http://www.entergy.com, as a routine channel for distribution of important information, including news releases, analyst presentations and financial information. Filings made with the SEC are posted and available without charge on Entergy'sEntergy’s website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. These filings include our annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format) and current reports on Form 8-K; our proxy statements; and any amendments to those reports or statements. All such postings and filings are available on Entergy'sEntergy’s Investor Relations website free of charge. Entergy is providing the address to its Internet site solely for the information of investors and does not intend the address to be an active link or to otherwise incorporate thelink. The contents of the website are not incorporated into this report.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Investors should review carefully the following risk factors and the other information in this Form 10-K. The risks that Entergy faces are not limited to those in this section. There may be additional risks and uncertainties (either currently unknown or not currently believed to be material) that could adversely affect Entergy'sEntergy’s financial condition, results of operations, and liquidity. See "FORWARD-LOOKING INFORMATION."“FORWARD-LOOKING INFORMATION.”
Utility Regulatory Risks
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The terms and conditions of service, including electric and gas rates, of the Utility operating companies and System Energy are determined through regulatory approval proceedings that are lengthy and subject to appeal that could result in delays in effecting rate changes and uncertainty as to ultimate results.
The rates that the Utility operating companies and System Energy charge reflect their capital expenditures, operations and maintenance charges,costs, allowed rates of return, financing costs, and related costs of service. These rates significantly influence the financial condition, results of operations, and liquidity of Entergy and each of the Utility operating companies and System Energy. These rates are determined in regulatory proceedings and are subject to periodic regulatory review and adjustment.
In addition, regulators can initiate proceedings to investigate the prudence of costs in the Utility operating companies'companies’ base rates and examine, among other things, the reasonableness or prudence of the companies'companies’ operation and maintenance practices, level of expenditures (including storm costs)costs and costs associated with capital projects), allowed rates of return and rate base, proposed resource acquisitions, and previously incurred capital expenditures.expenditures that the operating companies seek to place in rates. The regulators can disallow costs subject to their jurisdiction found not to have been prudently incurred or found not to have been incurred in compliance with applicable tariffs, creating some risk to the ultimate recovery of those costs. Regulatory proceedings relating to rates and other matters typically involve multiple parties seeking to limit or reduce rates. The proceedings generally have long timelines, are primarily based on historical costs, and may or may not be limited in scope or duration by statute, which couldstatute. The length of the proceedings can cause the Utility operating companies and System Energy to experience regulatory lag in recovering such costs through rates. Decisions are typically subject to appeal, potentially leading to additional uncertainty associated with rate case proceedings. Although four
The base rates of Entergy Arkansas and Entergy Texas are established in traditional base rate case proceedings. Entergy Arkansas recovers fuel and purchased energy and certain non-fuel costs through other APSC-approved tariffs. Entergy Mississippi infrequently has traditional base rate cases, although one was filed and settled in 2014. More commonly, it obtains base rate adjustments through its formula rate plan, which operates annually. In the event that this formula rate plan were terminated, Entergy Mississippi would at that time revert to the more traditional rate case environment.
In January 2013, Entergy Gulf States Louisiana’s and Entergy Louisiana’s then-existing formula rate plans expired, and each company filed full rate cases in February 2013. As part of the rate cases that Entergy Louisiana and Entergy Gulf States Louisiana filed, each company requested that the LPSC approve new formula rate plans. In December 2013 the LPSC voted to approve a settlement that provides for the continued use, through the test year 2016 filing, of formula rate plans by Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana’s formula rate plan changes are capped at a cumulative total of $30 million through the formula rate plan cycle. Entergy Gulf States Louisiana has no cap but is not permitted to increase rates prior to the test year 2015 filing. As part of the settlement, both companies established mechanisms to recover non-fuel MISO-related costs calculated separately from the formula rate plan requirements, but embedded in the formula rate plan factor applied on customer bills. MISO fuel and energy-related costs are recoverable in Entergy Gulf States Louisiana’s and Entergy Louisiana’s fuel adjustment
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, (Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans) currently obtain recovery underSystem Energy
clauses. The formula rate plans at some point incontinue to retain exceptions from the futurerate cap/restrictions and sharing requirements for certain large capital investment projects, including the Ninemile 6 generating facility. In the event that these formula rate plans may no longer be extended, at which time these Utility operating companies would operate again in a more traditional rate case environment. In addition,were terminated, or expire without renewal or extension, Entergy Gulf States Louisiana and Entergy Louisiana were required bywould at that time revert to the more traditional rate case environment. Additionally, in September 2014, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC a joint application seeking to file full rate cases by January 2013 when their currentcombine the two companies. In connection with this request, the companies are also seeking to combine the formula rate plans expire.approved for each company into a single formula rate plan with a single combined-company filing for 2014. Most of the provisions under the existing separate formula rate plans would be retained under the combined formula rate plan. Further, Entergy Louisiana and Entergy New Orleans have filed with the Council of the City of New Orleans a joint application seeking authorization to transfer certain assets of Entergy Louisiana used to serve the Fifteenth Ward of New Orleans (commonly referred to as Algiers) to Entergy New Orleans. Entergy New Orleans has operated under a formula rate plan that ended with the 2011 test year and has not yet been extended. If no formula rate plan is approved going forward, Entergy New Orleans will continue operating in the more traditional rate case environment.
The Utility operating companies and System Energy, and the energy industry as a whole, have experienced a period of rising costs and investments, and an upward trend in spending, especially with respect to infrastructure investments, which is likely to continue in the foreseeable future and could result in more frequent rate cases and requests for, and the continuation of, cost recovery mechanisms. For information regarding rate case proceedings and formula rate plans applicable to certain of the Utility operating companies, see Note 2 to the financial statements.
The Utility operating companies recover fuel, and purchased power, and associated costs through rate mechanisms that are subject to risks of delay or disallowance in regulatory proceedings.
The Utility operating companies recover their fuel, and purchased power, and associated costs from their customers through rate mechanisms subject to periodic regulatory review and adjustment. Because regulatory review can result in the disallowance of incurred costs found not to have been prudently incurred with the possibility of refunds to ratepayers, there exists some risk to the ultimate recovery of those costs. Regulators can initiate proceedings to investigate the continued usage or the adequacy and operation of the fuel and purchased power recovery clauses of the Utility operating companies.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The Utility operating companies'companies’ cash flows can be negatively affected by the time delays between when gas, power, or other commodities are purchased and the ultimate recovery from customers of the costs in rates. On occasion, when the level of incurred costs for fuel and purchased power rises very dramatically, some of the Utility operating companies may agree to defer recovery of a portion of that period'speriod’s fuel and purchased power costs for recovery at a later date, which could increase the near-term working capital and borrowing requirements of those companies. For a description of fuel and purchased power recovery mechanisms and information regarding the regulatory proceedings for fuel and purchased power costs recovery, see Note 2 to the financial statements.
As a result of a challenge by the LPSC, the manner in which the Utility operating companies have traditionally shared the costs associated with coordinated planning, construction, and operation of generating resources has been changed by the FERC, a development which willhas had and could continue to require adjustment of retail and wholesale rates in the jurisdictions where the Utility operating companies provide service and has introduced additional uncertainty in the ratemaking process.
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating resources and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. In 2005 the FERC issued a decision requiring changes to the cost allocation methodology used in that rate schedule.
In 2007 through 2011,2012, payments were made by Entergy Arkansas to certain of the Utility operating companies in compliance with the 2005 FERC decision on the cost allocation methodology.methodology, and in 2013 and 2014, payments were made by Entergy Texas to Entergy New Orleans. There have been challenges to the level and timing of payments
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
made by Entergy Arkansas under the FERC’s decision and the prudence of the Utility operating companies’ production costs. The ability to recover in rates any changes to the cost allocation resulting from the challenges, and timing of such recovery, could be uncertain and could be the subject of additional regulatory and other proceedings. For information regarding these and other proceedings associated with the System Agreement, as well as additional information regarding the System Agreement itself, see Note 2 to financial statements, System Agreement Cost Equalization Proceedings.The outcome and timing of thisthese FERC proceedingproceedings and resulting recovery and impact on rates cannot be predicted at this time.
There isThe withdrawal and notices of withdrawal of certain Utility operating companies from the System Agreement create uncertainty as to the timing or form of any successor arrangement toregarding the System Agreement and the effect of the absence of such an arrangement (or absence thereof) on Entergy and the Utility operating companies.
Based uponEntergy Arkansas’s participation in the effect ofSystem Agreement terminated in December 2013, and Entergy Mississippi’s participation in the System Agreement is scheduled to terminate in November 2015.
In October 2013, the Utility operating companies filed at the FERC decision describedseeking to shorten to 60 months the provision in the preceding risk factor, in December 2005, Entergy Arkansas providedSystem Agreement that requires a Utility operating company seeking to withdraw from the System Agreement to provide 96 months advance notice of termination of participation. In October 2013, Entergy Texas provided its intentnotice to the other Utility operating companies to terminate its participation in the System Agreement. In November 2007,Agreement after expiration of the proposed 60-month notice period or such other period as approved by the FERC. Subsequently, Entergy Mississippi providedTexas filed its notice to terminate its participation in the System Agreement. EachAgreement at FERC in October 2013. In January 2014, the LPSC directed Entergy Louisiana and Entergy Gulf States Louisiana to provide no later than February 15, 2014 notice of termination is effective ninety-six (96) months from the date of notice (December 2013 for Entergy Arkansas and November 2015 for Entergy Mississippi) or such earlier date as authorized by the FERC. The FERC accepted the notices in November 2009; the LPSC and City Council have requested rehearing of that order. In February 2011, the FERC denied the request for rehearing. The LPSC has appealed the FERC’s decisiontheir intention to the U.S. Court of Appeals for the District of Columbia and oral argument was held January 13, 2012.
The Utility operating companies have concluded that joining the MISO RTO isterminate their participation in the System Agreement, and to use their reasonable best interestefforts to achieve a consensual resolution permitting early termination of all stakeholdersthe System Agreement. Entergy Louisiana and are seeking regulatory approvals to accomplish the transfer of functional controlEntergy Gulf States Louisiana provided notice of their transmission assets totermination on February 14, 2014. Accordingly, there is uncertainty regarding the MISO RTO by December 2013. However, Entergy cannot predict when or whether it will obtain the approvals necessary to join the MISO RTO, when the Utility operating companies’ generation and transmission systems can be fully integrated into the MISO RTO, or whether alternative arrangements will need to be implemented to allow Entergy Arkansas, and eventually Entergy Mississippi, to operate independentcontinuation of the System Agreement and the effect such arrangements (orof the absence thereof) will haveof such an arrangement on Entergy or the Utility operating companies.
For further information regarding the FERC and APSCregulatory proceedings relating to the System Agreement, see the “Rate, Cost-recovery, and Other Regulation – - Federal Regulation – - System Agreement”Agreement” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries.
The Utility operating companies are subject to economic risks associated with participation in the MISO markets and the allocation of transmission upgrade costs. The operation of the Utility operating companies’ transmission system pursuant to the MISO RTO tariff and their participation in the MISO RTO’s wholesale markets may be adversely affected by regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.
On December 19, 2013, the Utility operating companies integrated into the MISO RTO. For further information regarding the FERC and proceedings related to the MISO RTO, see the “Rate, Cost-recovery, and Other Regulation - Federal Regulation - Entergy’s Integration Into the MISO Regional Transmission Organization” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries. MISO maintains functional control over the combined transmission systems of its members and administers wholesale energy and ancillary services markets for market participants in the MISO region, including the Utility operating companies. The Utility operating companies sell capacity, energy, and ancillary services on a bilateral basis to certain wholesale customers and offer available electricity production of their generating facilities into the MISO day-ahead and real-time energy markets pursuant to the MISO tariff and market rules. The Utility operating companies are subject to economic risks associated with participation in the MISO markets. MISO tariff rules and system conditions, including transmission congestion, could affect the Utility operating companies’ ability to sell power in certain regions and/or the economic value of such sales, and MISO market rules may change in ways, including the implementation of competition among transmission providers, that cause additional risk.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The arrangement forUtility operating companies participate in the MISO regional transmission planning process and are subject to risks associated with planning decisions that MISO makes in the exercise of control over the planning of the Utility operating companies’ transmission assets that are under MISO’s functional control. The Utility operating companies pay transmission rates that reflect the cost of transmission projects that the Utility operating companies do not own, which could increase cash or financing needs. The terms and conditions of the MISO tariff, including provisions related to the design and implementation of wholesale markets and the allocation of transmission upgrade costs, are subject to regulation by FERC. The operation of the Utility operating companies’ transmission system faces regulatory and operating challenges and uncertainty in connection with the Utility operating companies’ proposal to movepursuant to the MISO RTOtariff and the scheduled expiration of the current Independent Coordinator of Transmission arrangement in November 2012.
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of an independent RTO. In November 2006, the Utility operating companies installed the Southwest Power Pool (SPP), a regional transmission organization, as their Independent Coordinator of Transmission (ICT) with responsibility for certain transmission tariff functions, including granting or denying transmission service, administering OASIS, evaluating all transmission requests, and serving as the reliability coordinator. The initial term of the ICT was for four years and in November 2010 the FERC approved an extension of the ICT arrangement for two years, or until November 2012. In its order issued in March 2009 pertaining to a requested modification regarding the weekly procurement process (WPP) through the ICT arrangement, the FERC imposed conditions related to the ICT arrangement and indicated it wanted an evaluation of the success of the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT arrangement. An Entergy Regional State Committee (E-RSC), comprised of one representative from each of the Utility operating companies’ retail regulators has been formed and, in concert with the FERC, retained an independent entity to conduct a cost/benefit analysis of comparing the ICT arrangement to a proposal under which Entergy would join the SPP RTO. The scope of the study was expanded to consider Entergy joining the MISO RTO as another alternative. On April 25, 2011, Entergy announced that each of the Utility operating companies propose joining the MISO RTO. In May 2011, the Utility operating companies submitted to each of their respective retail regulators the cost-benefit analysis comparing the ICT arrangement to joining the SPP RTO or the MISO RTO. The Utility operating companies either have filed or expect to file in 2012 applications with their local regulators seeking to join the MISO RTO and transfer control of the companies’ transmission assets to the MISO RTO. The target implementation date for joining the MISO RTO is December 2013. For further information regarding the FERC and proceedings related to the ICT and MISO, see “Rate, Cost-recovery, and Other Regulation - Federal Regulation - Independent Coordinator of Transmission” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries.
There is uncertainty as to whether the Utility operating companies’ proposal to join the MISO RTO by December 2013 will receive all required regulatory approvals in a timely manner and, if the proposal is approved, the nature and effect of any operational challenges the Utility operating companies might face in connection with integration into the MISO RTO. For the period of time prior to integration of all of the Utility operating companies into the MISO RTO or in the event all necessary approvals to participateparticipation in the MISO RTO are not obtained in a timely manner, an extension of the current ICT arrangement or the establishment of a similar arrangement with another qualified entitywholesale markets may be required. The outcome ofadversely affected by regulatory or market design changes, as well as liability under, or any effortfuture inability to negotiate an extension of the current arrangementcomply with, existing or to make alternative arrangements cannot be predicted at this time.future regulations or requirements.
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
A delay or failure in recovering amounts for storm restoration costs incurred as a result of severe weather could have material effects on Entergy and those Utility operating companies affected by severe weather.
Entergy'sEntergy’s and its Utility operating companies'companies’ results of operations, liquidity, and financial condition can be materially affected by the destructive effects of severe weather. Severe weather can also result in significant outages for the customers of the Utility operating companies and, therefore, reduced revenues for the Utility operating companies during the period of the outages. A delay or failure in recovering amounts for storm restoration costs incurred or revenues lost as a result of severe weather could have a material effect on Entergy and those Utility operating companies affected by severe weather.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Nuclear Operating and Regulatory Risks
(Entergy Corporation, Entergy Arkansas, Entergy Gulf StatesLouisiana, Entergy Louisiana, and System Energy)
Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities must consistently operate their nuclear power plants at high capacity factors in order to be successful, and lower capacity factors could materially affect Entergy'sEntergy’s and their results of operations, financial condition, and liquidity.
Nuclear capacity factors significantly affect the results of operations of certain Utility operating companies, System Energy, and Entergy Wholesale Commodities. Nuclear plant operations involve substantial fixed operating costs. Consequently, to be successful, a plant owner must consistently operate its nuclear power plants at high capacity factors. For the Utility operating companies that own nuclear plants, lower capacity factors can increase production costs by requiring the affected companies to generate additional energy, sometimes at higher costs, from their fossil facilities or purchase additional energy in the spot or forward markets in order to satisfy their supply needs. For the Entergy Wholesale Commodities nuclear plants, lower capacity factors directly affect revenues and cash flow from operations. Although most of the Entergy Wholesale Commodities nuclearCommodities’ forward sales are on a pure unit-contingent basis,comprised of various hedge products, many of which depends on the availabilityhave some degree of the asset, some of theoperational-contingent price risk. Certain unit-contingent contracts guarantee a specified minimum capacity factor.factors. In the event plants with these plantscontracts were operating below the guaranteed capacity factors, Entergy would be subject to price risk for the undelivered power. Further, Entergy Wholesale Commodities’ nuclear forward sales contracts can also be on a firm LD basis, which subjects Entergy to increasing price risk ifas capacity factors decrease. Many of these firm hedge products have damages risk, capped through the use of risk management products.
Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities’Commodities nuclear plant owners periodically shut down their nuclear power plants to replenish fuel. Plant maintenance and upgrades are often scheduled during such refueling outages. If refueling outages last longer than anticipated or if unplanned outages arise, Entergy'sEntergy’s and their results of operations, financial condition, and liquidity could be materially affected.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Outages at nuclear power plants to replenish fuel require the plant to be “turned off.” Refueling outages generally are planned to occur once every 18 to 24 months and average approximately 30 days in duration. Plant maintenance and upgrades are often scheduled during such planned outages. When refueling outages last longer than anticipated or a plant experiences unplanned outages, capacity factors decrease and maintenance costs may increase. Lower than forecasted capacity factors may cause Entergy Wholesale Commodities’ nuclear plantsCommodities to experience reduced revenues and may face lower margins due to higher costs and lower energy sales for unit-contingent power supply contracts or potentially higher energy replacement costs for unit-contingent contractsalso create damages risk with capacity guarantees that are not met due to extended or unplanned outages.certain hedge products as previously discussed.
Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities face risks related to the purchase of uranium fuel (and its conversion, enrichment, and fabrication), and the risk of being unable to effectively manage these risks by purchasing from a diversified mix of sellers located in a diversified mix of countries could materially affect Entergy'sEntergy’s and their results of operations, financial condition, and liquidity.
Based upon currently planned fuel cycles, Entergy'sEntergy’s nuclear units have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable prices through most of 2012, and with substantial additional amounts after that time. Entergy's2015. Entergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the performance reliability of uranium miners. Thereminers and enrichers. While there are a number of possible alternate suppliers that may be accessed to mitigate any supplier performance failure, although the pricing of any such alternate uranium supply from the market will be dependent upon the market for uranium supply at that time. Entergy also may draw upon its own inventory intended for later generation periods, depending upon its risk management strategy at that time. Entergy
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S. Market prices for nuclear fuel have been extremely volatile from time to time in the past. Although Entergy’s nuclear fuel contract portfolio provides a degree of hedging against market risks for several years, costs for nuclear fuel in the future cannot be predicted with certainty due to normal inherent market uncertainties, and price increases could materially affect the liquidity, financial condition, and results of operations of certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities.
Entergy’s ability to assure nuclear fuel supply also depends upon the performance and reliability of conversion, enrichment, and fabrication services providers. These service providers are fewer in number than uranium suppliers. For conversion and enrichment services, Entergy diversifies its supply by supplier and country and may take special measures to ensure a reliable supply of enriched uranium for fabrication into nuclear fuel. For fabrication services, each plant is dependent upon the performance of the fabricator of that plant’s nuclear fuel; therefore, Entergy relies upon additional monitoring, inspection, and oversight of the fabrication process to assure reliability and quality of its nuclear fuel. Certain of the suppliers and service providers are located in or dependent upon countries, such as Russia, in which deteriorating economic conditions or international sanctions could restrict the ability of such suppliers to continue to supply fuel or provide such services. The inability of such suppliers or service providers to perform such obligations could materially affect the liquidity, financial condition, and results of operations of certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities.
Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business face the risk that the NRC will change or modify its regulations or suspend or revoke their licenses, which could materially affect Entergy'sEntergy’s and their results of operations, financial condition, and liquidity.
Under the Atomic Energy Act and Energy Reorganization Act, the NRC regulates the operation of nuclear power plants. The NRC may modify, suspend, or revoke licenses, shut down a nuclear facility and impose civil penalties for failure to comply with the Atomic Energy Act, related regulations, or the terms of the licenses for nuclear facilities. A change in the Atomic Energy Act, other applicable statutes, or the applicable regulations or licenses may require a substantial increase in capital expenditures or may result in increased operating or decommissioning costs and could materially affect the results of operations, liquidity, or financial condition of Entergy (through Entergy Wholesale Commodities), its Utility operating companies, or System Energy. Events at nuclear plants owned by others, as well as those owned by one of these companies, may cause the NRC to initiate such actions. As a result, if an incident were to occur at any nuclear generating unit, whether an Entergy nuclear generating unit or not, it could materially affect
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
the financial condition, results of operations, and liquidity of Entergy, certain of the Utility operating companies, System Energy, or Entergy Wholesale Commodities. For example, the earthquake of March 11, 2011 that affected the Fukushima Daiichi nuclear plants in Japan is expectedresulted in the NRC issuing three orders effective on March 12, 2012 requiring U.S. nuclear operators, including Entergy, to undertake plant modifications or perform additional analyses that will, among other things, result in regulatory changes in the U.S. that may impose additionalincreased capital and operating costs on all U.S.associated with operating Entergy’s nuclear plants, some of which could be material.
Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities are exposed to risks and costs related to operating and maintaining their nuclear power plants, and their failure to maintain operational efficiency at their nuclear power plants could materially affect Entergy'sEntergy’s and their results of operations, financial condition, and liquidity.
The nuclear generating units owned by certain of the Utility operating companies, System Energy,and the Entergy Wholesale Commodities business began commercial operations in the 1970s-1980s. Older equipment may require more capital expenditures to keep each of these nuclear power plants operating efficiently. This equipment is also likely to require periodic upgrading and improvement. Any unexpected failure, including failure associated with breakdowns, forced outages, or any unanticipated capital expenditures, could result in reduced profitability. Operations at any of the nuclear generating units owned and operated by Entergy'sEntergy’s subsidiaries could degrade to the point where the affected unit needs to be shut down or operated at less than full capacity. If this were to happen, identifying and correcting the causes may require significant time and expense. A decision may be made to close a unit rather than incur the expense of restarting it or returning the unit to full capacity. For Entergy Wholesale Commodities, this could result in lost revenue and increased fuel and purchased power expense to meet supply commitments and penalties for failure to perform under their contracts with customers. Moreover, Entergy is becoming more dependent on fewer suppliers for key parts of Entergy'sEntergy’s nuclear power plants that may need to be replaced or refurbished. In addition, certain major parts have long lead-times to manufacture if an unplanned replacement is needed. This dependence on a reduced number of suppliers and long lead-times on certain major parts for unplanned replacements could result in delays in obtaining qualified replacement parts and, therefore, greater expense for Entergy.
The costs associated with the storage of the spent nuclear fuel of certain of the Utility operating companies, System Energy, and the owners of the Entergy Wholesale Commodities nuclear power plants, as well as the costs of and their ability to fully decommission their nuclear power plants, could be significantly affected by the timing of the opening of a spent nuclear fuel storagedisposal facility, as well as interim storage and transportation requirements.
Certain of the Utility operating companies, System Energy and the owners of the Entergy Wholesale Commodities nuclear plants incur costs on a periodic basis for the on-site storage of spent nuclear fuel. The approval of a license for a national repository for the storagedisposal of spent nuclear fuel, such as the one proposed for Yucca Mountain, Nevada, or any interim storage facility, and the timing of such facility opening, will significantly affect the costs
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
associated with on-site storage of spent nuclear fuel. For example, while the DOE is required by law to proceed with the licensing of Yucca Mountain and, after the license is granted by the NRC, to construct the repository and commence the receipt of spent fuel, the Obama administration has expressed its intention and taken specific steps to discontinue the Yucca Mountain project and study a new spent fuel strategy. These actions may prolong the time before spent fuel is removed from Entergy’s plant sites. Because the DOE has not accomplished its objectives, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts, and Entergy has sued the DOE for such breach. Furthermore, Entergy is uncertain as to when the DOE plans to commence acceptance of spent fuel from its facilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity at the companies’ nuclear sites. The costs of on-site storage are also affected by regulatory requirements for such storage. In addition, the availability of a repository or other off-site storage facility for spent nuclear fuel may affect the ability to fully decommission the nuclear units and the costs relating to decommissioning. For further information regarding spent fuel storage, see the "“Critical Accounting Estimates – Nuclear Decommissioning Costs – Spent Fuel Disposal” section of Management'sManagement’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities nuclear plant owners may be required to pay substantial retrospective premiums imposed under the Price-Anderson Act in the event of a nuclear incident, and losses not covered by insurance could have a material effect on Entergy'sEntergy’s and their results of operations, financial condition, or liquidity.
Accidents and other unforeseen problems at nuclear power plants have occurred both in the United States and elsewhere. The Price-Anderson Act limits each reactor owner'sowner’s public liability (off-site) for a single nuclear incident to the payment of retrospective premiums into a secondary insurance pool of up to approximately $117.5$127.318 million per reactor. With 104 reactors currently participating, this translates to a total public liability cap of approximately $12.2$13.241 billion per incident. The limit is subject to change to account for the effects of inflation, a change in the primary limit of insurance coverage, and changes in the number of licensed reactors. As required by the Price-Anderson Act, the Utility operating companies, System Energy, and Entergy Wholesale Commodities carry the maximum available amount of primary nuclear off-site liability insurance with American Nuclear Insurers (currently $375 million for each operating site). Claims for any nuclear incident exceeding that amount are covered under the retrospective premiums paid into the secondary insurance pool. As a result, in the event of a nuclear incident that causes damages (off-site) in excess of the $375 million in primary insurance coverage, each owner of a nuclear plant reactor, including Entergy'sEntergy’s Utility operating companies, System Energy, and the Entergy Wholesale Commodities plant owners, regardless of fault or proximity to the incident, will be required to pay a retrospective premium, equal to its proportionate share of the loss in excess of the $375 million primary level, up to a maximum of $117.5$127.318 million per reactor per incident (Entergy's(Entergy’s maximum total contingent obligation per incident is $1.3$1.4 billion). The retrospective premium payment is currently limited to $17.5$18.963 million per year per incident per reactor until the aggregate public liability for each licensee is paid up to the $117.5$127.318 million cap.
NEIL is a utility industry mutual insurance company, owned by its members. All member plants could be subject to assessmentsan annual assessment (retrospective premium of up to 10 times current annual premium for all policies) should the surplus (reserve) be significantly depleted due toinsured losses. As of April 1, 2011,2014, the maximum annual assessment amounts total $72.7$105.7 million for the Utility plants and $89.3$126.4 million for the Entergy Wholesale Commodities plants. Retrospective Premium Insurance available through NEIL’s reinsurance treaty can cover the potential assessments. The Entergy Wholesale Commodities plants currently maintain the Retrospective Premium Insurance to cover this potential assessment.
As an owner of nuclear power plants, Entergy participates in industry self-insurance programs and could be liable to fund claims should a plant owned by a different company experience a major event. Any resulting liability from a nuclear accident may exceed the applicable primary insurance coverage and require contribution of additional funds through the industry-wide program that could significantly affect the results of operations, financial condition, or liquidity of Entergy, certain of the Utility operating companies, System Energy, or the Entergy Wholesale Commodities subsidiaries.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Market performance and other changes may decrease the value of assets in the decommissioning trusts, which then could require significant additional funding.
Owners of nuclear generating plants have an obligation to decommission those plants. Certain of the Utility operating companies, System Energy, and owners of the Entergy Wholesale Commodities nuclear power plants maintain decommissioning trust funds for this purpose. Certain of the Utility operating companies collect funds from their customers, which are deposited into the trusts covering the units operated for or on behalf of those companies. Those rate collections are based upon operating license lives as well as estimated trust fund earnings and decommissioning costs. In connection with the acquisition of certain nuclear plants, the Entergy Wholesale Commodities plant owners also acquired decommissioning trust funds that are funded in accordance with NRC regulations. Assets in these trust funds are subject to market fluctuations, will yield uncertain returns that may fall below projected return rates, and may result in losses resulting from the recognition of impairments of the value of certain securities held in these trust funds. As part of the Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades/Big Rock Point purchases, the former owners transferred decommissioning trust funds, along with the liability to decommission the plants, to the
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
respective Entergy Wholesale Commodities nuclear power plant owners. In addition, the former owner of Indian Point 3 and FitzPatrick retained the decommissioning trusts and related liability to decommission these plants, but has the right to require the respective Entergy Wholesale Commodities nuclear plant owners to assume the decommissioning liability provided that it assigns the funds in the corresponding decommissioning trust, up to a specified level, to such owners. Alternatively, the former owner may contract with Entergy Nuclear, Inc. for the decommissioning work at a price equal to the transferred funds mentioned above.in the corresponding decommissioning trust up to a specified amount. As part of the Indian Point 1 and 2 purchase, the Entergy Wholesale Commodities nuclear power plant owner also funded an additional $25 million to a supplemental decommissioning trust fund. As part of the Palisades transaction, the Entergy Wholesale Commodities business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan. Once the spent fuel is removed from the site, the Entergy Wholesale Commodities business will dismantle the spent fuel storage facility and complete site decommissioning. The Entergy Wholesale Commodities business expects to fund this activity from operating revenue, and Entergy is providing $5 million in credit support to provide financial assurance to the NRC for this obligation.
In 2008, Entergy experienced declines in the market value of assets held in the trust funds for meeting its decommissioning funding assurance obligations for its plants. This decline adversely affected Entergy’s ability to demonstrate compliance with the NRC’s requirements for providing financial assurance for decommissioning funding for some of its plants, which deficiencies have now been corrected. An early plant shutdown, poor investment results or higher than anticipated decommissioning costs could cause trust fund assets to be insufficient to meet the decommissioning obligations, with the result that the Entergy Wholesale Commodities nuclear plant owners may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning. For further information regarding nuclear decommissioning costs, see the "“Critical Accounting Estimates– Nuclear Decommissioning Costs"” section of Management'sManagement’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy and Note 9 to the financial statements.
Changes in NRC regulations or other binding regulatory requirements may cause increased funding requirements for nuclear plant decommissioning trusts.
NRC regulations require certain minimum financial assurance requirements for meeting obligations to decommission nuclear power plants. Those financial assurance requirements may change from time to time, and certain changes may result in a material increase in the financial assurance required for decommissioning the Utility operating companies’, System Energy’s and owners of the Entergy Wholesale Commodities nuclear power plants. Such changes could result in the need for additional contributions to decommissioning trusts, or the posting of parent guarantees, letters of credit, or other surety mechanisms. For further information regarding nuclear decommissioning costs, see the “Critical Accounting Estimates– Nuclear Decommissioning Costs” section of Management’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy and Note 9 to the financial statements.
New or existing safety concerns regarding operating nuclear power plants and nuclear fuel could lead to restrictions upon the operation of Entergy’s nuclear power plants.
New and existing concerns are being expressed in public forums about the safety of nuclear generating units and nuclear fuel, in particular in the northeastern United States, which is where five of the six units in the current fleet of Entergy Wholesale Commodities nuclear power plants are located. These concerns have led to, and are expected to continue to lead to, various proposals to Federal regulators and governing bodies in some localities where Entergy'sEntergy’s subsidiaries own nuclear generating units for legislative and regulatory changes that could lead to the shutdown of nuclear units, denial of license renewal applications, municipalization of nuclear units, restrictions on nuclear units as a result of unavailability of sites for spent nuclear fuel storage and disposal, or other adverse effects on owning and operating nuclear generating units. Entergy vigorously responds to these concerns and proposals. If any of the existing proposals, or any proposals that may arise in the future with respect to legislative and regulatory changes, become effective, they could have a material effect on Entergy'sEntergy’s results of operations, financial condition, and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
(Entergy Corporation)
A failure to obtain renewed licenses or other approvals required for the continued operation of the Entergy Wholesale Commodities nuclear power plants could have a material effect on Entergy'sEntergy’s results of operations, financial condition, and liquidity and could lead to an increase in depreciation rates or an acceleration of the timing for the funding of decommissioning obligations.
The license renewal and related processes for the Entergy Wholesale Commodities nuclear power plants have been and may continue to be the subject of significant public debate and regulatory and legislative review and scrutiny at the federal and, in certain cases, state level. The original expiration date of the operating licenseslicense for Pilgrim, Indian Point 2 was September 2013 and the original expiration date of the operating license for Indian Point 3 expire in June 2012, September 2013 andis December 2015, respectively.2015. Because these plants filed timely license renewal applications, the NRC’s rules provide that these plants may continue to operate under their existing operating licenses until their renewal applications have been finally determined. Various parties have expressed opposition to renewal of these licenses. Renewal of the Indian Point licenses is the subject of ongoing proceedings before the Atomic Safety and Licensing Board (ASLB) of the NRC. Initial hearings on certain of the contentions admittedNRC and, with respect to issues resolved by the ASLB, currently are expected to begin by the end of 2012. In the Pilgrim license renewal proceeding, the ASLB has denied the last pending proposed contention and has terminated proceedings before it. Appeals of ASLB decisions remain pending before the NRC. Also pending before the NRC is a motion by Entergy affiliates requesting specific authorization to NRC staff to issue the Pilgrim license. In responding to that motion, NRC staff stated the position that whether to issue a license where no admitted contentions are pending is a matter of staff discretion. There is no schedule for NRC action on the pending appeals or motion.appeal.
In relation to Indian Point 2 and Indian Point 3, the New York State Department of Environmental Conservation has taken the position that these plant owners must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. ForIn addition, before the Indian Point plants,NRC may issue renewed operating licenses it must resolve its obligation to address the Entergy Wholesale Commodities plant owners also must ensure that requirements of the Coastal Zone Management Act which(CZMA). Most commonly, those requirements are met by the applicant's demonstration that the activity authorized by the federal permit being sought is administered in New York State primarily byconsistent with the host state's federally-approved coastal management policies. Entergy has undertaken three independent initiatives to resolve CZMA issues: "grandfathering," "previous review," and a "consistency certification." In December 2014 the New York Department of State, are satisfied prior to getting the renewed licenses.Supreme Court, Appellate Division, issued a unanimous ruling stating that Indian Point 2 and Indian Point 3 “are exempt from New York’s Coastal Management Program.” That decision could be appealed. For further information regarding these environmental regulations see “Environmental the “Regulation of Entergy's Business - Environmental Regulation - Clean Water Act”Act” section in Part I, Item 1.
The NRC operating license for Vermont Yankee was to expire in March 2012. In March 2011 the NRC renewed Vermont Yankee’s operating license for an additional 20 years, as a result of which the license now expires in 2032. Vermont Yankee also is operating under a Certificate of Public Good from the State of Vermont that expires in March 2012, but has an application pending before the Vermont Public Service Board for a new Certificate of Public Good for operation until March 2032. For additional discussion regarding the continued operation of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 1 to the financial statements.
If the NRC finally denies the applications for the renewal of operating licenses for one or more of the Entergy Wholesale Commodities nuclear power plants, or a state in which any such nuclear power plant is located is able to prevent the continued operation of such plant, Entergy’s results of operations, financial condition, and liquidity could be materially affected by loss of revenue and cash flow associated with the plant or plants, potential impairments of the carrying value of the plants, increased depreciation rates, and an accelerated need for decommissioning funds, which could require additional funding. In addition, Entergy may incur increased operating costs depending on any conditions that may be imposed in connection with license renewal. For further discussion regarding the license renewal processes for the Entergy Wholesale Commodities’Commodities nuclear power plants, see the “ENTERGY’S BUSINESS – Entergy Wholesale Commodities – Property – Authorizations to Operate Its Nuclear Generating StationsPlants” in Part I, Item 1 for Entergy Corporation and its subsidiaries.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies,Subsidiaries Management’s Financial Discussion and System EnergyAnalysis.
The decommissioning trust fund assets for the nuclear power plants owned by Entergy Wholesale Commodities’Commodities nuclear plant owners may not be adequate to meet decommissioning obligations if one or more of their nuclear power plants is retired earlier than the anticipated shutdown date, the plants cost more to decommission than estimated, or if current regulatory requirements change, which then could require additional funding.
Under NRC regulations, Entergy’sEntergy Wholesale Commodities’ nuclear subsidiaries are permitted to project the NRC-required decommissioning amount, based on an NRC formula or a site-specific estimate, and the amount in each of the Entergy Wholesale Commodities nuclear power plant'splant’s decommissioning trusts combined with other decommissioning financial assurances in place. The projections are made based on the operating license expiration date and the mid-point of the subsequent decommissioning process, or the anticipated actual completion of decommissioning if a site-specific estimate is used, for each of these nuclear power plants. As a result, if the projected amount of ourindividual plants’ decommissioning trusts exceeds the NRC-required decommissioning amount, then its
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
decommissioning obligations are considered to be funded in accordance with NRC regulations. In the eventIf the projected costs do not sufficiently reflect the actual costs the applicable Entergy subsidiaries would be required to incur to decommission these nuclear power plants, and funding is otherwise inadequate, or if the formula or site-specific estimate is changed to require increased funding, additional resources would be required. Furthermore, depending upon the level of funding available in the trust funds, the NRC may not permit the trust funds to be used to pay for related costs such as the management of spent nuclear fuel that are not included in the NRC’s formula. The NRC may also require a plan for the provision of separate funding for spent fuel management costs. In addition to NRC requirements, there are other decommissioning-related obligations for certain of the Entergy Wholesale Commodities nuclear power plants, which management believes it will be able to satisfy.
With respect to the decommissioning trusts for Indian Point 2 and Palisades, the total amount in each of those trusts as of December 31, 2011 would not have been sufficient to initiate and complete the immediate near-term radiological decommissioning of the respective unit as of the license termination date of each respective plant, but rather the funds would have been sufficient to place the unit in a condition of safe storage status pending future completion of decommissioning. For example, if an Entergy subsidiary decides to shut down and immediately begin decommissioning one of those nuclear power plants on its license expiration date, its trust funds for the plant as of December 31, 2011 would have been insufficient and the applicable Entergy subsidiary would have been required to rely on other capital resources to fund the remainder of the radiological decommissioning obligations unless the completion of decommissioning could be deferred during some number of years of safe storage status (as is permitted by NRC regulations). If any Entergy Wholesale Commodities subsidiary decides to shut down one of its nuclear power plants earlier than the scheduled shutdown date and conduct decommissioning without the benefit of a prompt decommissioning,safe storage period, the applicable Entergy subsidiary may be unable to rely upon only the decommissioning trust to fund the entire decommissioning obligations, which would require it to obtain funding from other sources.
Vermont Yankee submitted notification of permanent cessation of operations and permanent removal of fuel from the reactor in January 2015 after final shutdown in December 2014. The Post Shutdown Decommissioning Activities Report for Vermont Yankee, including a site specific cost estimate, was submitted to the NRC in December 2014. Vermont Yankee’s future certifications to satisfy the NRC’s financial assurance requirements will now be based on the site specific cost estimate, including the estimated cost of managing spent fuel, rather than the NRC minimum formula for estimating decommissioning costs. Entergy expects that amounts available in Vermont Yankee’s decommissioning trust fund, including expected earnings, together with the credit facilities entered into in January 2015 that are expected to be repaid with recoveries from DOE litigation related to spent fuel storage, will be sufficient to cover expected costs of decommissioning, spent fuel management costs, and site restoration. Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligation.
Further, federal or state regulatory changes, including mandated increases in decommissioning funding or changes in the methods or standards for decommissioning operations, may also increase the funding requirements of, or accelerate the timing for funding of, the obligations related to the decommissioning of Entergy Wholesale Commodities’Commodities nuclear power plants. As a result, under any of these circumstances, Entergy'sEntergy’s results of operations, liquidity, and financial condition could be materially affected.
Entergy Wholesale Commodities’Commodities nuclear power plants are exposed to price risk through either advance sale of energy and capacity into forward markets or accepting spot prices primarily in day-ahead markets.risk.
Entergy and its subsidiaries aredo not guaranteed anyhave a regulator-authorized rate of return on their capital investments in non-utility businesses. In particular, the sale of capacity and energy from the Entergy Wholesale Commodities nuclear power plants, unless otherwise contracted, is subject to the fluctuation of market power prices. As of December 31, 2011, Entergy Wholesale Commodities nuclear power generation plants had sold forward 88%, 81%, 39%, 25% and 25% of its generation portfolio's planned energy output for 2012, 2013, 2014, 2015, and 2016, respectively. In order to hedgereduce future price risk to desired levels, Entergy Wholesale Commodities utilizes contracts that are unit-contingent and Firm LD and various products such as forward sales, options, and collars. As of December 31, 2014, Entergy Wholesale Commodities’ nuclear power generation plants had sold forward 86%, 74%, 39%, 17%, and 19% of its generation portfolio’s planned energy output for 2015, 2016, 2017, 2018, and 2019, respectively.
Market conditions such as product cost, market liquidity, and other portfolio considerations influence the product and contractual mix. The obligations under unit-contingent agreements depend on a generating asset that is operating; if the generation asset is not operating, the seller generally is not liable for damages. For some unit-contingent obligations, however, there is also a guarantee of availability that provides for the payment to the power
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
purchaser of contract damages, if incurred, in the event the unit owner 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. Firm LD sales transactions may be exposed to substantial operational price risk, a portion of which may be capped through the use of risk management products, to the extent that the plants do not run as expected and market prices exceed contract prices.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Market prices may fluctuate substantially, sometimes over relatively short periods of time, and at other times experience sustained increases or decreases. Demand for electricity and its fuel stock can fluctuate dramatically, creating periods of substantial under- or over-supply. During periods of over-supply, prices might be depressed. Also, from time to time there may be political pressure, or pressure from regulatory authorities with jurisdiction over wholesale and retail energy commodity and transportation rates, to impose price limitations, credit requirements, bidding rules and other mechanisms to address volatility and other issues in these markets.
The price that different counterparties offer for various products including forward sales is influenced both by market conditions as well as the contract terms such as damage provisions, credit support requirements, and the number of available counterparties interested in contracting for the desired forward period. Depending on differences between market factors at the time of contracting versus current conditions, Entergy Wholesale Commodities'Commodities’ contract portfolio may have average contract prices above or below current market prices, including at the expiration of the contracts, which may significantly affect Entergy Wholesale Commodities’ results of operations, financial condition, or liquidity. The recent economic downturnNew hedges are generally layered into on a rolling forward basis, which tends to drive hedge over-performance to market in a falling price environment, and negative trendshedge underperformance to market in a rising price environment; however, hedge timing, product choice, and hedging costs will also affect these results. See the energy commodity markets have resulted in lower natural gas prices, and current prevailing market prices for electricity in the New York and New England power regions are therefore generally below the prices of Entergy Wholesale Commodities’ existing contracts in those regions. To the extent these market conditions persist, Entergy Wholesale Commodities’ realized price per MWh can be expected to continue to decline. See “Entergy Corporation and Subsidiaries, Management’s Financial Discussion and Analysis, “Results of Operations, - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants.Plants” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries. With operating licenses for Pilgrim, Indian Point 2 and Indian Point 3 expiring between 2012in 2013 and 2015, respectively (see discussion above regarding the continued operation of Indian Point 2 and 3 past the license expiration dates), and as a consequence of any delays in obtaining extension of the operating licenses and any other approvals required for continued operation of the plants, Entergy Wholesale Commodities may enter into fewer unit-contingent forward sales contracts for output from such plants for periods beyond the license expiration.
Among the factors that could affect market prices for electricity and fuel, all of which are beyond Entergy'sEntergy’s control to a significant degree, are:
· | prevailing market prices for natural gas, uranium (and its conversion, enrichment, and fabrication), coal, oil, and other fuels used in electric generation plants, including associated transportation costs, and supplies of such commodities; |
seasonality and realized weather deviations compared to normalized weather forecasts; · | availability of competitively priced alternative energy sources and the requirements of a renewable portfolio standard; |
· | changes in production and storage levels of natural gas, lignite, coal and crude oil, and refined products; |
· | liquidity in the general wholesale electricity market, including the number of creditworthy counterparties available and interested in entering into forward sales agreements for Entergy’s full hedging term; |
· | the actions of external parties, such as the FERC and local independent system operators and other state or Federal energy regulatory bodies, that may impose price limitations and other mechanisms to address some of the volatility in the energy markets; |
· | electricity transmission, competing generation or fuel transportation constraints, inoperability, or inefficiencies; |
· | the general demand for electricity, which may be significantly affected by national and regional economic conditions; |
· | weather conditions affecting demand for electricity or availability of hydroelectric power or fuel supplies; |
· | the rate of growth in demand for electricity as a result of population changes, regional economic conditions and the implementation of conservation programs; |
the rate of growth in demand for electricity as a result of population changes, regional economic conditions, and the implementation of conservation programs or distributed generation;regulatory policies of state agencies that affect the willingness of Entergy Wholesale Commodities customers to enter into long-term contracts generally, and contracts for energy in particular;
increases in supplies due to actions of current Entergy Wholesale Commodities competitors or new market entrants, including the development of new generation facilities, expansion of existing generation facilities, the disaggregation of vertically integrated utilities, and improvements in transmission that allow additional supply to reach Entergy Wholesale Commodities’ nuclear markets;
union and labor relations;
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
changes in Federal and state energy and environmental laws and regulations and other initiatives, including but not limited to, the price impacts of proposed emission controls such as the Regional Greenhouse Gas Initiative (RGGI);
· | regulatory policies of state agencies that affect the willingness of Entergy Wholesale Commodities nuclear customers to enter into long-term contracts generally,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; and contracts for energy in particular; |
· | increases in supplies due to actions of current Entergy Wholesale Commodities nuclear competitors or new market entrants, including the development of new generation facilities, expansion of existing generation facilities, the disaggregation of vertically integrated utilities and improvements in transmission that allow additional supply to reach Entergy Wholesale Commodities’ nuclear markets; |
· | union and labor relations; |
· | changes in Federal and state energy and environmental laws and regulations and other initiatives, including but not limited to, the price impacts of proposed emission controls such as the Regional Greenhouse Gas Initiative (RGGI); |
· | 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; and |
· | natural disasters, terrorist actions, wars, embargoes, and other catastrophic events. |
The Entergy Wholesale Commodities business is subject to substantial governmental regulation and may be adversely affected by legislative, regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.
The Entergy Wholesale Commodities business is subject to extensive federal, state, and local laws and regulation. Compliance with the requirements under these various regulatory regimes may cause the Entergy Wholesale Commodities business to incur significant additional costs, and failure to comply with such requirements could result in the shutdown of the non-complying facility, the imposition of liens, fines and/or civil or criminal liability.
Public utilities under the Federal Power Act are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity. Each of the owners of the Entergy Wholesale Commodities nuclear power plants that generates electricity, as well as Entergy Nuclear Power Marketing, LLC, is a "public utility"“public utility” under the Federal Power Act by virtue of making wholesale sales of electric energy.energy and/or owning wholesale electric transmission facilities. The FERC has granted these generating and power marketing companies the authority to sell electricity at market-based rates. The FERC’s orders that grant the Entergy Wholesale Commodities’ generating and power marketing companies market-based rate authority reserve the right to revoke or revise that authority if the FERC subsequently determines that the Entergy Wholesale Commodities business can exercise market power in transmission or generation, create barriers to entry, or engage in abusive affiliate transactions. In addition, the Entergy Wholesale Commodities’ market-based sales are subject to certain market behavior rules, and if any of its generating and power marketing companies were deemed to have violated one of those rules, they would be subject to potential disgorgement of profits associated with the violation and/or suspension or revocation of their market-based rate authority and potential penalties of up to $1 million per day per violation. If the Entergy Wholesale Commodities’ generating or power marketing companies were to lose their market-based rate authority, such companies would be required to obtain the FERC’s acceptance of a cost-of-service rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules. This could have an adverse effect on the rates the Entergy Wholesale Commodities business charges for power from its facilities.
The Entergy Wholesale Commodities business is also affected by legislative and regulatory changes, as well as changes to market design, market rules, tariffs, cost allocations, and bidding rules imposed by the existing Independent System Operators. The Independent System Operators that oversee most of the wholesale power markets impose, and in the future may continue to impose, mitigation, including price limitations, offer caps and other mechanisms, to address some of the volatility and the potential exercise of market power in these markets. These types of price limitations and other regulatory mechanisms may have an adverse effect on the profitability of the Entergy Wholesale Commodities business'business’ generation facilities that sell energy and capacity into the wholesale power markets. For further information regarding federal, state and local laws and regulation applicable to the Entergy Wholesale Commodities business, see the “Entergy’s Business - Regulation of Entergy’s Business” section in Part I, Item 1 for Entergy Corporation and its subsidiaries.1.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The regulatory environment applicable to the electric power industry has undergone substantial changes over the past several years as a result of restructuring initiatives at both the state and federal levels. These changes are ongoing and Entergy cannot predict the future design of the wholesale power markets or the ultimate effect that the changing regulatory environment will have on the Entergy Wholesale Commodities business. In addition, in some of these markets, interested parties have proposed material market design changes, including the elimination of a single clearing price mechanism and have raised claims that the competitive marketplace is not working because energy prices in wholesale markets exceed the marginal cost of operating nuclear power plants, as well as proposals to re-regulate the markets, impose a generation tax, or require divestitures by generating companies to reduce their market share. Other
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
proposals to re-regulate may be made and legislative or other attention to the electric power market restructuring process may delay or reverse the deregulation process, which could require material changes to business planning models. If competitive restructuring of the electric power markets is reversed, modified, discontinued, or delayed, the Entergy Wholesale Commodities business'business’ results of operations, financial condition, and liquidity could be materially affected.
The nuclear power plants owned by the Entergy Wholesale Commodities business are subject to impairment charges in certain circumstances, which could have a material effect on Entergy'sEntergy’s results of operations, financial condition or liquidity.
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from suchthe operations andof such assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. In particular, the assets of the Entergy Wholesale Commodities business including the nuclear power plants, are subject to impairment if adverse market conditions arise and continue (such as expected long-term declines in market prices for electricity), if adverse regulatory events occur (including with respect to environmental regulation), if a unit ceases operation or if a unit'sunit’s operating license is not renewed. Moreover, the failure of the Entergy Wholesale Commodities business to achieve forecasted operating results and cash flows, an unfavorable change in forecasted operating results or cash flows, or a decline in observable industry market multiples could all result in potential impairment charges for the affected assets.
As discussed in the “Entergy Wholesale Commodities - Property” section in Part I, Item 1, Entergy Wholesale Commodities, Property, in this Form 10-K,the original expiration dates of the operating licenses for Pilgrim, Indian Point 2 and Indian Point 3 expire between 2012are 2013 and 2015, respectively (see discussion above regarding the continued operation of Indian Point 2 and 3 past the license expiration dates),and are currently the subject of license renewal processes at the NRC and the statesstate in which the plants operateoperate. On August 27, 2013, Entergy announced its plan to close and thedecommission Vermont Yankee. Vermont Yankee plant isceased power production in the subjectfourth quarter 2014 at the end of certain statea fuel cycle. This decision was approved by the Board in August 2013, and federal proceedingsresulted in the recognition of impairment charges in 2013 and federal litigation relating to continued operation of that plant.2014. If Entergy concludes that any of theseits nuclear power plants is unlikely to operate significantly beyondthrough its current license expiration date,useful life, which conclusion would be based on a variety of factors, such a conclusion could result in an impairment of part or all of the carrying value of the plant. Any impairment charge taken by Entergy with respect to its long-lived assets, including the nuclear power plants owned by the Entergy Wholesale Commodities business, would likely be material in the quarter that the charge is taken and could otherwise have a material effect on Entergy'sEntergy’s results of operations, financial condition, or liquidity. For further information regarding evaluating long-lived assets for impairment, see the “Critical Accounting Estimates - Nuclear Decommissioning Costs” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries.
General Business
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Entergy and the Utility operating companies depend on access to the capital markets and, at times, may face potential liquidity constraints, which could make it more difficult to handle future contingencies such as natural disasters or substantial increases in gas and fuel prices. Disruptions in the capital and credit markets may adversely affect EntergyEntergy’s and its subsidiaries'subsidiaries’ ability to meet liquidity needs, access capital and operate and grow their businesses, and the cost of capital.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Entergy'sEntergy’s business is capital intensive and dependent upon its ability to access capital at reasonable rates and other terms. At times there are also spikes in the price for natural gas and other commodities that increase the liquidity requirements of the Utility operating companies and Entergy Wholesale Commodities. In addition, Entergy'sEntergy’s and the Utility operating companies'companies’ liquidity needs could significantly increase in the event of a hurricane or other weather-relatedweather-
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
related or unforeseen disaster similar to that experienced in Entergy'sEntergy’s service territory with Hurricane Katrina and Hurricane Rita in 2005, and Hurricane Gustav and Hurricane Ike in 2008.2008, and Hurricane Isaac in 2012. The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel or purchased power costs or storm restoration costs, higher than expected pension contributions, an acceleration of payments or decreased credit lines, less cash flow from operations than expected, or other unknown events, such as future storms, could cause the financing needs of Entergy and its subsidiaries to increase. In addition, accessing the debt capital markets more frequently in these situations may result in an increase in leverage. Material leverage increases could negatively affect the credit ratings of Entergy and the Utility operating companies, which in turn could negatively affect access to the capital markets.
The global capital and credit markets experienced extreme volatility and disruption in the fourth quarter of 2008 and much of 2009. The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could negatively affect Entergy and its subsidiaries'subsidiaries’ ability to maintain and to expand their businesses. Events beyond Entergy'sEntergy’s control, such as the volatility and disruption in global capital and credit markets in 2008 and 2009, may create uncertainty that could increase its cost of capital or impair its ability to access the capital markets, including the ability to draw on its bank credit facilities. Entergy and its subsidiaries are unable to predict the degree of success they will have in renewing or replacing their credit facilities as they come up for renewal, including the Entergy Corporation $3.5 billion revolving credit facility that expires in August 2012.renewal. Moreover, the size, terms, and covenants of any new credit facilities may not be comparable to, and may be more restrictive than, existing facilities. If Entergy and its subsidiaries are unable to access the credit and capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities and/or bear an unfavorable cost of capital, which, in turn, could impact their ability to grow their businesses, decrease earnings, significantly reduce financial flexibility and/or limit Entergy Corporation'sCorporation’s ability to sustain its current common stock dividend level.
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
A downgrade in Entergy Corporation'’s or its subsidiaries'’ credit ratings could negatively affect Entergy Corporation'’s and its subsidiaries'’ ability to access capital and/or could require Entergy Corporation or its subsidiaries to post collateral, accelerate certain payments, or repay certain indebtedness.
There are a number of factors that rating agencies evaluate to arrive at credit ratings for each of Entergy Corporation and the Registrant Subsidiaries, including each Registrant’s regulatory framework, ability to recover costs and earn returns, diversification and financial strength and liquidity. If one or more rating agencies downgrade Entergy Corporation's,Corporation’s, any of the Utility operating companies'companies’, or System Energy'sEnergy’s ratings, particularly below investment grade, borrowing costs would increase, the potential pool of investors and funding sources would likely decrease, and cash or letter of credit collateral demands may be triggered by the terms of a number of commodity contracts, leases, and other agreements.
Most of Entergy Corporation'sCorporation’s and its subsidiaries'subsidiaries’ large customers, suppliers, and counterparties require sufficient creditworthiness to enter into transactions. If Entergy Corporation'sCorporation’s or its subsidiaries'subsidiaries’ ratings decline, particularly below investment grade, or if certain counterparties believe Entergy Corporation or the Utility operating companies are losing creditworthiness and demand adequate assurance under fuel, gas, and purchased power contracts, the counterparties may require posting of collateral in cash or letters of credit, prepayment for fuel, gas or purchased power or accelerated payment, or counterparties may decline business with Entergy Corporation or its subsidiaries. At December 31, 2011,2014, based on power prices at that time, Entergy had liquidity exposure forof $159 million under the guarantees in place supporting Entergy Wholesale Commodities business transactions of $133 million under guarantees, $20and $5 million of guarantees thatposted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2014, Entergy would have been required to provide approximately $51 million of additional cash or letters of credit under some of the agreements. As of December 31, 2014, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $52 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Entergy and its subsidiaries’ ability to successfully complete strategic transactions, including merger, acquisition, divestiture, joint venture, restructuring or other strategic transactions, is subject to significant risks, including the risk that required regulatory or governmental approvals may not be obtained, risks relating to unknown or undisclosed problems or liabilities, and the risk that for these or other reasons, Entergy and its subsidiaries may be unable to achieve some or all of the benefits that they anticipate from such transactions.
support letters of credit,
From time to time, Entergy and $6 million of posted cash collateralits subsidiaries have pursued and may continue to pursue strategic transactions including merger, acquisition, divestiture, joint venture, restructuring or other strategic transactions. In particular, as discussed in Note 2 to the ISOs. Asfinancial statements, two of December 31, 2011Entergy’s subsidiaries, Entergy Louisiana and Entergy Gulf States Louisiana, are undertaking a transaction that would result in the liquidity exposure associated withcombination of those entities into a single public utility. In addition, as discussed in the “Capital Expenditure Plans and Other Uses of Capital - Union Power Station Purchase Agreement” section of Management’s Financial Discussion and Analysis for Entergy Wholesale Commodities assurance requirementsCorporation and Subsidiaries, certain of Entergy’s subsidiaries have entered into an asset purchase agreement to acquire the Union Power Station, consisting of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating), from Union Power Partners, L.P. Each of these transactions is subject to regulatory approval and other material conditions or contingencies. The failure to complete these transactions or any future strategic transaction successfully or on a timely basis could increase by $132 millionhave an adverse effect on Entergy’s financial condition, results of operations and the market’s perception of Entergy’s ability to execute its strategy. Further, these transactions, and any completed or future strategic transactions, involve substantial risks, including the following:
acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels;
acquired businesses or assets could have environmental, permitting or other problems for which contractual protections prove inadequate;
Entergy and/or its subsidiaries may assume liabilities that were not disclosed to them, that exceed their estimates, or for which their rights to indemnification from the seller are limited;
Entergy and/or its subsidiaries may be unable to obtain the necessary regulatory or governmental approvals to close a $1 per MMBtu increase in gas prices in bothtransaction, such approvals may be granted subject to terms that are unacceptable to them, or Entergy or its subsidiaries otherwise may be unable to achieve anticipated regulatory treatment of any such transaction or acquired business or assets; and
Entergy or its subsidiaries otherwise may be unable to achieve the short-full strategic and long-term markets. Infinancial benefits that they anticipate from the event of a decrease in Entergy Corporation's credit rating to below investment grade, based on power prices as of December 31, 2011, Entergy would have been required to provide approximately $44 million of additional cashtransaction, or letters of credit under some of the agreements.such benefits may be delayed or may not occur at all.
The construction of, and capital improvements to, power generation facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful, the financial condition, results of operations, or liquidity of Entergy and the Utility operating companies could be materially affected.
Entergy'sEntergy’s and the Utility operating companies'companies’ ability to complete construction of power generation facilities in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include, but are not limited to, project management expertise and escalating costs for materials, labor, and environmental compliance. Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing as required under their contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs, downward changes in the economy, changes in law or regulation, including environmental compliance requirements, and other events beyond the control of the Utility operating companies or the Entergy Wholesale Commodities business may occur that may materially affect the schedule, cost, and performance of these projects. If these projects are significantly delayed or become subject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and termination payments, or face increased risk of potential write-off of the investment in the project. For further information regarding capital expenditure plans and other uses of capital in connection with the potential construction of additional generation supply sources within the Utility operating companies'companies’ service territory, and as to the Entergy Wholesale Commodities business, see the "“Capital Expenditure Plans and Other Uses of Capital"” section of Management'sManagement’s Financial Discussion and Analysis for Entergy and each of the Registrant Subsidiaries.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial costs to fulfill their obligations related to environmental and other matters.
The businesses in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business operate are subject to extensive environmental regulation by local, state, and Federalfederal authorities. These laws and regulations affect the manner in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business conduct their operations and make capital expenditures. These laws and regulations also affect how the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business manage air emissions, discharges to water, wetlands impacts, solid and hazardous waste storage and disposal, cooling and service water intake, the protection of threatened and endangered species, hazardous materials transportation, and similar matters. Federal, state, and local authorities continually revise these laws and regulations, and the laws and regulations are subject to judicial interpretation and to the permitting and enforcement discretion vested in the implementing agencies. Developing and implementing plans for facility compliance with these requirements can lead to capital, personnel, and operation and maintenance expenditures. Violations of these requirements can subject the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, remediation and clean-up costs, civil penalties, and exposure to third parties'parties’ claims for alleged health or property damages or for violations of applicable permits or standards. In addition, the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business potentially are subject to liability under these laws for the costs of remediation of environmental contamination of property now or formerly owned or operated by the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business and of property contaminated by hazardous substances they generate. The Utility operating companies are currently involved in proceedings relating to sites where hazardous substances have been released and may be subject to additional proceedings in the future. The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business have incurred and expect to incur significant costs related to environmental compliance.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Emissions of nitrogen and sulfur oxides, mercury, particulates, greenhouse gases, and other regulated air contaminantsemissions from generating plants are potentially subject to increased regulation, controls and mitigation expenses. In addition, existing air regulations and programs promulgated by the EPA often are challenged legally, sometimes resulting in large-scale changes to anticipated regulatory regimes and the resulting need to shift course, both operationally and economically, depending on the nature of the changes. Risks relating to global climate change, and initiatives to compel CO2greenhouse gas emission reductions, and water availability issues are discussed below.
Entergy and its subsidiaries may not be able to obtain or maintain all required environmental regulatory approvals. If there is a delay in obtaining any required environmental regulatory approvals, or if Entergy and its subsidiaries fail to obtain, maintain, or comply with any such approval, the operation of its facilities could be stopped or become subject to additional costs. For further information regarding environmental regulation and environmental matters, see the "“Regulation of Entergy'’s Business– Environmental Regulation"” section of Part I, Item 1.
The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial costs related to reliability standards.
Entergy'sEntergy’s business is subject to extensive and mandatory reliability standards. Such standards, which are established by the North American Electric Reliability Corporation (NERC) and, the SERC Reliability Corporation (SERC), and other regional enforcement entities, are approved by the FERC and frequently are reviewed, amended, and supplemented. Failure to comply with such standards could result in the imposition of fines or civil penalties, and potential exposure to third party claims for alleged violations of such standards. The standards, as well as the laws and regulations that govern them, are subject to judicial interpretation and to the enforcement discretion vested in the implementing agencies. In addition to exposure to civil penalties and fines, the Utility operating companies have incurred and expect to incur significant costs related to compliance with new and existing reliability standards, including costs associated with the Utility operating companies’ transmission system.system and generation assets. The changes to the
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
reliability standards applicable to the electric power industry are ongoing, and Entergy cannot predict the ultimate effect that the reliability standards will have on its Utility and Entergy Wholesale Commodities business. Entergy has notified the SERC of potential violations of certain NERC reliability standards, including certain Critical Infrastructure Protection, Facilities Design, Connection and Maintenance, and System Protection and Control standards. Entergy is working with the SERC to provide information concerning these potential violations. In addition, FERC’s Division of Investigations is conducting an investigation of certain issues relating to the Utility operating companies compliance with certain Reliability Standards related to protective system maintenance, facility ratings and modeling, training, and communications.Commodities.
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
The effects of weather and economic conditions, and the related impact on electricity and gas usage, may materially affect the Utility operating companies'’ results of operations.
Temperatures above normal levels in the summer tend to increase summer cooling electricity demand and revenues, and temperatures below moderate levels in the winter tend to increase winter heating electricity and gas demand and revenues. As a corollary, moderate temperatures tend to decrease usage of energy and resulting revenues. Seasonal pricing differentials, coupled with higher consumption levels, typically cause the Utility operating companies to report higher revenues in the third quarter of the fiscal year than in the other quarters. Extreme weather conditions or storms, however, may stress the Utility operating companies'companies’ generation facilities and transmission and distribution systems, resulting in increased maintenance and capital costs (and potential increased financing needs), limits on their ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction. These extreme conditions could have a material effect on the Utility operating companies'companies’ financial condition, results of operations, and liquidity.
IndustrialEntergy’s electricity sales volume was depressedvolumes are affected by a number of factors, including the state of the national and regional economies, weather, customer bill sizes (large bills tend to induce conservation), trends in energy efficiency, and the willingness and ability of large industrial customers to develop co-generation facilities that greatly reduce their demand from Entergy. Some of these factors are inherently cyclical or temporary in nature, such as the weather or economic conditions, and rarely have a long-lasting impact on Entergy’s operating results. Others, such as the increasing adoption of energy efficient appliances and building codes, are having a more permanent impact of reducing sales growth rates from historical norms. Newer technologies such as distributed generation have not yet had a substantive impact on Entergy’s electricity sales, but further advances have the potential to do so in the latter partfuture. Since the national economy emerged from the last recession in 2009, Entergy’s industrial sales in particular have benefited from steady economic growth and relatively low natural gas prices from an historical perspective. Any substantial negative change in any of 2008 and through most of 2009, in part becausethese factors has the overall economy declined, with lower usage across the industrial sector affecting both the large customer industrial segment as well as small and mid-sized industrial customers. It is possible that continued or recurrent poor economic conditions couldpotential to result in slower or declining sales growth and increased bad debt expense, which could materially affect Entergy'sEntergy’s and the Utility operating companies'companies’ results of operations, financial condition, and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The effects of climate change and environmental and regulatory obligations intended to compel CO2greenhouse gas emission reductions or to place a price on greenhouse gas emissions could materially affect the financial condition, results of operations, and liquidity of Entergy, and the Utility operating companies.companies, System Energy, and the Entergy Wholesale Commodities business.
In an effort to address climate change concerns, Federal,federal, state, and local authorities are calling for additional laws and regulations aimed at known or suspected causes of climate change. For example, in response to the United States Supreme Court'sCourt’s 2007 decision holding that the EPA has authority to regulate emissions of CO2CO2 and other "greenhouse gases"“greenhouse gases” under the Clean Air Act, the EPA, various environmental interest groups, and other organizations are focusing considerable attention on CO2CO2 emissions from power generation facilities and their potential role in climate change. In 2010, EPA promulgated its first regulations controlling greenhouse gas emissions from certain vehicles and from new and significantly modified stationary sources of emissions, including electric generating units,units. In 2012 and additional2013, EPA proposed a CO2 emission standard for new source performance standards aresources; this standard is expected to be finalized in 2015. Additionally, EPA proposed a CO2 existing source performance standard regulation in 2012. 2014 for finalization in 2015. As examples of state action, in the Northeast, the Regional Greenhouse Gas Initiative (RGGI) establishes a cap on CO2 emissions from electric power plants and requires generators to purchase emission permits to cover their CO2 emissions, and a similar program has been developed in California.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Developing and implementing plans for compliance with CO2greenhouse gas emissions reduction requirements can lead to additional capital, personnel, and operation and maintenance expenditures and could significantly affect the economic position of existing facilities and proposed projects; moreover, long termlong-term planning to meet environmental requirements can be negatively impacted and costs may increase to the extent laws and regulations change prior to full implementation. Violations of such requirements may subject Entergy Wholesale Commodities and the Utility operating companies to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, civil penalties, and exposure to third parties'parties’ claims for alleged health or property damages or for violations of applicable permits or standards. To the extent Entergy believes any of these costs are recoverable in rates, however, additional material rate increases for customers could be resisted by Entergy'sEntergy’s regulators and, in extreme cases, Entergy'sEntergy’s regulators might deny or defer timely recovery of these costs. Future changes in environmental regulation governing the emission of CO2CO2 and other "greenhouse gases"greenhouse gases could make some of Entergy'sEntergy’s electric generating units uneconomical to maintain or operate, and could increase the difficulty that Entergy and its subsidiaries have with obtaining or maintaining required environmental regulatory approvals, which could also materially affect the financial condition, results of operations and liquidity of Entergy and the Utility operating companies.its subsidiaries. In addition, multiple lawsuits currently are pending or are reasonably expected against emitters of greenhouse gases alleging that these companies are liable for personal injuries and property damage caused by climate change. These lawsuits may seek injunctive relief, monetary compensation, and punitive damages.
In addition to the regulatory and financial risks associated with climate change discussed above, physical risks from climate change include an increase in sea level, wind and storm surge damages, wetland and barrier island erosion, risks of flooding and changes in weather conditions, such as changes in precipitation, drought, average temperatures, and potential increased impacts of extreme weather conditions or storms. Entergy subsidiaries own assets in, and serve, communities that are at risk from sea level rise, changes in weather conditions, storms, and loss of the protection offered by coastal wetlands. A significant portion of the nation’s oil and gas infrastructure is located in these areas and susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to fuel supply interruptions and price spikes. Entergy and its subsidiaries also face the risk that climate change could impact the availability and quality of water supply necessary for operations.
These and other physical changes could result in changes in customer demand, increased costs associated with repairing and maintaining generation facilities and transmission and distribution systems resulting in increased maintenance and capital costs (and potential increased financing needs), limits on the Entergy System'sSystem’s ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction. Also, to the extent that climate change adversely impacts the economic health of a region or results in energy conservation or demand side management programs, it may adversely impact customer demand and revenues. Such physical or operational risks could have a material effect on Entergy'sEntergy’s, Entergy Wholesale Commodities’, System Energy’s, and the Utility operating companies'companies’ financial condition, results of operations, and liquidity.
Continued and future availability and quality of water for cooling, process, and sanitary uses could materially affect the financial condition, results of operations, and liquidity of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business.
Water is a vital natural resource that is also critical to the Utility operating companies’, System Energy's, and Entergy Wholesale Commodities’ business operations. Entergy’s facilities use water for cooling, boiler make-up, sanitary uses, potable supply, and many other uses. Two of Entergy’s Utility operating companies own and/or operate hydroelectric facilities. Accordingly, water availability and quality are critical to Entergy’s business operations. Impacts to water availability or quality could negatively impact both operations and revenues.
Entergy secures water through various mechanisms (ground water wells, surface waters intakes, municipal supply, etc.) and operates under the provisions and conditions set forth by the provider and/or regulatory authorities. Entergy also obtains and operates in substantial compliance with water discharge permits issued under various provisions of the Clean Water Act. Regulations and authorizations for both water intake and use and for waste discharge can become more stringent in times of water shortages, low flows in rivers, low lake levels, low groundwater
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
aquifer volumes, and similar conditions. The increased use of water by industry, agriculture, and the population at large, population growth, and the potential impacts of climate change on water resources may cause water use restrictions that affect Entergy and its subsidiaries.
Entergy and its subsidiaries may not be adequately hedged against changes in commodity prices, which could materially affect Entergy'sEntergy’s and its subsidiaries'subsidiaries’ results of operations, financial condition, and liquidity.
To manage their near-term financial exposure related to commodity price fluctuations, Entergy and its subsidiaries, including the Utility operating companies and the Entergy Wholesale Commodities business, may enter into contracts to hedge portions of their purchase and sale commitments, fuel requirements, and inventories of natural gas, uranium (andand its conversion),conversion and enrichment, coal, refined products, and other commodities, within established risk management guidelines. As part of this strategy, Entergy and its subsidiaries may utilize fixed- and variable-price forward physical purchase and sales contracts, futures, financial swaps, and option contracts traded in the over-the-counter markets or on exchanges. However, Entergy and its subsidiaries normally cover only a portion of the exposure of their assets and positions to market price volatility, and the coverage will vary over time. In addition, Entergy also elects to leave certain volumes during certain years unhedged. To the extent Entergy and its subsidiaries have unhedged positions, fluctuating commodity prices can materially affect Entergy'sEntergy’s and its subsidiaries'subsidiaries’ results of operations and financial position.
Although Entergy and its subsidiaries devote a considerable effort to these risk management strategies, they cannot eliminate all the risks associated with these activities. As a result of these and other factors, Entergy and its subsidiaries cannot predict with precision the impact that risk management decisions may have on their business, results of operations, or financial position.
Entergy has guaranteed or indemnified the performance of a portion of the obligations relating to hedging and risk management activities. Reductions in Entergy'sEntergy’s or its subsidiaries'subsidiaries’ credit quality or changes in the market prices of energy commodities could increase the cash or letter of credit collateral required to be posted in connection with hedging and risk management activities, which could materially affect Entergy'sEntergy’s or its subsidiaries'subsidiaries’ liquidity and financial position.
The Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterparties may not meet their obligations, which may materially affect the Utility operating companies and Entergy Wholesale Commodities.
The hedging and risk management practices of the Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterparties that owe Entergy and its subsidiaries money, energy, or other commodities will not perform their obligations. Currently, some hedging agreements contain provisions that require the counterparties to provide credit support to secure all or part of their obligations to Entergy or its subsidiaries. If the counterparties to these arrangements fail to perform, Entergy or its subsidiaries may enforce and recover the proceeds from the credit support provided and acquire alternative hedging arrangements, or draw on the credit support provided by the counterparties, which credit support may not always be adequate to cover the related obligations. In such event, Entergy and its subsidiaries might incur losses in addition to amounts, if any, already paid to the counterparties. In addition, the credit commitments of Entergy'sEntergy’s lenders under its bank facilities may not be honored for a variety of reasons, including unexpected periods of financial distress affecting such lenders, which could materially affect the adequacy of its liquidity sources.
The Wall Street Transparency and Accountability Act of 2010 and rules and regulations promulgated under the act may adversely affect the ability of the Utility operating companies and the Entergy Wholesale Commodities business to utilize certain commodity derivatives for hedging and mitigating commercial risk.
The Wall Street Transparency and Accountability Act of 2010, which was enacted on July 21, 2010 as part of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act (Act), and the rules and regulations to be promulgated under the act will impose governmental regulation on the over-the-counter derivative market, including the commodity
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
swaps used by the Utility operating companies and the Entergy Wholesale Commodities business to hedge and mitigate commercial risk. Under the act,Act, certain swaps will beare subject to mandatory clearing and exchange trading requirements. Swap dealers and major market participants in the swap market will beare subject to capital, margin, registration, reporting, recordkeeping, and business conduct requirements with respect to their swap activities. Entergy is not a swap dealer or a major swap participant, and does not expect to qualify as either in the future. Non-swap dealers and non-major swap participants, such as Entergy, are subject to reporting, recordkeeping, and business conduct requirements (i.e., anti-manipulation, anti-disruptive trading practices, and whistleblower provisions) with respect to their swap activities. Position limits willmay also apply to certain swaps activities. Position limit rules promulgated by the Commodity Futures Trading Commission were vacated by the US District Court for the District of Columbia. The act requiresCommodity Futures Trading Commission has subsequently proposed new position limit rules. If the Commodity Futures Trading Commission’s issues final position limit rules, those rules may apply to certain of Entergy’s swaps activities.
The Act required the applicable regulators, which in the case of commodity swaps will be the Commodity Futures Trading Commission, to engage in substantial rulemaking in order to implement the provisions of the actAct and such rulemaking is not yet final.has been largely completed. Both the Utility operating companies
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
and the Entergy Wholesale Commodities business currently utilize commodity swaps to hedge and mitigate commodity price risk. It is not known whether the actAct and regulations promulgated under the actAct will have an adverse effect upon the market for the commodity swaps used by the Utility operating companies and the Entergy Wholesale Commodities business. However, to the extent that the actAct and regulations promulgated under the actAct have the effect of increasing the price of such commodity swaps or limiting or reducing the availability of such commodity swaps, whether through the imposition of additional capital, margin, or compliance costs upon market participants, the imposition of position limits, or otherwise, the financial performance of the Utility operating companies and/or the Entergy Wholesale Commodities business may be adversely affected. To the extent that the Utility operating companies and the Entergy Wholesale Commodities business wouldmay be required to post margin in connection with existing or future commodity swaps in addition to any margin currently posted by such entities, such entities may need to secure additional sources of capital to meet such liquidity needs or cease utilizing such commodity swaps.
Market performance and other changes may decrease the value of benefit plan assets, which then could require additional funding.
The performance of the capital markets affects the values of the assets held in trust under Entergy'sEntergy’s pension and postretirement benefit plans. A decline in the market value of the assets may increase the funding requirements relating to Entergy'sEntergy’s benefit plan liabilities. The recent recession and volatilityVolatility in the capital markets havehas affected the market value of these assets, which may affect Entergy'sEntergy’s planned levels of contributions in the future. Additionally, changes in interest rates affect the liabilities under Entergy'sEntergy’s pension and postretirement benefit plans; as interest rates decrease, the liabilities increase, potentially requiring additional funding. The funding requirements of the obligations related to the pension benefit plans can also increase as a result of changes in, among other factors, retirement rates, life expectancy assumptions, or Federal regulations. Guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act of 2006 as a result of these discussions and efforts may affect the level of Entergy's pension contributions in the future. For further information regarding Entergy'sEntergy’s pension and other postretirement benefit plans, reference is maderefer to the "“Critical Accounting Estimates– Qualified Pension and Other Postretirement Benefits"” section of Management'sManagement’s Financial Discussion and Analysis for Entergy and each of its Registrant Subsidiaries and Note 11 to the financial statements.
The litigation environment in the states in which certain Entergy subsidiaries operate poses a significant risk to those businesses.
Entergy and its subsidiaries are involved in the ordinary course of business in a number of lawsuits involving employment, commercial, asbestos, hazardous material and ratepayer matters, and injuries and damages issues, among other matters. The states in which the Utility operating companies operate, in particular Louisiana, Mississippi, and Texas, have proven to be unusually litigious environments. Judges and juries in these states have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
business tort cases. Entergy and its subsidiaries use legal and appropriate means to contest litigation threatened or filed against them, but the litigation environment in these states poses a significant business risk.
TerroristDomestic or international terrorist attacks, including cyber attacks, and failures or breaches of Entergy’s and its subsidiaries’ technology systems may adversely affect Entergy’s results of operations.
As power generators and distributors, Entergy and its subsidiaries face heightened risk of an act or threat of terrorism, including physical and cyber attacks, either as a direct act against one of Entergy'sEntergy’s generation facilities, an act against the transmission andoperations centers, or distribution infrastructure used to manage and transport power that affects itsto customers. An actual act could affect Entergy’s ability to operate or an act against the necessary information technology systems and network infrastructure of Entergy and its subsidiaries.
Part I Item 1A & 1B
Entergy Corporation,infrastructure. The Utility operating companies and System Energyalso face heightened risk of an act or threat by cyber criminals, intent on accessing personal information for the purpose of committing identity theft.
Entergy and its subsidiaries operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure.infrastructure in accordance with prescriptive standards. Despite the implementation of multiple layers of security measures by Entergy and its subsidiaries, all technology systems areremain vulnerable to disability, failures, orpotential threats that could lead to unauthorized access dueor loss of availability to such activities.critical systems essential to the reliable operation of Entergy’s electric system. If Entergy’s or its subsidiaries’ technology systems were to fail or be breachedcompromised and be unable to recover intimely to a timely way,normal state of operations, Entergy or its subsidiaries may be unable to fulfillperform critical business functions that are essential to the company’s well-being and the health, safety, and security needs of its customers. In addition, an attack on its information technology infrastructure may result in a loss of its confidential, sensitive, confidential and other data could be compromised.
proprietary information, including personal information of its customers, employees, vendors, and others in Entergy’s care.
If any such attacks, failures or breaches were to occur, Entergy'sEntergy’s and the Utility operating companies’ business, financial condition, and results of operations could be materially and adversely affected. The risk of such attacks, failures, or breaches also may cause Entergy and the Utility operating companies to incur increased capital and operating costs to implement increased security for its nuclear power plants and other facilities, such as additional physical facility security and additional security personnel, and for systems to protect its information technology and network infrastructure systems. Such events may also expose Entergy to an increased risk of judgments and fines.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition and liquidity.
Entergy and its subsidiaries make judgments regarding the potential tax effects of various financial transactions and results of operations to estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use, and employment-related taxes. These judgments include reservesprovisions for potential adverse outcomes regarding tax positions that have been taken. Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards for which the benefits have already been reflected in the financial statements. Changes in federal, state, or local tax laws, adverse tax audit results or adverse tax rulings on positions taken by Entergy and its subsidiaries could negatively affect Entergy's,Entergy’s, the Utility operating companies'companies’, and System Energy'sEnergy’s results of operations, financial condition, and liquidity. For further information regarding Entergy's accounting for tax obligations, reference is madeEntergy’s income taxes, refer to Note 3 to the financial statements.
Entergy and the Utility operating companies may be unable to satisfy the conditions or obtain the approvals to complete the transaction with ITC or such approvals may contain material restrictions or conditions.
See “Plan to Spin Off the Utility’s Transmission Business” in Entergy Corporation’s Management’s Financial Discussion and Analysis for a discussion of the agreements that Entergy entered in December 2011 to spin off its transmission business and merge it with a newly-formed subsidiary of ITC Holdings Corp. The consummation of the ITC transaction is subject to numerous conditions, including (i) consummation of certain transactions and financings contemplated by the Merger Agreement and the Separation Agreement (such as the separation of the Transmission Business conducted by the Utility operating companies, (ii) obtaining the required ITC shareholder approvals, and (iii) the receipt of certain regulatory approvals from governmental agencies necessary to consummate the ITC transaction, and that no such regulatory approvals impose a burdensome condition on ITC or Entergy as described in the Merger Agreement. Entergy can make no assurances that the ITC transaction will be consummated on the terms or timeline currently contemplated, or at all. Governmental agencies may not approve the ITC transaction or may impose conditions to the approval of the ITC transaction or require changes to the terms of the ITC transaction. Any such conditions or changes could have the effect of delaying completion of the ITC transaction, imposing costs on or limiting the revenues of Entergy or the Utility operating companies or otherwise reducing the anticipated benefits of the ITC transaction. Any condition or change could result in a burdensome condition on the Transmission Business or ITC under the Merger Agreement and might cause Entergy or ITC to abandon the ITC transaction. In addition, Entergy must pay its costs related to the ITC transaction including, legal, accounting, advisory, financing and filing fees and printing costs, whether the ITC transaction is completed or not. Any failure to consummate the ITC transaction as currently contemplated, or at all, could have a material effect on the business and results of operations of Entergy and the Utility operating companies and the trading price of Entergy Corporation’s common stock could be adversely affected.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
(Entergy Gulf States Louisiana and Entergy New Orleans)
The effect of higher purchased gas cost charges to customers may adversely affect Entergy Gulf States Louisiana'sLouisiana’s and Entergy New Orleans'Orleans’s results of operations and liquidity.
Gas rates charged to retail gas customers are comprised primarily of purchased gas cost charges, which provide no return or profit to Entergy Gulf States Louisiana or Entergy New Orleans, and distribution charges, which provide
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
a return or profit to the utility. Distribution charges are affected by the amount of gas sold to customers. Purchased gas cost charges, which comprise most of a customer'scustomer’s bill and may be adjusted quarterly,monthly, represent gas commodity costs that Entergy Gulf States Louisiana or Entergy New Orleans recovers from its customers. Entergy Gulf States Louisiana'sLouisiana’s or Entergy New Orleans'Orleans’s cash flows can be affected by differences between the time period when gas is purchased and the time when ultimate recovery from customers occurs. When purchased gas cost charges increase substantially reflecting higher gas procurement costs incurred by Entergy Gulf States Louisiana or Entergy New Orleans, customer usage may decrease, especially in weaker economic times, resulting in lower distribution charges for Entergy Gulf States Louisiana or Entergy New Orleans, which could adversely affect results of operations.
(System Energy)
System Energy owns and operates a single nuclear generating facility, and it is dependent on affiliated companies for all of its revenues.
System Energy'sEnergy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% ownership/leasehold interest in Grand Gulf. Charges under the Unit Power Sales Agreement are paid by the Utility operating companies as consideration for their respective entitlements to receive capacity and energy. The useful economic life of Grand Gulf is finite and is limited by the terms of its operating license, which is currently due to expire on November 1, 2024. System Energy filed in October 2011 an application with the NRC for an extension of Grand Gulf’s operating license to 2045. The NRC accepted the filing in December 2011 and there is an expected NRC review period of 22 months before an order would be issued.2044. System Energy'sEnergy’s financial condition depends both on the receipt of payments from the Utility operating companies under the Unit Power Sales Agreement and on the continued commercial operation of Grand Gulf.
For information regarding the Unit Power Sales Agreement, the sale and leaseback transactions and certain other agreements relating to the Entergy System companies'companies’ support of System Energy (including the Capital Funds Agreement), see the "Grand Gulf - Related Agreements"“Grand Gulf-Related Agreements” section of Note 8 to the financial statements and the "Utility“Sale and Leaseback Transactions” section of Note 10 to the financial statements, and the “Utility - System Energy and Related Agreements"Agreements” section of Part I, Item 1.
(Entergy Corporation)
Entergy Corporation'sAs a holding company, structure could limitEntergy Corporation depends on cash distributions from its abilitysubsidiaries to meet its debt service and other financial obligations and to pay dividends.dividends on its common stock.
Entergy Corporation is a holding company with no material revenue generating operations of its own or material assets other than the stock of its subsidiaries. Accordingly, all of its operations are conducted by its subsidiaries. Entergy Corporation'sCorporation’s ability to satisfy its financial obligations, including the payment of interest and principal on its outstanding debt, and to pay dividends on its common stock depends on the payment to it of dividends or distributions by its subsidiaries. The payments of dividends or distributions to Entergy Corporation by its subsidiaries in turn depend on their results of operations and cash flows and other items affecting retained earnings, and on any applicable legal, regulatory, or contractual limitations on subsidiaries’ ability to pay such dividends or distributions. Provisions in the organizational documents, indentures for debt issuances, and other agreements of certain of Entergy Corporation'sCorporation’s subsidiaries restrict the payment of cash dividends to Entergy Corporation. For further information regarding dividend or distribution restrictions to Entergy Corporation, reference is made tosee the "COMMON EQUITY – “Retained Earnings and Dividend Restrictions"” section of Note 7 to the financial statements.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
If completed, the transaction with ITC may not achieve its anticipated results.
Entergy entered into the ITC transaction with the expectation that it would result in various benefits, including the receipt by Entergy’s shareholders of shares of ITC common stock as a result of the transaction. If the ITC transaction is consummated, it is possible that the full strategic, financial, operational and regulatory benefits to Entergy and its shareholders that Entergy expected would result from the ITC transaction may not be achieved or that such benefits may be delayed or not occur due to unforeseen changes in market, economic or regulatory conditions or other events. As a result, the aggregate market price of the common stock of Entergy Corporation and the shares of ITC common stock that shareholders of Entergy Corporation would receive in the ITC transaction could be less than the market price of Entergy Corporation’s common stock if the ITC transaction had not occurred.
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Plan to Spin Off the Utility’s Transmission Business
See the “Plan to Spin Off the Utility’s Transmission Business” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of this matter, including the planned retirement of debt and preferred securities.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income decreased $7.7by $40.6 million primarily due to higher other operation and maintenance expenses, lower other income, higher depreciation and amortization expenses, and a higher effective income tax rate, lower other income, and higher other operation and maintenance expenses, substantiallypartially offset by higher net revenue, lower depreciation and amortization expenses, and lower interest expense.revenue.
20102013 Compared to 20092012
Net income increased $105.7$9.6 million primarily due to higher net revenue, higher other income, lower nuclear refueling outage expenses, and a lower effective income tax rate, higher other income, and lower depreciation and amortization expenses, partially offset by higher other operation and maintenance expenses, higher interest expense, and higher depreciation and amortization expenses.
Net Revenue
20112014 Compared to 20102013
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).credits. Following is an analysis of the change in net revenue comparing 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20102013 net revenue |
| $1,216.7 1,301.5 |
|
| Retail electric price | 43.3 | 31.0
|
ANO decommissioning trustReserve equalization | 16.5 | 26.4
|
| Transmission revenue | 13.7 | 13.1
|
| Asset retirement obligation | 12.7 |
|
| MISO deferral | (11.1 | ) |
| Volume/weather | (13.0 | (15.9)) |
| Net wholesale revenue | (20.5 | (11.9) |
Capacity acquisition recovery | | (10.3)) |
| Other | (7.2 | 3.2 ) |
20112014 net revenue |
| $1,252.3 1,335.9 |
|
The retail electric price variance is primarily due to aan increase in the energy efficiency rider, as approved by the APSC, effective July 2013 and July 2014, and the effect of the APSC’s order in the 2013 rate case, including an annual base rate increase effective July 2010.January 2014, offset by a MISO rider to provide customers credits in rates for transmission revenue received through MISO. Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income. See Note 2 to the financial statements for morefurther discussion of the rate case settlement.case.
The ANO decommissioning trustreserve equalization variance is primarily relateddue to the deferralabsence of investment gainsreserve equalization expenses as compared to 2013 resulting from Entergy Arkansas’s exit from the ANO 1 and 2 decommissioning trust in 2010 in accordance with regulatory treatment. The gains resulted in an increase in 2010 in interest and investment income and a corresponding increase in regulatory charges with no effect on net income.System Agreement.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The transmission revenue variance is primarily due to changes as a revision to transmission investment equalization billings under the Entergy System Agreement among the Utility operating companies (for the approximate periodresult of 1996 – 2011) recordedparticipation in the fourth quarter 2011.MISO RTO in 2014.
The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation related costs collected in revenue. The variance is primarily caused by an increase in regulatory credits because of a decrease in decommissioning trust earnings.
The MISO deferral variance is due to the deferral in April 2013, as approved by the APSC, of costs incurred
from March 2010 through December 2012 related to the transition and implementation of joining the MISO RTO.
The volume/weather variance is primarily due to a decrease in sales volume during the effect of less favorable weather on residential and commercialunbilled sales period, partially offset by more favorable weather-adjustedan increase of 190 GWh, or 1%, in billed electricity usage primarily in the residential sector.
The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and lower wholesale billings to affiliate companies due to lower expenses.contract changes.
The capacity acquisition recovery variance is primarily due2013 Compared to the cessation of the capacity acquisition rider to recover expenses incurred because those costs are recovered in base rates effective July 2010.2012
Net Revenue
2010 Compared to 2009
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 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20092012 net revenue |
| $1,102.4 |
Volume/weather1,253.0 | | 84.2 |
Provision for regulatory proceedings | | 26.1
|
| Retail electric price | 46.4 | 16.1
|
2009 capitalization of Ouachita Plant service chargesMISO deferral | 11.1 | 12.5 |
ANO decommissioning trust | | (24.4)
|
| Net wholesale revenue | 6.5 | (12.2)
|
| Volume/weather | (10.7 | ) |
| Asset retirement obligation | (10.4 | ) |
| Other | 5.6 | 12.0
|
20102013 net revenue |
| $1,216.7 1,301.5 |
|
The volume/weather variance is primarily due to an increase of 2,078 GWh, or 10%, in billed electricity usage. Usage in the industrial sector increased primarily in the small industrial customers segment, as well as in the petroleum refining, chemicals, industrial inorganic, and pulp and paper industries, reflecting strong sales growth on continuing signs of economic recovery. The effect of more favorable weather was the primary driver of the increase in residential and commercial sales.
The provision for regulatory proceedings variance is primarily due to provisions recorded in 2009. See Note 2 to the financial statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
The retail electric price variance is primarily due to a base rateto:
an increase effective July 2010, partially offset byin the recovery in 2009 of 2008 extraordinary storm costs,capacity acquisition rider, as approved by the APSC, which ceased in January 2010.effective with the first billing cycle of December 2012, relating to the Hot Spring plant acquisition. The net income effect of the Hot Spring plant cost recovery of stormis limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hot Spring plant costs is offset in other operation and maintenance expenses. See Note 2 toexpenses, depreciation expenses, and taxes other than income taxes; and
increases in the financial statements for more discussion ofenergy efficiency rider, as approved by the rate case settlementAPSC, effective July 2014 and the 2008 extraordinary storm costs.
In 2009, Entergy Arkansas capitalized $12.5 million of Ouachita Plant service charges that were previously expensed. The result of the capitalization in 2009 was a decrease in netJuly 2013. Energy efficiency revenues with an offsetting decreaseare largely offset by costs included in other operation and maintenance expenses.expenses and have minimal effect on net income.
The ANO decommissioning trustMISO deferral variance is due to the deferral in April 2013, as approved by the APSC, of costs incurred
from March 2010 through December 2012 related to the transition and implementation of joining the MISO RTO.
The net wholesale revenue variance is primarily relateddue to the deferral of investment gains from the ANO 1 and 2 decommissioning trust. The gains resulted in an increase in interest and investment income and a corresponding increase in regulatory charges with no effecthigher margins on net income in accordance with regulatory treatment.co-owner contracts.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The volume/weather variance is due to lower weather-adjusted usage across all sectors, partially offset by the effect of more favorable weather on residential sales. The decrease in the industry usage was primarily driven by the pulp and paper industry, the chemicals industry, and the food products industry.
The asset retirement obligation affects net wholesale revenue because Entergy Arkansas records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation related costs collected in revenue. The variance is primarily due to reduced margin on wholesale contracts including lower capacity billings to an affiliate for the Ouachita unit that was later purchasedcaused by the affiliate in November 2009, and lower margins on co-owner contracts, somewhat offset by lower wholesale energy costs.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
· | a decrease of $98.6 million in rider revenues primarily due to lower System Agreement payments in 2010; |
· | a decrease of $95.6 million in fuel cost recovery revenues due to a change in the energy cost recovery rider rate change effective April 2010; and |
· | a decrease of $72.5 million in gross wholesale revenue due to decreased sales to affiliated customers and the expiration of a wholesale customer contract in 2009. |
The decrease was offset by volume/weather, as discussed above.
Fuel and purchased power expenses decreased primarily due to a decrease in the average market priceregulatory credits because of purchased power.an increase in decommissioning trust earnings.
Other Income Statement Variances
20112014 Compared to 20102013
Other operation and maintenance expenses increased primarily due to:
· | an increase of $6.1a net increase of $26.4 million in energy efficiency costs, including a $4.3 million true-up to the 2013 energy efficiency filing for fixed costs collected from customers. These costs are recovered through the energy efficiency rider and have a minimal effect on net income;an increase of $21.2 million in nuclear generation expenses primarily due to higher material costs, higher nuclear labor costs, including contract labor, and higher NRC fees; an increase of $13.9 million in fossil-fueled generation costs due to higher fossil plant outage costs due to a greater scope of work in 2011; |
· | an increase of $3.9 million in transmission and distribution maintenance work in 2011; |
· | $3.5 million in contract costs due to the transition and implementation of joining the MISO RTO; and |
· | an increase of $3 million in nuclear expenses primarily due to higher labor and contract costs caused by several factors. |
The increase was offset by a $7.5 million decrease in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010 and a decrease in stock option expense.
Depreciation and amortization expenses decreased primarily due to a decrease in depreciation ratesstorm damage accruals effective January 2014, as a result of the rate case settlement agreement approved by the APSCAPSC;
an increase of $7.5 million in June 2010.administration fees in 2014 related to participation in the MISO RTO;
Other income decreased primarilyan increase of $7.2 million due to the investment gains onamortization in 2014 of human capital management costs that were deferred in 2013, as approved by the ANO 1 and 2 decommissioning trust in 2010, as discussed above in net revenue, and the carrying charges on storm restoration costs recorded in 2010 related to the January 2009 ice storm.APSC. See Note 2 to the financial statements for further discussion of the 2009 ice stormdeferral of these costs;
an increase of $5.2 million due to the amortization in 2014 of costs deferred in 2013 related to the transition and implementation of joining the MISO RTO, as discussed above; and
the effects of recording the final court decision in 2013 in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $3.2 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense.
The increase was partially offset by:
a decrease of $20.8 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 511 to the financial statements for further discussion of benefits costs;
a decrease of $9 million resulting from costs incurred in 2013 related to the generator stator incident at ANO, including an offset for insurance proceeds. See “ANO Damage, Outage, and NRC Reviews” below for further discussion of the August 2010 issuanceincident; and
a decrease of securitization bonds$8.6 million resulting from costs incurred in 2013 related to finance these costs.the now-terminated plan to spin off and merge the Utility’s transmission business.
Interest expense decreased primarily due to the refinancing of debt at lower interest rates.
2010 Compared to 2009
Other operationDepreciation and maintenanceamortization expenses increased primarily due to:to additions to plant in service, higher depreciation rates in 2014, as approved by the APSC, and the effects of recording the final court decision in 2013 in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $3.6 million of spent nuclear fuel storage costs previously recorded as depreciation expense.
· | an increase of $21.7 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefits costs; |
· | an increase of $6.2 million in vegetation and maintenance expenses; and |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Other income decreased primarily due to lower earnings in 2014 on decommissioning trust fund investments. There is no effect on net income as the trust fund earnings are offset by a corresponding amount of regulatory charges.
· | an increase of $5.4 million in nuclear expenses primarily due to higher labor costs, higher materials costs, and additional projects. |
2013 Compared to 2012
Nuclear refueling outage expenses decreased primarily due to lower costs associated with the most recent outage as compared to the previous outages.
Other operation and maintenance expenses increased primarily due to:
an increase of $24.3 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative, partially offset by the deferral, as approved by the APSC, of $21.8 million of these costs. See “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion;
an increase of $16.2 million in fossil-fueled generation expenses primarily due to the addition of the Hot Spring plant in November 2012;
an increase of $16.1 million in energy efficiency costs. These costs are recovered through the energy efficiency rider and have minimal effect on net income;
an increase of $10.8 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs; and
an increase of $9 million resulting from costs related to the generator stator incident at ANO, including an offset for expected insurance proceeds. See “ANO Damage, Outage, and NRC Reviews” below for further discussion of the incident.
The increase was partially offset by by:
a decrease of $19.4$4.6 million due to 2008 storm costs which were deferred per an APSC orderincurred in 2012 related to the transition and were recovered through revenuesimplementation of joining the MISO RTO. In April 2013, Entergy Arkansas began deferring these costs as approved by the APSC; and
the effects of recording the final court decision in 2009.2013 in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $3.2 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense.
Also, other operation and maintenance expenses include $8.6 million in 2013 and $13.3 million in 2012 of costs incurred related to the now terminated plan to spin off and merge the transmission business.
Depreciation and amortization expenses decreasedincreased primarily due to a decrease in depreciation rates as a resultthe acquisition of the rate case settlement agreement approvedHot Spring plant in November 2012, partially offset by the APSCeffects of recording the final court decision in June 2010.2013 in the Entergy Arkansas lawsuit against the U.S. Department of Energy related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $3.6 million of spent nuclear fuel storage costs previously recorded as depreciation expense.
Other income increased primarily due to the investmenthigher realized gains in 2013 on the ANO 1 and ANO 2 decommissioning trust discussed abovefund investments. There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Interest expense increased primarily due to:
the issuance of $200 million of 4.90% Series first mortgage bonds in net revenue.December 2012;
the issuance of $250 million of 3.05% Series first mortgage bonds bonds in May 2013; and
the issuance of $125 million of 4.75% Series first mortgage bonds in June 2013.
This increase was offset by the retirement, at maturity, of $300 million of 5.40% Series first mortgage bonds in August 2013.
Income Taxes
The effective income tax rates for 2011, 2010,2014, 2013, and 20092012 were 44.6%40.8%, 39.6%,36.2% and 55.0%38.4%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0%35% to the effective income tax rates.
LiquidityANO Damage, Outage, and Capital ResourcesNRC Reviews
On March 31, 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The turbine building serves both ANO 1 and 2 and is a non-radiological area of the plant. ANO 2 reconnected to the grid on April 28, 2013 and ANO 1 reconnected to the grid on August 7, 2013. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $95 million. In April 2011, several thunderstorms with either tornados or straight-line winds caused damage toaddition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014 the APSC approved Entergy Arkansas’s transmission and distribution lines, equipment poles, and other facilities. The incurredrequest to exclude from the calculation of its revised energy cost of repairing that damage is $70rate $65.9 million of which $19deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is operatingavailable.
Entergy Arkansas is pursuing its options for recovering damages that resulted from the stator drop, including its insurance coverage and maintenance costslegal action. Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that are chargedprovides property damage coverage to the members’ nuclear generating plants, including ANO. NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO. Entergy has responded that it disagrees with NEIL’s position and is evaluating its options for enforcing its rights under the policy. During 2014, Entergy Arkansas collected $50 million from NEIL and is pursuing additional recoveries due under the policy. On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the storm cost provision,owner of the heavy-lifting apparatus that collapsed, an engineering firm, a contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the remainder is capital investment.stator drop.
Cash FlowShortly after the stator incident, the NRC deployed an augmented inspection team to review the plant’s response. In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review.
Cash flows for the years ended December 31, 2011, 2010, and 2009 were as follows:
| | | | 2011 | | 2010 | | 2009 |
| | | | (In Thousands) |
| | | | | | | | |
| Cash and cash equivalents at beginning of period | | $106,102 | | $86,233 | | $39,568 |
| | | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| | Operating activities | | 564,124 | | 512,260 | | 384,192 |
| | Investing activities | | (503,524) | | (413,180) | | (281,512) |
| | Financing activities | | (144,103) | | (79,211) | | (56,015) |
| | Net increase (decrease) in cash and cash equivalents | | (83,503) | | 19,869�� | | 46,665 |
| | | | | | | | |
| Cash and cash equivalents at end of period | | $22,599 | | $106,102 | | $86,233 |
Operating Activities300
Cash flow from operations increased $51.9 million in 2011 primarily due to:
· | income tax refunds of $90 million in 2011 compared to income tax payments of $66.4 million in 2010. In 2011, Entergy Arkansas received tax cash refunds in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds result from a decrease in 2010 taxable income from what was previously estimated because of the recognition of additional repair expenses for tax purposes associated with a tax accounting change filed in 2010 and from the reversal of temporary differences for which Entergy Arkansas previously made cash tax payments; and |
· | a decrease of $16.6 million in pension contributions. See “Critical Accounting Estimates” below for a discussion of qualified pension and other postretirement benefits funding.
|
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
In May 2014 the NRC met with Entergy during a regulatory conference to discuss the preliminary red and yellow findings and Entergy’s response to the findings. During the regulatory conference, Entergy presented information on the facts and assumptions the NRC used to assess the potential findings. The NRC used the information provided by Entergy at the regulatory conference to finalize its decision regarding the inspection team’s findings. In a letter dated June 23, 2014, the NRC classified both findings as “yellow with substantial safety significance.” In an assessment follow-up letter for ANO dated July 29, 2014, the NRC stated that given the two yellow findings, it determined that the performance at ANO is in the “degraded cornerstone column,” or column 3, of the NRC’s reactor oversight process action matrix beginning the first quarter 2014. Corrective actions in response to the NRC’s findings have been taken and remain ongoing at ANO. The NRC plans to conduct supplemental inspection activity to review the actions taken to address the yellow findings. Entergy will continue to interact with the NRC to address the NRC’s findings.
In September 2014 the NRC issued an inspection report on the flood barrier effectiveness issue that was still under review at the time of the March 2014 inspection report. While Entergy believes that the flood barrier issues that led to the finding have been addressed at ANO, NRC processes still required that the NRC assess the safety significance of the deficiencies. In its September 2014 inspection report, the NRC discussed a preliminary finding of “yellow with substantial safety significance” for the Unit 1 and Unit 2 auxiliary and emergency diesel fuel storage buildings. The NRC indicated that these preliminary findings may warrant additional regulatory oversight. Entergy requested a public regulatory conference regarding the inspection, and the conference was held on October 28, 2014. During the regulatory conference, Entergy presented information related to the facts and assumptions used by the NRC in arriving at its preliminary finding of “yellow with substantial safety significance.” In January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.”
The increase was offset by under-recoveryNRC’s January 2015 letter did not advise ANO of fuel costs and spending resultingthe additional level of oversight that will result from the April 2011 storms discussed above.yellow finding related to the flood barrier issue, and it stated that the NRC would inform ANO of this decision by separate correspondence. The yellow finding may result in ANO being placed into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column would require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2014, 2013, and 2012 were as follows:
|
| | | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $127,022 |
| |
| $34,533 |
| |
| $22,599 |
| |
| | | | | | | |
| Net cash provided by (used in): | | | |
| | |
| |
| Operating activities | 403,826 |
| | 401,250 |
| | 509,117 |
| |
| Investing activities | (600,628 | ) | | (524,473 | ) | | (723,248 | ) | |
| Financing activities | 288,285 |
| | 215,712 |
| | 226,065 |
| |
| Net increase in cash and cash equivalents | 91,483 |
| | 92,489 |
| | 11,934 |
| |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $218,505 |
| |
| $127,022 |
| |
| $34,533 |
| |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Operating Activities
Net cash flow from operationsprovided by operating activities increased $128.1$2.6 million in 20102014 primarily due to:
income tax refunds of $48.9 million in 2014 compared to 2009 primarily due to an increase in net revenue as discussed above, ice storm spending in 2009, and the collectionincome tax payments of previously under-recovered fuel costs through the normal operation of the energy cost recovery rider. The increase was offset by an increase of $112$184.6 million in pension contributions, and an increase of $65 million in2013. Entergy Arkansas received income tax payments. See “Critical Accounting Estimates” below for a discussion of qualified pension and other postretirement benefits funding. In 2010 Entergy Arkansas made tax paymentsrefunds in 2014 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax refunds in 2014 resulted primarily from the utilization of Entergy Arkansas’s net operating losses by the consolidated group whereas the income tax payments in 2013 resulted primarily from the reversal of temporary differences for which Entergy Arkansas had previously claimed a tax deduction;
approximately $25 million in spending in 2013 related to the generator stator incident at ANO, as discussed
above; and
$13.4 million in insurance proceeds received in 2014 for property damages related to the generator stator
incident at ANO, as discussed above.
The increase was partially offset by:
a decrease in the recovery of fuel and purchased power costs including a $68 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period and a $33.7 million System Agreement bandwidth remedy payment made in September 2014 as a result of the compliance filing pursuant to the FERC’s orders related to the bandwidth payments/receipts for the comprehensive recalculation for 2007, 2008, and 2009. See Note 2 to the financial statements for a discussion of the System Agreement bandwidth remedy payments;
an increase of $60.1 million in pension contributions in 2014. See “Critical Accounting Estimates”below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding;
proceeds of $38 million received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel;
the timing of payments to vendors; and
an increase of $24.6 million in storm spending in 2014.
Net cash tax benefits and from estimated federal flow provided by operating activities decreased $107.9 million in 2013 primarily due to:
income tax payments of $184.6 million in 2013 compared to income tax refunds of $20.5 million in 2012. Entergy Arkansas had income tax payments in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax payments in 2013 resulted primarily from the reversal of temporary differences for which Entergy Arkansas had previously claimed a tax year 2010.deduction;
approximately $25 million in spending related to the generator stator incident at ANO, as discussed above;
$22.6 million in storm restoration spending in 2013 resulting from the December 2012 winter storm which caused significant damage to Entergy Arkansas’s distribution lines, equipment, poles and other facilities; and
a decrease in the recovery of fuel and purchased power costs.
The decrease was partially offset by:
proceeds of $38 million associated with the payments received in 2013 from the U.S. Department of Energy resulting from litigation regarding the storage of spent nuclear fuel; and
the $30.6 million June 2012 refund to AmerenUE, including interest, in rough production cost equalization payments previously collected from Ameren UE .
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $90.3$76.2 million in 20112014 primarily due to to:
an increase of $66.3$101.4 million storm spending in 2014;
fluctuations in nuclear fuel purchases primarily dueactivity because of variations from year to year in the purchasetiming and pricing of nuclear fuel inventory from System Fuels becausereload requirements in the Utility companies will now purchase nuclear fuel throughoutbusiness, material and services deliveries, and the timing of cash payments during the nuclear fuel procurement cycle, rather than purchasing itcycle; and
proceeds of $10.3 million received in 2013 from System Fuels at the timeU.S. Department of refueling. The increase is also due to $51 million in storm restoration spendingEnergy resulting from litigation regarding the April storms as discussed above, and $30 million in transmission substation reliability work in 2011. storage of spent nuclear fuel.
The increasedecrease was partially offset by by:
approximately $69 million in spending in 2013 related to the generator stator incident at ANO, as discussed above;
$36.6 million in insurance proceeds received in 2014 for property damages related to the generator stator incident at ANO, as discussed above; and
money pool activity.
Decreases in Entergy Arkansas’s receivable from the money pool are a source of cash flow, and Entergy Arkansas’s receivable from the money pool decreased by $24.1$15.3 million in 20112014 as compared to increasing by $12.6$9.5 million in 2010.2013. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities increased $131.7decreased $198.8 million in 2010 compared to 20092013 primarily due to:
· | the sale to Entergy Gulf States Louisiana of one-third of the Ouachita plant for $75 million in 2009; |
· | proceeds from the sale/leaseback of nuclear fuel of $118.6 million in 2009. See Note 18 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interest entity effective January 1, 2010; and |
· | increases in nuclear construction expenditures primarily due to the ANO 1 reactor coolant pump upgrade project and security upgrades. |
to the purchase of the Hot Spring Energy Facility for approximately $253 million in November 2012 and fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle. See Note 15 to the financial statements for a discussion of the purchase of the Hot Spring Energy Facility.
The increasedecrease was partially offset by a decreaseby:
approximately $69 million in distribution construction expendituresspending related to the generator stator incident at ANO, as a result of an icediscussed above;
$39.6 million in storm hittingrestoration spending in 2013 resulting from the December 2012 winter storm;
$7.6 million in storm restoration spending in 2013 resulting from the December 2013 winter storm; and
money pool activity.
Increases in Entergy Arkansas’s service territoryreceivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased by $9.5 million in the first quarter 2009.2013 as compared to decreasing by $9.3 million in 2012.
Financing Activities
Net cash flow used inprovided by financing activities increased $64.9$72.6 million in 20112014 primarily due to:
· | the issuance of $575 million of first mortgage bonds by Entergy Arkansas and $124.1 million of storm cost recovery bonds by Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, in 2010 compared to the issuance of the $55 million Series J note by the nuclear fuel company variable interest entity in 2011; and |
the issuance of $375 million of 3.70% Series first mortgage bonds in March 2014;· | a decrease in borrowings on the nuclear fuel company variable interest entity’s credit facility. |
the retirement, at maturity, of $300 million of 5.40% Series first mortgage bonds in August 2013;
the issuance of $90 million of 9% Series L notes by the nuclear fuel company variable interest entity in July 2014;
The increase was offset by:the issuance of $250 million of 4.95% Series first mortgage bonds in December 2014;
net borrowings of $48 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2014 compared to net repayments of $36.7 million in 2013;
· | the retirement of $450 million of first mortgage bonds and $139.5 million of pollution control revenue bonds in 2010 compared to the retirement of the $35 million Series G note by the nuclear fuel company variable interest entity in 2011; and |
· | a decrease of $55.6 million in common stock dividends in 2011. |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
the retirement, at maturity, of $30 million of 9% Series H notes by the nuclear fuel company variable interest entity in June 2013; and
Net cash flow used in financing activities increased $23.2a decrease of $5 million in 2010 compared to 2009 primarily due to:
· | retirements of $450 million of first mortgage bonds in 2010; |
· | retirements of $139.5 million of pollution control bonds in 2010; and |
· | an increase of $125.1 million in common stock dividends paid in 2010. |
common stock dividends paid in 2014.
The increase was partially offset by:
· | issuances of $575 million of first mortgage bonds in 2010; and |
borrowings on a $250 million term loan credit facility entered into in July 2013 and its repayment, prior to maturity, in March 2014;· | the issuance in August 2010 of $124.1 million of storm cost recovery bonds by Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas. |
the issuance of $250 million of 3.05% Series first mortgage bonds in May 2013;the issuance of $125 million of 4.75% Series first mortgage bonds in June 2013;
the retirement, prior to maturity, of $115 million of 5.0% Series first mortgage bonds in April 2014; and
the retirement, at maturity, of $70 million of 5.69% Series I notes by the nuclear fuel company variable interest entity in July 2014.
Net cash provided by financing activities decreased $10.4 million in 2013 primarily due to:
the retirement, at maturity, of $30 million of 9% Series H notes by the nuclear fuel company variable interest entity in June 2013;
the retirement, at maturity, of $300 million of 5.40% Series first mortgage bonds in August 2013;
the issuance of $200 million of 4.9% Series first mortgage bonds in December 2012;
the issuance of $60 million of 2.62% Series K notes by the nuclear fuel company variable interest entity in December 2012; and
the net repayment of $36.7 million of borrowings on the nuclear fuel company variable interest entity credit facility in 2013 compared to net borrowings of $2.8 million in 2012.
The decrease was partially offset by:
the issuance of $250 million of 3.05% Series first mortgage bonds in May 2013 and $125 million of 4.75% Series first mortgage bonds in June 2013; and
borrowings on a $250 million term loan credit facility entered into in July 2013.
See Note 5 to the financial statements for details of long-term debt.
Capital Structure
Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table. The
increase in the debt to capital ratio for Entergy Arkansas is primarily due to an increase in long-term debt as a result of the issuance of $375 million of 3.70% Series first mortgage bonds in March 2014.
|
| | | |
| | December 31,
2014 | | December 31,
2013 |
| Debt to capital | 58.4% | | 56.7% |
| Effect of excluding the securitization bonds | (0.7%) | | (0.9%) |
| Debt to capital, excluding securitization bonds (a) | 57.7% | | 55.8% |
| Effect of subtracting cash | (2.2%) | | (1.4%) |
| Net debt to net capital, excluding securitization bonds (a) | 55.5% | | 54.4% |
| | | December 31, 2011 | | December 31, 2010 |
| | | | | |
| Debt to capital | | 55.0% | | 55.9% |
| Effect of excluding the securitization bonds | | (1.5)% | | (1.6)% |
| Debt to capital, excluding securitization bonds (1) | | 53.5% | | 54.3% |
| Effect of subtracting cash | | (0.3)% | | (1.5)% |
| Net debt to net capital, excluding securitization bonds (1) | | 53.2% | | 52.8% |
(1) | |
| (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 notes payable, capital lease obligations,short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratios
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
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. 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.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 of Capital
Entergy Arkansas requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred stock maturities or retirements; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Following are the amounts of Entergy Arkansas’s planned construction and other capital investments,investments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | |
| | |
|
| Generation |
| $405 |
| |
| $155 |
| |
| $235 |
|
| Transmission | 255 |
| | 130 |
| | 80 |
|
| Distribution | 195 |
| | 180 |
| | 165 |
|
| Other | 35 |
| | 20 |
| | 20 |
|
| Total |
| $890 |
| |
| $485 |
| |
| $500 |
|
Following are the amounts of Entergy Arkansas’s existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019
| | after 2020 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $105 |
| |
| $378 |
| |
| $203 |
| |
| $3,963 |
| |
| $4,649 |
|
| Operating leases |
| $28 |
| |
| $40 |
| |
| $22 |
| |
| $9 |
| |
| $99 |
|
| Purchase obligations (b) |
| $760 |
| |
| $986 |
| |
| $761 |
| |
| $1,694 |
| |
| $4,201 |
|
| | | 2012 | | 2013-2014 | | 2015-2016 | | after 2016 | | Total | |
| | | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | | | |
| Generation | | $359 | | $207 | | N/A | | N/A | | $566 | |
| Transmission | | 117 | | 242 | | N/A | | N/A | | 359 | |
| Distribution | | 122 | | 254 | | N/A | | N/A | | 376 | |
| Other | | 26 | | 37 | | N/A | | N/A | | 63 | |
| Total | | $624 | | $740 | | N/A | | N/A | | $1,364 | |
| Long-term debt (2) | | $84 | | $538 | | $175 | | $2,070 | | $2,867 | |
| Capital lease payments | | $0.2 | | $0.5 | | $0.2 | | $- | | $0.9 | |
| Operating leases | | $23 | | $42 | | $29 | | $5 | | $99 | |
| Purchase obligations (3) | | $646 | | $1,201 | | $618 | | $1,792 | | $4,257 | |
(1) | Includes approximately $234 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Arkansas, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which isare discussed in Note 8 to the financial statements. |
In addition to the contractual obligations given above, Entergy Arkansas currently expects to contribute approximately $31.9$92.5 million to its pension plans and approximately $26.7$16.9 million to other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015. See “Critical Accounting Estimates– Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding.
Also in addition to the contractual obligations, Entergy Arkansas has $113.1$1.9 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
TheIn addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Arkansas reflects capital requiredincludes specific investments, such as the Union Power Station acquisition discussed below; NRC post-Fukushima requirements; environmental compliance spending, including potential scrubbers at White Bluff to support existing businessmeet pending Arkansas state requirements under the Clean Air Visibility Rule; transmission projects to enhance reliability, reduce congestion, and customer growth. Entergy’s Utility supply plan initiative will continue to seek to transform itsenable economic growth; resource planning; generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimatedprojects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, requirements, and oversight, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital, and the outcome of Entergy Arkansas’s exit from the Entergy System Agreement (which is discussed in “System Agreement” in the “Rate, Cost-recovery, and Other Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis).capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Arkansas pays dividends to Entergy Corporation from its earnings at a percentage determined monthly. Entergy Arkansas’s long-term debt indentures restrictindenture restricts the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock. As of December 31, 2011,2014, Entergy Arkansas had restricted retained earnings unavailable for distribution to Entergy Corporation of $394.9 million.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Hot Spring Energy FacilityUnion Power Station Purchase Agreement
In April 2011,December 2014, Entergy Arkansas, announced that it signedEntergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Hot Spring Energy Facility,Union Power Station, a 6201,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine plant locatedpower blocks, each rated at 495 MW (summer rating). Pursuant to the agreement, Entergy Gulf States Louisiana will acquire two of the power blocks and a 50% undivided ownership interest in Hot Spring County,certain assets related to the facility, and Entergy Arkansas fromand Entergy Texas will each acquire one power block and a subsidiary25% undivided ownership interest in such related assets. (If Entergy Arkansas or Entergy Texas do not obtain approval for the purchase of KGen Power Corporation.their power blocks, Entergy Gulf States Louisiana will seek to purchase the power blocks not approved.) The base purchase price is expected to be approximately $253 million.$948 million (approximately $237 million for each power block) subject to adjustments. In addition, Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total costGulf States Louisiana anticipates selling 20% of the acquisition, including plant upgrades, transaction costs,capacity and contingencies, to be approximately $277 million. A new transmission service request has been submitted to the ICT to determine if investments for supplemental upgrades in the Entergy transmission system are needed to make energy from the Hot Spring Energy Facility deliverableassociated with its two power blocks to Entergy Arkansas for the period after Entergy Arkansas exits the System Agreement. The initial results of the service request were received in January 2012 and indicate that available transfer capability does not exist with existing transmission facilities and that upgrades are required. The studies do not provideNew Orleans through a final and definitive indication of what those upgrades would be. Entergy Arkansas has submitted transmission service requests for facilities studies which, when performed by the ICT, will provide more detailed estimates of the transmission upgrades and the associated costs required to obtain network service for the Hot Spring plant. Accordingly there are still uncertainties that must be resolved.cost-based, life-of-unit power purchase agreement. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC, LPSC, PUCT, and the FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In February 2012December 2014, Entergy Texas filed its application with the FERC issued an order approvingPUCT for approval of the acquisition. Closing is expectedThe PUCT has indicated that it will convene the hearing on the merits of this case in June 2015. Entergy Texas intends to occurfile a rate application to seek cost recovery later in mid-2012.
2015. In July 2011,January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, requestingeach for approval of the acquisition and full cost recovery. In January 2012, Entergy Arkansas, the APSC General Staff, and the Arkansas Attorney General filed a MotionClosing is targeted to Suspend the Procedural Schedule and Joint Stipulation and Settlement for consideration by the APSC. Under the settlement, the parties agreed that the acquisition costs may be recovered through a capacity acquisition rider and agreed that the level of the return on equity reflectedoccur in the rider would be submitted to the APSC for resolution. Because the transmission upgrade costs remain uncertain, the parties requested that the APSC suspend the procedural schedule and cancel the hearing scheduled for January 24, 2012, pending resolution of the transmission costs. The APSC issued an order accepting the settlement as part of the record and directing Entergy Arkansas to file the transmission studies when available and directing the parties to propose a procedural schedule to address the results of those studies.late-2015.
Sources of Capital
Entergy Arkansas’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Entergy Arkansas may refinance, redeem, or otherwise retire debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred stock issuances by Entergy Arkansas require prior regulatory approval. Preferred stock and debt issuances are also subject to issuance tests set forth in Entergy Arkansas’s corporate charters, bond indentures, and other agreements. Entergy Arkansas has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Entergy Arkansas’s receivables from the money pool were as follows as of December 31 for each of the following years:years.
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $2,218 | | $17,531 | | $8,035 | | $17,362 |
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| $17,362 | | $41,463 | | $28,859 | | $15,991 |
Entergy Arkansas has credit facilities in the amount of $20 million and $150 million scheduled to expire in April 2015 and March 2019, respectively. The $150 million credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2014, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In April 2011,addition, Entergy Arkansas entered into a new $78 millionan uncommitted letter of credit facility that expires in April 2012. There were no outstanding borrowings2014 as a means to post collateral to support its obligations under the Entergy Arkansas credit facility asMISO. As of December 31, 2011.2014, a $2 million letter of credit was outstanding under Entergy Arkansas’s letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $85 million scheduled to expire in June 2016. As of December 31, 2014, $48 million was outstanding on the credit facility. See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facility.
Entergy Arkansas obtained short-term borrowing authorizationauthorizations from the FERC under which it may borrow through October 2013, up2015 for short-term borrowings not to theexceed an aggregate amount of $250 million at any one time outstanding of $250 million.and long-term borrowings by its nuclear fuel company variable interest entity. See Note 4 to the financial statements for further discussion of Entergy Arkansas’s short-term borrowing limits. Entergy Arkansas has also obtained an order from the APSC authorizingThe long-term securities issuances of Entergy Arkansas are limited to amounts authorized by the APSC and the Tennessee Regulatory Authority; the current authorizations extend through December 2012.2015.
In March 2014, Entergy Arkansas issued $375 million of 3.70% Series first mortgage bonds due June 2024. Entergy Arkansas used the proceeds to pay, prior to maturity, its $250 million term loan, to pay, prior to maturity, its $115 million of 5.0% Series first mortgage bonds due July 2018, and for general corporate purposes.
In July 2014 the Entergy Arkansas nuclear fuel trust variable interest entity issued $90 million of 3.65% Series L notes due July 2021. The Entergy Arkansas nuclear fuel trust variable interest entity used the proceeds to pay, at maturity, its $70 million of 5.69% Series I notes due July 2014 and to purchase additional nuclear fuel.
In December 2014, Entergy Arkansas issued $250 million of 4.95% Series first mortgage bonds due December 2044. Entergy Arkansas used the proceeds for general corporate purposes.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
State and Local Rate Regulation and Fuel-Cost Recovery
Retail Rates
20092013 Base Rate Filing
In September 2009,March 2013, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing assumed Entergy Arkansas’s transition to MISO in December 2013, and requested a rate increase of $174 million, including $49 million of revenue being transferred from collection in riders to base rates. The filing also proposed a new transmission rider and a capacity cost recovery rider. The filing requested a 10.4% return on common equity. In June 2010September 2013, Entergy Arkansas filed testimony reflecting an updated rate increase request of $145 million, with no change to its requested return on common equity of 10.4%. Hearings in the proceeding began in October 2013, and in December 2013 the APSC approvedissued an order. The order authorized a settlement and subsequent compliance tariffs that provide for a $63.7 millionbase rate increase effective for bills rendered forof $81 million and included an authorized return on common equity of 9.3%. The order allows Entergy Arkansas to amortize its human capital management costs over a three-and-a-half year period, but also orders Entergy Arkansas to file a detailed report of the Arkansas-specific costs, savings and final payroll changes upon conclusion of the human capital management strategic imperative. The detailed report was subsequently filed in February 2015. The substance of the report will be addressed in Entergy Arkansas’s next base rate filing. New rates were implemented in the first billing cycle of July 2010. The settlement providesMarch 2014, effective as of January 2014. Additionally, in January 2014, Entergy Arkansas filed a petition for a 10.2%rehearing or clarification of several aspects of the APSC’s order, including the 9.3% authorized return on common equity. In February 2014 the APSC granted Entergy Arkansas’s petition for the purpose of considering the additional evidence identified by Entergy Arkansas. In August 2014 the APSC issued an order amending certain aspects of the original order, including providing for a 9.5% authorized return on common equity. Pursuant to the August 2014 order, revised rates are effective for all bills rendered after December 31, 2013 and were implemented in the first billing cycle of October 2014.
On January 30, 2015, Entergy Arkansas filed with the APSC a notice of intent to file a rate case within 60 to 90 days.
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
See Note 2 to the financial statements and Entergy Corporation and Subsidiaries “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -System Agreement” for discussions of the System Agreement proceedings.
In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In June 2014 the APSC suspended the annual redetermination of the production cost allocation rider and scheduled a hearing in September 2014. Upon a joint motion of the parties, the APSC canceled the September 2014 hearing and in January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect the first billing cycle of February 2015.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly customer bills. The rider utilizes the prior calendar yearcalendar-year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recoveryover- or under-recovery, including carrying charges, of the energy costcosts for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In early October 2005 the APSC initiated an investigation into Entergy Arkansas'sArkansas’s interim energy cost recovery rate. The investigation focused on Entergy Arkansas'sArkansas’s 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006 the APSC extended its investigation to cover the costs included in Entergy Arkansas'sArkansas’s March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resultingthat resulted from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60sixty days of the order. After a final determination of the costs is made by the APSC, Entergy Arkansas wouldwill be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas’s rehearing petition and because the value for Entergy Arkansas’s customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas’s rehearing request and the unresolved issues in the proceeding. The APSC ordered the parties to submit their unresolved issues list in the pending proceeding, which the parties did. In February 2010 the APSC denied Entergy Arkansas’s request for rehearing, and held a hearing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concluded with testimony through September 2010. TestimonyThe testimony has been filed, and the APSC will decide the case based on the record in the proceeding, includingproceeding.
In January 2014, Entergy Arkansas filed a motion with the prefiled testimony.APSC relating to its redetermination of its energy cost rate to be filed in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude $65.9 million of deferred fuel and purchased energy costs incurred in 2013 from the redetermination of its 2014 energy cost rate. The $65.9 million is an estimate of the incremental fuel and replacement energy costs that Entergy Arkansas incurred as a result of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in its deferred fuel balance, with recovery to be reviewed in a later period after more information is available regarding various claims associated with the ANO stator incident. The APSC approved Entergy Arkansas’s request in February 2014. See the “ANO Damage, Outage, and NRC Reviews” section above for further discussion of the ANO stator incident.
Storm Cost Recovery
Entergy Arkansas January 2009 IceDecember 2012 Winter Storm
In January 2009,December 2012 a severe winter storm consisting of ice, stormsnow, and high winds caused significant damage to Entergy Arkansas’s transmission and distribution lines, equipment, poles, and other facilities. A law was enactedTotal restoration costs for the repair and/or replacement of Entergy Arkansas’s electrical facilities in April 2009areas damaged from the winter storm were $63 million,
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
including costs recorded as regulatory assets of approximately $22 million. In the Entergy Arkansas 2013 rate case, the APSC approved inclusion of the construction spending in Arkansas that authorizes securitization ofrate base and approved an increase in the normal storm damage restoration costs. cost accrual, which will effectively amortize the regulatory asset over a five-year period.
Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds. In July 2009, the Utility operating companies filed a response to the complaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explained that the FERC already had determined that Entergy Arkansas’s short-term wholesale sales did not trigger the “right-of-first-refusal” provision of the System Agreement. While the D.C. Circuit recently determined that the “right-of-first-refusal” issue was not properly before the FERC at the time of its earlier decision on the issue, the LPSC raised no additional claims or facts that would warrant the FERC reaching a different conclusion.
The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers and these customers should be compensated for this harm by Entergy. In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills. The Utility operating companies believe the LPSC’s allegations are without merit. A hearing in the matter was held in August 2010.
In December 2010, the APSCALJ issued an initial decision. The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest. Entergy disagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision.
The FERC issued a financing order authorizingdecision in June 2012 and held that, while the issuance of storm cost recovery bonds, including carrying costs of $11.5 millionSystem Agreement is ambiguous, it does provide authority for individual Utility operating companies to make opportunity sales for their own account and $4.6 million of up-front financing costs. In August 2010, Entergy Arkansas Restoration Funding, LLC,made and priced these sales in good faith. The FERC found, however, that the System Agreement does not provide authority for an individual Utility operating company to allocate the energy associated with such opportunity sales as part of its load, but provides a company wholly-owneddifferent allocation authority. The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the sales was inconsistent with the System Agreement. Quantifying the effect of the FERC’s decision will require re-running intra-system bills for a ten-year period, and consolidatedthe FERC in its decision established further hearing procedures to determine the calculation of the effects. In July 2012, Entergy and the LPSC filed requests for rehearing of the FERC’s June 2012 decision, which are pending with the FERC.
As required by the procedural schedule established in the calculation proceeding, Entergy filed its direct testimony that included a proposed illustrative re-run, consistent with the directives in FERC’s order, of intra-system bills for 2003, 2004, and 2006, the three years with the highest volume of opportunity sales. Entergy’s proposed illustrative re-run of intra-system bills shows that the potential cost for Entergy Arkansas would be up to $12 million
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
for the years 2003, 2004, and 2006, excluding interest, and the potential benefit would be significantly less than that for each of the other Utility operating companies. Entergy’s proposed illustrative re-run of the intra-system bills also shows an offsetting potential benefit to Entergy Arkansas for the years 2003, 2004, and 2006 resulting from the effects of the FERC’s order on System Agreement Service Schedules MSS-1, MSS-2, and MSS-3, and the potential offsetting cost would be significantly less than that for each of the other Utility operating companies. Entergy provided to the LPSC an illustrative intra-system bill recalculation as specified by the LPSC for the years 2003, 2004, and 2006, and the LPSC then filed answering testimony in December 2012. In its testimony the LPSC claims that the damages, excluding interest, that should be paid by Entergy Arkansas issued $124.1 million of storm cost recovery bonds. See Note 5 to the financial statementsother Utility operating company’s customers for additional discussion2003, 2004, and 2006 are $42 million to Entergy Gulf States, Inc., $7 million to Entergy Louisiana, $23 million to Entergy Mississippi, and $4 million to Entergy New Orleans. The FERC staff and certain intervenors filed direct and answering testimony in February 2013. In April 2013, Entergy filed its rebuttal testimony in that proceeding, including a revised illustrative re-run of the issuanceintra-system bills for the years 2003, 2004, and 2006. The revised calculation determines the re-pricing of the stormopportunity sales based on consideration of moveable resources only and the removal of exchange energy received by Entergy Arkansas, which increases the potential cost recovery bonds.for Entergy Arkansas over the three years 2003, 2004, and 2006 by $2.3 million from the potential costs identified in the Utility operating companies’ prior filings in September and October 2012. A hearing was held in May 2013 to quantify the effect of repricing the opportunity sales in accordance with the FERC’s decision.
In August 2013 the presiding judge issued an initial decision in the calculation proceeding. The initial decision concludes that the methodology proposed by the LPSC, rather than the methodologies proposed by Entergy or the FERC Staff, should be used to calculate the payments that Entergy Arkansas is to make to the other Utility operating companies. The initial decision also concludes that the other System Agreement service schedules should not be adjusted and that payments by Entergy Arkansas should not be reflected in the rough production cost equalization bandwidth calculations for the applicable years. The initial decision does recognize that the LPSC’s methodology would result in an inequitable windfall to the other Utility operating companies and, therefore, concludes that any payments by Entergy Arkansas should be reduced by 20%. The Utility operating companies are currently analyzing the effects of the initial decision. The LPSC, APSC, City Council, and FERC staff filed briefs on exceptions and/or briefs opposing exceptions. Entergy filed a brief on exceptions requesting that FERC reverse the initial decision and a brief opposing certain exceptions taken by the LPSC and FERC staff. The FERC’s review of the initial decision is pending. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
Nuclear Matters
Entergy Arkansas owns and operates, through an affiliate, the ANO 1 and ANO 2 nuclear power plants. Entergy Arkansas is, therefore, subject to the risks related to owning and operating nuclear plants. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of either ANO 1 or ANO 2, Entergy Arkansas may be required to file with the APSC a rate mechanism to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials associated with components within the reactor coolant system. The issue is applicable to ANO and is managed in accordance with industry standard practices and guidelines and includesthat include in-service examinations, replacementreplacements, and mitigation strategy. Several major modifications tostrategies. Developments in the ANOindustry or identification of issues at the nuclear units have been implemented to mitigate the susceptibility of large bore dissimilar metal welds. In addition, a replacement reactor vessel head has been fabricated for ANO 2 and is onsite. Routine inspections of the existing ANO 2 reactor vessel head have identified no significant material degradation issues forcould require unanticipated remediation efforts that component. These inspections will continue at planned refueling outages. Timing for installation of the new reactor vessel head willcannot be based on the results of future inspection efforts.quantified in advance.
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The task force issued a near termnear-term (90-day) report in July 2011 that has made initial recommendations, which are currently being evaluated by the NRC. It is anticipated that the NRC will issue certain orderswere subsequently refined and requests for information to nuclear plant licensees by the end of the first quarter 2012 that will begin to implementprioritized after input from stakeholders. The task force then issued a second report in September 2011. Based upon the task force’s recommendations. Theserecommendations, the NRC issued three orders mayeffective on March 12, 2012. The three orders require U.S. nuclear operators including Entergy, to undertake plant modifications orand perform additional analyses that could,will, among other things, result in increased costsoperating and capital requirementscosts associated with operating Entergy’s nuclear plants. The NRC, with input from the industry, is continuing to determine the specific actions required by the orders. Entergy Arkansas’s estimated capital expenditures for 2015 through 2017 for complying with the NRC orders are included in the planned construction and other capital investments estimates given in “Liquidity and Capital Resources - Uses of Capital” above.
Environmental Risks
Entergy Arkansas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Arkansas is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of Entergy Arkansas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Arkansas’s financial position or results of operations.
Nuclear Decommissioning Costs
See “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
In 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $47.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Arkansas records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsArkansas’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Qualified Projected Benefit Obligation |
| | | Increase/(Decrease) | |
| | | | | | | | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $2,964 | | $37,338 | | (0.25%) | | $3,172 | | $51,882 |
| Rate of return on plan assets | | (0.25%) | | $1,837 | | - | | (0.25%) | | $2,153 | | $— |
| Rate of increase in compensation | | 0.25% | | $1,218 | | $6,706 | | 0.25% | | $1,238 | | $7,401 |
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $749 | | $10,813 |
| Health care cost trend | | 0.25% | | $1,378 | | $8,340 | | 0.25% | | $1,276 | | $9,378 |
| Discount rate | | (0.25%) | | $972 | | $10,175 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy Arkansas in 20112014 was $33.7$42.4 million. Entergy Arkansas anticipates 20122015 qualified pension cost to be approximately $53$62.7 million. Entergy Arkansas’sArkansas contributed $95.5 million to its pension plan in 2014 and estimates 2015 pension contributions to the pension trust were $120.4 million in 2011 and are currently estimated to be approximately $31.9$92.5 million, in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costsincome for Entergy Arkansas in 2011 were $17 million, including $6.3 million in savings due to the estimated effect of future Medicare Part D subsidies.2014 was $2.1 million. Entergy Arkansas expects 20122015 postretirement health care and life insurance benefit costs to approximate $18.1 million, including $5.8 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Arkansas expects to contribute approximately $26.7 million to other postretirement plans in 2012.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
$3.2 million. Entergy Arkansas contributed $15.3 million to its other postretirement plans in 2014 and expects to contribute approximately $16.9 million in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $106.9 million in the qualified pension benefit obligation and $16 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $15.4 million and other postretirement cost by approximately $2.2 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
(Page left blank intentionally)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Arkansas, Inc. and Subsidiaries
Little Rock, Arkansas
We have audited the accompanying consolidated balance sheets of Entergy Arkansas, Inc. and Subsidiaries (the “Company”) as of December 31, 20112014 and 2010,2013, and the related consolidated income statements, consolidated statements of cash flows, and consolidated statements of changes in common equity (pages 274316 through 278320 and applicable items in pages 53page 61 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Arkansas, Inc. and Subsidiaries as of December 31, 20112014 and 2010,2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
| | | | | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | | CONSOLIDATED INCOME STATEMENTS |
| | | | | | | | | | | | |
| | | For the Years Ended December 31, | | | For the Years Ended December 31, |
| | | 2011 | | | 2010 | | | 2009 | | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | | | | | | | |
| Electric | | $ | 2,084,310 | | | $ | 2,082,447 | | | $ | 2,211,263 | | |
| $2,172,391 |
| |
| $2,190,159 |
| |
| $2,127,004 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | |
| | |
| | |
|
| Operation and Maintenance: | | | | | | | | | | | | | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and | | | | | | | | | | | | | |
| gas purchased for resale | | | 186,036 | | | | 378,699 | | | | 298,219 | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | 327,695 |
| | 426,316 |
| | 480,464 |
|
| Purchased power | | | 659,464 | | | | 485,447 | | | | 795,526 | | | 528,815 |
| | 473,326 |
| | 431,932 |
|
| Nuclear refueling outage expenses | | | 42,557 | | | | 41,800 | | | | 42,148 | | | 43,258 |
| | 40,499 |
| | 47,103 |
|
| Other operation and maintenance | | | 511,592 | | | | 495,443 | | | | 475,222 | | | 647,461 |
| | 592,892 |
| | 545,782 |
|
| Decommissioning | | | 38,064 | | | | 35,790 | | | | 34,575 | | | 46,972 |
| | 43,058 |
| | 40,484 |
|
| Taxes other than income taxes | | | 82,847 | | | | 85,564 | | | | 80,829 | | | 91,470 |
| | 89,471 |
| | 89,527 |
|
| Depreciation and amortization | | | 218,902 | | | | 232,085 | | | | 252,742 | | | 236,770 |
| | 230,512 |
| | 222,734 |
|
| Other regulatory charges (credits) - net | | | (13,506 | ) | | | 1,603 | | | | 15,161 | | |
| Other regulatory credits - net | | | (20,054 | ) | | (10,975 | ) | | (38,406 | ) |
| TOTAL | | | 1,725,956 | | | | 1,756,431 | | | | 1,994,422 | | | 1,902,387 |
| | 1,885,099 |
| | 1,819,620 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | | 358,354 | | | | 326,016 | | | | 216,841 | | | 270,004 |
| | 305,060 |
| | 307,384 |
|
| | | | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | | 7,660 | | | | 4,118 | | | | 5,219 | | | 7,238 |
| | 10,913 |
| | 9,070 |
|
| Interest and investment income | | | 16,533 | | | | 46,363 | | | | 19,321 | | | 23,075 |
| | 30,148 |
| | 15,169 |
|
| Miscellaneous - net | | | (4,172 | ) | | | (1,743 | ) | | | (3,569 | ) | | (5,144 | ) | | (4,275 | ) | | (4,049 | ) |
| TOTAL | | | 20,021 | | | | 48,738 | | | | 20,971 | | | 25,169 |
| | 36,786 |
| | 20,190 |
|
| | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | |
| | |
| | |
|
| Interest expense | | | 83,545 | | | | 91,598 | | | | 92,340 | | | 93,921 |
| | 91,318 |
| | 82,860 |
|
| Allowance for borrowed funds used during construction | | | (2,826 | ) | | | (2,406 | ) | | | (3,159 | ) | | (3,769 | ) | | (3,207 | ) | | (2,457 | ) |
| TOTAL | | | 80,719 | | | | 89,192 | | | | 89,181 | | | 90,152 |
| | 88,111 |
| | 80,403 |
|
| | | | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 297,656 | | | | 285,562 | | | | 148,631 | | | 205,021 |
| | 253,735 |
| | 247,171 |
|
| | | | | | | | | | | | | | | | | | | |
| Income taxes | | | 132,765 | | | | 112,944 | | | | 81,756 | | | 83,629 |
| | 91,787 |
| | 94,806 |
|
| | | | | | | | | | | | | | | | | | | |
| NET INCOME | | | 164,891 | | | | 172,618 | | | | 66,875 | | | 121,392 |
| | 161,948 |
| | 152,365 |
|
| | | | | | | | | | | | | | | | | | | |
| Preferred dividend requirements and other | | | 6,873 | | | | 6,873 | | | | 6,873 | | |
| Preferred dividend requirements | | | 6,873 |
| | 6,873 |
| | 6,873 |
|
| | | | | | | | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO | | | | | | | | | | | | | |
| COMMON STOCK | | $ | 158,018 | | | $ | 165,745 | | | $ | 60,002 | | |
| EARNINGS APPLICABLE TO COMMON STOCK | | |
| $114,519 |
| |
| $155,075 |
| |
| $145,492 |
|
| | | | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | |
| | |
|
|
| | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
| |
| For the Years Ended December 31, |
| |
| 2014 |
| 2013 |
| 2012 |
| |
| (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $121,392 |
| |
| $161,948 |
| |
| $152,365 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 387,945 |
| | 357,639 |
| | 357,913 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 130,132 |
| | 130,707 |
| | (67,482 | ) |
| Changes in assets and liabilities: | | |
| | |
| | |
|
| Receivables | | 25,661 |
| | (26,320 | ) | | (30,786 | ) |
| Fuel inventory | | (9,394 | ) | | 7,471 |
| | (68 | ) |
| Accounts payable | | (120,097 | ) | | 141,041 |
| | (179,009 | ) |
| Prepaid taxes and taxes accrued | | 14,261 |
| | (204,990 | ) | | 178,688 |
|
| Interest accrued | | (1,786 | ) | | (6,382 | ) | | (1,463 | ) |
| Deferred fuel costs | | (140,483 | ) | | 28,609 |
| | 112,471 |
|
| Other working capital accounts | | 72,411 |
| | (34,909 | ) | | 55,735 |
|
| Provisions for estimated losses | | (57 | ) | | (76 | ) | | 182 |
|
| Other regulatory assets | | (367,234 | ) | | 214,131 |
| | (88,119 | ) |
| Pension and other postretirement liabilities | | 252,639 |
| | (295,435 | ) | | 75,725 |
|
| Other assets and liabilities | | 38,436 |
| | (72,184 | ) | | (57,035 | ) |
| Net cash flow provided by operating activities | | 403,826 |
| | 401,250 |
| | 509,117 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (535,464 | ) | | (489,079 | ) | | (361,858 | ) |
| Allowance for equity funds used during construction | | 10,789 |
| | 14,550 |
| | 12,441 |
|
| Nuclear fuel purchases | | (195,092 | ) | | (88,637 | ) | | (215,968 | ) |
| Proceeds from sale of nuclear fuel | | 75,860 |
| | 36,478 |
| | 96,700 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 181,489 |
| | 266,391 |
| | 144,275 |
|
| Investment in nuclear decommissioning trust funds | | (190,062 | ) | | (274,519 | ) | | (154,608 | ) |
| Payment for purchase of plant | | — |
| | — |
| | (253,043 | ) |
| Change in money pool receivable - net | | 15,313 |
| | (9,496 | ) | | 9,327 |
|
| Changes in securitization account | | (261 | ) | | 568 |
| | (514 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — |
| | 10,271 |
| | — |
|
Counterparty collateral deposit
| | — |
| | 9,000 |
| | — |
|
| Insurance proceeds | | 36,600 |
| | — |
| | — |
|
| Other | | 200 |
| | — |
| | — |
|
| Net cash flow used in investing activities | | (600,628 | ) |
| (524,473 | ) |
| (723,248 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | 707,465 |
| | 716,595 |
| | 252,347 |
|
| Retirement of long-term debt | | (447,815 | ) | | (442,302 | ) | | (12,230 | ) |
| Changes in short-term borrowings - net | | 47,968 |
| | (36,735 | ) | | 2,821 |
|
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (10,000 | ) | | (15,000 | ) | | (10,000 | ) |
| Preferred stock | | (6,873 | ) | | (6,873 | ) | | (6,873 | ) |
| Other | | (2,460 | ) | | 27 |
| | — |
|
| Net cash flow provided by financing activities | | 288,285 |
| | 215,712 |
| | 226,065 |
|
| Net increase in cash and cash equivalents | | 91,483 |
| | 92,489 |
| | 11,934 |
|
| Cash and cash equivalents at beginning of period | | 127,022 |
| | 34,533 |
| | 22,599 |
|
| Cash and cash equivalents at end of period | |
| $218,505 |
| |
| $127,022 |
| |
| $34,533 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $90,285 |
| |
| $92,353 |
| |
| $79,271 |
|
| Income taxes | |
| ($48,948 | ) | |
| $184,592 |
| |
| ($20,480 | ) |
| See Notes to Financial Statements. |
| |
|
| |
|
| |
|
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 164,891 | | | $ | 172,618 | | | $ | 66,875 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 339,819 | | | | 347,587 | | | | 287,317 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 94,410 | | | | 100,071 | | | | 66,777 | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | (11,021 | ) | | | 34,214 | | | | 3,477 | |
| Fuel inventory | | | (11,190 | ) | | | (22,639 | ) | | | 163 | |
| Accounts payable | | | 160,983 | | | | (14,777 | ) | | | (338,993 | ) |
| Prepaid taxes and taxes accrued | | | 122,974 | | | | (63,188 | ) | | | 5,517 | |
| Interest accrued | | | 2,861 | | | | 426 | | | | (1,103 | ) |
| Deferred fuel costs | | | (148,274 | ) | | | 61,300 | | | | (3,741 | ) |
| Other working capital accounts | | | (3,855 | ) | | | 31,550 | | | | 330,263 | |
| Provisions for estimated losses | | | (2,330 | ) | | | (5,247 | ) | | | (2,708 | ) |
| Other regulatory assets | | | (215,841 | ) | | | (87,087 | ) | | | (70,412 | ) |
| Pension and other postretirement liabilities | | | 123,156 | | | | (32,496 | ) | | | 6,501 | |
| Other assets and liabilities | | | (52,459 | ) | | | (10,072 | ) | | | 34,259 | |
| Net cash flow provided by operating activities | | | 564,124 | | | | 512,260 | | | | 384,192 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (382,776 | ) | | | (291,267 | ) | | | (338,752 | ) |
| Allowance for equity funds used during construction | | | 9,607 | | | | 4,118 | | | | 5,219 | |
| Nuclear fuel purchases | | | (148,657 | ) | | | (82,371 | ) | | | (118,379 | ) |
| Proceeds from sale of nuclear fuel | | | - | | | | - | | | | 118,590 | |
| Proceeds from sale of equipment | | | - | | | | 2,489 | | | | 74,818 | |
| Proceeds from nuclear decommissioning trust fund sales | | | 125,408 | | | | 367,266 | | | | 154,644 | |
| Investment in nuclear decommissioning trust funds | | | (140,724 | ) | | | (400,832 | ) | | | (164,879 | ) |
| Change in money pool receivable - net | | | 24,101 | | | | (12,604 | ) | | | (12,868 | ) |
| Changes in other investments - net | | | - | | | | 2,415 | | | | - | |
| Investment in affiliates | | | 10,994 | | | | - | | | | - | |
| Remittances to transition charge account | | | (15,650 | ) | | | (2,412 | ) | | | - | |
| Payments from transition charge account | | | 14,173 | | | | - | | | | - | |
| Other | | | - | | | | 18 | | | | 95 | |
| Net cash flow used in investing activities | | | (503,524 | ) | | | (413,180 | ) | | | (281,512 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | 54,743 | | | | 684,851 | | | | - | |
| Retirement of long-term debt | | | (45,310 | ) | | | (589,500 | ) | | | - | |
| Changes in credit borrowings - net | | | (28,863 | ) | | | 5,711 | | | | - | |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (117,800 | ) | | | (173,400 | ) | | | (48,300 | ) |
| Preferred stock | | | (6,873 | ) | | | (6,873 | ) | | | (6,873 | ) |
| Other | | | - | | | | - | | | | (842 | ) |
| Net cash flow used in financing activities | | | (144,103 | ) | | | (79,211 | ) | | | (56,015 | ) |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (83,503 | ) | | | 19,869 | | | | 46,665 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 106,102 | | | | 86,233 | | | | 39,568 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 22,599 | | | $ | 106,102 | | | $ | 86,233 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid/(received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 75,650 | | | $ | 85,639 | | | $ | 88,397 | |
| Income taxes | | $ | (89,994 | ) | | $ | 66,403 | | | $ | 1,434 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $10,526 |
| |
| $4,181 |
|
| Temporary cash investments | | 207,979 |
| | 122,841 |
|
| Total cash and cash equivalents | | 218,505 |
| | 127,022 |
|
| Securitization recovery trust account | | 4,096 |
| | 3,835 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 97,314 |
| | 102,328 |
|
| Allowance for doubtful accounts | | (32,247 | ) | | (30,113 | ) |
| Associated companies | | 32,187 |
| | 68,875 |
|
| Other | | 110,269 |
| | 94,256 |
|
| Accrued unbilled revenues | | 80,704 |
| | 82,298 |
|
| Total accounts receivable | | 288,227 |
| | 317,644 |
|
| Accumulated deferred income taxes | | 21,533 |
| | 33,556 |
|
| Deferred fuel costs | | 143,279 |
| | 68,696 |
|
| Fuel inventory - at average cost | | 50,898 |
| | 41,504 |
|
| Materials and supplies - at average cost | | 162,792 |
| | 152,429 |
|
| Deferred nuclear refueling outage costs | | 29,690 |
| | 31,135 |
|
| System agreement cost equalization | | — |
| | 30,000 |
|
| Prepayments and other | | 9,588 |
| | 58,911 |
|
| TOTAL | | 928,608 |
| | 864,732 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Decommissioning trust funds | | 769,883 |
| | 710,913 |
|
| Other | | 14,170 |
| | 30,845 |
|
| TOTAL | | 784,053 |
| | 741,758 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 9,139,181 |
| | 8,798,458 |
|
| Property under capital lease | | 961 |
| | 1,064 |
|
| Construction work in progress | | 284,322 |
| | 209,036 |
|
| Nuclear fuel | | 293,695 |
| | 321,901 |
|
| TOTAL UTILITY PLANT | | 9,718,159 |
| | 9,330,459 |
|
| Less - accumulated depreciation and amortization | | 4,191,959 |
| | 4,034,880 |
|
| UTILITY PLANT - NET | | 5,526,200 |
| | 5,295,579 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 64,214 |
| | 73,864 |
|
| Other regulatory assets (includes securitization property of $67,877 as of December 31, 2014 and $80,963 as of December 31, 2013) | | 1,391,276 |
| | 1,014,392 |
|
| Deferred fuel costs | | 65,900 |
| | — |
|
| Other | | 47,674 |
| | 44,565 |
|
| TOTAL | | 1,569,064 |
| | 1,132,821 |
|
| | | | | |
| TOTAL ASSETS | |
| $8,807,925 |
| |
| $8,034,890 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| |
| CONSOLIDATED BALANCE SHEETS | |
| ASSETS | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents: | | | | | | |
| Cash | | $ | 4,712 | | | $ | 4,250 | |
| Temporary cash investments | | | 17,887 | | | | 101,852 | |
| Total cash and cash investments | | | 22,599 | | | | 106,102 | |
| Securitization recovery trust account | | | 3,890 | | | | 2,412 | |
| Accounts receivable: | | | | | | | | |
| Customer | | | 90,940 | | | | 79,905 | |
| Allowance for doubtful accounts | | | (26,155 | ) | | | (24,402 | ) |
| Associated companies | | | 58,030 | | | | 82,583 | |
| Other | | | 66,838 | | | | 61,135 | |
| Accrued unbilled revenues | | | 70,715 | | | | 74,227 | |
| Total accounts receivable | | | 260,368 | | | | 273,448 | |
| Deferred fuel costs | | | 209,776 | | | | 61,502 | |
| Fuel inventory - at average cost | | | 48,889 | | | | 37,699 | |
| Materials and supplies - at average cost | | | 143,343 | | | | 140,095 | |
| Deferred nuclear refueling outage costs | | | 49,047 | | | | 23,099 | |
| System agreement cost equalization | | | 36,800 | | | | 52,160 | |
| Prepaid taxes | | | - | | | | 86,693 | |
| Prepayments and other | | | 8,562 | | | | 7,877 | |
| TOTAL | | | 783,274 | | | | 791,087 | |
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | | 541,657 | | | | 520,841 | |
| Non-utility property - at cost (less accumulated depreciation) | | | 1,677 | | | | 1,684 | |
| Other | | | 3,182 | | | | 14,176 | |
| TOTAL | | | 546,516 | | | | 536,701 | |
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | | 8,079,732 | | | | 7,787,348 | |
| Property under capital lease | | | 1,234 | | | | 1,303 | |
| Construction work in progress | | | 120,211 | | | | 114,324 | |
| Nuclear fuel | | | 272,593 | | | | 188,611 | |
| TOTAL UTILITY PLANT | | | 8,473,770 | | | | 8,091,586 | |
| Less - accumulated depreciation and amortization | | | 3,833,596 | | | | 3,683,001 | |
| UTILITY PLANT - NET | | | 4,640,174 | | | | 4,408,585 | |
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | | 87,357 | | | | 98,836 | |
| Other regulatory assets (includes securitization property of | | | | | |
| $105,762 as of December 31, 2011 and $118,505 as of | | | | | |
| December 31, 2010) | | | 1,126,911 | | | | 892,449 | |
| Other | | | 27,980 | | | | 23,710 | |
| TOTAL | | | 1,242,248 | | | | 1,014,995 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 7,212,212 | | | $ | 6,751,368 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $— |
| |
| $70,000 |
|
| Short-term borrowings | | 47,968 |
| | — |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 56,078 |
| | 149,802 |
|
| Other | | 174,998 |
| | 228,160 |
|
| Customer deposits | | 115,647 |
| | 86,512 |
|
| Taxes accrued | | 24,240 |
| | 9,979 |
|
| Accumulated deferred income taxes | | 15,009 |
| | 9,231 |
|
| Interest accrued | | 20,250 |
| | 22,036 |
|
| Other | | 27,872 |
| | 55,656 |
|
| TOTAL | | 482,062 |
| | 631,376 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 1,997,983 |
| | 1,906,562 |
|
| Accumulated deferred investment tax credits | | 37,708 |
| | 38,958 |
|
| Other regulatory liabilities | | 254,036 |
| | 219,370 |
|
| Decommissioning | | 818,351 |
| | 723,771 |
|
| Accumulated provisions | | 5,689 |
| | 5,746 |
|
| Pension and other postretirement liabilities | | 571,870 |
| | 319,211 |
|
| Long-term debt (includes securitization bonds of $76,164 as of December 31, 2014 and $88,961 as of December 31, 2013) | | 2,671,343 |
| | 2,335,802 |
|
| Other | | 28,296 |
| | 18,026 |
|
| TOTAL | | 6,385,276 |
| | 5,567,446 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| Preferred stock without sinking fund | | 116,350 |
| | 116,350 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2014 and 2013 | | 470 |
| | 470 |
|
| Paid-in capital | | 588,471 |
| | 588,471 |
|
| Retained earnings | | 1,235,296 |
| | 1,130,777 |
|
| TOTAL | | 1,824,237 |
| | 1,719,718 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $8,807,925 |
| |
| $8,034,890 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | - | | | $ | 35,000 | |
| Short-term borrowings | | | 33,914 | | | | 62,777 | |
| Accounts payable: | | | | | | | | |
| Associated companies | | | 228,163 | | | | 92,627 | |
| Other | | | 138,054 | | | | 114,454 | |
| Customer deposits | | | 81,074 | | | | 72,535 | |
| Taxes accrued | | | 36,281 | | | | - | |
| Accumulated deferred income taxes | | | 124,267 | | | | 82,820 | |
| Interest accrued | | | 29,881 | | | | 27,020 | |
| Other | | | 23,305 | | | | 21,115 | |
| TOTAL | | | 694,939 | | | | 508,348 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 1,708,760 | | | | 1,661,365 | |
| Accumulated deferred investment tax credits | | | 42,939 | | | | 44,928 | |
| Other regulatory liabilities | | | 133,960 | | | | 140,801 | |
| Decommissioning | | | 640,228 | | | | 602,164 | |
| Accumulated provisions | | | 5,640 | | | | 7,970 | |
| Pension and other postretirement liabilities | | | 539,016 | | | | 415,925 | |
| Long-term debt (includes securitization bonds of $113,761 as | | | | | |
| of December 31, 2011 and $124,066 as of December 31, 2010) | | | 1,875,921 | | | | 1,828,910 | |
| Other | | | 10,335 | | | | 20,701 | |
| TOTAL | | | 4,956,799 | | | | 4,722,764 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Preferred stock without sinking fund | | | 116,350 | | | | 116,350 | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, $0.01 par value, authorized 325,000,000 | | | | | |
| shares; issued and outstanding 46,980,196 shares in 2011 | | | | | |
| and 2010 | | | 470 | | | | 470 | |
| Paid-in capital | | | 588,444 | | | | 588,444 | |
| Retained earnings | | | 855,210 | | | | 814,992 | |
| TOTAL | | | 1,444,124 | | | | 1,403,906 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 7,212,212 | | | $ | 6,751,368 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | | |
| | | Common Equity | | |
| | | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | | (In Thousands) | | |
| | | | | | | | | |
| Balance at December 31, 2011 | |
| $470 |
| |
| $588,444 |
| |
| $855,210 |
| |
| $1,444,124 |
|
| Net income | | — |
| | — |
| | 152,365 |
| | 152,365 |
|
| Common stock dividends | | — |
| | — |
| | (10,000 | ) | | (10,000 | ) |
| Preferred stock dividends | | — |
| | — |
| | (6,873 | ) | | (6,873 | ) |
| Balance at December 31, 2012 | |
| $470 |
| |
| $588,444 |
| |
| $990,702 |
| |
| $1,579,616 |
|
| Net income | | — |
| | — |
| | 161,948 |
| | 161,948 |
|
| Common stock dividends | | — |
| | — |
| | (15,000 | ) | | (15,000 | ) |
| Preferred stock dividends | | — |
| | — |
| | (6,873 | ) | | (6,873 | ) |
| Other | | — |
| | 27 |
| | — |
| | 27 |
|
| Balance at December 31, 2013 | |
| $470 |
| |
| $588,471 |
| |
| $1,130,777 |
| |
| $1,719,718 |
|
| Net income | | — |
| | — |
| | 121,392 |
| | 121,392 |
|
| Common stock dividends | | — |
| | — |
| | (10,000 | ) | | (10,000 | ) |
| Preferred stock dividends | | — |
| | — |
| | (6,873 | ) | | (6,873 | ) |
| Balance at December 31, 2014 | |
| $470 |
| |
| $588,471 |
| |
| $1,235,296 |
| |
| $1,824,237 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | Common Equity | | | | |
| | | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 470 | | | $ | 588,444 | | | $ | 810,945 | | | $ | 1,399,859 | |
| Net income | | | - | | | | - | | | | 66,875 | | | | 66,875 | |
| Common stock dividends | | | - | | | | - | | | | (48,300 | ) | | | (48,300 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
| Balance at December 31, 2009 | | $ | 470 | | | $ | 588,444 | | | $ | 822,647 | | | $ | 1,411,561 | |
| Net income | | | - | | | | - | | | | 172,618 | | | | 172,618 | |
| Common stock dividends | | | - | | | | - | | | | (173,400 | ) | | | (173,400 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
| Balance at December 31, 2010 | | $ | 470 | | | $ | 588,444 | | | $ | 814,992 | | | $ | 1,403,906 | |
| Net income | | | - | | | | - | | | | 164,891 | | | | 164,891 | |
| Common stock dividends | | | - | | | | - | | | | (117,800 | ) | | | (117,800 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
| Balance at December 31, 2011 | | $ | 470 | | | $ | 588,444 | | | $ | 855,210 | | | $ | 1,444,124 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | | SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 2,084,310 | | | $ | 2,082,447 | | | $ | 2,211,263 | | | $ | 2,328,349 | | | $ | 2,032,965 | | |
| $2,172,391 |
| |
| $2,190,159 |
| |
| $2,127,004 |
| |
| $2,084,310 |
| |
| $2,082,447 |
|
| Net Income | | $ | 164,891 | | | $ | 172,618 | | | $ | 66,875 | | | $ | 47,152 | | | $ | 139,111 | | |
| $121,392 |
| |
| $161,948 |
| |
| $152,365 |
| |
| $164,891 |
| |
| $172,618 |
|
| Total assets | | $ | 7,212,212 | | | $ | 6,751,368 | | | $ | 6,492,802 | | | $ | 6,568,213 | | | $ | 5,999,806 | | |
| $8,807,925 |
| |
| $8,034,890 |
| |
| $7,819,445 |
| |
| $7,212,212 |
| |
| $6,751,368 |
|
| Long-term obligations (1) | | $ | 1,992,271 | | | $ | 1,946,494 | | | $ | 1,736,520 | | | $ | 1,800,735 | | | $ | 1,508,158 | | |
| Long-term obligations (a) | | |
| $2,787,693 |
| |
| $2,452,152 |
| |
| $1,910,245 |
| |
| $1,992,271 |
| |
| $1,946,494 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and preferred stock without sinking fund. | | |
| (a) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. | | (a) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | (Dollars In Millions) |
| | | (Dollars In Millions) | | | | | | | | | | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
|
| Residential | | $ | 756 | | | $ | 773 | | | $ | 769 | | | $ | 756 | | | $ | 690 | | |
| $755 |
| |
| $772 |
| |
| $766 |
| |
| $756 |
| |
| $773 |
|
| Commercial | | | 450 | | | | 441 | | | | 475 | | | | 463 | | | | 409 | | | 461 |
| | 469 |
| | 472 |
| | 450 |
| | 441 |
|
| Industrial | | | 421 | | | | 415 | | | | 433 | | | | 461 | | | | 407 | | | 424 |
| | 433 |
| | 439 |
| | 421 |
| | 415 |
|
| Governmental | | | 20 | | | | 20 | | | | 21 | | | | 21 | | | | 19 | | | 18 |
| | 19 |
| | 20 |
| | 20 |
| | 20 |
|
| Total retail | | | 1,647 | | | | 1,649 | | | | 1,698 | | | | 1,701 | | | | 1,525 | | | 1,658 |
| | 1,693 |
| | 1,697 |
| | 1,647 |
| | 1,649 |
|
| | | | | | | | | | | | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
|
| Associated companies | | | 279 | | | | 302 | | | | 350 | | | | 416 | | | | 302 | | | 131 |
| | 346 |
| | 320 |
| | 279 |
| | 302 |
|
| Non-associated companies | | | 96 | | | | 78 | | | | 102 | | | | 156 | | | | 156 | | | 282 |
| | 83 |
| | 49 |
| | 96 |
| | 78 |
|
| Other | | | 62 | | | | 53 | | | | 61 | | | | 55 | | | | 50 | | | 101 |
| | 68 |
| | 61 |
| | 62 |
| | 53 |
|
| Total | | $ | 2,084 | | | $ | 2,082 | | | $ | 2,211 | | | $ | 2,328 | | | $ | 2,033 | | |
| $2,172 |
| |
| $2,190 |
| |
| $2,127 |
| |
| $2,084 |
| |
| $2,082 |
|
| | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
|
| Residential | | | 8,229 | | | | 8,501 | | | | 7,464 | | | | 7,678 | | | | 7,725 | | | 8,070 |
| | 7,921 |
| | 7,859 |
| | 8,229 |
| | 8,501 |
|
| Commercial | | | 6,051 | | | | 6,144 | | | | 5,817 | | | | 5,875 | | | | 5,945 | | | 5,934 |
| | 5,929 |
| | 6,046 |
| | 6,051 |
| | 6,144 |
|
| Industrial | | | 7,029 | | | | 7,082 | | | | 6,376 | | | | 7,211 | | | | 7,424 | | | 6,808 |
| | 6,769 |
| | 6,925 |
| | 7,029 |
| | 7,082 |
|
| Governmental | | | 275 | | | | 277 | | | | 269 | | | | 274 | | | | 277 | | | 238 |
| | 241 |
| | 257 |
| | 275 |
| | 277 |
|
| Total retail | | | 21,584 | | | | 22,004 | | | | 19,926 | | | | 21,038 | | | | 21,371 | | | 21,050 |
| | 20,860 |
| | 21,087 |
| | 21,584 |
| | 22,004 |
|
| | | | | | | | | | | | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
|
| Associated companies | | | 6,893 | | | | 7,853 | | | | 9,980 | | | | 7,890 | | | | 7,185 | | | 2,299 |
| | 7,918 |
| | 7,926 |
| | 6,893 |
| | 7,853 |
|
| Non-associated companies | | | 1,304 | | | | 850 | | | | 1,631 | | | | 2,159 | | | | 2,651 | | | 8,003 |
| | 1,011 |
| | 1,093 |
| | 1,304 |
| | 850 |
|
| Total | | | 29,781 | | | | 30,707 | | | | 31,537 | | | | 31,087 | | | | 31,207 | | | 31,352 |
| | 29,789 |
| | 30,106 |
| | 29,781 |
| | 30,707 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Plan to Spin Off the Utility’s TransmissionEntergy Louisiana and Entergy Gulf States Louisiana Business Combination
SeeIn June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the “Plan to Spin OffLPSC. The report contained a preliminary analysis of the Utility’s Transmission Business” sectionpotential combination of Entergy CorporationLouisiana and Subsidiaries Entergy Gulf States Louisiana into a single public utility, including an overview of the combination that identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it would seek authorization to transfer to Entergy New Orleans the assets that currently support the provision of service to Entergy Louisiana’s customers in Algiers. Entergy Louisiana subsequently filed the referenced application with the City Council in October 2014. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.
On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.
The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. In December 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and the Algiers asset transfer. In January 2015, Entergy Services filed an application with the FERC for financing authority for the combined company. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.
The procedural schedule in the LPSC business combination proceeding calls for LPSC Staff and intervenor testimony to be filed in March 2015, with a hearing scheduled for June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015. In the City Council business combination proceeding, the City Council announced through a resolution that it would not initiate an active review of the business combination filing, but instead would establish a business combination docket for the limited purpose of receiving information filings relative to the business combination proceedings at the LPSC.
It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis for a discussion of this matter, including the planned retirement of debt and preferred securities.
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all of the liabilities of Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the liabilities of Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and hold the membership interests in New Entergy Gulf States Louisiana.
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.
Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income increased $12.3slightly, by $0.8 million, primarily due to lower interest expensehigher net revenue and lower other operation and maintenance expenses, substantially offset by a higher effective income tax rate, lower other income, higher depreciation and amortization expenses, higher interest expense, and a higher effectivetaxes other than income tax rate.taxes.
20102013 Compared to 20092012
Net income increased $37.7$2.7 million primarily due to higher net revenue a lower effectiveand higher other income, tax rate, and lower interest expense,substantially offset by higher other operation and maintenance expenses, lower other income,higher depreciation and amortization expenses, higher taxes other than income taxes.taxes, and a higher effective income tax rate partially due to the settlement of the tax treatment related to Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing in June 2012. See Note 3 to the financial statements for additional discussion of the tax treatment.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Net Revenue
20112014 Compared to 20102013
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.charges (credits). Following is an analysis of the change in net revenue comparing 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | |
|
20102013 net revenue |
| $933.6 913.4 |
|
| Volume/weather | 19.2 |
|
| Asset retirement obligation | 14.3 |
|
| MISO deferral | 8.4 |
|
| Transmission equalization | 3.5 |
|
| Retail electric price | 3.3 | (20.1) |
Volume/weather | | (5.2) |
Fuel recovery | | 14.8 |
Transmission revenue | | 12.4
|
| Other | 1.5 | (2.1)
|
20112014 net revenue |
| $933.4 963.6 |
|
The volume/weather variance is primarily due to an increase of 1,160 GWh, or 6%, in billed electricity usage, including the effect of more favorable weather on residential sales and higher industrial usage primarily in the chemicals industry.
The asset retirement obligation affects net revenue because Entergy Gulf States Louisiana records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by an increase in regulatory credits because of a decrease in decommissioning trust earnings and an increase in regulatory credits to realign the asset retirement obligation regulatory asset with regulatory treatment.
The MISO deferral variance is due to the deferral in 2014 of the non-fuel MISO-related charges, as approved by the LPSC. The deferral of non-fuel MISO-related charges is partially offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the recovery of non-fuel MISO-related charges.
The transmission equalization variance is primarily due to changes in transmission investment equalization billings under the Entergy System Agreement compared to the same period in 2013 primarily as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.
The retail electric price variance is primarily due to an increase in credits passed on to customers as a result ofpurchased power capacity costs that are recovered through base rates set in the Act 55 storm cost financing. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike” and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing.
The volume/weather variance is primarily due to less favorable weather on the residential sector as well as the unbilled sales period. The decrease was partially offset by an increase of 62 GWh, or 0.3%, in billed electricity usage, primarily due to increased consumption by an industrial customer as a result of the customer’s cogeneration outage and the addition of a new production unit by the industrial customer.
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in 2010.annual formula rate plan mechanism. See Note 2 to the financial statements for afurther discussion of fuel recovery.Entergy Gulf States Louisiana’s formula rate plan.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
The transmission revenue variance is primarily due2013 Compared to a revision to transmission investment equalization billings under the Entergy System Agreement among the Utility operating companies (for the approximate period of 1996 – 2011) recorded in the fourth quarter 2011. See Note 2 to the financial statements for further discussion of the revision.2012
Fuel and purchased power expenses
Fuel and purchased power expenses increased primarily due to:
· | an increase in deferred fuel expense due to the timing of receipt of System Agreement payments and credits to customers; |
· | an increase in natural gas fuel expense primarily due to increased generation; and |
· | an increase in deferred fuel expense due to fuel and purchased power expense decreases in excess of lower fuel cost recovery revenues. |
The increase was offset by a decrease in the average market price of purchased power and decreased net area demand.
2010 Compared to 2009
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.charges. Following is an analysis of the change in net revenue comparing 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | |
|
20092012 net revenue |
| $861.3 865.9 |
|
Retail electric priceLouisiana Act 55 financing savings obligation | 27.8 | 66.7
|
| Net wholesale revenue | 8.3 |
|
| Volume/weather | 7.5 | 32.7 |
Fuel recovery | | (28.7)
|
| Other | 3.9 | 1.6
|
20102013 net revenue |
| $933.6 913.4 |
|
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Gulf States Louisiana was required to share with customers the savings from the tax treatment related to the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing. See Note 3 to the financial statements for additional discussion of the tax treatment.
The retail electric pricenet wholesale revenue variance is primarily due to formula rate plan increases effective November 2009, January 2010, and September 2010. See Note 2 to the financial statements for further discussion of the formula rate plan increases.higher prices.
The volume/weather variance is primarily due to an increase of 1,86182 GWh, or 10%0.4%, in billed electricity usage primarily in the industrial sector as a result of increased consumption in the chemicals industry, and also the effect of more favorable weather, as compared to the prior period, primarily on residential sales. The increase was also driven by higher industrial usage primarily in the residentialchemicals industry.
Other Income Statement Variances
2014 Compared to 2013
Other operation and commercial sectors.maintenance expenses decreased primarily due to:
a decrease of $20.7 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates”below and Note 11 to the financial statements for further discussion of benefits costs;
a decrease of $7.2 million due to costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
a decrease of $2.3 million in loss reserves.
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to:
· | an increase of $100.9 million in rider revenues due to lower System Agreement credits in 2010; |
· | formula rate plan increases effective November 2009, January 2010, and September 2010, as noted above; |
· | an increase of $64.5 million in fuel cost recovery revenues due to increased usage primarily in the industrial sector; and |
· | the increase related to volume/weather, as discussed above. |
The increasedecrease was partially offset by a decreaseby:
an increase of $6.9 million due to administration fees in gross wholesale revenues2014 related to participation in the MISO RTO. The LPSC approved deferral of these expenses resulting in no net income effect;
an increase of $3.6 million in outside regulatory, consulting, and legal fees;
an increase of $1.7 million in customer service costs primarily due to the transferwrite-offs in 2014 of uncollectible customer accounts; and
several wholesale customers to Entergy Texas in 2009 and decreased system agreement remedy receipts.individually insignificant items.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Fuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power.
Other Income Statement Variances
2011 Compared to 2010
Nuclear refueling outage expenses decreased primarily due to the amortization of lower expenses associated with the planned maintenance and refueling outage at River Bend in the first quarter 2011.
Other operation and maintenance expenses decreased primarily due to:
· | a decrease of $6 million in fossil-fueled generation expenses primarily due to fewer outages and a reduced scope of work compared to 2010; and |
· | a decrease of $4.2 million in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010 and a decrease in stock option expense. |
The decrease was partially offset by an increase of $2.9 million in costs due to the transition and implementation of joining the MISO RTO, as well as several individually insignificant items.
Depreciation and amortization expenses increased primarily due to a revision in the second quarter 2010 related to depreciation on storm cost-related assets and an increase in plant in service. Recovery of the storm cost-related assets will now be through the Act 55 financing of storm costs as approved by the LPSC in June 2010. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike” and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing.
Interest expense decreased primarily due to:
· | redemptions of first mortgage bonds of $68 million in June 2010 and $304 million in November 2010, partially offset by the issuance of first mortgage bonds of $250 million in October 2010. See Note 5 to the financial statements for a discussion of long-term debt; and |
· | interest expense accrued in 2010 related to the expected result of the LPSC Staff audit of the fuel adjustment clause for the period 1995 through 2004. See Note 2 to the financial statements for a discussion of fuel recovery. |
2010 Compared to 2009
Other operation and maintenance expenses increased primarily due to an increase of $12.4 million in fossil expenses due to higher plant maintenance costs and plant outages and a $12.1 million increase in compensation and benefits costs resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefit costs.
Taxes other than income taxes increased primarily due to an increase in local franchise taxes as a result ofresulting from higher revenues primarily in the residential and commercial sectorsrevenues as compared to prior year and an increase in ad valorem taxes as a result ofresulting from higher millage rates, a higher 2010 assessment, and a reduction in capitalized property taxes as compared to 2009.assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income decreased primarily due to higher realized gains in 2013 on the River Bend decommissioning trust fund investments. There is no effect on net income as these investment gains are offset by a decreasecorresponding amount of $30.1regulatory charges.
Interest expense increased primarily due to $3.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac, as approved by the LPSC, and the issuance of $110 million of 3.78% Series first mortgage bonds in July 2014.
2013 Compared to 2012
Other operation and maintenance expenses increased primarily due to:
an increase of $15 million in interestcompensation and investment income related to the debt assumption agreement with Entergy Texas. In June 2010, Entergy Texas repaid the outstanding assumed debt and the debt assumption agreement was terminated.
Interest expense decreasedbenefits costs primarily due to a decrease in long-term debt outstanding asthe discount rates used to determine net periodic pension and other postretirement benefit costs and a resultsettlement charge, recognized in September 2013, related to the payment of redemptionslump sum benefits out of first mortgage bonds of $292 million in December 2009, $68 million in June 2010, the non-qualified pension plan. See “Critical Accounting Estimates” belowand $304 million in November 2010, partially offset by issuances of first mortgage bonds of $300 million in October 2009 and $250 million in October 2010. See Note 511 to the financial statements for further discussion of the decrease in long-term debt.benefits costs;
282
the deferral recorded in the second quarter 2012, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced expenses by $4.2 million in 2012;an increase of $13.5 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative, partially offset by the deferral, as approved by the LPSC, of $9.8 million of these costs. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion;
an increase of $3.5 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages as compared to the prior year;
an increase of $2.9 million in loss reserves; and
several individually insignificant items.
Also, other operation and maintenance expenses include $7.2 million in 2013 and $4.7 million in 2012 of costs incurred related to the now terminated plan to spin off and merge the transmission business.
Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from higher residential and commercial revenues as compared to prior year and an increase in ad valorem taxes resulting from higher assessments. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.
Depreciation and amortization expenses increased primarily due to increased plant in service.
Other income increased primarily due to higher realized gains in 2013 on the River Bend decommissioning trust fund investments. There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Income Taxes
The effective income tax rates were 30.3%35.3%, 28.5%26%, and 36.8%24.9% for 2011, 2010,2014, 2013, and 2009,2012, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 were as follows:
| | | | | 2011 | | 2010 | | 2009 | | | | | | | |
| | | | (In Thousands) | 2014 | | 2013 | | 2012 |
| | | | | | | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $155,173 | | $144,460 | | $49,303 |
| $15,581 |
| |
| $35,686 |
| |
| $24,845 |
|
| | | | | | | | | | | | | |
| Cash flow provided by (used in): | | | | | | | |
| | Operating activities | | 482,115 | | 726,130 | | 234,930 | |
| | Investing activities | | (267,262) | | (541,583) | | (286,486) | |
| | Financing activities | | (345,181) | | (173,834) | | 146,713 | |
| | Net increase (decrease) in cash and cash equivalents | | (130,328) | | 10,713 | | 95,157 | |
| Net cash provided by (used in): | | |
| | |
| | |
|
| Operating activities | | 592,551 |
| | 434,726 |
| | 346,208 |
|
| Investing activities | | (391,283 | ) | | (336,644 | ) | | (201,440 | ) |
| Financing activities | | (53,886 | ) | | (118,187 | ) | | (133,927 | ) |
| Net increase (decrease) in cash and cash equivalents | | 147,382 |
| | (20,105 | ) | | 10,841 |
|
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $24,845 | | $155,173 | | $144,460 |
| $162,963 |
| |
| $15,581 |
| |
| $35,686 |
|
Operating Activities
Net cash flow provided by operating activities decreased $244increased $157.8 million in 2011 compared to 20102014 primarily due to:
· | proceeds of $240.3 million received from the LURC as a result of the Act 55 storm cost financings in 2010.proceeds of $69 million received from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financing. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike and Note 2 to the financial statements and “Hurricane Isaac” below for a discussion of the Act 55 storm cost financing; and |
· | higher nuclear refueling outage spending at River Bend. River Bend had a refueling outage in 2011 and did not have one in 2010. |
lower nuclear refueling outage spending at River Bend. River Bend had a refueling outage in 2013 and did not have one in 2014; andthe timing of collections from customers.
The decreaseincrease was partially offset by an increase of $18.6 million in pension contributions in 2014. See “Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
Net cash flow provided by operating activities increased $88.5 million in 2013 primarily due to:
a decrease of $84.1 million in income tax refunds of $56.3 millionpayments in 20112013 compared to income tax refunds of $16.8 million in 2010. In 2011,2012. Entergy Gulf States Louisiana receivedhad income tax cash refundspayments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refundsIn 2013, the payments resulted primarily from the reversal of temporary differences for which Entergy Gulf States Louisiana had previously made cashclaimed a tax payments.deduction. In 2012, Entergy Gulf States Louisiana no longer had a net operating loss carryover from prior years to reduce current taxable income; and
decreased Hurricane Isaac storm spending in 2013.
Net cash flow providedThe increase was partially offset by operating activities increased $491.2 millionhigher nuclear refueling outage spending at River Bend. River Bend had a refueling outage in 2010 compared to 2009 primarily due to:
· | storm cost proceeds of $240.3 million received from the LURC as a result of the Act 55 storm cost financings; |
· | the absence in 2010 of the storm restoration spending that occurred in 2009. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; and
|
· | income tax refunds of $16.8 million in 2010 compared to income tax payments of $60.6 million in 2009. In 2010, Entergy Gulf States Louisiana received tax cash refunds in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds resulted from the reversal of temporary differences for which Entergy Gulf States Louisiana previously made cash tax payments. |
2013 and did not have one in 2012.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $274.3 million in 2011 compared to 2010 primarily due to:
· | the investment in 2010 of $150.3 million in affiliate securities and the investment of $90.1 million in the storm reserve escrow account as a result of the Act 55 storm cost financings. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; and
|
The decrease was partially offset by an increase in nuclear fuel purchases because River Bend had a refueling outage in 2011 and did not have one in 2010.
Decreases in Entergy Gulf States Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Gulf States Louisiana’s receivable from the money pool decreased by $39.4 million in 2011 compared to increasing by $12.9 million in 2010. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities increased $255.1$54.6 million in 2010 compared to 20092014 primarily due to:
· | the investment of $150.3 million in affiliate securities and the investment of $90.1 million in the storm reserve escrow account as a result of the Act 55 storm cost financings. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing;
|
the deposit in 2014 of $68.5 million into the storm escrow account;· | proceeds from the sale/leaseback of nuclear fuel of $72.8 million in 2009. See Note 18 to the financial statements for discussion of the consolidation of nuclear fuel company variable interest entities effective January 1, 2010; and |
the investment in 2014 of $66.2 million in affiliate securities as a result of the Act 55 storm cost financing. See Note 2 to the financial statements and “Hurricane Isaac” below for a discussion of the Act 55 storm cost financing;
· | an increase in construction expenditures primarily due to $24.9 million in costs associated with the development of new nuclear generation at River Bend. See “New Nuclear Development” below.
|
the withdrawal of $65.5 million from the storm reserve escrow account in 2013; andan increase in fossil-fueled generation expenditures as a result of an increased scope of work in 2014.
The increase was partially offset byby:
fluctuations in nuclear fuel activity because of variations from year to year in the purchasetiming and pricing of one-third (Unit 3)fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the three-unit, 789 MW Ouachita Power Plant for $75nuclear fuel cycle;
a decrease in nuclear construction expenditures as a result of spending on nuclear projects during the River Bend refueling outage in 2013. River Bend had a refueling outage in 2013 and did not have one in 2014; and
a decrease in transmission construction expenditures due to a decreased scope of work performed in 2014.
Net cash flow used in investing activities increased $135.2 million in November 20092013 primarily due to:
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
$51 million in proceeds in 2012 from the sale of a portion of Entergy Arkansas and Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests to a third party. See Note 2 to the financial statements for discussion of Entergy Gulf States Louisiana’s investment in Entergy Holdings Company’s Class A preferred membership interests;
money pool activity.activity;
an increase in nuclear construction expenditures as a result of spending on nuclear projects during the River Bend refueling outage in 2013; and
an increase in transmission construction expenditures due to additional reliability work performed in 2013.
The increase was partially offset by:
the withdrawal of $65.5 million from the storm reserve escrow account in 2013;
a decrease in distribution construction expenditures due to prior year Hurricane Isaac spending; and
a decrease in fossil-fueled generation construction expenditures as a result of decreased scope of work in 2013.
Increases in Entergy Gulf States Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s receivable from the money pool increased by $12.9$1.9 million for the year ended December 31, 2010in 2013 compared to increasingdecreasing by $38.5$23.6 million in 2012. The money pool is an inter-company borrowing arrangement designed to reduce the Utility operating companies’ need for the year ended December 31, 2009.external short-term borrowings.
Financing Activities
Net cash flow used in financing activities increased $171.3decreased $64.3 million in 2011 compared to 20102014 primarily due to an increase of $177.7 million in common equity distributions.to:
Financing activities used cashthe issuance of $173.8$110 million of 3.78% Series first mortgage bonds in 2010 compared to providing cashJuly 2014;
the retirement, at maturity, of $146.7$75 million of 5.56% Series N notes by the nuclear fuel company variable interest entity in 2009 primarily due to:
· | net cash issuances of $178.2 million of long-term debt in 2009; |
· | net cash redemptions of $38.6 million of long-term debt in 2010;May 2013; and |
· | an increase of $93.6 million in common equity distributions. |
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
money pool activity.
The decrease was partially offset by:
the issuance of $70 million of 3.38% Series R notes by the nuclear fuel company variable interest entity in February 2013;
an increase of $47 million in common equity distributions in 2014; and
payments of $14.8 million on credit borrowings in 2014 compared to an increase of $14.8 million in credit borrowings in 2013 against the nuclear fuel company variable interest entity credit facility.
Decreases in Entergy Gulf States Louisiana’s payable to the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s payable to the money pool decreased by $7.1 million in 2013.
Net cash flow used in financing activities decreased $15.7 million in 2013 primarily due to $14.8 million in credit borrowings in 2013 compared to payments of $29.4 million on credit borrowings in 2012 against the nuclear fuel company variable interest entity credit facility.
The decrease was partially offset by:
money pool activity;
an increase of $5.7 million in common equity distributions;
the issuance of $75 million of 3.25% Series Q notes by the nuclear fuel company variable interest entity in July 2012 compared to the issuance of $70 million of 3.38% Series R notes by the nuclear fuel company variable interest entity in February 2013;
the retirement, at maturity, of $75 million of 5.56% Series N notes by the nuclear fuel company variable interest entity in May 2013 compared to the retirement, at maturity, of $60 million of 5.41% Series O notes by the nuclear fuel company variable interest entity in July 2012; and
the redemption of $10.84 million of pollution control revenue bonds in 2012.
Decreases in Entergy Gulf States Louisiana’s payable to the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s payable to the money pool decreased by $7.1 million in 2013 compared to increasing by $7.1 million in 2012.
See Note 5 to the financial statements for more details on long-term debt.
Capital Structure
Entergy Gulf States Louisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Gulf States Louisiana as of December 31, 2011 is primarily due to a decreasean increase in member’s equitylong-term debt as a result of an increasethe issuance of $177.6$110 million of 3.78% Series first mortgage bonds in common equity distributions.July 2014.
| | | December 31, 2011 | | December 31, 2010 |
| | | | | |
| Debt to capital | | 52.2% | | 51.2% |
| Effect of subtracting cash | | (0.4)% | | (2.6)% |
| Net debt to net capital | | 51.8% | | 48.6% |
|
| | | | | |
| | December 31,
2014 | | December 31,
2013 |
| Debt to capital | 53.1 | % | | 51.1 | % |
| Effect of subtracting cash | (2.6 | %) | | (0.2 | %) |
| Net debt to net capital | 50.5 | % | | 50.9 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payableshort-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and members’ equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States Louisiana uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States Louisiana’s
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
financial condition. Entergy Gulf States Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States Louisiana’s financial condition.condition because net debt indicates Entergy Gulf States Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses of Capital
Entergy Gulf States Louisiana requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred equity maturities or retirements; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | distribution and interest payments. |
Following are the amounts of Entergy Gulf States Louisiana’s planned construction and other capital investments,investments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $570 |
| |
| $145 |
| |
| $210 |
|
| Transmission | 195 |
| | 150 |
| | 160 |
|
| Distribution | 95 |
| | 100 |
| | 125 |
|
| Other | 40 |
| | 30 |
| | 30 |
|
| Total |
| $900 |
| |
| $425 |
| |
| $525 |
|
Following are the amounts of Entergy Gulf States Louisiana’s existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $115 |
| |
| $244 |
| |
| $509 |
| |
| $1,582 |
| |
| $2,450 |
|
| Operating leases |
| $13 |
| |
| $21 |
| |
| $20 |
| |
| $26 |
| |
| $80 |
|
| Purchase obligations (b) |
| $308 |
| |
| $490 |
| |
| $398 |
| |
| $275 |
| |
| $1,471 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | after 2016 | | Total |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | |
| Generation | $67 | | $102 | | N/A | | N/A | | $169 |
| Transmission | 95 | | 139 | | N/A | | N/A | | 234 |
| Distribution | 59 | | 132 | | N/A | | N/A | | 191 |
| Other | 18 | | 34 | | N/A | | N/A | | 52 |
| Total | $239 | | $407 | | N/A | | N/A | | $646 |
| Long-term debt (2) | $141 | | $262 | | $203 | | $1,924 | | $2,530 |
| Operating leases | $11 | | $29 | | $16 | | $66 | | $122 |
| Purchase obligations (3) | $154 | | $237 | | $209 | | $54 | | $654 |
(1) | Includes approximately $152 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Gulf States Louisiana, it primarily includes unconditional fuel and purchased power obligations. |
In addition to the contractual obligations given above, Entergy Gulf States Louisiana expects to contribute $10.8approximately $32.5 million to its pension plans and $8.3approximately $8.9 million to other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussionqualified pension and Analysisother postretirement benefits funding.
Also, in addition to the contractual obligations, Entergy Gulf States Louisiana has $318.6$427.9 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
TheIn addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Gulf States Louisiana reflects capital requiredincludes specific investments, such as the Union Power Station acquisition discussed below; NRC post-Fukushima requirements; environmental compliance spending; transmission projects to support existing businessenhance reliability, reduce congestion, and customer growth.enable economic growth; resource planning; generation projects; system improvements; and other investments. Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Management provides more information on long-term debt maturities in Note 5 to the financial statements.
As an indirect, wholly-owned subsidiary of Entergy Corporation, Entergy Gulf States Louisiana pays distributions from its earnings at a percentage determined monthly. Entergy Gulf States Louisiana’s long-term debt indentures containindenture contains restrictions on the payment of cash dividends or other distributions on its common and preferred membership interests.
Union Power Station Purchase Agreement
In December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Pursuant to the agreement, Entergy Gulf States Louisiana will acquire two of the power blocks and a 50% undivided ownership interest in certain assets related to the facility, and Entergy Arkansas and Entergy Texas will each acquire one power block and a 25% undivided ownership interest in such related assets. (If Entergy Arkansas or Entergy Texas do not obtain approval for the purchase of their power blocks, Entergy Gulf States Louisiana will seek to purchase the power blocks not approved.) The base purchase price is expected to be approximately $948 million (approximately $237 million for each power block) subject to adjustments. In addition, Entergy Gulf States Louisiana anticipates selling 20% of the capacity and energy associated with its two power blocks to Entergy New Orleans through a cost-based, life-of-unit power purchase agreement. The purchase is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In December 2014, Entergy Texas filed its application with the PUCT for approval of the acquisition. The PUCT has indicated that it will convene the hearing on the merits of this case in June 2015. Entergy Texas intends to file a rate application to seek cost recovery later in 2015. In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery. Closing is targeted to occur in late-2015.
New Nuclear Development
Entergy Gulf States Louisiana and Entergy Louisiana provided public notice to the LPSC of their intention to makehave been developing and are preserving a filing pursuant to the LPSC’s general order that governs the development of new nuclear generation in Louisiana. The project option being developed by the companies is for new nuclear generation at River Bend. Entergy Gulf States Louisiana and Entergy Louisiana, together with Entergy Mississippi, have been engaged in the development of options to construct new nuclear generation at the River Bend and Grand Gulf sites. Entergy Gulf States Louisiana and Entergy Louisiana are leading the development at River Bend, and Entergy Mississippi is leading the development at Grand Gulf. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In the first quarter 2010, Entergy Gulf States Louisiana and Entergy Louisiana each paid for and recognized on its books $24.9 million in costs associated with the development of new nuclear generation at the River Bend site; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. Entergy Gulf States Louisiana and Entergy Louisiana will share costs going forward on a 50/50 basis, which reflects each company’s current participation level in the project.
In March 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the limited development activities. The testimonyactivities necessary to preserve an option to construct a new unit at River Bend.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and legal briefs ofAnalysis
At its June 2012 meeting the LPSC staff generally supportvoted to uphold an ALJ recommendation that the request of Entergy Gulf States Louisiana and Entergy Louisiana although other partiesbe declined on the basis that the LPSC’s rule on new nuclear development does not apply to activities to preserve an option to develop and on the further grounds that the companies improperly engaged in advanced preparation activities prior to certification. The LPSC directed that Entergy Gulf States Louisiana and Entergy Louisiana be permitted to seek recovery of these costs in their upcoming rate case filings that were subsequently filed briefs,in February 2013. In the resolution of the rate case proceeding, the LPSC provided for an eight-year amortization of costs incurred in connection with the potential development of a new nuclear generation at River Bend, without supporting testimony,carrying costs, beginning in oppositionDecember 2014, provided, however, that amortization of these costs shall not result in a future rate increase. As of December 31, 2014, Entergy Gulf States Louisiana and Entergy Louisiana each have a regulatory asset of $29.2 million on its balance sheet related to the request. An evidentiary hearing was held in October 2011 and the ALJ’s decision is pending.these new nuclear generation development costs.
Sources of Capital
Entergy Gulf States Louisiana’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred membership interest issuances; and |
· | bank financing under new or existing facilities. |
Entergy Gulf States Louisiana may refinance, redeem, or otherwise retire debt and preferred equity/membership interests prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
All debt and common and preferred equity/membership interest issuances by Entergy Gulf States Louisiana require prior regulatory approval. Preferred equity/membership interest and debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. Entergy Gulf States Louisiana has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Gulf States Louisiana’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| $23,596 | | $63,003 | | $50,131 | | $11,589 |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $1,166 | | $1,925 | | ($7,074) | | $23,596 |
See Note 4 to the financial statements for a description of the money pool.
Entergy Gulf States Louisiana has a credit facility in the amount of $100$150 million scheduled to expire in August 2012.March 2019. The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. No borrowings were outstanding under the credit facility as of December 31, 2011.2014. In addition, Entergy Gulf States Louisiana entered into an uncommitted letter of credit facility in 2014 as a means to post collateral to support its obligations under MISO. As of December 31, 2014, a $27.9 million letter of credit was outstanding under Entergy Gulf States Louisiana’s letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.
Entergy Gulf States Louisiana obtained short-term borrowing authorizationauthorizations from the FERC under which it may borrow through October 2013, up2015 for the following:
short-term borrowings not to theexceed an aggregate amount of $200 million at any one time outstanding,outstanding;
long-term borrowings and security issuances; and
long-term borrowings by its nuclear fuel company variable interest entity.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
See Note 4 to the financial statements for further discussion of Entergy Gulf States Louisiana’s short-term borrowing limits.
The Entergy Gulf States Louisiana nuclear fuel company variable interest entity has also obtained an order froma credit facility in the FERC authorizing long-term securities issuances throughamount of $100 million scheduled to expire in June 2016. No borrowings were outstanding under the credit facility as of December 31, 2014. See Note 4 to the financial statements for additional discussion of the variable interest entity credit facility.
In July 2013.2014, Entergy Gulf States Louisiana issued $110 million of 3.78% Series first mortgage bonds due April 2025. Entergy Gulf States Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.
Hurricane Gustav and Hurricane IkeIsaac
In September 2008,August 2012, Hurricane Gustav and Hurricane IkeIsaac caused catastrophicextensive damage to Entergy Gulf States Louisiana’s service territory.area. The stormsstorm resulted in widespread power outages, significant damage primarily to distribution transmission, and generation infrastructure, and the loss of sales during the power outages. In October 2008,January 2013, Entergy Gulf States Louisiana drew all of$65 million from its $85 million funded storm reserve. On October 15, 2008, the LPSC approved Entergy Gulf States Louisiana’s request to defer and accrue carrying cost on unrecovered storm expenditures during the period the company seeks regulatory recovery. The approval was without prejudice to the ultimate resolution of the total amount of prudently incurred storm cost or final carrying cost rate.
reserve escrow accounts. In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery casea joint application with the LPSC inrelating to Hurricane Isaac system restoration costs. In May 2009. In September 2009,2013, Entergy Gulf States Louisiana, and Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings)(Louisiana Act 55). Entergy Gulf States Louisiana’s and Entergy Louisiana’sThe LPSC Staff filed direct testimony in September 2013 concluding that Hurricane Katrina and Hurricane Rita stormIsaac system restoration costs were financed primarilyincurred by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filedwere reasonable and prudent, subject to proposed minor adjustments which totaled approximately 1% of each company’s costs. Following an application requestingevidentiary hearing and recommendations by the ALJ, the LPSC approvalvoted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for ancillary issues includingEntergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the mechanismlevel of storm reserves to flow chargesbe re-established ($90 million for Entergy Gulf States Louisiana and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009,$200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreementto utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with the LPSC Staff that provides for total recoverable costsstorm reserves and Act 55 financing of approximately $234 million forHurricane Isaac system restoration costs. Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitmentcommitted to pass on to customers a minimum of $15.5 million and $27.75$6.9 million of customer benefits respectively, through prospective annual rate reductionscustomer credits of $3.1 million and $5.55approximately $1.4 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation ofApprovals for the Act 55 financings. In June 2010financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission approved the Act 55 financings.Commission.
In July 2014, Entergy Gulf States Louisiana L.L.C.
Management’s Financial Discussionissued $110 million of 3.78% Series first mortgage bonds due April 2025 and Analysis
used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes. In July 2010August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $244.1$71 million in bonds under Act 55.55 of the Louisiana Legislature. From the $240.3$69 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90$3 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3$66 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3the $66 million received from the LURC to acquire 1,502,643.04662,426.80 Class BC preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9%7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010,2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1$1.75 billion.
Entergy Gulf States Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy Gulf States Louisiana in the event of a bond default. To service
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
the bonds, Entergy Gulf States Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Gulf States Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
Entergy Louisiana’s Ninemile Point Unit 6 Self-Build Project
In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station. Ninemile 6 will beis a nominally-sized 550560 MW unit that is estimatedexpected to cost approximately $721$655 million to construct when spending is complete, excluding interconnection and transmission upgrades. Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35%25% of the capacity and energy generated by Ninemile 6. The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans. In February 2012 the City Council passed a resolution authorizing Entergy New Orleans to purchase 20% of the Ninemile 6 energy and capacity. If approvals are obtained fromIn March 2012 the LPSC unanimously voted to grant the certifications requested by Entergy Gulf States Louisiana and other permitting agencies, Ninemile 6Entergy Louisiana. Following approval by the LPSC, Entergy Louisiana issued full notice to proceed to the project’s engineering, procurement, and construction is expected to begincontractor.
Under the terms approved by the LPSC, non-fuel costs may be recovered through Entergy Gulf States Louisiana’s formula rate plan beginning in 2012, andthe month after the unit is expected to commence commercial operation by mid-2015. The ALJ has established a schedule forplaced in service. In July 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an unopposed stipulation with the LPSC proceeding that includes February 27 - March 7, 2012 hearing dates.estimates a first year revenue requirement associated with Ninemile 6 and provides a mechanism to update the revenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In late December 2014, roughly contemporaneous with the unit’s placement in service, a final updated estimated revenue requirement of $26.8 million for Entergy Gulf States Louisiana was filed. The December 2014 estimate forms the basis of rates implemented effective with the first billing cycle of January 2015.
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that Entergy Gulf States Louisiana charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Gulf States Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the LPSC is primarily responsible for approval of the rates charged to customers.
Retail Rates –- Electric
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate plan filing in June 2005. The formula rate plan was subsequently extended one year. As discussed below the formula rate plan has been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, 2010, and 2011 test years.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommissioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
In May 2011, Entergy Gulf States Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $5.1 million rate decrease to reflect adjustments in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center by Entergy Louisiana. As a result of the closing of the acquisition and termination of the pre-acquisition power purchase agreement with Acadia, Entergy Gulf States Louisiana’s allocation of capacity related to this unit ended, resulting in a reduction in the additional capacity revenue requirement.
In May 2011, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2010 test year. The filing reflects an 11.11% earned return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing also reflects a $22.8 million rate decrease for incremental capacity costs. Entergy Gulf States Louisiana and the LPSC Staff subsequently filed a joint report that also stated that no cost of service rate change is necessary under the formula rate plan, and the LPSC approved it in October 2011.
In November 2011 the LPSC approved a one-year extension of Entergy Gulf States Louisiana’s formula rate plan. In addition,May 2012, Entergy Gulf States Louisiana is required to file a fullmade its formula rate case by January 2013, ifplan filing with the LPSC has not actedfor the 2011 test year. The filing reflected an 11.94% earned return on common equity, which was above the earnings bandwidth and indicated a $6.5 million cost of service rate decrease was necessary under the formula rate plan. The filing also reflected a $22.9 million rate decrease for the incremental capacity rider. Subsequently, in August 2012, Entergy Gulf States Louisiana submitted a revised filing that reflected an earned return on common equity of 11.86%, which indicated a $5.7 million cost of service rate decrease was necessary under the formula rate plan. The revised filing also indicated that a reduction of $20.3 million should be reflected in the incremental capacity rider. The rate reductions were implemented, subject to denyrefund, effective for bills rendered in the requested transmission change-of-control tofirst billing cycle of September 2012. Subsequently, in December 2012, Entergy Gulf States Louisiana submitted a revised evaluation report that reflected expected retail jurisdictional cost of $17 million for the MISO RTO. Iffirst-year capacity charges for the purchase from Entergy Louisiana of one-third of Acadia Unit 2 capacity and energy. This rate change was implemented effective with the first billing cycle of January 2013. The 2011 test year filings, as revised, were approved by the LPSC has denied this request, thenin February 2013. In April 2013, Entergy Gulf States Louisiana submitted a revised evaluation report increasing the rate case must be filedincremental capacity rider by September 30, 2012.
approximately $7.3 million to reflect the cost of an additional capacity contract.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Retail Rates – Gas
In January 2009,connection with its decision to extend the formula rate plan to the 2011 test year, the LPSC required that a base rate case be filed by Entergy Gulf States Louisiana, filed withand the LPSC its gas rate stabilization plan for the test year ending September 30, 2008.required filing was made in February 2013. The filing showed a revenue deficiency of $529 thousand based on a return on common equity mid-point of 10.5%.anticipated Entergy Gulf States Louisiana’s integration into MISO. In April 2009,the filing Entergy Gulf States Louisiana implemented a $255 thousand rate increase pursuant to an uncontested settlement with the LPSC staff.requested, among other relief:
In January 2010, Entergy Gulf States Louisiana filed withauthorization to increase the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed revenue it collects from customers by approximately $24 million;
an earnedauthorized return on common equity of 10.87%, which is within10.4%;
authorization to increase depreciation rates embedded in the earnings bandwidth of 10.5% plus or minus fifty basis points, resulting in noproposed revenue requirement; and,
authorization to implement a three-year formula rate change. In April 2010, Entergy Gulf States Louisiana filedplan with a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The revised evaluation report also resulted in no rate change.
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earnedmidpoint return on common equity of 8.84% and10.4%, plus or minus 75 basis points (the deadband), that would provide a revenue deficiency of $0.3 million. In March 2011, the LPSC Staff filed its findings, suggesting an adjustment that will produce an 11.76% earned return on common equitymeans for the annual re-setting of rates (commencing with calendar year 2013 as its first test year), that would include a mechanism to recover incremental transmission revenue requirement on the basis of a forward-looking test year andas compared to the initial base year of 2014 with an annual true-up, that would retain the primary aspects of the prior formula rate plan, including a $0.2 million rate reduction.60% to customers/40% to Entergy Gulf States Louisiana implementedsharing mechanism for earnings outside the $0.2 milliondeadband, and a capacity rider mechanism that would permit recovery of incremental capacity additions approved by the LPSC.
Following a hearing before an ALJ and the ALJ’s issuance of a Report of Proceedings, in December 2013 the LPSC approved an unopposed settlement of the proceeding. Major terms of the settlement include approval of a three-year formula rate reduction effectiveplan (effective for test years 2014-2016) modeled after the formula rate plan in effect for Entergy Gulf States Louisiana for 2011, including the following: (1) a midpoint return on equity of 9.95% plus or minus 80 basis points, with 60/40 sharing of earnings outside of the bandwidth; (2) recovery outside of the sharing mechanism for the non-fuel MISO-related costs, additional capacity revenue requirement, extraordinary items, such as the Ninemile 6 project, and certain special recovery items; (3) three-year amortization of costs to achieve savings associated with the May 2011 billing cycle. The LPSC docket is now closed.human capital management strategic imperative, with savings to be reflected as they are realized in subsequent years; (4) eight-year amortization of costs incurred in connection with potential development of a new nuclear unit at River Bend, without carrying costs, beginning December 2014, provided, however, that amortization of these costs shall not result in a future rate increase; (5) no change in rates related to test year 2013, except with respect to recovery of the non-fuel MISO-related costs and any changes to the additional capacity revenue requirement; and (6) no increase in rates related to test year 2014, except for those items eligible for recovery outside of the earnings sharing mechanism. Existing depreciation rates will not change. Implementation of rate changes for items recoverable outside of the earnings sharing mechanism occurred in December 2014.
Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Gulf States Louisiana submitted a compliance filing in May 2014 reflecting the effects of the estimated MISO cost recovery mechanism revenue requirement and adjustment of the additional capacity mechanism. In November 2014, Entergy Gulf States Louisiana submitted an additional compliance filing updating the estimated MISO cost recovery mechanism for the most recent actual data. Based on this updated filing, a net increase of $5.8 million in formula rate plan revenue to be collected over nine months was implemented in December 2014. The compliance filings are subject to the review in accordance with the review process set forth in Entergy Gulf States Louisiana’s formula rate plan.
Retail Rates - Gas
In January 2012, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2011. The filing showed an earned return on common equity of 10.48%, which is within the earnings bandwidth of 10.5%, plus or minus fifty basis points. In April 2012 the LPSC Staff filed its findings, suggesting adjustments that produced an 11.54% earned return on common equity for the test year and a $0.1 million rate reduction. Entergy Gulf States Louisiana accepted the LPSC Staff’s recommendations, and the rate reduction was effective with the first billing cycle of May 2012.
In January 2013, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2012. The sixty-dayfiling showed an earned return on common equity of 11.18%, which results in
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
a $43 thousand rate reduction. In March 2013 the LPSC Staff issued its proposed findings and recommended two adjustments. Entergy Gulf States Louisiana and the LPSC Staff reached agreement regarding the LPSC Staff’s proposed adjustments. As reflected in an unopposed joint report of proceedings filed by Entergy Gulf States Louisiana and the LPSC Staff in May 2013, Entergy Gulf States Louisiana accepted, with modification, the LPSC Staff’s proposed adjustment to property insurance expense and agreed to: (1) a three-year extension of the gas rate stabilization plan with a midpoint return on equity of 9.95%, with a first year midpoint reset; (2) dismissal of a docket initiated by the LPSC to evaluate the allowed return on equity for Entergy Gulf States Louisiana’s gas rate stabilization plan; and (3) presentation to the LPSC by November 2014 by Entergy Gulf States Louisiana and the LPSC Staff of their recommendation for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment. The LPSC approved the agreement in May 2013.
In January 2014, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2013. The filing showed an earned return on common equity of 5.47% which results in a $1.5 million rate increase. In April 2014 the LPSC Staff issued a report indicating “that Entergy Gulf States Louisiana has properly determined its earnings for the test year ended September 30, 2013.” The $1.5 million rate increase was implemented effective with the first billing cycle of April 2014.
In accordance with the settlement of Entergy Gulf States Louisiana’s gas rate stabilization plan for the test year ended September 30, 2012, in August 2014 Entergy Gulf States Louisiana submitted for consideration a proposal for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment and relocation projects mandated by local governments. After review by the LPSC staff and comment periodinclusion of certain customer safeguards required by the LPSC staff, in December 2014, Entergy Gulf States Louisiana and the LPSC staff submitted a joint settlement for thisimplementation of an accelerated gas pipe replacement program providing for the replacement of approximately 100 miles of pipe over the next ten years, as well as relocation of certain existing pipe resulting from local government-related infrastructure projects, and for a rider to recover the investment associated with these projects. The rider allows for recovery of approximately $65 million over ten years. The rider recovery will be adjusted on a quarterly basis to include actual investment incurred for the prior quarter and is subject to the following conditions, among others: a ten-year term; application of any earnings in excess of 10.45% as an offset to the revenue requirement of the infrastructure rider; adherence to a specified spending plan, within plus or minus 20 percent annually; annual filings comparing actual versus planned rider spending with actual spending and explanation of variances exceeding ten percent; and an annual true-up. The joint settlement was approved by the LPSC in January 2015. Implementation of the infrastructure rider will commence with bills rendered on and after the first billing cycle of April 2015.
In January 2015, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2014. The filing remains open.showed an earned return on common equity of 7.20%, which results in a $706 thousand rate increase. The rate increase, if approved, will be implemented effective with the first billing cycle of April 2015.
Fuel and purchased power cost recovery
In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana recovers electric fuel and its affiliates. The audit included a reviewpurchased power costs for the billing month based upon the level of such costs incurred two months prior to the reasonableness of charges flowed bybilling month. Entergy Gulf States Louisiana through its fuel adjustment clauseLouisiana’s purchased gas adjustments include estimates for the period 1995 through 2004. Entergy Gulf States Louisiana and the LPSC Staff reachedbilling month adjusted by a settlement to resolve the auditsurcharge or credit that requires Entergy Gulf States Louisiana to refund $18 millionarises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including the realignment to base rates of $2 million of SO2 costs. The ALJ held a stipulation hearing and in November 2011 the LPSC issued an order approving the settlement. The refund was made in the November 2011 billing cycle. Entergy Gulf States Louisiana had previously recorded provisions for the estimated outcome of this proceeding.carrying charges.
In December 2011 the LPSC authorized its staff to initiate anothera proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
In April 2010July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s purchased gasfuel adjustment clause filings for its gas distribution operations.filings. The audit includes a review of the reasonableness of charges flowed through by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 20032010 through 2008.2013. Discovery was completed and, in June 2011, the LPSC Staff filed an audit report generally supporting the appropriateness of charges flowed through the purchased gas adjustment clause filings. The LPSC approved the staff audit report in October 2011.has yet to commence.
Industrial and Commercial Customers
Entergy Gulf States Louisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Gulf States Louisiana’s industrial customer base. Entergy Gulf States Louisiana responds by working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that match specific customer needs and load profiles. Entergy Gulf States Louisiana actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Gulf States Louisiana does not currently expect additional significant losses to cogeneration because of the current economics of the electricity markets and Entergy Gulf States Louisiana’s marketing efforts in retaining industrial customers.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
Nuclear Matters
Entergy Gulf States Louisiana owns and, through an affiliate, operates the River Bend nuclear power plant. Entergy Gulf States Louisiana is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of River Bend, Entergy Gulf States Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials within the reactor coolant system. The issue is applicable to River Bend and is managed in accordance with industry standard practices and guidelines that include in-service examinations, replacements, and mitigation strategies. Developments in the industry or identification of issues at the nuclear units could require unanticipated remediation efforts that cannot be quantified in advance.
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The task force issued a near termnear-term (90-day) report in July 2011 that has made initial recommendations, which are currently being evaluated by the NRC. It is anticipated that the NRC will issue certain orderswere subsequently refined and requests for information to nuclear plant licensees by the end of the first quarter 2012 that will begin to implementprioritized after input from stakeholders. The task force then issued a second report in September 2011. Based upon the task force’s recommendations. Theserecommendations, the NRC issued three orders mayeffective on March 12, 2012. The three orders require U.S. nuclear operators including Entergy, to undertake plant modifications orand perform additional analyses that could,will, among other things, result in increased costsoperating and capital requirementscosts associated with operating Entergy’s nuclear plants. The NRC, with input from the industry, is continuing to determine the specific actions required by the orders. Entergy Gulf States Louisiana’s estimated capital expenditures for 2015 through 2017 for complying with the NRC orders are included in the planned construction and other capital investments estimates given in “Liquidity and Capital Resources - Uses of Capital” above.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Environmental Risks
Entergy Gulf States Louisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Gulf States Louisiana is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of Entergy Gulf States Louisiana’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy’s financial position or results of operations.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Nuclear Decommissioning Costs
See “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries’Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
In the fourth quarter 2014, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $20 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining useful life of the unit.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Gulf States Louisiana records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsGulf States Louisiana’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Qualified Projected Benefit Obligation |
| | | Increase/(Decrease) | |
| | | | | | | | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $1,542 | | $18,452 | | (0.25%) | | $1,737 | | $26,342 |
| Rate of return on plan assets | | (0.25%) | | $981 | | - | | (0.25%) | | $1,117 | | $— |
| Rate of increase in compensation | | 0.25% | | $625 | | $3,439 | | 0.25% | | $669 | | $4,020 |
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $534 | | $7,188 |
| Health care cost trend | | 0.25% | | $990 | | $6,253 | | 0.25% | | $956 | | $6,643 |
| Discount rate | | (0.25%) | | $697 | | $7,114 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Costs and Funding
Total qualified pension cost for Entergy Gulf States Louisiana in 20112014 was $9.4$18.6 million. Entergy Gulf States Louisiana anticipates 20122015 qualified pension cost to be $19.8$27.5 million. Entergy Gulf States Louisiana contributed $27.3$30.2 million to its pension plans in 20112014 and estimates 20122015 pension contributions to be approximately $10.8 million;$32.5 million, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costs for Entergy Gulf States Louisiana in 20112014 were $16.8 million, including $3.9 million in savings due to the estimated effect of future Medicare Part D subsidies.$12.2 million. Entergy Gulf States Louisiana expects 20122015 postretirement health care and life insurance benefit costs to approximate $21.3 million, including $3.7 million in savings due to the estimated effect of future Medicare Part D subsidies.approximately $13.1 million. Entergy Gulf States Louisiana expects to contribute approximatelycontributed $8.3 million to its other postretirement plans in 2012.2014 and expects to contribute approximately $8.9 million in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $51.3 million in the qualified pension benefit obligation and $11.8 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $7.6 million and other postretirement cost by approximately $1.6 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
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To the Board of Directors and Members of
Entergy Gulf States Louisiana, L.L.C.
Baton Rouge,Jefferson, Louisiana
We have audited the accompanying balance sheets of Entergy Gulf States Louisiana, L.L.C. (the “Company”) as of December 31, 20112014 and 2010,2013, and the related income statements, statements of comprehensive income, statements of cash flows, and statements of changes in equity (pages 295343 through 300348 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy Gulf States Louisiana, L.L.C. as of December 31, 20112014 and 2010,2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
| | | | | ENTERGY GULF STATES LOUISIANA, L.L.C. |
| INCOME STATEMENTS | INCOME STATEMENTS | | INCOME STATEMENTS |
| | | | | | | | | | | | |
| | | For the Years Ended December 31, | | | For the Years Ended December 31, |
| | | 2011 | | | 2010 | | | 2009 | | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | | | | | | | |
| Electric | | $ | 2,069,548 | | | $ | 2,015,710 | | | $ | 1,776,610 | | |
| $2,079,236 |
| |
| $1,881,895 |
| |
| $1,606,165 |
|
| Natural gas | | | 64,861 | | | | 81,311 | | | | 67,776 | | | 71,690 |
| | 59,238 |
| | 48,729 |
|
| TOTAL | | | 2,134,409 | | | | 2,097,021 | | | | 1,844,386 | | | 2,150,926 |
| | 1,941,133 |
| | 1,654,894 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | |
| | |
| | |
|
| Operation and Maintenance: | | | | | | | | | | | | | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and | | | | | | | | | | | | | |
| gas purchased for resale | | | 437,301 | | | | 312,960 | | | | 251,393 | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | 350,765 |
| | 286,625 |
| | 194,878 |
|
| Purchased power | | | 780,711 | | | | 851,694 | | | | 732,943 | | | 849,165 |
| | 731,611 |
| | 562,247 |
|
| Nuclear refueling outage expenses | | | 18,227 | | | | 24,046 | | | | 21,787 | | | 21,443 |
| | 20,345 |
| | 17,565 |
|
| Other operation and maintenance | | | 351,070 | | | | 361,329 | | | | 332,450 | | | 392,398 |
| | 398,589 |
| | 361,415 |
|
| Decommissioning | | | 14,189 | | | | 13,400 | | | | 13,591 | | | 16,844 |
| | 15,908 |
| | 15,024 |
|
| Taxes other than income taxes | | | 75,858 | | | | 77,519 | | | | 67,559 | | | 84,178 |
| | 80,307 |
| | 76,295 |
|
| Depreciation and amortization | | | 143,387 | | | | 132,714 | | | | 135,489 | | | 155,383 |
| | 150,929 |
| | 146,673 |
|
| Other regulatory credits - net | | | (17,045 | ) | | | (1,248 | ) | | | (1,261 | ) | |
| Other regulatory charges (credits) - net | | | (12,640 | ) | | 9,482 |
| | 31,835 |
|
| TOTAL | | | 1,803,698 | | | | 1,772,414 | | | | 1,553,951 | | | 1,857,536 |
| | 1,693,796 |
| | 1,405,932 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | | 330,711 | | | | 324,607 | | | | 290,435 | | | 293,390 |
| | 247,337 |
| | 248,962 |
|
| | | | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | | 9,094 | | | | 5,513 | | | | 5,426 | | | 7,433 |
| | 8,062 |
| | 8,694 |
|
| Interest and investment income | | | 40,945 | | | | 42,293 | | | | 69,951 | | | 40,448 |
| | 52,953 |
| | 42,773 |
|
| Miscellaneous - net | | | (8,799 | ) | | | (8,016 | ) | | | (8,764 | ) | | (7,608 | ) | | (11,567 | ) | | (8,928 | ) |
| TOTAL | | | 41,240 | | | | 39,790 | | | | 66,613 | | | 40,273 |
| | 49,448 |
| | 42,539 |
|
| | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | |
| | |
| | |
|
| Interest expense | | | 84,356 | | | | 101,318 | | | | 118,243 | | | 86,705 |
| | 81,118 |
| | 83,251 |
|
| Allowance for borrowed funds used during construction | | | (3,745 | ) | | | (3,537 | ) | | | (3,427 | ) | | (4,315 | ) | | (2,814 | ) | | (3,343 | ) |
| TOTAL | | | 80,611 | | | | 97,781 | | | | 114,816 | | | 82,390 |
| | 78,304 |
| | 79,908 |
|
| | | | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 291,340 | | | | 266,616 | | | | 242,232 | | | 251,273 |
| | 218,481 |
| | 211,593 |
|
| | | �� | | | | | | | | | | | | | | | | |
| Income taxes | | | 88,313 | | | | 75,878 | | | | 89,185 | | | 88,782 |
| | 56,819 |
| | 52,616 |
|
| | | | | | | | | | | | | | | | | | | |
| NET INCOME | | | 203,027 | | | | 190,738 | | | | 153,047 | | | 162,491 |
| | 161,662 |
| | 158,977 |
|
| | | | | | | | | | | | | | | | | | | |
| Preferred distribution requirements and other | | | 825 | | | | 827 | | | | 825 | | | 827 |
| | 825 |
| | 825 |
|
| | | | | | | | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO | | | | | | | | | | | | | |
| COMMON EQUITY | | $ | 202,202 | | | $ | 189,911 | | | $ | 152,222 | | |
| EARNINGS APPLICABLE TO COMMON EQUITY | | |
| $161,664 |
| |
| $160,837 |
| |
| $158,152 |
|
| | | | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | |
| | |
|
|
| | | | | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| STATEMENTS OF COMPREHENSIVE INCOME |
| | |
| | For the Years Ended December 31, |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| | | | | | |
| Net Income |
| $162,491 |
| |
| $161,662 |
| |
| $158,977 |
|
| | | | | | |
| Other comprehensive income | |
| | |
| | |
|
| Pension and other postretirement liabilities | |
| | |
| | |
|
| (net of tax expense (benefit) of ($15,777), $34,126, and $8,732) | (25,145 | ) | | 37,027 |
| | 4,381 |
|
| Other comprehensive income | (25,145 | ) | | 37,027 |
| | 4,381 |
|
| | | | | | |
| Comprehensive Income |
| $137,346 |
| |
| $198,689 |
| |
| $163,358 |
|
| | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
|
| |
| STATEMENTS OF COMPREHENSIVE INCOME | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| Net Income | | $ | 203,027 | | | $ | 190,738 | | | $ | 153,047 | |
| Other comprehensive income (loss) | | | | | | | | | | | | |
| Pension and other postretirement liabilities | | | | | | | | | | | | |
| (net of tax benefit of $16,556, $340, and $13,111) | | | (29,306 | ) | | | 1,867 | | | | (11,906 | ) |
| Other comprehensive income (loss) | | | (29,306 | ) | | | 1,867 | | | | (11,906 | ) |
| Comprehensive Income | | $ | 173,721 | | | $ | 192,605 | | | $ | 141,141 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $162,491 |
| |
| $161,662 |
| |
| $158,977 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 230,795 |
| | 223,420 |
| | 214,929 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 99,404 |
| | 86,125 |
| | 92,523 |
|
| Changes in working capital: | | |
| | |
| | |
|
| Receivables | | 31,710 |
| | (61,561 | ) | | 87,089 |
|
| Fuel inventory | | 10,348 |
| | 412 |
| | (3,718 | ) |
| Accounts payable | | 3,646 |
| | 24,694 |
| | (1,725 | ) |
| Prepaid taxes and taxes accrued | | (2,050 | ) | | (43,029 | ) | | (86,346 | ) |
| Interest accrued | | 1,267 |
| | 371 |
| | (647 | ) |
| Deferred fuel costs | | 20,205 |
| | (10,573 | ) | | (96,230 | ) |
| Other working capital accounts | | 22,323 |
| | (5,434 | ) | | (5,548 | ) |
| Changes in provisions for estimated losses | | 69,839 |
| | (60,084 | ) | | (2,222 | ) |
| Changes in other regulatory assets | | (101,173 | ) | | 123,254 |
| | (73,082 | ) |
| Changes in pension and other postretirement liabilities | | 126,889 |
| | (140,643 | ) | | 83,440 |
|
| Other | | (83,143 | ) | | 136,112 |
| | (21,232 | ) |
| Net cash flow provided by operating activities | | 592,551 |
| | 434,726 |
| | 346,208 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (272,738 | ) | | (267,122 | ) | | (284,458 | ) |
| Allowance for equity funds used during construction | | 7,433 |
| | 8,062 |
| | 8,694 |
|
| Nuclear fuel purchases | | (40,319 | ) | | (141,176 | ) | | (51,610 | ) |
| Proceeds from sale of nuclear fuel | | 66,220 |
| | 19,401 |
| | 67,632 |
|
| Investment in affiliates | | (66,243 | ) | | — |
| | — |
|
| Payment to storm reserve escrow account | | (68,523 | ) | | (29 | ) | | (99 | ) |
| Receipts from storm reserve escrow account | | — |
| | 65,475 |
| | 3,364 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 173,530 |
| | 193,792 |
| | 131,042 |
|
| Investment in nuclear decommissioning trust funds | | (191,402 | ) | | (213,122 | ) | | (150,601 | ) |
| Change in money pool receivable - net | | 759 |
| | (1,925 | ) | | 23,596 |
|
| Proceeds from the sale of investment | | — |
| | — |
| | 51,000 |
|
| Net cash flow used in investing activities | | (391,283 | ) | | (336,644 | ) | | (201,440 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | 108,730 |
| | 69,770 |
| | 74,251 |
|
| Retirement of long-term debt | | — |
| | (75,000 | ) | | (70,840 | ) |
| Change in money pool payable - net | | — |
| | (7,074 | ) | | 7,074 |
|
| Changes in credit borrowings - net | | (14,800 | ) | | 14,800 |
| | (29,400 | ) |
| Dividends/distributions paid: | | |
| | |
| | |
|
| Common equity | | (166,901 | ) | | (119,900 | ) | | (114,200 | ) |
| Preferred membership interests | | (825 | ) | | (825 | ) | | (825 | ) |
| Other | | 19,910 |
| | 42 |
| | 13 |
|
| Net cash flow used in financing activities | | (53,886 | ) | | (118,187 | ) | | (133,927 | ) |
| | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 147,382 |
| | (20,105 | ) | | 10,841 |
|
| Cash and cash equivalents at beginning of period | | 15,581 |
| | 35,686 |
| | 24,845 |
|
| Cash and cash equivalents at end of period | |
| $162,963 |
| |
| $15,581 |
| |
| $35,686 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $82,531 |
| |
| $77,882 |
| |
| $80,848 |
|
| Income taxes | |
| ($1,009 | ) | |
| $5,064 |
| |
| $89,191 |
|
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 203,027 | | | $ | 190,738 | | | $ | 153,047 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 207,753 | | | | 194,265 | | | | 149,080 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (6,268 | ) | | | 87,920 | | | | 138,817 | |
| Changes in working capital: | | | | | | | | | | | | |
| Receivables | | | (82,221 | ) | | | (30,732 | ) | | | 177,628 | |
| Fuel inventory | | | 2,578 | | | | 3,471 | | | | 4,453 | |
| Accounts payable | | | (58,981 | ) | | | 80,874 | | | | (131,603 | ) |
| Prepaid taxes and taxes accrued | | | 148,313 | | | | (8,176 | ) | | | (418 | ) |
| Interest accrued | | | (1,177 | ) | | | 537 | | | | (5,403 | ) |
| Deferred fuel costs | | | 74,877 | | | | (20,050 | ) | | | (49,625 | ) |
| Other working capital accounts | | | (4,600 | ) | | | 13,068 | | | | (116,816 | ) |
| Changes in provisions for estimated losses | | | 1,353 | | | | 83,011 | | | | 773 | |
| Changes in other regulatory assets | | | (80,027 | ) | | | 114,528 | | | | (44,612 | ) |
| Changes in pension and other postretirement liabilities | | | 112,736 | | | | (14,041 | ) | | | 46,083 | |
| Other | | | (35,248 | ) | | | 30,717 | | | | (86,474 | ) |
| Net cash flow provided by operating activities | | | 482,115 | | | | 726,130 | | | | 234,930 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (219,307 | ) | | | (237,251 | ) | | | (199,283 | ) |
| Allowance for equity funds used during construction | | | 9,094 | | | | 5,513 | | | | 5,426 | |
| Insurance proceeds | | | - | | | | 2,243 | | | | 2,180 | |
| Nuclear fuel purchases | | | (87,901 | ) | | | (47,785 | ) | | | (44,529 | ) |
| Proceeds from sale of nuclear fuel | | | 9,647 | | | | - | | | | 72,843 | |
| Payment for purchase of plant | | | - | | | | - | | | | (74,818 | ) |
| Investment in affiliates | | | - | | | | (150,264 | ) | | | 160 | |
| Payment to storm reserve escrow account | | | (124 | ) | | | (90,073 | ) | | | - | |
| Proceeds from nuclear decommissioning trust fund sales | | | 76,844 | | | | 100,825 | | | | 95,244 | |
| Investment in nuclear decommissioning trust funds | | | (94,922 | ) | | | (115,055 | ) | | | (105,167 | ) |
| Change in money pool receivable - net | | | 39,407 | | | | (12,872 | ) | | | (38,542 | ) |
| Changes in other investments - net | | | - | | | | 3,136 | | | | - | |
| Net cash flow used in investing activities | | | (267,262 | ) | | | (541,583 | ) | | | (286,486 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | - | | | | 306,234 | | | | 297,199 | |
| Retirement of long-term debt | | | (47,340 | ) | | | (344,841 | ) | | | (118,961 | ) |
| Changes in credit borrowings - net | | | 5,200 | | | | (10,100 | ) | | | - | |
| Dividends/distributions paid: | | | | | | | | | | | | |
| Common equity | | | (301,950 | ) | | | (124,300 | ) | | | (30,700 | ) |
| Preferred membership interests | | | (825 | ) | | | (827 | ) | | | (825 | ) |
| Other | | | (266 | ) | | | - | | | | - | |
| Net cash flow provided by (used in) financing activities | | | (345,181 | ) | | | (173,834 | ) | | | 146,713 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (130,328 | ) | | | 10,713 | | | | 95,157 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 155,173 | | | | 144,460 | | | | 49,303 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 24,845 | | | $ | 155,173 | | | $ | 144,460 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
| Cash paid/(received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 82,413 | | | $ | 97,803 | | | $ | 120,655 | |
| Income taxes | | $ | (56,289 | ) | | $ | (16,803 | ) | | $ | 60,594 | |
| | | | | | | | | | | | | |
| Noncash financing activities: | | | | | | | | | | | | |
| Repayment by Entergy Texas of assumed long-term debt | | $ | - | | | $ | 167,742 | | | $ | 602,229 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | ENTERGY GULF STATES LOUISIANA, L.L.C. |
| BALANCE SHEETS | BALANCE SHEETS | | BALANCE SHEETS |
| ASSETS | ASSETS | | ASSETS |
| | | | | | | | | |
| | | December 31, | | | December 31, |
| | | 2011 | | | 2010 | | | 2014 | | 2013 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | | | |
| Cash | | $ | 217 | | | $ | 231 | | |
| $53,394 |
| |
| $1,739 |
|
| Temporary cash investments | | | 24,628 | | | | 154,942 | | | 109,569 |
| | 13,842 |
|
| Total cash and cash equivalents | | | 24,845 | | | | 155,173 | | | 162,963 |
| | 15,581 |
|
| Accounts receivable: | | | | | | | | | | |
| | |
|
| Customer | | | 61,648 | | | | 60,369 | | | 67,006 |
| | 69,648 |
|
| Allowance for doubtful accounts | | | (843 | ) | | | (1,306 | ) | | (625 | ) | | (909 | ) |
| Associated companies | | | 171,431 | | | | 119,252 | | | 86,966 |
| | 107,723 |
|
| Other | | | 22,082 | | | | 27,728 | | | 18,379 |
| | 22,945 |
|
| Accrued unbilled revenues | | | 51,155 | | | | 56,616 | | | 54,079 |
| | 58,867 |
|
| Total accounts receivable | | | 305,473 | | | | 262,659 | | | 225,805 |
| | 258,274 |
|
| Deferred fuel costs | | | — |
| | 9,625 |
|
| Fuel inventory - at average cost | | | 23,249 | | | | 25,827 | | | 16,207 |
| | 26,555 |
|
| Materials and supplies - at average cost | | | 114,075 | | | | 113,302 | | | 121,237 |
| | 122,909 |
|
| Deferred nuclear refueling outage costs | | | 21,066 | | | | 7,372 | | | 7,416 |
| | 25,975 |
|
| Prepaid taxes | | | - | | | | 40,946 | | |
| Prepayments and other | | | 5,180 | | | | 5,127 | | | 45,122 |
| | 36,698 |
|
| TOTAL | | | 493,888 | | | | 610,406 | | | 578,750 |
| | 495,617 |
|
| | | | | | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | | | |
| | |
|
| Investment in affiliate preferred membership interests | | | 339,664 | | | | 339,664 | | | 355,906 |
| | 289,664 |
|
| Decommissioning trust funds | | | 420,917 | | | | 393,580 | | | 637,744 |
| | 573,744 |
|
| Non-utility property - at cost (less accumulated depreciation) | | | 164,712 | | | | 156,845 | | | 193,407 |
| | 174,134 |
|
| Storm reserve escrow account | | | 90,249 | | | | 90,125 | | | 90,061 |
| | 21,538 |
|
| Other | | | 12,701 | | | | 12,011 | | | 14,887 |
| | 14,145 |
|
| TOTAL | | | 1,028,243 | | | | 992,225 | | | 1,292,005 |
| | 1,073,225 |
|
| | | | | | | | | | | | | |
| UTILITY PLANT | | | | | | | | | | |
| | |
|
| Electric | | | 7,068,657 | | | | 6,907,268 | | | 7,600,730 |
| | 7,400,689 |
|
| Natural gas | | | 129,950 | | | | 124,020 | | | 148,586 |
| | 143,902 |
|
| Construction work in progress | | | 122,051 | | | | 119,017 | | | 127,436 |
| | 105,314 |
|
| Nuclear fuel | | | 206,031 | | | | 202,609 | | | 131,901 |
| | 196,508 |
|
| TOTAL UTILITY PLANT | | | 7,526,689 | | | | 7,352,914 | | | 8,008,653 |
| | 7,846,413 |
|
| Less - accumulated depreciation and amortization | | | 3,906,353 | | | | 3,812,394 | | | 4,176,242 |
| | 4,071,762 |
|
| UTILITY PLANT - NET | | | 3,620,336 | | | | 3,540,520 | | | 3,832,411 |
| | 3,774,651 |
|
| | | | | | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | | | |
| | |
|
| Regulatory assets: | | | | | | | | | | |
| | |
|
| Regulatory asset for income taxes - net | | | 249,058 | | | | 234,406 | | | 161,714 |
| | 165,456 |
|
| Other regulatory assets | | | 333,898 | | | | 270,883 | | | 426,381 |
| | 321,466 |
|
| Deferred fuel costs | | | 100,124 | | | | 100,124 | | | 100,124 |
| | 100,124 |
|
| Other | | | 13,506 | | | | 14,832 | | | 12,438 |
| | 12,049 |
|
| TOTAL | | | 696,586 | | | | 620,245 | | | 700,657 |
| | 599,095 |
|
| | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 5,839,053 | | | $ | 5,763,396 | | |
| $6,403,823 |
| |
| $5,942,588 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | |
|
|
| | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $31,955 |
| |
| $— |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 102,933 |
| | 95,853 |
|
| Other | | 108,874 |
| | 103,314 |
|
| Customer deposits | | 56,749 |
| | 51,839 |
|
| Accumulated deferred income taxes | | 21,095 |
| | 36,330 |
|
| Interest accrued | | 27,075 |
| | 25,808 |
|
| Deferred fuel costs | | 10,580 |
| | — |
|
| Other | | 44,517 |
| | 43,097 |
|
| TOTAL | | 403,778 |
| | 356,241 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 1,601,032 |
| | 1,512,547 |
|
| Accumulated deferred investment tax credits | | 72,277 |
| | 75,295 |
|
| Other regulatory liabilities | | 176,305 |
| | 159,429 |
|
| Decommissioning and asset retirement cost liabilities | | 446,619 |
| | 403,084 |
|
| Accumulated provisions | | 106,985 |
| | 37,146 |
|
| Pension and other postretirement liabilities | | 401,144 |
| | 274,315 |
|
| Long-term debt | | 1,590,862 |
| | 1,527,465 |
|
| Long-term payables - associated companies | | 26,156 |
| | 27,900 |
|
| Other | | 148,102 |
| | 108,189 |
|
| TOTAL | | 4,569,482 |
| | 4,125,370 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| EQUITY | | |
| | |
|
| Preferred membership interests without sinking fund | | 10,000 |
| | 10,000 |
|
| Member’s equity | | 1,473,910 |
| | 1,479,179 |
|
| Accumulated other comprehensive loss | | (53,347 | ) | | (28,202 | ) |
| TOTAL | | 1,430,563 |
| | 1,460,977 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $6,403,823 |
| |
| $5,942,588 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY GULF STATES LOUISIANA, L.L.C. | |
| BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | 60,000 | | | $ | - | |
| Accounts payable: | | | | | | | | |
| Associated companies | | | 73,305 | | | | 71,601 | |
| Other | | | 101,009 | | | | 160,246 | |
| Customer deposits | | | 49,734 | | | | 48,631 | |
| Taxes accrued | | | 107,367 | | | | - | |
| Accumulated deferred income taxes | | | 5,427 | | | | 1,749 | |
| Interest accrued | | | 26,084 | | | | 27,261 | |
| Deferred fuel costs | | | 97,178 | | | | 22,301 | |
| Pension and other postretirement liabilities | | | 7,911 | | | | 7,415 | |
| Gas hedge contracts | | | 8,572 | | | | 1,034 | |
| Other | | | 15,294 | | | | 14,015 | |
| TOTAL | | | 551,881 | | | | 354,253 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 1,397,230 | | | | 1,405,374 | |
| Accumulated deferred investment tax credits | | | 81,520 | | | | 84,858 | |
| Other regulatory liabilities | | | 75,721 | | | | 83,479 | |
| Decommissioning and asset retirement cost liabilities | | | 359,792 | | | | 339,925 | |
| Accumulated provisions | | | 99,033 | | | | 97,680 | |
| Pension and other postretirement liabilities | | | 332,672 | | | | 220,432 | |
| Long-term debt | | | 1,482,430 | | | | 1,584,332 | |
| Long-term payables - associated companies | | | 31,254 | | | | 32,596 | |
| Other | | | 47,397 | | | | 51,254 | |
| TOTAL | | | 3,907,049 | | | | 3,899,930 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Preferred membership interests without sinking fund | | | 10,000 | | | | 10,000 | |
| Member's equity | | | 1,439,733 | | | | 1,539,517 | |
| Accumulated other comprehensive loss | | | (69,610 | ) | | | (40,304 | ) |
| TOTAL | | | 1,380,123 | | | | 1,509,213 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 5,839,053 | | | $ | 5,763,396 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| |
| STATEMENTS OF CHANGES IN EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | | | | Common Equity | | | | |
| | | Preferred Membership Interests | | | Member's Equity | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 10,000 | | | $ | 1,352,408 | | | $ | (30,265 | ) | | $ | 1,332,143 | |
| Net income | | | - | | | | 153,047 | | | | - | | | | 153,047 | |
| Other comprehensive loss | | | - | | | | - | | | | (11,906 | ) | | | (11,906 | ) |
| Dividends/distributions declared on common equity | | | - | | | | (30,700 | ) | | | - | | | | (30,700 | ) |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (825 | ) | | | - | | | | (825 | ) |
| Balance at December 31, 2009 | | $ | 10,000 | | | $ | 1,473,930 | | | $ | (42,171 | ) | | $ | 1,441,759 | |
| Net income | | | - | | | | 190,738 | | | | - | | | | 190,738 | |
| Other comprehensive income | | | - | | | | - | | | | 1,867 | | | | 1,867 | |
| Dividends/distributions declared on common equity | | | - | | | | (124,300 | ) | | | - | | | | (124,300 | ) |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (827 | ) | | | - | | | | (827 | ) |
| Other | | | - | | | | (24 | ) | | | - | | | | (24 | ) |
| Balance at December 31, 2010 | | $ | 10,000 | | | $ | 1,539,517 | | | $ | (40,304 | ) | | $ | 1,509,213 | |
| Net income | | | - | | | | 203,027 | | | | - | | | | 203,027 | |
| Other comprehensive loss | | | - | | | | - | | | | (29,306 | ) | | | (29,306 | ) |
| Dividends/distributions declared on common equity | | | - | | | | (301,950 | ) | | | - | | | | (301,950 | ) |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (825 | ) | | | - | | | | (825 | ) |
| Other | | | - | | | | (36 | ) | | | - | | | | (36 | ) |
| Balance at December 31, 2011 | | $ | 10,000 | | | $ | 1,439,733 | | | $ | (69,610 | ) | | $ | 1,380,123 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
300 |
| | | | | | | | | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| STATEMENTS OF CHANGES IN EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | | | |
| | | | Common Equity | | |
| | Preferred
Membership
Interests | | Member’s Equity | | Accumulated Other Comprehensive Loss | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2011 |
| $10,000 |
| |
| $1,393,386 |
| |
| ($69,610 | ) | |
| $1,333,776 |
|
| Net income | — |
| | 158,977 |
| | — |
| | 158,977 |
|
| Member contribution | — |
| | 1,000 |
| | — |
| | 1,000 |
|
| Other comprehensive income | — |
| | — |
| | 4,381 |
| | 4,381 |
|
| Dividends/distributions declared on common equity | — |
| | (114,200 | ) | | — |
| | (114,200 | ) |
| Dividends/distributions declared on preferred membership interests | — |
| | (825 | ) | | — |
| | (825 | ) |
| Other | — |
| | (105 | ) | | — |
| | (105 | ) |
| Balance at December 31, 2012 |
| $10,000 |
| |
| $1,438,233 |
| |
| ($65,229 | ) | |
| $1,383,004 |
|
| Net income | — |
| | 161,662 |
| | — |
| | 161,662 |
|
| Other comprehensive income | — |
| | — |
| | 37,027 |
| | 37,027 |
|
| Dividends/distributions declared on common equity | — |
| | (119,900 | ) | | — |
| | (119,900 | ) |
| Dividends/distributions declared on preferred membership interests | — |
| | (825 | ) | | — |
| | (825 | ) |
| Other | — |
| | 9 |
| | — |
| | 9 |
|
| Balance at December 31, 2013 |
| $10,000 |
| |
| $1,479,179 |
| |
| ($28,202 | ) | |
| $1,460,977 |
|
| Net income | — |
| | 162,491 |
| | — |
| | 162,491 |
|
| Other comprehensive income | — |
| | — |
| | (25,145 | ) | | (25,145 | ) |
| Dividends/distributions declared on common equity | — |
| | (166,901 | ) | | — |
| | (166,901 | ) |
| Dividends/distributions declared on preferred membership interests | — |
| | (827 | ) | | — |
| | (827 | ) |
| Other | — |
| | (32 | ) | | — |
| | (32 | ) |
| Balance at December 31, 2014 |
| $10,000 |
| |
| $1,473,910 |
| |
| ($53,347 | ) | |
| $1,430,563 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues (2) | | $ | 2,134,409 | | | $ | 2,097,021 | | | $ | 1,844,386 | | | $ | 2,733,365 | | | $ | 3,534,612 | |
| Net Income (2) | | $ | 203,027 | | | $ | 190,738 | | | $ | 153,047 | | | $ | 144,767 | | | $ | 192,779 | |
| Total assets | | $ | 5,839,053 | | | $ | 5,763,396 | | | $ | 5,569,083 | | | $ | 6,056,961 | | | $ | 6,072,691 | |
| Long-term obligations (1) | | $ | 1,482,430 | | | $ | 1,584,332 | | | $ | 1,740,592 | | | $ | 1,944,180 | | | $ | 1,756,087 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Electric Operating Revenues (2): | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 479 | | | $ | 498 | | | $ | 393 | | | $ | 554 | | | $ | 1,042 | |
| Commercial | | | 416 | | | | 426 | | | | 354 | | | | 520 | | | | 817 | |
| Industrial | | | 490 | | | | 489 | | | | 383 | | | | 672 | | | | 1,035 | |
| Governmental | | | 22 | | | | 21 | | | | 18 | | | | 25 | | | | 45 | |
| Total retail | | | 1,407 | | | | 1,434 | | | | 1,148 | | | | 1,771 | | | | 2,939 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 562 | | | | 463 | | | | 475 | | | | 643 | | | | 233 | |
| Non-associated companies | | | 52 | | | | 79 | | | | 105 | | | | 181 | | | | 196 | |
| Other | | | 49 | | | | 40 | | | | 49 | | | | 38 | | | | 80 | |
| Total | | $ | 2,070 | | | $ | 2,016 | | | $ | 1,777 | | | $ | 2,633 | | | $ | 3,448 | |
| Billed Electric Energy Sales (GWh) (2): | | | | | | | | | | | | | | | | | | | | |
| Residential | | | 5,383 | | | | 5,538 | | | | 5,090 | | | | 4,888 | | | | 10,215 | |
| Commercial | | | 5,239 | | | | 5,274 | | | | 5,058 | | | | 4,973 | | | | 8,980 | |
| Industrial | | | 9,041 | | | | 8,801 | | | | 7,601 | | | | 8,416 | | | | 15,012 | |
| Governmental | | | 222 | | | | 210 | | | | 213 | | | | 215 | | | | 448 | |
| Total retail | | | 19,885 | | | | 19,823 | | | | 17,962 | | | | 18,492 | | | | 34,655 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 8,595 | | | | 8,516 | | | | 7,084 | | | | 6,490 | | | | 2,488 | |
| Non-associated companies | | | 1,013 | | | | 1,705 | | | | 2,546 | | | | 2,524 | | | | 2,900 | |
| Total | | | 29,493 | | | | 30,044 | | | | 27,592 | | | | 27,506 | | | | 40,043 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| (2) Entergy Gulf States Louisiana's income statements for the years ended December 31, 2008, 2009, 2010, and 2011 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's income statements for the year ended December 31, 2007 include the operations of Entergy Texas. | |
| | | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $2,150,926 |
| |
| $1,941,133 |
| |
| $1,654,894 |
| |
| $2,134,409 |
| |
| $2,097,021 |
|
| Net Income |
| $162,491 |
| |
| $161,662 |
| |
| $158,977 |
| |
| $201,604 |
| |
| $174,319 |
|
| Total assets |
| $6,403,823 |
| |
| $5,942,588 |
| |
| $5,803,119 |
| |
| $5,763,719 |
| |
| $5,690,376 |
|
| Long-term obligations (a) |
| $1,590,862 |
| |
| $1,527,465 |
| |
| $1,442,429 |
| |
| $1,482,430 |
| |
| $1,584,332 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt). |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Electric Operating Revenues: | |
| | |
| | |
| | |
| | |
|
| Residential |
| $502 |
| |
| $465 |
| |
| $389 |
| |
| $479 |
| |
| $498 |
|
| Commercial | 448 |
| | 417 |
| | 349 |
| | 416 |
| | 426 |
|
| Industrial | 588 |
| | 502 |
| | 392 |
| | 490 |
| | 489 |
|
| Governmental | 23 |
| | 22 |
| | 18 |
| | 22 |
| | 21 |
|
| Total retail | 1,561 |
| | 1,406 |
| | 1,148 |
| | 1,407 |
| | 1,434 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 407 |
| | 375 |
| | 377 |
| | 562 |
| | 463 |
|
| Non-associated companies | 62 |
| | 45 |
| | 34 |
| | 52 |
| | 79 |
|
| Other | 49 |
| | 56 |
| | 47 |
| | 49 |
| | 40 |
|
| Total |
| $2,079 |
| |
| $1,882 |
| |
| $1,606 |
| |
| $2,070 |
| |
| $2,016 |
|
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | |
| | |
| | |
| | |
|
| Residential | 5,368 |
| | 5,206 |
| | 5,176 |
| | 5,383 |
| | 5,538 |
|
| Commercial | 5,298 |
| | 5,208 |
| | 5,287 |
| | 5,239 |
| | 5,274 |
|
| Industrial | 9,925 |
| | 9,021 |
| | 8,890 |
| | 9,041 |
| | 8,801 |
|
| Governmental | 232 |
| | 228 |
| | 228 |
| | 222 |
| | 210 |
|
| Total retail | 20,823 |
| | 19,663 |
| | 19,581 |
| | 19,885 |
| | 19,823 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 6,966 |
| | 6,580 |
| | 7,727 |
| | 8,595 |
| | 8,516 |
|
| Non-associated companies | 925 |
| | 887 |
| | 941 |
| | 1,013 |
| | 1,705 |
|
| Total | 28,714 |
| | 27,130 |
| | 28,249 |
| | 29,493 |
| | 30,044 |
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Plan to Spin Off the Utility’s TransmissionEntergy Louisiana and Entergy Gulf States Louisiana Business Combination
SeeIn June 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a business combination study report with the “Plan to Spin OffLPSC. The report contained a preliminary analysis of the Utility’s Transmission Business” sectionpotential combination of Entergy CorporationLouisiana and Entergy Gulf States Louisiana into a single public utility, including an overview of the combination that identified its potential customer benefits. Although not part of the business combination, Entergy Louisiana provided notice to the City Council in June 2014 that it would seek authorization to transfer to Entergy New Orleans the assets that currently support the provision of service to Entergy Louisiana’s customers in Algiers. Entergy Louisiana subsequently filed the referenced application with the City Council in October 2014. In the summer of 2014, Entergy Louisiana and Entergy Gulf States Louisiana held technical conferences and face-to-face meetings with LPSC staff and other stakeholders to discuss potential effects of the combination, solicit suggestions and concerns, and identify areas in which additional information might be needed.
On September 30, 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility.
The combination is subject to regulatory review and approval of the LPSC, the FERC, and the NRC. In June 2014, Entergy submitted an application to the NRC for approval of River Bend and Waterford 3 license transfers as part of the steps to complete the business combination. The combination also could be subject to regulatory review of the City Council if Entergy Louisiana continues to own the assets that currently support Entergy Louisiana’s customers in Algiers at the time the combination is effectuated. In November 2014, Entergy Louisiana filed an application with the City Council seeking authorization to undertake the combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the combination. In December 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and the Algiers asset transfer. In January 2015, Entergy Services filed an application with the FERC for financing authority for the combined company. If approvals are obtained from the LPSC, the FERC, the NRC, and, if required, the City Council, Entergy Louisiana and Entergy Gulf States Louisiana expect the combination will be effected in the second half of 2015.
The procedural schedule in the LPSC business combination proceeding calls for LPSC Staff and intervenor testimony to be filed in March 2015, with a hearing scheduled for June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015. In the City Council business combination proceeding, the City Council announced through a resolution that it would not initiate an active review of the business combination filing, but instead would establish a business combination docket for the limited purpose of receiving information filings relative to the business combination proceedings at the LPSC.
It is currently contemplated that Entergy Louisiana and Entergy Gulf States Louisiana will undertake multiple steps to effectuate the combination, which steps would include the following:
Each of Entergy Louisiana and Entergy Gulf States Louisiana will redeem or repurchase all of their respective outstanding preferred membership interests (which interests have a $100 million liquidation value in the case of Entergy Louisiana and $10 million liquidation value in the case of Entergy Gulf States Louisiana).
Entergy Gulf States Louisiana will convert from a Louisiana limited liability company to a Texas limited liability company.
Under the Texas Business Organizations Code (TXBOC), Entergy Louisiana will allocate substantially all of its assets to a new subsidiary (New Entergy Louisiana) and New Entergy Louisiana will assume all
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis for
of the liabilities of Entergy Louisiana, in a discussiontransaction regarded as a merger under the TXBOC. Entergy Louisiana will remain in existence and hold the membership interests in New Entergy Louisiana.
Under the TXBOC, Entergy Gulf States Louisiana will allocate substantially all of this matter, includingits assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana will assume all of the planned retirementliabilities of debtEntergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. Entergy Gulf States Louisiana will remain in existence and preferred securities.hold the membership interests in New Entergy Gulf States Louisiana.
Entergy Louisiana and Entergy Gulf States Louisiana will contribute the membership interests in New Entergy Louisiana and New Entergy Gulf States Louisiana to an affiliate the common membership interests of which will be owned by Entergy Louisiana, Entergy Gulf States Louisiana and Entergy Corporation.
New Entergy Gulf States Louisiana will merge into New Entergy Louisiana with New Entergy Louisiana surviving the merger.
Upon the completion of the steps, New Entergy Louisiana will hold substantially all of the assets, and will have assumed all of the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. Entergy Louisiana and Entergy Gulf States Louisiana may modify or supplement the steps to be taken to effect the combination.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income increased $242.5$31.1 million primarily due to ahigher net revenue and higher other income, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense.
2013 Compared to 2012
Net income decreased $28.6 million primarily due to higher other operation and maintenance expenses, higher depreciation and amortization expenses, higher interest expense, and higher nuclear refueling outage expenses, partially offset by higher net revenue. Also contributing to the decrease in net income was the settlement withof the IRStax treatment related to the mark-to-market income tax treatment of power purchase contracts,Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing in June 2012, which resulted in a $422$142.7 million reduction of income tax benefit. The net income effect wasexpense partially offset by a $199$137.1 million ($84.3 million net-of-tax) regulatory charge, which reduced net revenue because a portion of the benefit will be shared with customers.in 2012. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.tax treatment.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Net income decreased slightly by $1.4 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, and higher interest expense, almost entirely offset by higher net revenue.
Net Revenue
20112014 Compared to 20102013
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 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20102013 net revenue |
| $1,043.7 1,208.8 |
|
Mark-to-market tax settlement sharingMISO deferral | 16.9 | (195.9)
|
| Retail electric price | 15.7 | 32.5
|
| Asset retirement obligation | 15.2 |
|
| Volume/weather | 12.6 | 11.6
|
| Other | 13.3 | (5.7)
|
20112014 net revenue |
| $886.2 1,282.5 |
|
The mark-to-market tax settlement sharingMISO deferral variance results from a regulatory charge because a portion of the benefits of a settlement with the IRS relatedis due to the mark-to-market income tax treatmentdeferral in 2014 of power purchase contracts will be shared with customers, slightly offsetnon-fuel MISO-related charges, as approved by the amortizationLPSC. The deferral of a portion of that charge beginningnon-fuel MISO-related charges is partially offset in October 2011.other operation and maintenance expenses. See Notes 3 and 8Note 2 to the financial statements for additionalfurther discussion of the settlement and benefit sharing.recovery of non-fuel MISO-related charges.
The retail electric price variance is primarily due to an increase in affiliated purchased power capacity costs that are recovered through base rates set in the annual formula rate plan mechanism and a formula rate plan increase effective May 2011. SeeDecember 2014. Entergy Louisiana’s formula rate plan is discussed in Note 2 to the financial statementsstatements.
The asset retirement obligation affects net revenue because Entergy Louisiana records a regulatory debit or credit for discussionthe difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by an increase in regulatory credits because of a decrease in decommissioning trust earnings, increases in depreciation and accretion expenses, and an increase in regulatory credits to realign the formula rate plan increase.asset retirement obligation regulatory asset with regulatory treatment.
The volume/weather variance is primarily due to an increase of 682 GWh, or 2%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales as compared to the prior year and an increase in industrial usage primarily due to increased consumption by a large industrial customer in the chemicals industry as a result of a prior year plant outage and the addition of new mid-small industrial customers.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
The volume/weather variance is primarily due2013 Compared to an increase of 1,095 GWh, or 4%, in billed electricity usage. Usage in the industrial sector increased primarily as a result of increased consumption by a large customer in the chemical industry as the result of a plant expansion. The increase was partially offset by the effect of less favorable weather on residential sales.2012
Other regulatory charges (credits)
Other regulatory charges increased primarily due to a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts because a portion of the settlement will be shared with customers. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.
2010 Compared to 2009
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 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20092012 net revenue |
| $980.0 933.3 |
|
Volume/weatherLouisiana Act 55 financing savings obligation | 137.6 | 52.9
|
| Retail electric price | 91.5 | 17.5
|
| Volume/weather | 23.9 |
|
| Net wholesale revenue | 18.1 |
|
| Fuel recovery | 9.4 |
|
| Other | (5.0 | (6.7)) |
20102013 net revenue |
| $1,043.7 1,208.8 |
|
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in the second quarter 2012 because Entergy Louisiana was required to share with customers the savings from the tax treatment related to the Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing. See Note 3 to the financial statements for additional discussion of the tax treatment.
The retail electric price variance is primarily due to a formula rate plan increase effective January 2013. See Note 2 to the financial statements for discussion of the formula rate plan increase.
The volume/weather variance is primarily due to an increase of 2,253512 GWh or 8%, in billed electricity usage. Usageusage in all sectors due to the industrial sector increased primarily as a result of increased consumption by a large customer in the petroleum refining industry, as well as increases in the chemical industry. The effect of more favorable weather wasas compared to the primary driverprevious year on residential sales and the effect of theHurricane Isaac, which decreased sales volume in 2012. The increase in industrial usage was also driven by a higher capacity factor in the residential and commercial sales.petroleum industry.
The retail electric pricenet wholesale revenue variance is primarily due to the sale to Entergy Gulf States Louisiana of one-third of Acadia Unit 2 capacity and energy.
The fuel recovery variance is primarily due to the expiration of the Evangeline gas contract on January 1, 2013.
Other Income Statement Variances
2014 Compared to 2013
Other operation and maintenance expenses increased primarily due to:
a net increase$16 million write-off recorded in 2014 because of the formula rate plan effective November 2009 which allowed Entergy Louisiana to reset its rates to achieve a 10.25% return on equity foruncertainty associated with the 2008 test year.resolution of the Waterford 3 replacement steam generator project prudence review. See Note 2 to the financial statements for further discussion of settlementthe prudence review;
an increase of $10.5 million due to administration fees related to the participation in the MISO RTO effective December 2013. The LPSC approved deferral of these expenses resulting in no net income effect;
an increase of $9.7 million in regulatory, consulting, and the formula rate plan reset.legal fees;
Gross operating revenues and fuel and purchased poweran increase of $7.9 million in nuclear generation expenses
Gross operating revenues increased primarily due to:
· | an increase of $200.7 million in fuel cost recovery revenues due to higher fuel rates and increased usage; |
· | an increase of $114.9 million in rider revenues primarily due to lower System Agreement credits in 2010; and |
· | the increase related to volume/weather, as discussed above. |
Fuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power, an increase in demand,higher labor costs, including contract labor, higher materials costs, and an increase in the recovery from customers of deferred fuel costs, partially offset by a decrease in the average market price of natural gas.
higher NRC fees;
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Other Income Statement Variances
2011 Compared to 2010
Other operation and maintenance expenses increased primarily due to an increase of $17.1 million in transmission investment equalization expenses as a result of a billing adjustment recorded in the fourth quarter 2011 related to prior transmission costs (for the approximate period of 1996-2011) allocable to Entergy Louisiana under the Entergy System Agreement and an increase of $17.5$7.3 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done during plant outages as compared to prior yearyear;
an increase of $4.4 million in transmission expenses primarily due to increased transmission equalization expenses and the additionhigher vegetation maintenance;
an increase of Acadia Unit 2$2.1 million as a result of higher write-offs of uncollectible accounts in April 2011.2014;
an increase of $1.7 million in distribution vegetation maintenance expenses; and
several individually insignificant items.
The increase was partially offset by:
a decrease of $24 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
a decrease of $6.1 million relating to the sale of surplus oil inventory in 2014; and
a decrease of $5.9 million due to costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income increased primarily due to to:
an increase of $10.8$9.5 million indue to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financingfinancing. See Note 2 to the financial statements and an“Hurricane Isaac” below for a discussion of the Act 55 storm cost financing;
$7.6 million of carrying charges recorded in 2014 on storm restoration costs related to Hurricane Isaac as approved by the LPSC; and
the increase in the allowance for equity funds used during construction due to morea higher construction work in progress balance in 2011. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav2014, including the Ninemile Unit 6 Self-Build Project.
The increase was partially offset by higher realized gains in 2013 on Waterford 3 decommissioning trust fund investments.
Interest expense increased primarily due to:
the issuance of $325 million of 4.05% Series first mortgage bonds in August 2013;
the issuance of $170 million of 5.0% Series first mortgage bonds in June 2014; and Hurricane Ike” and Note 2
the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014.
The increase was partially offset by an increase in the allowance for borrowed funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 Self-Build Project.
2013 Compared to 2012
Nuclear refueling outage expenses increased primarily due to the financial statements for a discussionamortization of higher expenses associated with the Act 55 storm cost financing.
2010 Compared to 2009refueling outage at Waterford 3.
Other operation and maintenance expenses increased primarily due to:
· | an increase of $16.2 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefits costs; |
an increase of $20.9 million in compensation and benefits costs primarily due to a decrease in the discount
· | an increase of $6.4 million in fossil expenses due to higher outage expenses compared to prior year; and |
Entergy Louisiana, LLC and Subsidiaries· | an increase of $5.9 million in nuclear expenses due to higher nuclear labor costs. |
Management’s Financial Discussion and Analysis
rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates”below and Note 11 to the financial statements for further discussion of benefits costs;
an increase of $16.5 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative, substantially offset by the deferral, as approved by the LPSC, of $13 million of these costs. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion;
an increase of $5.4 million in nuclear generation expenses primarily due to higher labor and materials costs; and
the prior year deferral, as approved by the LPSC and the FERC, of costs related to the transition and implementation of joining the MISO RTO, which reduced 2012 expenses by $5.2 million.
The increase was partially offset by a decrease of $9.2 million in fossil-fueled generation expenses due to an overall lower scope of work done during plant outages as compared to the prior year.
Also, other operation and maintenance expenses include $5.9 million in 2013 and $6.7 million in 2012 of costs incurred related to the now terminated plan to spin off and merge the transmission business.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including placing in service the Waterford 3 steam generator project in December 2012.
Interest expense increased primarily due to to:
the issuance of $400$200 million of 5.40%5.25% Series first mortgage bonds in November 2009.July 2012;
the issuance of $200 million of 3.30% Series first mortgage bonds in December 2012;
the issuance of $100 million of 4.70% Series first mortgage bonds in May 2013; and
the issuance of $325 million of 4.05% Series first mortgage bonds in August 2013.
Income Taxes
The effective income tax rates for 2011, 2010,2014, 2013, and 20092012, were (357)%25.3%, 22.3%24.5%, and 16.2%(84.7%), respectively. The decline in theeffective income tax rate of (84.7%) for 2011 is2012 was primarily due to the settlement of the tax treatment of the Louisiana Act 55 financing of the Hurricane Katrina and Hurricane Rita storm costs and the reversal inof the third quarter 2011provision for the uncertain tax positions resulting from a settlement with the IRS related to the mark-to-market income tax treatment of power purchase contracts.that item. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0%35% to the effective income tax rates for 2009, 2010, and 2011 and for a discussion of the IRS settlement and audits.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010, and 2009 were as follows:
| | | | 2011 | | 2010 | | 2009 |
| | | | (In Thousands) |
| | | | | | | | |
| Cash and cash equivalents at beginning of period | | $123,254 | | $151,849 | | $138,918 |
| | | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| | Operating activities | | 479,342 | | 932,334 | | 87,879 |
| | Investing activities | | (811,203) | | (861,329) | | (436,251) |
| | Financing activities | | 209,485 | | (99,600) | | 361,303 |
| | Net increase (decrease) in cash and cash equivalents | | (122,376) | | (28,595) | | 12,931 |
| | | | | | | | |
| Cash and cash equivalents at end of period | | $878 | | $123,254 | | $151,849 |
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2014, 2013, and 2012 were as follows:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $124,007 |
| |
| $30,086 |
| |
| $878 |
|
| | | | | | |
| Net cash provided by (used in): | |
| | |
| | |
|
| Operating activities | 1,126,040 |
| | 662,772 |
| | 447,698 |
|
| Investing activities | (938,758 | ) | | (540,807 | ) | | (850,866 | ) |
| Financing activities | (153,736 | ) | | (28,044 | ) | | 432,376 |
|
| Net increase in cash and cash equivalents | 33,546 |
| | 93,921 |
| | 29,208 |
|
| | | | | | |
| Cash and cash equivalents at end of period |
| $157,553 |
| |
| $124,007 |
| |
| $30,086 |
|
Operating Activities
CashNet cash flow provided by operating activities decreased $453increased $463.3 million in 20112014 primarily due to proceeds of $462$240 million received in 2010 from the LURCLouisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings.financing, an increase in income tax refunds of $207.8 million, and the timing of collections from customers. The decreaseincrease was partially offset by an increase of $33.4 million in pension contributions in 2014 and an increase of $15.6 million in interest paid resulting from an increase in interest expense, as discussed above. Entergy Louisiana had income tax refunds of $39.6 million in 2011 compared to income tax payments of $28.3 million in 2010. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Gustav and Hurricane Ike” and Note 2 to the financial statements herein for a discussion of the storm cost financings. In 2011, Entergy Louisiana received tax cash refunds2014 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds are primarily result from a decreasedue to favorable adjustments allowed in 2010 taxable income from what was previously estimated becausethe IRS Audit of the recognition2006-2007 tax years and a carryback of additional repair expensesa 2008 net operating loss. See Note 2 to the financial statements and “Hurricane Isaac” below for tax purposes associated with a tax accounting change filed in 2010.discussion of the Act 55 storm cost financing. See “Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
CashNet cash flow provided by operating activities increased $844.5$215.1 million in 20102013 primarily due to proceedsdecreased Hurricane Isaac storm spending in 2013 and a decrease of $462.4$7.7 million receivedin pension contributions. The increase was partially offset by an increase of $12.4 million in interest paid resulting from the LURCincrease in interest expense, as discussed above, and a decrease of $7.8 million in income tax refunds. See “Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
Investing Activities
Net cash flow used in investing activities increased $398 million in 2014 primarily due to:
the investment in 2014 of $227 million in affiliate securities as a result of the Act 55 storm cost financings, the absence in 2010 of the storm restoration spending that occurred in 2009, a decrease of $195.3 million in income tax payments, and increased recovery of fuel costs due to a higher fuel rate for the period, offset by an increase of $58.5 million in pension contributions.financing. See “Hurricane Gustav and Hurricane Ike” below and Note 2 to the financial statements herein for a discussion of the storm cost financings. Seeand “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISHurricane Isaac – Critical Accounting Estimates” below for a discussion of qualified pensionthe Act 55 storm cost financing;
the deposit of $200 million into the storm reserve escrow account in 2014;
receipts of $187 million from the storm reserve escrow account in 2013;
an increase in nuclear fuel activity because of variations from year to year in the timing and other postretirement benefits. In 2010, 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
Entergy Louisiana, made tax payments in accordance with the Entergy CorporationLLC and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments resulted from the reversal of temporary differences for which Entergy Louisiana previously received cash tax benefitsSubsidiaries
Management’s Financial Discussion and from estimated federal income tax payments for tax year 2010.Analysis
Investing Activities
Net cash flow usedan increase in investing activities decreased $50.1 milliontransmission construction expenditures as a result of additional reliability work performed in 2011 primarily due to:
· | the investment in 2010 of $262.4 million in affiliate securities and the investment of $200 million in the storm reserve escrow account as a result of the Act 55 storm cost financings. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Gustav and Hurricane Ike” and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; and
|
The increase was partially offset by:by a decrease in fossil-fueled generation construction expenditures due to lower spending on the Ninemile Unit 6 self-rebuild project and money pool activity.
· | the purchase of the Acadia Power Plant for approximately $300 million in April 2011; and |
· | an increase in nuclear fuel purchases because of the timing of refueling outages and the purchase of nuclear fuel inventory from System Fuels because the Utility companies will now purchase nuclear fuel throughout the nuclear fuel procurement cycle, rather than purchasing it from System Fuels at the time of refueling. |
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 $49.9$16 million in 20112014 compared to decreasingincreasing by $2.9$8.2 million in 2010.2013. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities increased $425.1decreased $310.1 million in 20102013 primarily due to the investment in 2010to:
receipts of $262.4$187 million in affiliate securities and the investment of $200 million infrom the storm reserve escrow account as a resultin 2013 compared to receipts of the Act 55 storm cost financings, partially offset by decreased construction expenditures as a result of higher distribution construction expenditures$14.5 million in 2009 due to Hurricane Gustav and decreased fossil construction expenditures due to the suspension of the Little Gypsy repowering project in 2009. The2012;
a decrease in construction expenditures was partially offset by an increase of $24.9 million in costs associated with the development of new nuclear generation at River Bend, as discussed below, increased nuclear construction expenditures primarily due to the Waterford 3 steam generator replacement project in 2012;
a decrease 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 drytiming of cash payments during the nuclear fuel storagecycle; and
a decrease in distribution construction expenditures due to higher Hurricane Isaac spending in prior year.
The decrease was partially offset by an increase in fossil-fueled generation construction expenditures due to spending on the Ninemile Unit 6 self-build project and increasedan increase in transmission construction expenditures as a result of additional reliability work performed in 2013.
Financing Activities
Net cash used by financing activities increased $125.7 million in 2014 primarily due to additional reliability work. the net issuance of $130.7 million of long-term debt in 2014 compared to the net issuance of $386.9 million of long-term debt in 2013, partially offset by borrowings of $43.1 million on the nuclear fuel company variable interest entity’s credit facility in 2014 compared to the repayment of borrowings of $51.7 million in 2013 and a decrease of $35.7 million in common equity distributions in 2014.
Entergy Louisiana’s financing activities used $28 million of cash in 2013 compared to providing $432.4 million of cash in 2012 primarily due to:
an increase of $340.7 million in common equity distributions in 2013;
the net issuance of $386.9 million of long-term debt in 2013 compared to the net issuance of $613.1 million of long-term debt in 2012; and
money pool activity.
Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased by $118.4 million in 2012.
See “Hurricane Gustav and Hurricane Ike” below and Note 25 to the financial statements for a discussiondetails of the storm cost financings. See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - “Little Gypsy Repowering Project” for a discussion of the suspension and subsequent cancellation of the Little Gypsy repowering project.long-term debt.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Financing Activities
Entergy Louisiana’s financing activities provided cash of $209.5 million in 2011 compared to using cash of $99.6 million in 2010 primarily due to the following cash flow activity:
· | the issuance by Entergy Louisiana Investment Recovery Funding, L.L.C., a wholly owned subsidiary of Entergy Louisiana, of $207.2 million of senior secured investment recovery bonds with a coupon of 2.04% in September 2011; |
· | net cash issuances of $200 million of first mortgage bonds in 2011 compared to net cash redemptions of $120 million of first mortgage bonds in 2010; |
· | an increase in borrowings on the nuclear fuel company variable interest entity’s credit facility; |
· | borrowings of $50 million on its credit facility in 2011; |
· | the retirement of the $30 million Series D note by the nuclear fuel company variable interest entity in January 2010; |
· | the issuance of the $20 million Series F note by the nuclear fuel company variable interest entity in March 2011; and |
The increases were offset by the following:
· | common equity dividends of $358.2 million paid in 2011; |
· | the issuance in October 2010 of $115 million of 5% Revenue Bonds Series 2010; and |
· | a principal payment of $35.5 million in 2011 for the Waterford 3 sale-leaseback obligation compared to a principal payment of $17.3 million in 2010. |
Increases in Entergy Louisiana’s payable to the money pool are a source of cash flow, and Entergy Louisiana’s payable to the money pool increased by $118.4 million in 2011.
Entergy Louisiana’s financing activities used $99.6 million in 2010 compared to providing $361.3 million in 2009. The following cash flow activity occurred:
· | net cash redemptions of $120 million of first mortgage bonds in 2010; |
· | the retirement in January 2010 of the $30 million Series D note by the nuclear fuel company variable interest entity; |
· | the issuance in October 2010 of $115 million of 5% Revenue Bonds Series 2010; |
· | the payment on credit borrowings of $24.1 million by the nuclear fuel company variable interest entity; |
· | $20.6 million in common equity distributions in 2009; and |
· | a principal payment of $17.3 million in 2010 for the Waterford 3 sale-leaseback obligation compared to a principal payment of $6.6 million in 2009. |
See Note 5 to the financial statements for details of long-term debt.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Capital Structure
Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to an increase in long-term debt as a result of the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014.
|
| | | | | |
| | December 31,
2014 | | December 31,
2013 |
| Debt to capital | 53.8 | % | | 52.0 | % |
| Effect of excluding securitization bonds | (1.0 | %) | | (1.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 52.8 | % | | 50.7 | % |
| Effect of subtracting cash | (1.3 | %) | | (1.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 51.5 | % | | 49.6 | % |
| | | December 31, 2011 | | December 31, 2010 |
| | | | | |
| Debt to capital | | 47.1% | | 46.1% |
| Effect of excluding securitization bonds | | (2.4)% | | 0.0% |
| Debt to capital, excluding securitization bonds (1) | | 44.7% | | 46.1% |
| Effect of subtracting cash | | 0.0% | | (1.7)% |
| Net debt to net capital, excluding securitization bonds (1) | | 44.7% | | 44.4% |
(1) | |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations,short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and members’common equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition. Entergy Louisiana 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 evaluatingevaluation Entergy Louisiana’s financial condition.condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents.
Uses of Capital
Entergy Louisiana requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred equity maturities or retirements; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | distribution and interest payments. |
Following are the amounts of Entergy Louisiana’s planned construction and other capital investments,investments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $225 |
| |
| $205 |
| |
| $395 |
|
| Transmission | 100 |
| | 90 |
| | 155 |
|
| Distribution | 160 |
| | 185 |
| | 140 |
|
| Other | 30 |
| | 20 |
| | 20 |
|
| Total |
| $515 |
| |
| $500 |
| |
| $710 |
|
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Following are the amounts of Entergy Louisiana’s existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $183 |
| |
| $476 |
| |
| $580 |
| |
| $4,682 |
| |
| $5,921 |
|
| Operating leases |
| $11 |
| |
| $18 |
| |
| $11 |
| |
| $5 |
| |
| $45 |
|
| Purchase obligations (b) |
| $682 |
| |
| $1,260 |
| |
| $1,135 |
| |
| $3,623 |
| |
| $6,700 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | After 2016 | | Total |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | |
| Generation | $487 | | $659 | | N/A | | N/A | | $1,146 |
| Transmission | 108 | | 185 | | N/A | | N/A | | 293 |
| Distribution | 105 | | 265 | | N/A | | N/A | | 370 |
| Other | 12 | | 31 | | N/A | | N/A | | 43 |
| Total | $712 | | $1,140 | | N/A | | N/A | | $1,852 |
| Long-term debt (2) | $193 | | $314 | | $268 | | $3,084 | | $3,859 |
| Operating leases | $9 | | $14 | | $8 | | $2 | | $33 |
| Purchase obligations (3) | $609 | | $720 | | $705 | | $3,820 | | $5,854 |
(1) | Includes approximately $217 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Louisiana, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Vidalia purchased power agreement and the Unit Power Sales Agreement, both of which are discussed in Note 8 to the financial statements. |
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
In addition to the contractual obligations given above, Entergy Louisiana currently expects to contribute approximately $23.8$57 million to its pension plans and approximately $10$9.9 million to other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding.
Also, in addition to the contractual obligations, Entergy Louisiana has $229.5$38.1 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
TheIn addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Louisiana reflects capital requiredincludes specific investments such as NRC post-Fukushima requirements; environmental compliance spending; transmission projects to support existing businessenhance reliability, reduce congestion, and customer growth, including the replacement of the Waterford 3 steam generatorsenable economic growth; resource planning; generation projects; system improvements; and the Ninemile 6 self-build project, both of which are discussed below.other investments. Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Management provides more information on long-term debt maturities in Note 5 to the financial statements.
As an indirect, wholly-ownedmajority-owned subsidiary of Entergy Corporation, Entergy Louisiana pays distributions from its earnings at a percentage determined monthly. Entergy Louisiana’s long-term debt indentures containindenture contains restrictions on the payment of cash dividends or other distributions on its common and preferred membership interests.
Waterford 3 Steam Generator Replacement Project
Entergy Louisiana planned to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in the spring 2011. Replacement of these components is common to pressurized water reactors throughout the nuclear industry. In December 2010, Entergy Louisiana advised the LPSC that the replacement generators would not be completed and delivered by the manufacturer in time to install them during the spring 2011 refueling outage. During the final steps in the manufacturing process, the manufacturer discovered separation of stainless steel cladding from the carbon steel base metal in the channel head of both replacement steam generators (RSGs), in areas beneath and adjacent to the divider plate. As a result of this damage, the manufacturer was unable to meet the contractual delivery deadlines, and the RSGs were not installed in the spring 2011. Entergy Louisiana worked with the manufacturer to fully develop and evaluate repair options, and expects the replacement steam generators to be delivered in time for the Fall 2012 refueling outage. Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011. The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators. Entergy Louisiana has formally reported its findings to the NRC. At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated. Entergy Louisiana currently expects the cost of the project, including carrying costs, to be approximately $687 million, assuming the replacement occurs during the Fall 2012 refueling outage.
In June 2008, Entergy Louisiana filed with the LPSC for approval of the replacement project, including full cost recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008. The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the then-estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project at the target installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs determined to be prudent in a future prudence review are eligible for cost recovery, either in an extension or renewal of the formula rate plan or in a full base rate case including necessary pro forma adjustments. Upon completion of the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
See State and Local Rate Regulation and Fuel-Cost Recovery below for a discussion of the renewal of Entergy Louisiana’s formula rate plan for the 2011 test year and its provisions addressing the Waterford 3 steam generator replacement project.
Ninemile Point Unit 6 Self-Build Project
In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station. Ninemile 6 will beis a nominally-sized 550560 MW unit that is estimatedexpected to cost approximately $721$655 million to construct when spending is complete, excluding interconnection and transmission upgrades. Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35%25% of the capacity and energy
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
generated by Ninemile 6. The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans. In February 2012 the City Council passed a resolution authorizing Entergy New Orleans to purchase 20% of the Ninemile 6 energy and capacity. If approvals are obtained fromIn March 2012 the LPSC unanimously voted to grant the certifications requested by Entergy Gulf States Louisiana and other permitting agencies, Ninemile 6Entergy Louisiana. Following approval by the LPSC, Entergy Louisiana issued full notice to proceed to the project’s engineering, procurement, and construction is expected to begincontractor.
Under terms approved by the LPSC, non-fuel costs may be recovered through Entergy Louisiana’s formula rate plan beginning in 2012, andthe month after the unit is expected to commence commercial operation by mid-2015. The ALJ has established a schedule forplaced in service. In July 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed an unopposed stipulation with the LPSC proceeding that includes February 27 - March 7, 2012 hearing dates.estimates a first year revenue requirement associated with Ninemile 6 and provides a mechanism to update the revenue requirement as the in-service date approaches, which was subsequently approved by the LPSC. In late December 2014, roughly contemporaneous with the unit’s placement in service, a final updated estimated revenue requirement of $51.1 million for Entergy Louisiana was filed. The December 2014 estimate forms the basis of rates implemented effective with the first billing cycle of January 2015. Entergy Louisiana will submit project and cost information to the LPSC in mid-2015 to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project.
New Nuclear Development
Entergy Gulf States Louisiana and Entergy Louisiana provided public notice to the LPSC of their intention to makehave been developing and are preserving a filing pursuant to the LPSC’s general order that governs the development of new nuclear generation in Louisiana. The project option being developed by the companies is for new nuclear generation at River Bend. Entergy Gulf States Louisiana and Entergy Louisiana, together with Entergy Mississippi, have been engaged in the development of options to construct new nuclear generation at the River Bend and Grand Gulf sites. Entergy Gulf States Louisiana and Entergy Louisiana are leading the development at River Bend, and Entergy Mississippi is leading the development at Grand Gulf. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In the first quarter 2010, Entergy Gulf States Louisiana and Entergy Louisiana each paid for and recognized on its books $24.9 million in costs associated with the development of new nuclear generation at the River Bend site; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. Entergy Gulf States Louisiana and Entergy Louisiana will share costs going forward on a 50/50 basis, which reflects each company’s current participation level in the project.
In March 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the limited development activities. The testimony and legal briefs ofactivities necessary to preserve an option to construct a new unit at River Bend. At its June 2012 meeting the LPSC staff generally supportvoted to uphold an ALJ recommendation that the request of Entergy Gulf States Louisiana and Entergy Louisiana although other partiesbe declined on the basis that the LPSC’s rule on new nuclear development does not apply to activities to preserve an option to develop and on the further grounds that the companies improperly engaged in advanced preparation activities prior to certification. The LPSC directed that Entergy Gulf States Louisiana and Entergy Louisiana be permitted to seek recovery of these costs in their upcoming rate case filings that were subsequently filed briefs,in February 2013. In the resolution of the rate case proceeding, the LPSC provided for an eight-year amortization of costs incurred in connection with the potential development of a new nuclear generation at River Bend, without supporting testimony,carrying costs, beginning in oppositionDecember 2014, provided, however, that amortization of these costs shall not result in a future rate increase. As of December 31, 2014, Entergy Gulf States Louisiana and Entergy Louisiana each have a regulatory asset of $29.2 million on its balance sheet related to the request. An evidentiary hearing was held in October 2011 and the ALJ’s decision is pending.these new nuclear generation development costs.
Sources of Capital
Entergy Louisiana’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred membership interest issuances; and bank financing under new or preferred membership interest issuances; and |
· | bank financing under new and existing facilities. |
Entergy Louisiana may refinance, redeem, or otherwise retire debt and preferred membership interests prior to maturity, to the extent market conditions and interest and distribution rates are favorable.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
All debt and common and preferred membership interest issuances by Entergy Louisiana require prior regulatory approval. Preferred membership interest and debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. Entergy Louisiana has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| ($118,415) | | $49,887 | | $52,807 | | $61,236 |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $1,649 | | $17,648 | | $9,433 | | ($118,415) |
See Note 4 to the financial statements for a description of the money pool.
Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in August 2012.March 2019. The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2011, $502014, there were no cash borrowings and no letters of credit outstanding under the credit facility. See Note 4 to the financial statements for additional discussion of the credit facility. In addition, Entergy Louisiana entered into an uncommitted letter of credit facility in 2014 as a means to post collateral to support its obligations under MISO. As of December 31, 2014, a $4.7 million letter of credit was outstanding on theunder Entergy Louisiana’s letter of credit facility.
The Entergy Louisiana nuclear fuel company variable interest entity has a credit facility in the amount of $90 million scheduled to expire in June 2016. As of December 31, 2014, $46.1 million of letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Louisiana nuclear fuel company variable interest entity. See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facility.
Entergy Louisiana obtained short-term borrowing authorizationauthorizations from the FERC under which it may borrow through October 2013, up2015 for the following:
short-term borrowings not to theexceed an aggregate amount of $250 million at any one time outstanding, of $250 million. outstanding;
long-term borrowings and security issuances; and
long-term borrowings by its nuclear fuel company variable interest entity.
See Note 4 to the financial statements for further discussion of Entergy Louisiana’s short-term borrowing limits.
In February 2014 the Entergy Louisiana has also obtained an order fromnuclear fuel company variable interest entity issued $40 million of 3.92% Series H Notes due February 2021. The Entergy Louisiana nuclear fuel company variable interest entity used the FERC authorizing long-term securities issuances through July 2013.proceeds to purchase additional nuclear fuel.
In January 2012,June 2014, Entergy Louisiana issued $170 million of 5% Series first mortgage bonds due July 2044. Entergy Louisiana used the proceeds to pay, prior to maturity, its $70 million 6.4% Series first mortgage bonds due October 2034 and to pay, prior to maturity, its $100 million 6.3% Series first mortgage bonds due September 2035.
In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025. Entergy Louisiana used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.
In July 2014 the Entergy Louisiana nuclear fuel company variable interest entity redeemed, at maturity, its $50 million of 5.69% Series E Notes.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
In November 2014, Entergy Louisiana issued $250 million of 4.95% Series first mortgage bonds due January 2045. Entergy Louisiana used the proceeds to repay, at maturity, its $250 million of 1.875% Series first mortgage bonds due December 2014.
Hurricane Isaac
In August 2012, Hurricane Isaac caused extensive damage to Entergy Louisiana’s service area. The storm resulted in widespread power outages, significant damage primarily to distribution infrastructure, and the loss of sales during the power outages. In January 2013, Entergy Louisiana drew $187 million from its funded storm reserve escrow account. In April 2013, Entergy Gulf States Louisiana and Entergy Louisiana filed a joint application with the LPSC relating to Hurricane Isaac system restoration costs. In May 2013, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55). The LPSC Staff filed direct testimony in September 2013 concluding that Hurricane Isaac system restoration costs incurred by Entergy Gulf States Louisiana and Entergy Louisiana were reasonable and prudent, subject to proposed minor adjustments which totaled approximately 1% of each company’s costs. Following an evidentiary hearing and recommendations by the ALJ, the LPSC voted in June 2014 to approve a series of orders which (i) quantify the amount of Hurricane Isaac system restoration costs prudently incurred ($66.5 million for Entergy Gulf States Louisiana and $224.3 million for Entergy Louisiana); (ii) determine the level of storm reserves to be re-established ($90 million for Entergy Gulf States Louisiana and $200 million for Entergy Louisiana); (iii) authorize Entergy Gulf States Louisiana and Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) grant other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Louisiana committed to pass on to customers a minimum of $23.9 million of customer benefits through annual customer credits of approximately $4.8 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.
In July 2014, Entergy Louisiana issued $190 million of 3.78% Series first mortgage bonds due April 2025 and used the proceeds to re-establish and replenish its storm damage escrow reserves and for general corporate purposes.
In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $243.85 million in bonds under Act 55 of the Louisiana Legislature. From the $240 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $13 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $227 million directly to Entergy Louisiana. Entergy Louisiana used the proceeds$227 million received from the LURC to repay short-term borrowingsacquire 2,272,725.89 Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy System money pool.Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion.
Entergy Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
Little Gypsy Repowering Project
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to
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temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended period of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, but at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5)
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indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it was probable that the Little Gypsy repowering project would be abandoned and accordingly reclassified $199.8 million of project costs from construction work in progress to a regulatory asset. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties participated in a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement provides for Entergy Louisiana to recover $200 million as of March 31, 2011, and carrying costs on that amount on specified terms thereafter. The settlement also provides for Entergy Louisiana to recover the approved project costs by securitization. In April 2011, Entergy Louisiana filed an application with the LPSC to authorize the securitization of the investment recovery costs associated with the project and to issue a financing order by which Entergy Louisiana could accomplish such securitization. In August 2011 the LPSC issued an order approving the settlement and also issued a financing order for the securitization. See Note 5 to the financial statements for a discussion of the September 2011 issuance of the securitization bonds.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav (and, to a much lesser extent, Hurricane Ike) caused catastrophic damage to Entergy Louisiana’s service territory. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. On October 9, 2008, Entergy Louisiana drew all of its $134 million funded storm reserve. On October 15, 2008, the LPSC approved Entergy Louisiana’s request to defer and accrue carrying costs on unrecovered storm expenditures during the period the company seeks regulatory recovery. The approval was without prejudice to the ultimate resolution of the total amount of prudently incurred storm costs or final carrying costs rate.
Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
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Entergy Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that Entergy Louisiana charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the LPSC, is primarily responsible for approval of the rates charged to customers.
Retail Rates
Filings with the LPSC
In May 2005 the LPSC approved a rate filing settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006. As discussed below the formula rate plan has been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, 2010, and 2011 test years.
In October 2009November 2011 the LPSC approved a settlement that resolvedone-year extension of Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%). Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
plan. In May 2010,2012, Entergy Louisiana made its formula rate plan filing with the LPSC for the 20092011 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82%9.63% earned return on common equity, which is within the allowed earnings bandwidth resultingand resulted in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
In May 2011, Entergy Louisiana made a special formula rate plan rate implementation filing with the LPSC that implements effective with the May 2011 billing cycle a $43.1 million net rate increase to reflect adjustments in accordance with a previous LPSC order relating to the acquisition of Unit 2 of the Acadia Energy Center. The net rate increase represents the decrease in the additional capacity revenue requirement resulting from the termination of the power purchase agreement with Acadia and the increase in the revenue requirement resulting from the ownership of the Acadia facility. In August 2011, Entergy Louisiana made a filing to correct the May 2011 filing and decrease the rate by $1.1 million.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
In May 2011, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2010 test year. The filing reflects an 11.07% earned return on common equity, which is just outside of the allowed earnings bandwidth and results in no cost of service rate change under the formula rate plan. The filing also reflects a very slight ($9 thousand)reflected an $18.1 million rate increase for the incremental capacity costs.rider. In August 2012, Entergy Louisiana and the LPSC Staff subsequently filedsubmitted a joint reportrevised filing that reflectsreflected an 11.07% earned return and resultson common equity of 10.38%, which is still within the earnings bandwidth, resulting in no cost of service rate change. The revised filing also indicated that an increase of $15.9 million should be reflected in the incremental capacity rider. The rate change underwas implemented, subject to refund, effective for bills rendered the formula rate plan, and the LPSC approved the jointfirst billing cycle of September 2012. Subsequently, in December 2012, Entergy Louisiana submitted a revised evaluation report in October 2011.
In November 2011 the LPSC approvedthat reflected two items: 1) a one-year extension of Entergy Louisiana’s current formula rate plan. The next formula rate plan filing,$17 million reduction for the 2011 test year, will be made in May 2012first-year capacity charges for the purchase by Entergy Gulf States Louisiana from Entergy Louisiana of one-third of Acadia Unit 2 capacity and will include a separate identification of any operatingenergy, and maintenance expense savings that are expected to occur once2) an $88 million increase for the Waterford 3 steam generator replacement project is complete. Pursuant to the LPSC decision, from September 2012 through December 2012 earnings above an 11.05% return on common equity (based on the 2011 test year) would be accrued and used to offsetfirst-year retail revenue requirement associated with the Waterford 3 replacement steam generator project, which was in-service in December 2012. These rate changes were implemented, subject to refund, effective with the first billing cycle of January 2013. In April 2013, Entergy Louisiana and the LPSC staff filed a joint report resolving the 2011 test year formula rate plan and recovery related to the Grand Gulf uprate. This report was approved by the LPSC in April 2013.
With completion of the Waterford 3 replacement steam generator project, the LPSC is conducting a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from Entergy Louisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent. Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. A post-hearing briefing schedule has not been established. Entergy Louisiana believes that the replacement steam generator costs were prudently incurred and applicable legal principles support their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty associated with the resolution of the prudence review.
In connection with its decision to extend the formula rate plan to the 2011 test year, the LPSC required that a base rate case be filed by Entergy Louisiana, and the required filing was made on February 15, 2013. The filing anticipated Entergy Louisiana’s integration into MISO. In the filing Entergy Louisiana requested, among other relief:
authorization to increase the revenue it collects from customers by approximately $145 million (which does not take into account a revenue offset of approximately $2 million resulting from a proposed increase for those customers taking service under the Qualifying Facility Standby Service);
an authorized return on common equity of 10.4%;
authorization to increase depreciation rates embedded in the proposed revenue requirement; and
authorization to implement a three-year formula rate plan with a midpoint return on common equity of 10.4%, plus or minus 75 basis points (the deadband), that would provide a means for the annual re-setting of rates (commencing with calendar year 2013 as its first test year), that would include a mechanism to recover incremental transmission revenue requirements on the basis of a forward-looking test year as compared to the initial base year of 2014 with an annual true-up, that would retain the primary aspects of the prior formula rate plan, including a 60% to customers/40% to Entergy Louisiana sharing mechanism for earnings outside the deadband, and a capacity rider mechanism that would permit recovery of incremental capacity additions approved by the LPSC.
Following a hearing before an ALJ and the ALJ’s issuance of a Report of Proceedings, in December 2013 the LPSC approved an unopposed settlement of the proceeding. The settlement provides for a $10 million rate increase effective with the first billing cycle of December 2014. Major terms of the settlement include approval of a three-year formula rate plan (effective for test years 2014-2016) modeled after the formula rate plan in effect for Entergy Louisiana for 2011, including the following: (1) a midpoint return on equity of 9.95% plus or minus 80 basis points, with 60/40 sharing of earnings outside of the bandwidth; (2) recovery outside of the sharing mechanism for the non-fuel MISO-related costs, additional capacity revenue requirement, extraordinary items, such as the Ninemile 6 project, and certain
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special recovery items; (3) three-year amortization of costs to achieve savings associated with the human capital management strategic imperative, with savings reflected as they are realized in subsequent years; (4) eight-year amortization of costs incurred in connection with potential development of a new nuclear unit at River Bend, without carrying costs, beginning December 2014, provided, however, that amortization of these costs shall not result in a future rate increase; (5) recovery of non-fuel MISO-related costs and any changes to the additional capacity revenue requirement related to test year 2013 effective with the first billing cycle of December 2014; and (6) a cumulative $30 million cap on cost of service increases over the three-year formula rate plan cycle, except for those items outside of the sharing mechanism. Existing depreciation rates will not change.
Pursuant to the rate case settlement approved by the LPSC in December 2013, Entergy Louisiana submitted a compliance filing in May 2014 reflecting the effects of the $10 million agreed-upon increase in formula rate plan revenue, the estimated MISO cost recovery mechanism revenue requirement, and the adjustment of the additional capacity mechanism. In November 2014, Entergy Louisiana submitted an additional compliance filing updating the estimated MISO cost recovery mechanism for the most recent actual data, as well as providing for a refund and prospective reduction in rates for the true-up of the estimated revenue requirement for the first twelveWaterford 3 replacement steam generator project. Based on this updated filing, a net increase of $41.7 million in formula rate plan revenue to be collected over nine months thatwas implemented in December 2014. The compliance filings are subject to the unitreview in accordance with the review process set forth in Entergy Louisiana’s formula rate plan. Additionally, the adjustments of rates made related to the Waterford 3 replacement steam generator project included in the December 2014 compliance filing are subject to final true-up following completion of the LPSC’s determination regarding the prudence of the project.
Filings with the City Council
In March 2013, Entergy Louisiana filed a rate case for the Algiers area, which is in rates. IfNew Orleans and is regulated by the project is not in service by January 1, 2013, earnings aboveCity Council. Entergy Louisiana requested a 10.25%rate increase of $13 million over three years, including a 10.4% return on common equity (basedand a formula rate plan mechanism identical to its LPSC request made in February 2013. In January 2014, the City Council Advisors filed direct testimony recommending a rate increase of $5.56 million over three years, including an 8.13% return on common equity. In June 2014 the 2011 test year) forCity Council unanimously approved a settlement that includes the period January 1, 2013following:
a $9.3 million base rate revenue increase to be phased in on a levelized basis over four years;
recovery of an additional $853 thousand annually through a MISO recovery rider; and
adoption of a four-year formula rate plan requiring the date that the project is placedfiling of annual evaluation reports in service will be accrued and used to offset the incremental revenue requirement for the first twelve months that the unit isMay of each year, commencing May 2015, with resulting rates being implemented in rates. Upon the in-service dateOctober of the replacement steam generators, rates will increase, subject to refund following any prudence review, by the full revenue requirement associated with the replacement steam generators, less (i) the previously accrued excess earnings from September 2012 until the in-service date and (ii) any earnings aboveeach year. The formula rate plan includes a 10.25%midpoint target authorized return on common equity (basedof 9.95% with a +/- 40 basis point bandwidth.
The rate increase was effective with bills rendered on and after the 2011 test year)first billing cycle of July 2014. Additional compliance filings were made with the Council in October 2014 for approval of the form of certain rate riders, including among others, a Ninemile 6 non-fuel cost recovery interim rider, allowing for contemporaneous recovery of capacity costs related to the commencement of commercial operation of the Ninemile 6 generating unit and a purchased power capacity cost recovery rider. The Ninemile 6 cost recovery interim rider was implemented in December 2014 to collect $915 thousand from Entergy Louisiana customers in the Algiers area.
Fuel and purchased power recovery
Entergy Louisiana recovers electric fuel and purchased power costs for the period followingbilling month based upon the in-service date, provided that the excess earnings accruedlevel of such costs incurred two months prior to the in-service date shall only offset the revenue requirement for the first year of operation of the replacement steam generators. These rates are anticipated to remain in effect until Entergy Louisiana’s next full rate case is resolved. Entergy Louisiana is required to file a full rate case by January 2013, if the LPSC has not acted to deny the requested transmission change-of-control to the MISO RTO. If the LPSC has denied this request, then the rate case must be filed by September 30, 2012.billing month.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana'sLouisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by
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Management’s Financial Discussion and Analysis
Entergy Louisiana for the period from 2005 through 2009. The LPSC Staff issued its audit report in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervened in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC Staff report and any issues raised by intervenors. One intervenor is seeking further proceedings regarding certain issues it raised in its comments on the LPSC Staff report. Entergy Louisiana has filed responses to both the LPSC Staff report and the issues raised by the intervenor. As required by the procedural schedule, a joint status report was submitted in October 2013 by the parties. A status conference was held in December 2013. Discovery is in progress, but a procedural schedule has not been established.
In August 2000,July 2014 the LPSC authorized its staff to initiate a proceeding toan audit theof Entergy Louisiana’s fuel adjustment clause filings of Entergy Louisiana.filings. The time period that is the subject of the audit was January 1, 2000 through December 31, 2001. The scope of this docket was expanded to includeincludes a review of annual reports onthe reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery has yet to commence.
Algiers Asset Transfer
In October 2014, Entergy Louisiana and purchased power transactionsEntergy New Orleans filed an application with affiliates andthe City Council seeking authorization to undertake a prudence reviewtransaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of transmission planning issues andcertain assets that currently support the provision of service to include the years 2002 through 2004. Hearings were held and in May 2008 the ALJ issued a final recommendation that found in Entergy Louisiana’s favorcustomers in Algiers. The transaction is expected to result in the transfer of net assets of approximately $60 million. The Algiers asset transfer is also subject to regulatory review and approval of the FERC. As discussed previously, Entergy Louisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Entergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and the FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In November 2014 the City Council approved a resolution establishing a procedural schedule that provides for a hearing on the issues, except for the disallowance of hypothetical SO2 allowance costs includedjoint application in affiliate purchases. The ALJ recommendedlate-May 2015, with a refund of the SO2 allowance costs collecteddecision to date and a realignment of these costs into base rates prospectively with an amortization of the refunded amount through base rates over a five-year period. The LPSC issued an order in December 2008 affirming the ALJ’s recommendation. Entergy Louisiana recorded a provision for the disallowance, including interest, and refunded approximately $7 million to customers in 2009.be rendered no later than June 2015.
Industrial and Commercial Customers
Entergy Louisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Louisiana’s industrial customer base. Entergy Louisiana responds by working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that match specific customer needs and load profiles. Entergy Louisiana actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Louisiana does not currently expect additional significant losses to cogeneration because of the current economics of the electricity markets and Entergy Louisiana’s marketing efforts in retaining industrial customers.
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Management’s Financial Discussion and Analysis
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
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Nuclear Matters
Entergy Louisiana owns and, through an affiliate, operates the Waterford 3 nuclear power plant. Entergy Louisiana is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of Waterford 3, Entergy Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials associated with components within the reactor coolant system. The issue is applicable to Waterford 3 and is managed in accordance with industry standard industry practices and guidelines. As discussed aboveguidelines that include in-service examinations, replacements, and mitigation strategies. Developments in more detail, Entergy Louisiana plans to replace the Waterford 3 steam generators, along withindustry or identification of issues at the reactor vessel closure head and control element drive mechanisms.nuclear units could require unanticipated remediation efforts that cannot be quantified in advance.
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The task force issued a near termnear-term (90-day) report in July 2011 that has made initial recommendations, which are currently being evaluated by the NRC. It is anticipated that the NRC will issue certain orderswere subsequently refined and requests for information to nuclear plant licensees by the end of the first quarter 2012 that will begin to implementprioritized after input from stakeholders. The task force then issued a second report in September 2011. Based upon the task force’s recommendations. Theserecommendations, the NRC issued three orders mayeffective on March 12, 2012. The three orders require U.S. nuclear operators including Entergy, to undertake plant modifications orand perform additional analyses that could,will, among other things, result in increased costsoperating and capital requirementscosts associated with operating Entergy’s nuclear plants. The NRC, with input from the industry, is continuing to determine the specific actions required by the orders. Entergy Louisiana’s estimated capital expenditures for 2015 through 2017 for complying with the NRC orders are included in the planned construction and other capital investments estimates given in “Liquidity and Capital Resources - Uses of Capital” above.
Environmental Risks
Entergy Louisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Louisiana is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of Entergy Louisiana’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Louisiana’s financial position or results of operations.
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Management’s Financial Discussion and Analysis
Nuclear Decommissioning Costs
See “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
In the fourth quarter 2013, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Waterford 3 as a result of a revised decommissioning cost study. The revised estimate resulted in a $39.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement costs asset that will be depreciated over the remaining life of the unit.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Louisiana records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsLouisiana’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
|
| | | | | | |
Actuarial Assumption | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Projected Qualified Benefit Obligation |
| | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $2,235 | | $35,324 |
| Rate of return on plan assets | | (0.25%) | | $1,346 | | $— |
| Rate of increase in compensation | | 0.25% | | $892 | | $5,860 |
Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | | Increase/(Decrease) |
| | | | | | | |
| Discount rate | | (0.25%) | | $1,989 | | $24,591 |
| Rate of return on plan assets | | (0.25%) | | $1,143 | | - |
| Rate of increase in compensation | | 0.25% | | $848 | | $4,931 |
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $465 | | $6,598 |
| Health care cost trend | | 0.25% | | $984 | | $5,801 | | 0.25% | | $820 | | $5,691 |
| Discount rate | | (0.25%) | | $720 | | $6,995 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
Costs and Funding
Total qualified pension cost for Entergy Louisiana in 20112014 was $23.6$30.8 million. Entergy Louisiana anticipates 20122015 qualified pension cost to be $37.4$45.4 million. Entergy Louisiana contributed $60.6$54.5 million to its pension plans in 20112014 and anticipates fundingestimates 2015 pension contributions to be approximately $23.8$57 million, in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costs for Entergy Louisiana in 20112014 were $18.2 million, including $3.9 million in savings due to the estimated effect of future Medicare Part D subsidies.$10.9 million. Entergy Louisiana expects 20122015 postretirement health care and life insurance benefit costs to approximate $22.1 million, including $3.6 million in savings due to the estimated effect of future Medicare Part D subsidies.approximately $12.8 million. Entergy Louisiana expects to contribute approximately $10contributed $11.2 million to its other postretirement plans in 2012.2014 and expects to contribute approximately $9.9 million in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $70.3 million in the qualified pension benefit obligation and $9.7 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $10.5 million and other postretirement cost by approximately $1.2 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
(page left blank intentionally)
To the Board of Directors and Members of
Entergy Louisiana, LLC and Subsidiaries
Baton Rouge,Jefferson, Louisiana
We have audited the accompanying consolidated balance sheets of Entergy Louisiana, LLC and Subsidiaries (the “Company”) as of December 31, 20112014 and 20102013 and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of cash flows, and consolidated statements of changes in equity (pages 319371 through 324376 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Louisiana, LLC and Subsidiaries as of December 31, 20112014 and 2010,2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
|
| | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING REVENUES | | | | | | |
| Electric | |
| $2,825,881 |
| |
| $2,626,935 |
| |
| $2,149,443 |
|
| | | | | | | |
| OPERATING EXPENSES | | |
| | |
| | |
|
| Operation and Maintenance: | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and gas purchased for resale | | 679,028 |
| | 570,956 |
| | 360,964 |
|
| Purchased power | | 895,242 |
| | 850,998 |
| | 728,170 |
|
| Nuclear refueling outage expenses | | 30,347 |
| | 34,566 |
| | 24,344 |
|
| Other operation and maintenance | | 514,910 |
| | 480,166 |
| | 449,172 |
|
| Decommissioning | | 24,649 |
| | 21,612 |
| | 23,406 |
|
| Taxes other than income taxes | | 75,416 |
| | 74,241 |
| | 69,186 |
|
| Depreciation and amortization | | 252,690 |
| | 242,787 |
| | 218,140 |
|
| Other regulatory charges (credits) - net | | (30,844 | ) | | (3,785 | ) | | 127,050 |
|
| TOTAL | | 2,441,438 |
| | 2,271,541 |
| | 2,000,432 |
|
| | | | | | | |
| OPERATING INCOME | | 384,443 |
| | 355,394 |
| | 149,011 |
|
| | | | | | | |
| OTHER INCOME | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | 38,807 |
| | 31,544 |
| | 39,610 |
|
| Interest and investment income | | 94,437 |
| | 91,599 |
| | 84,478 |
|
| Miscellaneous - net | | 8,458 |
| | (3,990 | ) | | (2,584 | ) |
| TOTAL | | 141,702 |
| | 119,153 |
| | 121,504 |
|
| | | | | | | |
| INTEREST EXPENSE | | |
| | |
| | |
|
| Interest expense | | 166,750 |
| | 153,529 |
| | 136,967 |
|
| Allowance for borrowed funds used during construction | | (20,406 | ) | | (13,323 | ) | | (18,611 | ) |
| TOTAL | | 146,344 |
| | 140,206 |
| | 118,356 |
|
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 379,801 |
| | 334,341 |
| | 152,159 |
|
| | | | | | | |
| Income taxes | | 96,270 |
| | 81,877 |
| | (128,922 | ) |
| | | | | | | |
| NET INCOME | | 283,531 |
| | 252,464 |
| | 281,081 |
|
| | | | | | | |
| Preferred distribution requirements and other | | 6,969 |
| | 6,950 |
| | 6,950 |
|
| | | | | | | |
| EARNINGS APPLICABLE TO COMMON EQUITY | |
| $276,562 |
| |
| $245,514 |
| |
| $274,131 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Electric | | $ | 2,508,915 | | | $ | 2,538,766 | | | $ | 2,183,586 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and | | | | | | | | | | | | |
| gas purchased for resale | | | 596,808 | | | | 667,744 | | | | 428,904 | |
| Purchased power | | | 843,099 | | | | 847,464 | | | | 782,235 | |
| Nuclear refueling outage expenses | | | 27,903 | | | | 24,955 | | | | 21,895 | |
| Other operation and maintenance | | | 470,783 | | | | 432,341 | | | | 401,898 | |
| Decommissioning | | | 24,658 | | | | 22,960 | | | | 21,377 | |
| Taxes other than income taxes | | | 69,769 | | | | 68,687 | | | | 66,627 | |
| Depreciation and amortization | | | 206,986 | | | | 198,133 | | | | 203,791 | |
| Other regulatory charges (credits) - net | | | 182,800 | | | | (20,192 | ) | | | (7,561 | ) |
| TOTAL | | | 2,422,806 | | | | 2,242,092 | | | | 1,919,166 | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 86,109 | | | | 296,674 | | | | 264,420 | |
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | | 33,033 | | | | 26,875 | | | | 27,990 | |
| Interest and investment income | | | 87,487 | | | | 80,007 | | | | 75,522 | |
| Miscellaneous - net | | | (3,520 | ) | | | (4,043 | ) | | | (4,425 | ) |
| TOTAL | | | 117,000 | | | | 102,839 | | | | 99,087 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | | 116,803 | | | | 119,484 | | | | 103,671 | |
| Allowance for borrowed funds used during construction | | | (17,406 | ) | | | (17,952 | ) | | | (18,059 | ) |
| TOTAL | | | 99,397 | | | | 101,532 | | | | 85,612 | |
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 103,712 | | | | 297,981 | | | | 277,895 | |
| | | | | | | | | | | | | |
| Income taxes (benefit) | | | (370,211 | ) | | | 66,546 | | | | 45,050 | |
| | | | | | | | | | | | | |
| NET INCOME | | | 473,923 | | | | 231,435 | | | | 232,845 | |
| | | | | | | | | | | | | |
| Preferred distribution requirements and other | | | 6,950 | | | | 6,950 | | | | 6,950 | |
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO | | | | | | | | | | | | |
| COMMON EQUITY | | $ | 466,973 | | | $ | 224,485 | | | $ | 225,895 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| Net Income | |
| $283,531 |
| |
| $252,464 |
| |
| $281,081 |
|
| | | | | | | |
| Other comprehensive income (loss) | | |
| | |
| | |
|
| Pension and other postretirement liabilities | | |
| | |
| | |
|
| (net of tax expense (benefit) of ($10,207), $30,591, and $5,095) | | (16,241 | ) | | 36,497 |
| | (6,625 | ) |
| Other comprehensive income (loss) | | (16,241 | ) | | 36,497 |
| | (6,625 | ) |
| | | | | | | |
| Comprehensive Income | |
| $267,290 |
| |
| $288,961 |
| |
| $274,456 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
|
| | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $283,531 |
| |
| $252,464 |
| |
| $281,081 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 349,947 |
| | 337,333 |
| | 293,774 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 149,282 |
| | 310,964 |
| | (59,069 | ) |
| Changes in working capital: | | |
| | |
| | |
|
| Receivables | | 60,747 |
| | (121,118 | ) | | 43,850 |
|
| Fuel inventory | | (7,640 | ) | | 272 |
| | 336 |
|
| Accounts payable | | (22,560 | ) | | (29,151 | ) | | 40,085 |
|
| Prepaid taxes and taxes accrued | | 185,363 |
| | (176,566 | ) | | (39,275 | ) |
| Interest accrued | | 2,300 |
| | 4,808 |
| | 729 |
|
| Deferred fuel costs | | 20,040 |
| | 56,960 |
| | (93,103 | ) |
| Other working capital accounts | | (4,562 | ) | | 41,693 |
| | (79,771 | ) |
| Changes in provisions for estimated losses | | 204,510 |
| | (188,741 | ) | | (16,586 | ) |
| Changes in other regulatory assets | | (213,664 | ) | | 111,049 |
| | (116,249 | ) |
| Changes in other regulatory liabilities | | 12,837 |
| | 156,446 |
| | 81,259 |
|
| Changes in pension and other postretirement liabilities | | 172,430 |
| | (180,601 | ) | | 80,027 |
|
| Other | | (66,521 | ) | | 86,960 |
| | 30,610 |
|
| Net cash flow provided by operating activities | | 1,126,040 |
| | 662,772 |
| | 447,698 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (484,638 | ) | | (711,470 | ) | | (787,075 | ) |
| Allowance for equity funds used during construction | | 38,807 |
| | 31,544 |
| | 39,610 |
|
| Nuclear fuel purchases | | (131,978 | ) | | (51,016 | ) | | (159,501 | ) |
| Proceeds from the sale of nuclear fuel | | 59,784 |
| | 23,438 |
| | 62,248 |
|
| Investment in affiliates | | (227,273 | ) | | — |
| | — |
|
| Payments to storm reserve escrow account | | (200,053 | ) | | — |
| | — |
|
| Receipts from storm reserve escrow account | | — |
| | 187,008 |
| | 14,478 |
|
| Changes in securitization account | | 1,480 |
| | (157 | ) | | 818 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 43,158 |
| | 109,856 |
| | 27,577 |
|
| Investment in nuclear decommissioning trust funds | | (54,044 | ) | | (121,773 | ) | | (39,374 | ) |
| Change in money pool receivable - net | | 15,999 |
| | (8,215 | ) | | (9,433 | ) |
| Other | | — |
| | (22 | ) | | (214 | ) |
| Net cash flow used in investing activities | | (938,758 | ) | | (540,807 | ) | | (850,866 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | 642,835 |
| | 417,740 |
| | 663,975 |
|
| Retirement of long-term debt | | (512,180 | ) | | (30,846 | ) | | (50,899 | ) |
| Change in money pool payable - net | | — |
| | — |
| | (118,415 | ) |
| Changes in credit borrowings - net | | 43,110 |
| | (51,734 | ) | | (39,735 | ) |
| Distributions paid: | | |
| | |
| | |
|
| Common equity | | (320,601 | ) | | (356,254 | ) | | (15,600 | ) |
| Preferred membership interests | | (6,950 | ) | | (6,950 | ) | | (6,950 | ) |
| Other | | 50 |
| | — |
| | — |
|
| Net cash flow provided by (used in) financing activities | | (153,736 | ) | | (28,044 | ) | | 432,376 |
|
| Net increase in cash and cash equivalents | | 33,546 |
| | 93,921 |
| | 29,208 |
|
| Cash and cash equivalents at beginning of period | | 124,007 |
| | 30,086 |
| | 878 |
|
| Cash and cash equivalents at end of period | |
| $157,553 |
| |
| $124,007 |
| |
| $30,086 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $158,905 |
| |
| $143,257 |
| |
| $130,934 |
|
| Income taxes | |
| ($241,411 | ) | |
| ($33,622 | ) | |
| ($41,423 | ) |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| Net Income | | $ | 473,923 | | | $ | 231,435 | | | $ | 232,845 | |
| Other comprehensive income (loss) | | | | | | | | | | | | |
| Pension and other postretirement liabilities | | | | | | | | | | | | |
| (net of tax benefit of $7,363, $1,818, and $1,692) | | | (14,545 | ) | | | 577 | | | | (1,324 | ) |
| Other comprehensive income (loss) | | | (14,545 | ) | | | 577 | | | | (1,324 | ) |
| Comprehensive Income | | $ | 459,378 | | | $ | 232,012 | | | $ | 231,521 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 473,923 | | | $ | 231,435 | | | $ | 232,845 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 288,459 | | | | 285,330 | | | | 225,168 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (327,046 | ) | | | 28,896 | | | | (183,872 | ) |
| Changes in working capital: | | | | | | | | | | | | |
| Receivables | | | (50,014 | ) | | | (6,245 | ) | | | 193,181 | |
| Fuel inventory | | | (23,916 | ) | | | - | | | | - | |
| Accounts payable | | | 21,489 | | | | 86,103 | | | | (25,074 | ) |
| Prepaid taxes and taxes accrued | | | 56,348 | | | | (25,993 | ) | | | 300 | |
| Interest accrued | | | 4,646 | | | | (2,991 | ) | | | (5,325 | ) |
| Deferred fuel costs | | | 7,308 | | | | 57,594 | | | | (89,930 | ) |
| Other working capital accounts | | | 34,824 | | | | (51,771 | ) | | | (168,238 | ) |
| Changes in provisions for estimated losses | | | (10,496 | ) | | | 203,255 | | | | 1,455 | |
| Changes in other regulatory assets | | | (95,909 | ) | | | 150,952 | | | | (84,503 | ) |
| Changes in pension and other postretirement liabilities | | | 114,489 | | | | 49,378 | | | | 13,664 | |
| Other | | | (14,763 | ) | | | (73,609 | ) | | | (21,792 | ) |
| Net cash flow provided by operating activities | | | 479,342 | | | | 932,334 | | | | 87,879 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (433,876 | ) | | | (428,373 | ) | | | (467,519 | ) |
| Allowance for equity funds used during construction | | | 33,033 | | | | 26,875 | | | | 27,990 | |
| Insurance proceeds | | | - | | | | 188 | | | | 153 | |
| Nuclear fuel purchases | | | (155,932 | ) | | | (617 | ) | | | (93,272 | ) |
| Proceeds from the sale of nuclear fuel | | | 11,570 | | | | - | | | | 93,672 | |
| Payment for purchase of plant | | | (299,589 | ) | | | - | | | | - | |
| Investment in affiliates | | | - | | | | (262,430 | ) | | | 160 | |
| Payments to storm reserve escrow account | | | (277 | ) | | | (200,166 | ) | | | - | |
| Remittances to transition charge account | | | (5,200 | ) | | | - | | | | - | |
| Proceeds from nuclear decommissioning trust fund sales | | | 19,909 | | | | 44,500 | | | | 47,520 | |
| Investment in nuclear decommissioning trust funds | | | (30,728 | ) | | | (53,579 | ) | | | (54,379 | ) |
| Change in money pool receivable - net | | | 49,887 | | | | 2,920 | | | | 8,429 | |
| Changes in other investments - net | | | - | | | | 9,353 | | | | 995 | |
| Net cash flow used in investing activities | | | (811,203 | ) | | | (861,329 | ) | | | (436,251 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | 1,170,441 | | | | 498,801 | | | | 395,450 | |
| Retirement of long-term debt | | | (785,547 | ) | | | (567,326 | ) | | | (6,597 | ) |
| Change in money pool payable - net | | | 118,415 | | | | - | | | | - | |
| Changes in credit borrowings - net | | | 71,326 | | | | (24,125 | ) | | | - | |
| Dividends/distributions paid: | | | | | | | | | | | | |
| Common equity | | | (358,200 | ) | | | - | | | | (20,600 | ) |
| Preferred membership interests | | | (6,950 | ) | | | (6,950 | ) | | | (6,950 | ) |
| Net cash flow provided by (used in) financing activities | | | 209,485 | | | | (99,600 | ) | | | 361,303 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (122,376 | ) | | | (28,595 | ) | | | 12,931 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 123,254 | | | | 151,849 | | | | 138,918 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 878 | | | $ | 123,254 | | | $ | 151,849 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid/(received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 108,072 | | | $ | 118,676 | | | $ | 105,586 | |
| Income taxes | | $ | (39,555 | ) | | $ | 28,266 | | | $ | 223,610 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
|
| | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $431 |
| |
| $427 |
|
| Temporary cash investments | | 157,122 |
| | 123,580 |
|
| Total cash and cash equivalents | | 157,553 |
| | 124,007 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 124,125 |
| | 144,836 |
|
| Allowance for doubtful accounts | | (984 | ) | | (965 | ) |
| Associated companies | | 48,474 |
| | 87,820 |
|
| Other | | 9,150 |
| | 21,420 |
|
| Accrued unbilled revenues | | 88,673 |
| | 93,073 |
|
| Total accounts receivable | | 269,438 |
| | 346,184 |
|
| Accumulated deferred income taxes | | 74,558 |
| | 100,022 |
|
| Fuel inventory | | 30,951 |
| | 23,311 |
|
| Materials and supplies - at average cost | | 154,295 |
| | 156,487 |
|
| Deferred nuclear refueling outage costs | | 23,067 |
| | 13,670 |
|
| Prepaid taxes | | — |
| | 184,503 |
|
| Prepayments and other | | 24,962 |
| | 22,651 |
|
| TOTAL | | 734,824 |
| | 970,835 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Investment in affiliate preferred membership interests | | 1,034,696 |
| | 807,423 |
|
| Decommissioning trust funds | | 383,615 |
| | 347,274 |
|
| Storm reserve escrow account | | 200,053 |
| | — |
|
| Non-utility property - at cost (less accumulated depreciation) | | 214 |
| | 396 |
|
| TOTAL | | 1,618,578 |
| | 1,155,093 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 9,627,495 |
| | 8,799,393 |
|
| Property under capital lease | | 334,716 |
| | 331,895 |
|
| Construction work in progress | | 241,923 |
| | 672,883 |
|
| Nuclear fuel | | 162,721 |
| | 147,385 |
|
| TOTAL UTILITY PLANT | | 10,366,855 |
| | 9,951,556 |
|
| Less - accumulated depreciation and amortization | | 3,942,916 |
| | 3,763,234 |
|
| UTILITY PLANT - NET | | 6,423,939 |
| | 6,188,322 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 324,555 |
| | 309,617 |
|
| Other regulatory assets (includes securitization property of $135,538 as of December 31, 2014 and $156,103 as of December 31, 2013) | | 914,229 |
| | 715,503 |
|
| Deferred fuel costs | | 67,998 |
| | 67,998 |
|
| Other | | 45,182 |
| | 43,025 |
|
| TOTAL | | 1,351,964 |
| | 1,136,143 |
|
| | | | | |
| TOTAL ASSETS | |
| $10,129,305 |
| |
| $9,450,393 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $19,525 |
| |
| $320,231 |
|
| Short-term borrowings | | 46,033 |
| | 2,923 |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 74,692 |
| | 83,655 |
|
| Other | | 164,329 |
| | 162,507 |
|
| Customer deposits | | 93,010 |
| | 90,393 |
|
| Taxes accrued | | 860 |
| | — |
|
| Accumulated deferred income taxes | | — |
| | 338 |
|
| Interest accrued | | 44,372 |
| | 42,072 |
|
| Deferred fuel costs | | 50,432 |
| | 30,392 |
|
| Other | | 48,250 |
| | 46,698 |
|
| TOTAL | | 541,503 |
| | 779,209 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 1,406,507 |
| | 1,275,584 |
|
| Accumulated deferred investment tax credits | | 64,771 |
| | 67,347 |
|
| Other regulatory liabilities | | 546,084 |
| | 533,247 |
|
| Decommissioning | | 503,734 |
| | 479,086 |
|
| Accumulated provisions | | 212,243 |
| | 7,733 |
|
| Pension and other postretirement liabilities | | 530,844 |
| | 358,017 |
|
| Long-term debt (includes securitization bonds of $143,039 as of December 31, 2014 and $164,965 as of December 31, 2013) | | 3,337,054 |
| | 2,899,285 |
|
| Other | | 70,141 |
| | 75,233 |
|
| TOTAL | | 6,671,378 |
| | 5,695,532 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| EQUITY | | |
| | |
|
| Preferred membership interests without sinking fund | | 100,000 |
| | 100,000 |
|
| Member’s equity | | 2,842,300 |
| | 2,885,287 |
|
| Accumulated other comprehensive loss | | (25,876 | ) | | (9,635 | ) |
| TOTAL | | 2,916,424 |
| | 2,975,652 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $10,129,305 |
| |
| $9,450,393 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| |
| CONSOLIDATED BALANCE SHEETS | |
| ASSETS | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents: | | | | | | |
| Cash | | $ | 878 | | | $ | 708 | |
| Temporary cash investments | | | - | | | | 122,546 | |
| Total cash and cash equivalents | | | 878 | | | | 123,254 | |
| Securitization recovery trust account | | | 5,200 | | | | - | |
| Accounts receivable: | | | | | | | | |
| Customer | | | 102,379 | | | | 85,799 | |
| Allowance for doubtful accounts | | | (1,147 | ) | | | (1,961 | ) |
| Associated companies | | | 60,661 | | | | 81,050 | |
| Other | | | 10,945 | | | | 14,594 | |
| Accrued unbilled revenues | | | 78,430 | | | | 71,659 | |
| Total accounts receivable | | | 251,268 | | | | 251,141 | |
| Accumulated deferred income taxes | | | - | | | | 7,072 | |
| Fuel inventory | | | 23,919 | | | | 3 | |
| Materials and supplies - at average cost | | | 140,561 | | | | 138,047 | |
| Deferred nuclear refueling outage costs | | | 24,197 | | | | 11,364 | |
| Prepaid taxes | | | - | | | | 25,010 | |
| Prepayments and other | | | 13,171 | | | | 10,719 | |
| TOTAL | | | 459,194 | | | | 566,610 | |
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliate preferred membership interests | | | 807,424 | | | | 807,424 | |
| Decommissioning trust funds | | | 253,968 | | | | 240,535 | |
| Storm reserve escrow account | | | 201,249 | | | | 200,972 | |
| Non-utility property - at cost (less accumulated depreciation) | | | 760 | | | | 946 | |
| TOTAL | | | 1,263,401 | | | | 1,249,877 | |
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | | 7,859,136 | | | | 7,216,146 | |
| Property under capital lease | | | 274,334 | | | | 264,266 | |
| Construction work in progress | | | 559,437 | | | | 521,172 | |
| Nuclear fuel | | | 165,380 | | | | 134,528 | |
| TOTAL UTILITY PLANT | | | 8,858,287 | | | | 8,136,112 | |
| Less - accumulated depreciation and amortization | | | 3,606,706 | | | | 3,457,190 | |
| UTILITY PLANT - NET | | | 5,251,581 | | | | 4,678,922 | |
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | | 175,952 | | | | 235,404 | |
| Other regulatory assets (includes securitization property of | | | | | | | | |
| $198,445 as of December 31, 2011 and | | | | | | | | |
| $- as of December 31, 2010) | | | 814,472 | | | | 662,746 | |
| Deferred fuel costs | | | 67,998 | | | | 67,998 | |
| Other | | | 31,269 | | | | 26,866 | |
| TOTAL | | | 1,089,691 | | | | 993,014 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 8,063,867 | | | $ | 7,488,423 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | 75,309 | | | $ | 35,550 | |
| Short-term borrowings | | | 44,392 | | | | 23,066 | |
| Accounts payable: | | | | | | | | |
| Associated companies | | | 218,001 | | | | 148,528 | |
| Other | | | 130,295 | | | | 140,564 | |
| Customer deposits | | | 86,099 | | | | 84,437 | |
| Accumulated deferred income taxes | | | 4,690 | | | | - | |
| Taxes accrued | | | 31,338 | | | | - | |
| Interest accrued | | | 36,535 | | | | 31,889 | |
| Deferred fuel costs | | | 66,535 | | | | 59,227 | |
| Pension and other postretirement liabilities | | | 9,161 | | | | 8,632 | |
| System agreement cost equalization | | | 36,800 | | | | - | |
| Gas hedge contracts | | | 12,397 | | | | 380 | |
| Other | | | 19,278 | | | | 17,134 | |
| TOTAL | | | 770,830 | | | | 549,407 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 1,098,690 | | | | 1,896,685 | |
| Accumulated deferred investment tax credits | | �� | 73,283 | | | | 76,453 | |
| Other regulatory liabilities | | | 295,542 | | | | 88,899 | |
| Decommissioning | | | 345,834 | | | | 321,176 | |
| Accumulated provisions | | | 213,060 | | | | 223,556 | |
| Pension and other postretirement liabilities | | | 459,685 | | | | 345,725 | |
| Long-term debt (includes securitization bonds of | | | | | | | | |
| $207,123 as of December 31, 2011 and | | | | | | | | |
| $- as of December 31, 2010) | | | 2,177,003 | | | | 1,771,566 | |
| Other | | | 65,011 | | | | 78,085 | |
| TOTAL | | | 4,728,108 | | | | 4,802,145 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Preferred membership interests without sinking fund | | | 100,000 | | | | 100,000 | |
| Member's equity | | | 2,504,436 | | | | 2,061,833 | |
| Accumulated other comprehensive loss | | | (39,507 | ) | | | (24,962 | ) |
| TOTAL | | | 2,564,929 | | | | 2,136,871 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 8,063,867 | | | $ | 7,488,423 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | | | |
| | | | Common Equity | | |
| | Preferred Membership Interests | | Member’s Equity | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2011 |
| $100,000 |
| |
| $2,504,436 |
| |
| ($39,507 | ) | |
| $2,564,929 |
|
| Net income | — |
| | 281,081 |
| | — |
| | 281,081 |
|
| Additional contribution from parent | — |
| | 253,661 |
| | — |
| | 253,661 |
|
| Other comprehensive loss | — |
| | — |
| | (6,625 | ) | | (6,625 | ) |
| Distributions to parent | — |
| | (15,600 | ) | | — |
| | (15,600 | ) |
| Distributions declared on preferred membership interests | — |
| | (6,950 | ) | | — |
| | (6,950 | ) |
| Balance at December 31, 2012 |
| $100,000 |
| |
| $3,016,628 |
| |
| ($46,132 | ) | |
| $3,070,496 |
|
| Net income | — |
| | 252,464 |
| | — |
| | 252,464 |
|
| Other comprehensive income | — |
| | — |
| | 36,497 |
| | 36,497 |
|
| Distributions to parent | — |
| | (376,855 | ) | | — |
| | (376,855 | ) |
| Distributions declared on preferred membership interests | — |
| | (6,950 | ) | | — |
| | (6,950 | ) |
| Balance at December 31, 2013 |
| $100,000 |
| |
| $2,885,287 |
| |
| ($9,635 | ) | |
| $2,975,652 |
|
| Net income | — |
| | 283,531 |
| | — |
| | 283,531 |
|
| Other comprehensive loss | — |
| | — |
| | (16,241 | ) | | (16,241 | ) |
| Contributions from parent | — |
| | 1,052 |
| | — |
| | 1,052 |
|
| Distributions to parent | — |
| | (320,601 | ) | | — |
| | (320,601 | ) |
| Distributions declared on preferred membership interests | — |
| | (6,969 | ) | | — |
| | (6,969 | ) |
| Balance at December 31, 2014 |
| $100,000 |
| |
| $2,842,300 |
| |
| ($25,876 | ) | |
| $2,916,424 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $2,825,881 |
| |
| $2,626,935 |
| |
| $2,149,443 |
| |
| $2,508,915 |
| |
| $2,538,766 |
|
| Net Income |
| $283,531 |
| |
| $252,464 |
| |
| $281,081 |
| |
| $473,923 |
| |
| $231,435 |
|
| Total assets |
| $10,129,305 |
| |
| $9,450,393 |
| |
| $9,074,084 |
| |
| $8,063,867 |
| |
| $7,488,423 |
|
| Long-term obligations (a) |
| $3,337,054 |
| |
| $2,899,285 |
| |
| $2,811,859 |
| |
| $2,177,003 |
| |
| $1,771,566 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt). |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Electric Operating Revenues: | |
| | |
| | |
| | |
| | |
|
| Residential |
| $856 |
| |
| $839 |
| |
| $687 |
| |
| $830 |
| |
| $840 |
|
| Commercial | 596 |
| | 586 |
| | 482 |
| | 549 |
| | 543 |
|
| Industrial | 981 |
| | 955 |
| | 731 |
| | 867 |
| | 817 |
|
| Governmental | 47 |
| | 46 |
| | 38 |
| | 42 |
| | 42 |
|
| Total retail |
| $2,480 |
| |
| $2,426 |
| |
| $1,938 |
| |
| $2,288 |
| |
| $2,242 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 256 |
| | 114 |
| | 137 |
| | 137 |
| | 220 |
|
| Non-associated companies | 18 |
| | 3 |
| | 2 |
| | 8 |
| | 5 |
|
| Other | 72 |
| | 84 |
| | 72 |
| | 76 |
| | 72 |
|
| Total |
| $2,826 |
| |
| $2,627 |
| |
| $2,149 |
| |
| $2,509 |
| |
| $2,539 |
|
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | |
| | |
| | |
| | |
| | |
|
| Residential | 9,047 |
| | 8,820 |
| | 8,703 |
| | 9,303 |
| | 9,533 |
|
| Commercial | 6,257 |
| | 6,194 |
| | 6,112 |
| | 6,155 |
| | 6,164 |
|
| Industrial | 17,100 |
| | 16,713 |
| | 16,416 |
| | 15,813 |
| | 14,473 |
|
| Governmental | 500 |
| | 495 |
| | 479 |
| | 473 |
| | 479 |
|
| Total retail | 32,904 |
| | 32,222 |
| | 31,710 |
| | 31,744 |
| | 30,649 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 4,450 |
| | 1,844 |
| | 2,156 |
| | 2,145 |
| | 2,860 |
|
| Non-associated companies | 126 |
| | 92 |
| | 65 |
| | 185 |
| | 101 |
|
| Total | 37,480 |
| | 34,158 |
| | 33,931 |
| | 34,074 |
| | 33,610 |
|
| |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | | | | Common Equity | | | | |
| | | Preferred Membership Interests | | | Member's Equity | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | | (In Thousands) | | | | | | | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 100,000 | | | $ | 1,632,053 | | | $ | (24,215 | ) | | $ | 1,707,838 | |
| Net income | | | - | | | | 232,845 | | | | - | | | | 232,845 | |
| Other comprehensive loss | | | - | | | | - | | | | (1,324 | ) | | | (1,324 | ) |
| Dividends/distributions declared on common equity | | | - | | | | (20,600 | ) | | | - | | | | (20,600 | ) |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (6,950 | ) | | | - | | | | (6,950 | ) |
| Balance at December 31, 2009 | | $ | 100,000 | | | $ | 1,837,348 | | | $ | (25,539 | ) | | $ | 1,911,809 | |
| Net income | | | - | | | | 231,435 | | | | - | | | | 231,435 | |
| Other comprehensive income | | | - | | | | - | | | | 577 | | | | 577 | |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (6,950 | ) | | | - | | | | (6,950 | ) |
| Balance at December 31, 2010 | | $ | 100,000 | | | $ | 2,061,833 | | | $ | (24,962 | ) | | $ | 2,136,871 | |
| Net income | | | - | | | | 473,923 | | | | - | | | | 473,923 | |
| Additional contribution from parent | | | - | | | | 333,830 | | | | - | | | | 333,830 | |
| Other comprehensive loss | | | - | | | | - | | | | (14,545 | ) | | | (14,545 | ) |
| Dividends/distributions declared on common equity | | | - | | | | (358,200 | ) | | | - | | | | (358,200 | ) |
| Dividends/distributions declared on preferred membership interests | | | - | | | | (6,950 | ) | | | - | | | | (6,950 | ) |
| Balance at December 31, 2011 | | $ | 100,000 | | | $ | 2,504,436 | | | $ | (39,507 | ) | | $ | 2,564,929 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 2,508,915 | | | $ | 2,538,766 | | | $ | 2,183,586 | | | $ | 3,051,294 | | | $ | 2,737,552 | |
| Net Income | | $ | 473,923 | | | $ | 231,435 | | | $ | 232,845 | | | $ | 157,543 | | | $ | 143,337 | |
| Total assets | | $ | 8,063,867 | | | $ | 7,488,423 | | | $ | 6,861,903 | | | $ | 6,685,168 | | | $ | 5,723,121 | |
| Long-term obligations (1) | | $ | 2,177,003 | | | $ | 1,771,566 | | | $ | 1,622,709 | | | $ | 1,423,316 | | | $ | 1,149,478 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 830 | | | $ | 840 | | | $ | 669 | | | $ | 967 | | | $ | 854 | |
| Commercial | | | 549 | | | | 543 | | | | 456 | | | | 660 | | | | 578 | |
| Industrial | | | 867 | | | | 817 | | | | 664 | | | | 1,062 | | | | 872 | |
| Governmental | | | 42 | | | | 42 | | | | 36 | | | | 51 | | | | 43 | |
| Total retail | | $ | 2,288 | | | $ | 2,242 | | | $ | 1,825 | | | | 2,740 | | | | 2,347 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 137 | | | | 220 | | | | 252 | | | | 249 | | | | 310 | |
| Non-associated companies | | | 8 | | | | 5 | | | | 5 | | | | 12 | | | | 8 | |
| Other | | | 76 | | | | 72 | | | | 102 | | | | 50 | | | | 73 | |
| Total | | $ | 2,509 | | | $ | 2,539 | | | $ | 2,184 | | | $ | 3,051 | | | $ | 2,738 | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
| Residential | | | 9,303 | | | | 9,533 | | | | 8,684 | | | | 8,487 | | | | 8,646 | |
| Commercial | | | 6,155 | | | | 6,164 | | | | 5,867 | | | | 5,784 | | | | 5,848 | |
| Industrial | | | 15,813 | | | | 14,473 | | | | 13,386 | | | | 13,162 | | | | 13,209 | |
| Governmental | | | 473 | | | | 479 | | | | 459 | | | | 459 | | | | 446 | |
| Total retail (2) | | | 31,744 | | | | 30,649 | | | | 28,396 | | | | 27,892 | | | | 28,149 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 2,145 | | | | 2,860 | | | | 1,513 | | | | 2,028 | | | | 2,299 | |
| Non-associated companies | | | 185 | | | | 101 | | | | 109 | | | | 205 | | | | 112 | |
| Total | | | 34,074 | | | | 33,610 | | | | 30,018 | | | | 30,125 | | | | 30,560 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| (2) 2006 billed electric energy sales includes 96 GWh of billings related to 2005 deliveries that were billed in 2006 | |
| because of billing delays following Hurricane Katrina, which results in an increase of 402 GWh in 2006, or 1.5%, and | |
| an increase of 762 GWh in 2007, or 2.8%. | | | | | | | | | | | | | | | | | | | | |
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Plan to Spin Off the Utility’s Transmission Business
See the “Plan to Spin Off the Utility’s Transmission Business” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of this matter, including the planned retirement of debt and preferred securities.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income increased $23.4decreased $7.3 million primarily due to the write-off in 2014 of the regulatory asset associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff, subsequently approved by the MPSC, in which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements for discussion of the new nuclear generation development costs and the joint stipulation. Also contributing to the decrease were higher depreciation and amortization expenses and higher taxes other than income taxes. These decreases were significantly offset by higher net revenue and lower effective income tax rate.other operation and maintenance expenses.
20102013 Compared to 20092012
Net income increased $6.0$35.4 million primarily due to higher net revenue and higher othera lower effective income tax rate, partially offset by higher taxes other than income taxes, higher depreciationoperation and amortization expenses, and higher interest expense.maintenance expenses.
Net Revenue
20112014 Compared to 20102013
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 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20102013 net revenue |
| $555.3 644.4 |
|
Volume/weatherRetail electric price | 39.7 | (4.5)
|
| Reserve equalization | 11.2 |
|
| Transmission equalization | 1.3 | 4.5
|
| Volume/weather | 1.3 |
|
| Other | 3.3 | (0.4)
|
20112014 net revenue |
| $554.9 701.2 |
|
The volume/weatherretail electric price variance is primarily due to a decrease of 97 GWh in weather-adjusted usageformula rate plan increase, as approved by the MPSC, effective September 2013 and an increase in the residential and commercial sectors and a decrease in sales volumestorm damage rider, as approved by the MPSC, effective October 2013. The increase in the unbilled sales period.storm damage rider is offset by other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements for a discussion of the formula rate plan and storm damage rider.
The reserve equalization variance is primarily due to an increase in reserve equalization revenue primarily due to the changes in the Entergy System generation mix as a result of Entergy Arkansas’s exit from the System Agreement in December 2013.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
The transmission equalization variance is primarily due to changes in transmission investment equalization billings under the additionEntergy System Agreement compared to the same period in 20112013 primarily as a result of transmission investments that are subject to equalization.Entergy Arkansas’s exit from the System Agreement in December 2013.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increasedThe volume/weather variance is primarily due to an increase of $57.5 million86 GWh, or 1%, in gross wholesale revenues duebilled electricity usage, including the effect of more favorable weather on residential sales as compared to the prior year and an increase in sales to affiliated customers, partially offset by a decrease of $26.9 millionindustrial. The increase in power management rider revenue.industrial usage is primarily in the primary metals and pipelines industries.
Fuel and purchased power expenses increased primarily due to an increase in deferred fuel expense as a result of higher fuel revenues due to higher fuel rates, partially offset by a decrease in the average market prices of natural gas and purchased power.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
20102013 Compared to 20092012
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).credits. Following is an analysis of the change in net revenue comparing 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20092012 net revenue |
| $536.7 578.0 |
|
Volume/weatherRetail electric price | 55.1 | 18.9
|
| Reserve equalization | 8.0 |
|
| Other | 3.3 | (0.3)
|
20102013 net revenue |
| $555.3 644.4 |
|
The volume/weatherretail electric price variance is primarily due to an increasethe recovery of 1,046 GWh, or 8%, in billed electricity usage in all sectors, primarily due toHinds plant costs through the effect of more favorable weather on the residential sector.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues increased primarily due to an increase of $22 million in power management rider, revenue as approved by the resultMPSC, effective with the first billing cycle of higher rates,2013 and a formula rate plan increase effective September 2013. The net income effect of the volume/weather variance discussed above,Hinds plant cost recovery is limited to a portion representing an allowed return on equity on the net plant investment with the remainder offset by the Hinds plant costs in other operation and anmaintenance expenses, depreciation expenses, and taxes other than income taxes. The increase in Grand Gulf rider revenue as a result of higher rates and increased usage,is partially offset by a decrease of $23.5 milliontemporary increase in fuel2012 in the storm cost recovery rider, as approved by the MPSC for a five-month period effective August 2012. This temporary increase in revenues due to lower fuel rates.
Fuel and purchased power expenses decreased primarily due to a decrease in deferred fuel expense as a result of prior over-collections,2012 was offset by an increasecosts included in other operation and maintenance expenses and had no effect on net income. See Note 2 to the average market pricefinancial statements for discussion of purchased power coupled with increased net area demand.the formula rate plan increase.
Other regulatory charges increasedThe reserve equalization variance is primarily due to increased recoveryreserve equalization revenue resulting from the acquisition of costs associated with the power management recovery rider.Hinds plant in November 2012.
Other Income Statement Variances
20112014 Compared to 20102013
Other operation and maintenance expenses decreased primarily due to:
· | a $5.4 million decrease in compensation and benefits costs primarily resulting from an increase in the accrual for incentive-based compensation in 2010 and a decrease in stock option expense; and |
a decrease of $11.6 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs;
· | the sale of $4.9 million of surplus oil inventory. |
a decrease of $7.6 million in fossil-fueled generation expenses primarily due to a lower scope of work done during plant outages in 2014 as compared to the same period in 2013;a decrease of $5.9 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business;
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
a decrease of $5.1 million in implementation costs, severance costs, and curtailment and special termination benefits related to the human capital management strategic imperative in 2014 as compared to the same period in 2013. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion; and
a net decrease of $3.8 million related to Baxter Wilson (Unit 1) repairs. The increase in repair costs incurred in 2014 compared to the prior year were offset by expected insurance proceeds and the deferral of repair costs, as approved by the MPSC. See “Baxter Wilson Plant Event” below for further discussion.
The decrease was partially offset by by:
an increase of $3.9$10 million in storm damage accruals, as approved by the MPSC, effective October 2013;
an increase of $5.1 million in 2014 as compared to 2013 in administration fees related to participation in the MISO RTO;
an increase of $4 million in regulatory, consulting, and legal expensesfees;
an increase of $2.3 million in distribution and transmission vegetation maintenance;
an increase of $1.3 million due to higher write-offs of uncollectible customer accounts in 2014 as compared to 2013; and
several individually insignificant items.
The asset write-off resulted from the deferral$56.2 million ($36.7 million after-tax) write-off in 20102014 of certain litigation expensesthe regulatory asset associated with new nuclear generation development costs as a result of a joint stipulation entered into with the Mississippi Public Utilities Staff, subsequently approved by the MPSC, in accordance with regulatory treatment.which Entergy Mississippi agreed not to pursue recovery of the costs deferred by an MPSC order in the new nuclear generation docket. See Note 2 to the financial statements for discussion of the new nuclear generation development costs and the joint stipulation.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes due to a higher 2011 assessmentin 2014 as compared to 2010, partially offset byprior year and an increase in local franchise taxes due to higher capitalized property taxes as compared with prior year.revenues.
Depreciation and amortization expenses increased primarily due to an increase inadditions to plant in service.
2013 Compared to 2012
Other operation and maintenance expenses increased primarily due to:
an increase of $30.6 million in fossil-fueled generation expenses resulting from a higher scope of work done during plant outages in 2013 as compared to 2012, the acquisition of the Hinds plant in November 2012, and the Baxter Wilson (Unit 1) unplanned outage in September 2013;
Interest expense decreasedan increase of $7.1 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion; and
an increase of $5.9 million in compensation and benefits costs primarily due to a revision caused by FERC’s acceptance of a changedecrease in the treatmentdiscount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of funds received from independent power producerslump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for transmission interconnection projects.further discussion of benefits costs.
The increase was partially offset by a temporary increase in 2012 of $17.8 million in storm damage accruals, as approved by the MPSC for a five-month period effective August 2012, and several individually insignificant items.
Also, other operation and maintenance expenses include $5.9 million in 2013 and $7.6 million in 2012 of costs incurred related to the now terminated plan to spin off and merge the transmission business.
Entergy Mississippi, Inc.
Management’sManagement's Financial Discussion and Analysis
2010 Compared to 2009
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of higher millage rates and a higher 2010 assessment as comparedin 2013 primarily due to 2009 and an increasethe acquisition of the Hinds plant in local franchise taxes as a result of higher revenues primarily in the residential and commercial sectors.November 2012.
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income increased primarily due to an increase in the allowance for equity funds used during construction due to more construction work in progress in 2010,service, including the new nuclear development project that is discussed below.
Interest expense increased primarily due toacquisition of the issuance of $150 million of 6.64% Series first mortgage bondsHinds plant in June 2009.November 2012.
Income Taxes
The effective income tax rates for 2011, 2010,2014, 2013, and 20092012 were 20.9%42.7%, 37.0%37.7%, and 35.3%55.6%, respectively. The decline in the rate for 2011 is primarily due to an intercompany settle up for federal income taxes for years prior to 2008 which include an allocation of the tax benefit of Entergy Corporation’s expenses to the subsidiaries generating taxable income for the respective years. Entergy Mississippi received benefits for the effects of various tax positions settled with the IRS pertaining to the 2006/2007 audit. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0%35% to the effective income tax rates.
Baxter Wilson Plant Event
On September 11, 2013, Entergy Mississippi’s Baxter Wilson (Unit 1) power plant experienced a significant unplanned outage event. Entergy Mississippi completed the repairs to the unit in December 2014. As of December 31, 2014, Entergy Mississippi incurred $22.3 million of capital spending and $26.6 million of operation and maintenance expenses to return the unit to service. The damage was covered by Entergy Mississippi’s property insurance policy, subject to a $20 million deductible. As of December 31, 2014, Entergy Mississippi recorded an insurance receivable of $28.2 million for the amount expected to be received from its insurance policy, allocating $12.9 million of the expected insurance proceeds to capital spending and $15.3 million to operation and maintenance expenses. In June 2014, Entergy Mississippi filed a rate case with the MPSC, which includes recovery of the costs associated with Baxter Wilson (Unit 1) repair activities, net of applicable insurance proceeds. In December 2014 the MPSC issued an order that provided for a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset to occur over two years beginning in February 2015, and provided that the capital costs will be reflected in rate base. The final accounting of costs to return the unit to service and insurance proceeds will be addressed in Entergy Mississippi’s next formula rate plan filing.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 were as follows:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $31 |
| |
| $52,970 |
| |
| $16 |
|
| | | | | | |
| Net cash provided by (used in): | |
| | |
| | |
|
| Operating activities | 303,463 |
| | 219,665 |
| | 202,406 |
|
| Investing activities | (177,765 | ) | | (149,410 | ) | | (391,127 | ) |
| Financing activities | (64,096 | ) | | (123,194 | ) | | 241,675 |
|
| Net increase (decrease) in cash and cash equivalents | 61,602 |
| | (52,939 | ) | | 52,954 |
|
| | | | | | |
| Cash and cash equivalents at end of period |
| $61,633 |
| |
| $31 |
| |
| $52,970 |
|
| | | | 2011 | | 2010 | | 2009 |
| | | | (In Thousands) |
| | | | | | | | |
| Cash and cash equivalents at beginning of period | | $1,216 | | $91,451 | | $1,082 |
| | | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| | Operating activities | | 99,596 | | 120,107 | | 222,018 |
| | Investing activities | | (151,830) | | (174,096) | | (159,473) |
| | Financing activities | | 51,034 | | (36,246) | | 27,824 |
| | Net increase (decrease) in cash and cash equivalents | | (1,200) | | (90,235) | | 90,369 |
| | | | | | | | |
| Cash and cash equivalents at end of period | | $16 | | $1,216 | | $91,451 |
381
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Operating Activities
CashNet cash flow provided by operating activities decreased $20.5increased $83.8 million in 20112014 primarily due to the purchase of $42.6 million of fuel oil inventory from System Fuels because System Fuels will no longer procure fuel oil for the Utility companies. The decrease was partially offset by an increase in theto:
increased recovery of fuel costs.costs;
the timing of collections of receivables from customers; and
Cash flow provided by operating activities decreased $101.9System Agreement bandwidth remedy payments of $11.3 million received in 2010 primarily due to decreased recovery of fuel costs primarilythe second quarter 2014 as a result of prior period over-collections and the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period.
The increase was partially offset by:
System Agreement bandwidth remedy payments made in September 2014 of $16.4 million as a result of the compliance filing pursuant to the FERC’s orders related to the bandwidth payments/receipts for the 2007 - 2009 period;
an increase of $27.7 million in pension contributions, offset by a decrease of $7.1$15 million in income tax payments. See Note 2 to the financial statements for a discussion of Entergy Mississippi’s fuel and purchased power cost recovery mechanism. See “Critical Accounting Estimates” below for further discussion of qualified pension and other postretirement benefits funding. In 2010,payments in 2014. Entergy Mississippi received federalhad income tax cash refundspayments in 2014 and made state tax cash payments2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The federal refunds2013 and 2014 payments resulted primarily from the 2009reversal of temporary differences for which Entergy Mississippi had previously claimed a tax return fileddeduction; and
an increase of $13.7 million in 2010pension contributions in 2014 as compared to 2013. See “Critical Accounting Estimates” below and the associated true up adjustment which relates primarilyNote 11 to the accelerationfinancial statements for a discussion of deductionsqualified pension and other postretirement benefits funding.
See Note 2 to the financial statements for plant-related expenditures. The state payments result from the allocationa discussion of the combined Mississippi tax reflected on the 2009 tax return filed in 2010 and for amended Mississippi returns for 2006-2008 filed in 2010.
Entergy Mississippi, Inc.
Management’s Financial Discussion and AnalysisSystem Agreement proceedings.
Net cash flow provided by operating activities increased $17.3 million in 2013 primarily due to the timing of collections of receivables from customers and a $1.5 million decrease in pension contributions in 2013 as compared to 2012. The increase was partially offset by income tax payments of $4.7 million in 2013, as discussed above, as compared to income tax refunds of $0.7 million in 2012. See “Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
Investing Activities
CashNet cash flow used in investing activities increased $28.4 million in 2014 primarily due to money pool activity and an increase in fossil-fueled generation construction expenditures primarily due to a higher scope of work done during plant outages in 2014 and an increase in spending on Baxter Wilson (Unit 1) repairs in 2014. The increase was partially offset by a decrease in transmission construction expenditures as a result of a decrease in reliability work performed in 2014.
Increases in Entergy Mississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi’s receivable from the money pool increased by $0.6 million in 2014 compared to decreasing by $16.9 million in 2013. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities decreased $22.3$241.7 million in 20112013 primarily due to a decreasethe payment for the purchase of Hinds Energy Facility in construction expenditures becauseNovember 2012 of a $49approximately $203 million, payment in 2010including adjustments to a System Energy subsidiary for costs associated with the development of new nuclear generation at Grand Gulfpurchase price, and the repayment by System Fuels of Entergy Mississippi’s $5.5 million investment in System Fuels. The decrease was offset by money pool activity. See Note 15 to the financial statements for a discussion of the purchase of Hinds Energy Facility.
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 $31.4by $16.9 million in 2010. Entergy Mississippi did not have a receivable from the money pool in 2011. The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Cash flow used in investing activities increased $14.6 million in 2010 primarily due to increased construction expenditures resulting from a $49 million payment to a System Energy subsidiary for costs associated with the development of new nuclear generation at Grand Gulf, as discussed below, and increased transmission construction expenditures resulting from additional transmission reliability work in 2010, offset by money pool activity.
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 $31.4 million in 20102013 compared to increasing by $31.4$16.9 million in 2009.2012.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Financing Activities
Entergy Mississippi’sNet cash flow used in financing activities provided $51.0decreased $59.1 million in 2014 primarily due to the issuance of $100 million of cash in 2011 compared to using $36.2 million of cash in 2010 primarily due to:
· | the issuance of $275 million of first mortgage bonds in 2011 compared to the issuance of $80 million of first mortgage bonds in 2010; and |
· | a decrease of $40.1 million in common stock dividends. |
The cash provided was partially offset by the redemption of $180 million of3.75% Series first mortgage bonds in 2011 compared toMarch 2014 and the redemptionpayment, at maturity, of $100 million of 5.15% Series first mortgage bonds in 2010February 2013.
The decrease was partially offset by:
the payment, prior to maturity, of $95 million of 4.95% Series first mortgage bonds in April 2014;
an increase of $54 million in common stock dividends paid in 2014 as compared to 2013; and
money pool activity.
Decreases in Entergy Mississippi’s payable to the money pool are a use of cash flow, and Entergy Mississippi’s payable to the money pool decreased by $31.3$3.5 million in 20112014 compared to increasing by $33.3$3.5 million in 2010.2013.
Entergy Mississippi’s financing activities used $36.2$123.2 million of cash in 20102013 as compared to providing $27.8$241.7 million of cash in 20092012 primarily due to:to the payment, at maturity, of $100 million of 5.15% Series first mortgage bonds in February 2013 and the issuance of $250 million of 3.1% Series first mortgage bonds in December 2012.
· | the redemption, prior to maturity, of $100 million of 7.25% Series first mortgage bonds in April 2010; |
· | the issuance of $150 million of 6.64% Series first mortgage bonds in June 2009; and |
· | the issuance of $80 million of 6.20% Series first mortgage bonds in April 2010; offset by |
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
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 $33.3 million in 2010 compared to decreasing by $66 million in 2009.
See Note 5 to the financial statements for details on long-term debt.
Capital Structure
Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | December 31, 2011 | | December 31, 2010 | | | | |
| | | | | | December 31,
2014 | | December 31,
2013 |
| Debt to capital | | 51.2% | | 51.9% | 51.2 | % | | 51.4 | % |
| Effect of subtracting cash | | 0.0% | | 0.0% | (1.5 | %) | | — | % |
| Net debt to net capital | | 51.2% | | 51.9% | 49.7 | % | | 51.4 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition.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 of Capital
Entergy Mississippi requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred stock maturities or retirements; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Following are the amounts of Entergy Mississippi’s planned construction and other capital investments, andinvestments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $35 |
| |
| $15 |
| |
| $20 |
|
| Transmission | 70 |
| | 115 |
| | 180 |
|
| Distribution | 125 |
| | 115 |
| | 100 |
|
| Other | 25 |
| | 15 |
| | 15 |
|
| Total |
| $255 |
| |
| $260 |
| |
| $315 |
|
Following are the amounts of Entergy Mississippi’s existing debt obligations and lease obligations (includes estimated interest payments): and other purchase obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $52 |
| |
| $222 |
| |
| $240 |
| |
| $1,245 |
| |
| $1,759 |
|
| Capital lease payments |
| $2 |
| |
| $3 |
| |
| $1 |
| |
| $— |
| |
| $6 |
|
| Operating leases |
| $7 |
| |
| $9 |
| |
| $6 |
| |
| $4 |
| |
| $26 |
|
| Purchase obligations (b) |
| $318 |
| |
| $563 |
| |
| $496 |
| |
| $1,033 |
| |
| $2,410 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | After 2016 | | Total |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | |
| Generation | $233 | | $31 | | N/A | | N/A | | $264 |
| Transmission | 74 | | 125 | | N/A | | N/A | | 199 |
| Distribution | 72 | | 159 | | N/A | | N/A | | 231 |
| Other | 7 | | 13 | | N/A | | N/A | | 20 |
| Total | $386 | | $328 | | N/A | | N/A | | $714 |
| Long-term debt (2) | $51 | | $192 | | $214 | | $1,343 | | $1,800 |
| Capital lease payments | $3 | | $5 | | $3 | | $2 | | $13 |
| Operating leases | $6 | | $10 | | $5 | | $6 | | $27 |
| Purchase obligations (3) | $221 | | $404 | | $400 | | $1,570 | | $2,595 |
(1) | Includes approximately $129 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems, and to support normal customer growth. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Mississippi, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. |
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
In addition to the contractual obligations given above, Entergy Mississippi currently expects to contribute approximately $8.4$22.5 million to its pension plans and approximately $5.5 million$535 thousand to its other postretirement plans in 20122015, although the 2015 required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015. See “Critical Accounting Estimates– Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding.
Also in addition to the contractual obligations, Entergy Mississippi has $13.2 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
TheIn addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Mississippi reflects capital requiredincludes amounts associated with specific investments such as environmental compliance spending; transmission projects to support existing businessenhance reliability, reduce congestion, and customer growth. Entergy’s Utility supply plan initiative will continue to seek to transform itsenable economic growth; resource planning; generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimatedprojects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Mississippi dividends its earnings to Entergy Corporation at a percentage determined monthly. Entergy Mississippi’s long-term debt indentures restrictindenture restricts the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock. As of
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
December 31, 2011,2014, Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $68.5 million.
Hinds Energy Facility Purchase Agreement
In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation. The purchase price is expected to be approximately $206 million. Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million. A new transmission service request has been submitted to determine if investments for supplemental upgrades in the Entergy transmission system are needed to make the Hinds Energy Facility deliverable to Entergy Mississippi for the period after Entergy Mississippi exits the System Agreement. Facilities studies are ongoing to determine transmission upgrades costs associated with the plant, with results expected by early March 2012. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In February 2012 the FERC issued an order approving the acquisition. Closing is expected to occur in mid-2012. In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery. A hearing on the request for a certificate of public convenience and necessity is scheduled for February 28, 2012. A hearing on Entergy Mississippi’s proposed cost recovery has not been scheduled.
New Nuclear Generation Development Costs
Pursuant to the Mississippi Baseload Act and the Mississippi Public Utilities Act, Entergy Mississippi ishad been developing and preserving a project option for new nuclear generation at Grand Gulf Nuclear Station. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In 2010, Entergy Mississippi paid for and has recognized on its books $49 million in costs associated with the development of new nuclear generation at Grand Gulf; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. In October 2010, Entergy Mississippi filed an application with the MPSC requesting that the MPSC determine that it iswas in the public interest to preserve the option to construct new nuclear generation at Grand Gulf and that the MPSC approve the deferral of Entergy Mississippi’s costs incurred to date and in the future related to this project, including the accrual of AFUDC or similar carrying charges. In October 2011, Entergy Mississippi and the Mississippi Public Utilities Staff filed with the MPSC a joint stipulation.stipulation that the MPSC approved in November 2011. The stipulation statesstated that there should be a deferral of the $57 million of costs incurred through September 2011 in connection with planning, evaluation,evaluating, monitoring, and other and related
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
generation resource development activities for new nuclear generation at Grand Gulf. The costs shall be treated as a regulatory asset until
In October 2014, Entergy Mississippi and the proceeding is resolved. The Mississippi Public Utilities Staff entered into and filed joint stipulations in Entergy Mississippi also agreeMississippi’s general rate case proceeding, which are discussed below. In consideration of the comprehensive terms for settlement in that the MPSC should conduct a hearing during 2012 to consider the relief requested by Entergy Mississippi in its application, including evidence regarding whether costs incurred in connection with planning, evaluation, monitoring, and other and related generation resource development activities for new nuclear generation at Grand Gulf were prudently incurred and are otherwise allowable. The Mississippi Public Utilities Staff and Entergy Mississippi further agree that such prudently incurred costs shall be recoverable in a manner to be determined by the MPSC. In the Stipulation,rate case proceeding, the Mississippi Public Utilities Staff and Entergy Mississippi agreeagreed that the development of a nuclear unit project option is consistent with the Mississippi Baseload Act. The Mississippi Public Utilities Staff and Entergy Mississippi further agree thatwould request consolidation of the deferral of costs incurred in connection with planning, evaluation, monitoring, and other and related generation resource development activities for new nuclear generation at Grand Gulf also is consistentdevelopment costs proceeding with the Mississippi Baseload Act.rate case proceeding for hearing purposes and will not further pursue, except as noted below, recovery of the costs deferred by MPSC order in the new nuclear generation development docket. The stipulations state, however, that, if Entergy Mississippi will not accrue carrying charges or continuedecides to accrue AFUDC onmove forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs pendingare verifiable and prudent and the outcomeESP is still valid and relevant to any such option pursued. After considering the progress of the proceeding. Thenew nuclear generation costs proceeding in light of the joint stipulation, Entergy Mississippi recorded in 2014 a $56.2 million pre-tax charge to recognize that the regulatory asset associated with new nuclear generation development is no longer probable of recovery. In December 2014 the MPSC approvedissued an order accepting in their entirety the stipulation in November 2011.October 2014 stipulations, including the findings and terms of the stipulations regarding new nuclear generation development costs.
Sources of Capital
Entergy Mississippi’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Mississippi may refinance, redeem, or otherwise retire debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred stock issuances by Entergy Mississippi require prior regulatory approval. Preferred stock and debt issuances are also subject to issuance tests set forth in its corporate charter, bond indenture, and other agreements. Entergy Mississippi has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Mississippi, renewed its three separate credit facilities through May 2012 in the aggregate amount of $70 million. No borrowings were outstanding under the credit facilities as of December 31, 2011.Inc.
Management’s Financial Discussion and Analysis
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| ($1,999) | | ($33,255) | | $31,435 | | ($66,044) |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $644 | | ($3,536) | | $16,878 | | ($1,999) |
See Note 4 to the financial statements for a description of the money pool.
Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire May 2015. No borrowings were outstanding under the credit facilities as of December 31, 2014. See Note 4 to the financial statements for additional discussion of the credit facilities. In addition, Entergy Mississippi entered into an uncommitted letter of credit facility in 2013 and an uncommitted letter of credit facility in 2014 as a means to post collateral to support its obligations under MISO. As of December 31, 2014, a $14.4 million letter of credit was outstanding under Entergy Mississippi’s letter of credit facility which was issued in 2014.
Entergy Mississippi obtained short-term borrowing authorizationauthorizations from the FERC under which it may borrow through October 2013, up2015 for short-term borrowings not to theexceed an aggregate amount of $175 million at any one time outstanding of $175 million.and long-term borrowings and security issuances. See Note 4 to the financial statements for further discussion of Entergy Mississippi’s short-term borrowing limits. Entergy Mississippi has also obtained an order from the FERC authorizing long-term securities issuances through July 2013.October 2015.
In March 2014, Entergy Mississippi issued $100 million of 3.75% Series first mortgage bonds due July 2024. Entergy Mississippi used the proceeds to pay, prior to maturity, its $95 million of 4.95% Series first mortgage bonds due June 2018 and for general corporate purposes.
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that Entergy Mississippi charges for electricity significantly influence its financial position, results of operations, and liquidity. Entergy Mississippi is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the MPSC, is primarily responsible for approval of the rates charged to customers.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Formula Rate Plan
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi'sMississippi’s return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi'sMississippi’s request to use a projected test year for its annual scheduled formula rate plan filing and, therefore, Entergy Mississippi will continuecontinued to use a historical test year for its annual evaluation reports under the plan.
In March 2009, Entergy Mississippi made with the MPSC its annual scheduled formula rate plan filing for the 2008 test year. The filing reported a $27.0 million revenue deficiency and an earned return on common equity of 7.41%. Entergy Mississippi requested a $14.5 million increase in annual electric revenues, which is the maximum increase allowed under the terms of the formula rate plan. The MPSC issued an order on June 30, 2009, finding that Entergy Mississippi’s earned return was sufficiently below the lower bandwidth limit set by the formula rate plan to require a $14.5 million increase in annual revenues, effective for bills rendered on or after June 30, 2009.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
In March 2011,2012, Entergy Mississippi submitted its formula rate plan 2010filing for the 2011 test year filing.year. The filing shows an earned return on common equity of 10.65%10.92% for the test year, which is within the earnings bandwidth and results in no change in rates. In November 2011February 2013 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that providesprovided for no change in rates.
In March 2013, Entergy Mississippi submitted its formula rate plan filing for the 2012 test year. The filing requested a $36.3 million revenue increase to reset Entergy Mississippi’s return on common equity to 10.55%, which is a point within the formula rate plan bandwidth. In June 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, in which both parties agreed that the MPSC should approve a $22.3 million rate
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
increase for Entergy Mississippi which, with other adjustments reflected in the stipulation, would have the effect of resetting Entergy Mississippi’s return on common equity to 10.59% when adjusted for performance under the formula rate plan. In August 2013 the MPSC approved the joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff authorizing the rate increase effective with September 2013 bills. Additionally, the MPSC authorized Entergy Mississippi to defer approximately $1.2 million in MISO-related implementation costs incurred in 2012 along with other MISO-related implementation costs incurred in 2013.
In June 2014, Entergy Mississippi filed its first general rate case before the MPSC in almost 12 years. The rate filing laid out Entergy Mississippi’s plans for improving reliability, modernizing the grid, maintaining its workforce, stabilizing rates, utilizing new technologies, and attracting new industry to its service territory. Entergy Mississippi requested a net increase in revenue of $49 million for bills rendered during calendar year 2015, including $30 million resulting from new depreciation rates to update the estimated service life of assets. In addition, the filing proposed, among other things: 1) realigning cost recovery of the Attala and Hinds power plant acquisitions from the power management rider to base rates; 2) including certain MISO-related revenues and expenses in the power management rider; 3) power management rider changes that reflect the changes in costs and revenues that will accompany Entergy Mississippi’s withdrawal from participation in the System Agreement; and 4) a formula rate plan forward test year to allow for known changes in expenses and revenues for the rate effective period. Entergy Mississippi proposed maintaining the current authorized return on common equity of 10.59%.
In October 2014, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed joint stipulations that addressed the majority of issues in the proceeding. The stipulations provided for:
an approximate $16 million net increase in revenues, which reflected an agreed upon 10.07% return on common equity;
revision of Entergy Mississippi’s formula rate plan by providing Entergy Mississippi with the ability to reflect known and measurable changes to historical rate base and certain expense amounts; resolving uncertainty around and obviating the need for an additional rate filing in connection with Entergy Mississippi’s withdrawal from participation in the System Agreement; updating depreciation rates; and moving costs associated with the Attala and Hinds generating plants from the power management rider to base rates;
recovery of non-fuel MISO-related costs through a separate rider for that purpose;
a deferral of $6 million in other operation and maintenance expenses associated with the Baxter Wilson outage and a determination that the regulatory asset should accrue carrying costs, with amortization of the regulatory asset over two years beginning in February 2015, and a provision that the capital costs will be reflected in rate base. See "Baxter Wilson Plant Event" above for further discussion of the Baxter Wilson outage; and
consolidation of the new nuclear generation development costs proceeding with the general rate case proceeding for hearing purposes and a determination that Entergy Mississippi would not further pursue, except as noted below, recovery of the costs that were approved for deferral by the MPSC in November 2011. The stipulations state, however, that, if Entergy Mississippi decides to move forward with nuclear development in Mississippi, it can at that time re-present for consideration by the MPSC only those costs directly associated with the existing early site permit (ESP), to the extent that the costs are verifiable and prudent and the ESP is still valid and relevant to any such option pursued. See "New Nuclear Generation Development Costs" above for further discussion of the new nuclear generation development costs proceeding and subsequent write-off in 2014 of the regulatory asset related to those costs.
In December 2014 the MPSC issued an order accepting the stipulations in their entirety and approving the revenue adjustments and rate changes effective with February 2015 bills.
In August 2012 the MPSC opened inquiries to review whether the current formulaic methodology used to calculate the return on common equity in both Entergy Mississippi’s formula rate plan and Mississippi Power Company’s annual formula rate plan is still appropriate or can be improved to better serve the public interest. The intent of this inquiry and review was for informational purposes only; the evaluation of any recommendations for changes to the existing methodology would take place in a general rate case or in the existing formula rate plan docket. In March
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
2013 the Mississippi Public Utilities Staff filed its consultant’s report which noted the return on common equity estimation methods used by Entergy Mississippi and Mississippi Power Company are commonly used throughout the electric utility industry. The report suggested ways in which the methods used by Entergy Mississippi and Mississippi Power Company might be improved, but did not recommend specific changes in the return on common equity formulas or calculations at that time. In June 2014 the MPSC expanded the scope of the August 2012 inquiry to study the merits of adopting a uniform formula rate plan that could be applied, where possible in whole or in part, to both Entergy Mississippi and Mississippi Power Company in order to achieve greater consistency in the plans. The MPSC directed the Mississippi Public Utilities Staff to investigate and review Entergy Mississippi’s formula rate plan rider schedule and Mississippi Power Company’s Performance Evaluation Plan by considering the merits and deficiencies and possibilities for improvement of each and then to propose a uniform formula rate plan that, where possible, could be applicable to both companies. No procedural schedule has been set. In October 2014 the Mississippi Public Utilities Staff conducted a public technical conference to discuss performance benchmarking and its potential application to the electric utilities’ formula rate plans.
In Entergy Mississippi’s 2014 general rate case, the Mississippi Public Utilities Staff conducted a review of Entergy Mississippi’s proposed changes to its formula rate plan and recommended changes in that proceeding that may be duplicative of the review being conducted simultaneously in the above-described formula rate plan docket. Consequently, the MPSC found in the general rate case order that the changes to Entergy Mississippi's formula rate plan schedule approved in that order are just and reasonable and should remain unchanged by any MPSC action in the above-described formula rate plan docket, but that any provisions of Entergy Mississippi's formula rate plan schedule not specifically addressed in the general rate case order may be reviewed and changed.
Fuel and Purchased Power Cost Recovery
Entergy Mississippi’s rate schedules include an energy cost recovery rider that, effective January 1, 2013, is adjusted quarterlyannually to reflect accumulated over- or under-recoveries from the second prior quarter.under-recoveries. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
Entergy Mississippi had a deferred fuel balance of $60.4 million as of March 31, 2014. In July 2008May 2014, Entergy Mississippi filed for an interim adjustment under its energy cost recovery rider. The interim adjustment proposed a net energy cost factor designed to collect over a six-month period the under-recovered deferred fuel balance as of March 31, 2014 and also reflected a natural gas price of $4.50 per MMBtu. In May 2014, Entergy Mississippi and the Public Utilities Staff entered into a joint stipulation in which Entergy Mississippi agreed to a revised net energy cost factor that reflected the proposed interim adjustment with a reduction in costs recovered through the energy cost recovery rider associated with the suspension of the DOE nuclear waste storage fee. In June 2014 the MPSC began a proceeding to investigateapproved the fuel procurement practicesjoint stipulation and fuel adjustment schedulesallowed Entergy Mississippi’s interim adjustment. In November 2014, Entergy Mississippi filed its annual redetermination of the Mississippi utility companies, including Entergy Mississippi. The MPSC stated thatannual factor to be applied under the goal ofenergy cost recovery rider. Due to lower gas prices and a lower deferred fuel balance, the proceeding is fact-finding so thatredetermined annual factor was a decrease from the revised interim net energy cost factor. In January 2015 the MPSC may decide whether to amendapproved the current fuel cost recovery process. Hearings were held in July and August 2008. Further proceedings have not been scheduled.redetermined annual factor effective January 30, 2015.
Mississippi Attorney General Complaint
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 litigationcomplaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. OnIn December 29, 2008 the defendant Entergy companies filed to removeremoved the attorney general’s suitlawsuit to U.S. District Court (the forumin Jackson, Mississippi. The Mississippi attorney general moved to remand the matter to state court. In August 2012 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.
Entergy believes is appropriate to resolve the types of federal issues raised in the suit), where it is currently pending,Mississippi, Inc.
Management's Financial Discussion and additionallyAnalysis
The defendant Entergy companies answered the complaint and filed a counter-claimcounterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings. The District Court’s ruling on the motion for judgment on the pleadings is pending.
In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not subject to the federal law that allowed federal courts to hear those cases as “mass action” lawsuits. One day later the Attorney General renewed its motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies have responded to that motion and the District Court held oral argument on the motion to remand in February 2014. Entergy also has asserted federal question jurisdiction as a basis for the district court having jurisdiction and also has pending the motion for judgment on the pleadings.
Storm Damage Accrual and Storm Cost Recovery
In two orders issued in July 2012 the MPSC temporarily increased Entergy Mississippi’s storm damage provision monthly accrual from $0.75 million to $2 million for bills rendered during the billing months of August 2012 through December 2012, and approved recovery of $14.9 million in prudently incurred storm costs to be amortized over five months, beginning with August 2012 bills.
In August 2012, Hurricane Isaac caused damage to Entergy Mississippi’s service area. The storm resulted in widespread power outages, significant damage primarily to distribution infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy Mississippi’s electric facilities damaged by Hurricane Isaac were $22 million.
On July 1, 2013, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation, wherein both parties agreed that approximately $32 million in storm restoration costs incurred in 2011 and 2012 were prudently incurred and chargeable to the attorney general requested a status conference regarding its motionstorm damage provision, while approximately $700,000 in prudently incurred costs were more properly recoverable through the formula rate plan. Entergy Mississippi and the Mississippi Public Utilities Staff also agreed that the storm damage accrual should be increased from $750,000 per month to remand. The court granted$1.75 million per month. In September 2013 the attorney general’s request for a status conference, which was held in September 2011. ConsistentMPSC approved the joint stipulation with the court’s instructions, both parties submitted lettersincrease in the storm damage accrual effective with October 2013 bills. In February 2015, Entergy Mississippi provided notice to the court in September 2011 providing updates onMississippi Public Utilities Staff that the factsstorm damage accrual would be set to zero effective with the March 2015 billing cycle as a result of Entergy Mississippi's storm damage accrual balance exceeding $15 million as of January 31, 2015, but will return to its current level when the case and the law, and the court has now taken the parties’ arguments under advisement.storm damage accrual balance becomes less than $10 million.
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
Nuclear Matters
See the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Environmental Risks
Entergy Mississippi’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Mississippi is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of Entergy Mississippi’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy Mississippi’s financial position or results of operations.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Mississippi records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsMississippi’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected qualified benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
|
| | | | | | |
Actuarial Assumption | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Projected Qualified Benefit Obligation |
| | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $906 | | $14,873 |
| Rate of return on plan assets | | (0.25%) | | $671 | | $— |
| Rate of increase in compensation | | 0.25% | | $361 | | $2,205 |
Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | | Increase/(Decrease) |
| | | | | | | |
| Discount rate | | (0.25%) | | $829 | | $10,541 |
| Rate of return on plan assets | | (0.25%) | | $593 | | - |
| Rate of increase in compensation | | 0.25% | | $346 | | $1,929 |
390
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $225 | | $2,925 |
| Health care cost trend | | 0.25% | | $447 | | $2,776 | | 0.25% | | $377 | | $2,531 |
| Discount rate | | (0.25%) | | $318 | | $3,342 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy Mississippi in 20112014 was $7.7$10 million. Entergy Mississippi anticipates 20122015 qualified pension cost to be $12.3$16.4 million. Entergy Mississippi contributed $29.2$21.8 million to its qualified pension plans in 20112014 and anticipates that it will contributeestimates 2015 pension contributions to be approximately $8.4$22.5 million, in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costsincome for Entergy Mississippi in 2011 were $5.5 million, including $2 million in savings due to the estimated effect of future Medicare Part D subsidies.2014 was $982 thousand. Entergy Mississippi expects 20122015 postretirement health care and life insurance benefit costs to approximate $6.4 million, including $1.8 million in savings due to the estimated effectincome of future Medicare Part D subsidies.approximately $758 thousand. Entergy Mississippi expects to contribute approximately $5.5contributed $8.5 million to its other postretirement plans in 2012.2014 and expects to contribute $535 thousand in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $33.5 million in the qualified pension benefit obligation and $4.6 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $4.8 million and other postretirement cost by approximately $0.6 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
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Management’s Financial Discussion and Analysis
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To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheets of Entergy Mississippi, Inc. (the “Company”) as of December 31, 20112014 and 2010,2013, and the related income statements, statements of cash flows, and statements of changes in common equity (pages 338394 through 342398 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy Mississippi, Inc. as of December 31, 20112014 and 2010,2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
| |
| INCOME STATEMENTS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Electric | | $ | 1,266,470 | | | $ | 1,232,922 | | | $ | 1,180,107 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and | | | | | | | | | | | | |
| gas purchased for resale | | | 363,025 | | | | 277,806 | | | | 340,804 | |
| Purchased power | | | 339,061 | | | | 383,769 | | | | 359,664 | |
| Other operation and maintenance | | | 210,657 | | | | 217,354 | | | | 217,452 | |
| Taxes other than income taxes | | | 69,759 | | | | 66,841 | | | | 63,381 | |
| Depreciation and amortization | | | 93,119 | | | | 89,875 | | | | 86,872 | |
| Other regulatory charges (credits) - net | | | 9,460 | | | | 16,001 | | | | (57,056 | ) |
| TOTAL | | | 1,085,081 | | | | 1,051,646 | | | | 1,011,117 | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 181,389 | | | | 181,276 | | | | 168,990 | |
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | | 7,755 | | | | 6,655 | | | | 2,964 | |
| Interest and investment income | | | 249 | | | | 416 | | | | 863 | |
| Miscellaneous - net | | | (3,904 | ) | | | (804 | ) | | | (564 | ) |
| TOTAL | | | 4,100 | | | | 6,267 | | | | 3,263 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | | 52,273 | | | | 55,774 | | | | 51,282 | |
| Allowance for borrowed funds used during construction | | | (4,314 | ) | | | (3,719 | ) | | | (1,791 | ) |
| TOTAL | | | 47,959 | | | | 52,055 | | | | 49,491 | |
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 137,530 | | | | 135,488 | | | | 122,762 | |
| | | | | | | | | | | | | |
| Income taxes | | | 28,801 | | | | 50,111 | | | | 43,395 | |
| | | | | | | | | | | | | |
| NET INCOME | | | 108,729 | | | | 85,377 | | | | 79,367 | |
| | | | | | | | | | | | | |
| Preferred dividend requirements and other | | | 2,828 | | | | 2,828 | | | | 2,828 | |
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO | | | | | | | | | | | | |
| COMMON STOCK | | $ | 105,901 | | | $ | 82,549 | | | $ | 76,539 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
338 |
| | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING REVENUES | | | | | | |
| Electric | |
| $1,524,193 |
| |
| $1,334,540 |
| |
| $1,120,366 |
|
| | | | | | | |
| OPERATING EXPENSES | | |
| | |
| | |
|
| Operation and Maintenance: | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and gas purchased for resale | | 325,643 |
| | 328,934 |
| | 227,133 |
|
| Purchased power | | 493,533 |
| | 375,745 |
| | 320,923 |
|
| Other operation and maintenance | | 256,339 |
| | 261,832 |
| | 244,722 |
|
| Asset write-off | | 56,225 |
| | — |
| | — |
|
| Taxes other than income taxes | | 87,936 |
| | 83,630 |
| | 75,006 |
|
| Depreciation and amortization | | 113,903 |
| | 108,714 |
| | 97,768 |
|
| Other regulatory charges (credits) - net | | 3,854 |
| | (14,545 | ) | | (5,701 | ) |
| TOTAL | | 1,337,433 |
| | 1,144,310 |
| | 959,851 |
|
| | | | | | | |
| OPERATING INCOME | | 186,760 |
| | 190,230 |
| | 160,515 |
|
| | | | | | | |
| OTHER INCOME | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | 2,380 |
| | 2,182 |
| | 3,955 |
|
| Interest and investment income | | 1,055 |
| | 817 |
| | 170 |
|
| Miscellaneous - net | | (3,905 | ) | | (3,821 | ) | | (3,951 | ) |
| TOTAL | | (470 | ) | | (822 | ) | | 174 |
|
| | | | | | | |
| INTEREST EXPENSE | | |
| | |
| | |
|
| Interest expense | | 57,002 |
| | 59,031 |
| | 57,345 |
|
| Allowance for borrowed funds used during construction | | (1,243 | ) | | (1,539 | ) | | (2,103 | ) |
| TOTAL | | 55,759 |
| | 57,492 |
| | 55,242 |
|
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 130,531 |
| | 131,916 |
| | 105,447 |
|
| | | | | | | |
| Income taxes | | 55,710 |
| | 49,757 |
| | 58,679 |
|
| | | | | | | |
| NET INCOME | | 74,821 |
| | 82,159 |
| | 46,768 |
|
| | | | | | | |
| Preferred dividend requirements and other | | 2,828 |
| | 2,828 |
| | 2,828 |
|
| | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $71,993 |
| |
| $79,331 |
| |
| $43,940 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
|
| | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $74,821 |
| |
| $82,159 |
| |
| $46,768 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation and amortization | | 113,903 |
| | 108,714 |
| | 97,768 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 32,472 |
| | 47,878 |
| | 58,221 |
|
| Changes in assets and liabilities: | | |
| | |
| | |
|
| Receivables | | (27,444 | ) | | (31,647 | ) | | 42,222 |
|
| Fuel inventory | | 6,163 |
| | (121 | ) | | (6,202 | ) |
| Accounts payable | | (14,618 | ) | | 38,727 |
| | (3,796 | ) |
| Taxes accrued | | 318 |
| | 920 |
| | 6,791 |
|
| Interest accrued | | 2,789 |
| | 2,157 |
| | (3,324 | ) |
| Deferred fuel costs | | 40,251 |
| | (11,567 | ) | | (42,331 | ) |
| Other working capital accounts | | 17,567 |
| | (12,820 | ) | | (6,859 | ) |
| Provisions for estimated losses | | 14,468 |
| | (146 | ) | | (2,469 | ) |
| Other regulatory assets | | (36,875 | ) | | 87,907 |
| | (6,501 | ) |
| Pension and other postretirement liabilities | | 68,434 |
| | (94,143 | ) | | 16,782 |
|
| Other assets and liabilities | | 11,214 |
| | 1,647 |
| | 5,336 |
|
| Net cash flow provided by operating activities | | 303,463 |
| | 219,665 |
| | 202,406 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (179,544 | ) | | (168,510 | ) | | (175,544 | ) |
| Allowance for equity funds used during construction | | 2,380 |
| | 2,182 |
| | 3,955 |
|
| Payment for purchase of plant | | — |
| | — |
| | (202,668 | ) |
| Change in money pool receivable - net | | (644 | ) | | 16,878 |
| | (16,878 | ) |
| Other | | 43 |
| | 40 |
| | 8 |
|
| Net cash flow used in investing activities | | (177,765 | ) | | (149,410 | ) | | (391,127 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | 98,668 |
| | — |
| | 246,502 |
|
| Retirement of long-term debt | | (95,000 | ) | | (116,030 | ) | | — |
|
| Change in money pool payable - net | | (3,536 | ) | | 3,536 |
| | (1,999 | ) |
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (61,400 | ) | | (7,400 | ) | | — |
|
| Preferred stock | | (2,828 | ) | | (2,828 | ) | | (2,828 | ) |
| Other | | — |
| | (472 | ) | | — |
|
| Net cash flow provided by (used in) financing activities | | (64,096 | ) | | (123,194 | ) | | 241,675 |
|
| Net increase (decrease) in cash and cash equivalents | | 61,602 |
| | (52,939 | ) | | 52,954 |
|
| Cash and cash equivalents at beginning of period | | 31 |
| | 52,970 |
| | 16 |
|
| Cash and cash equivalents at end of period | |
| $61,633 |
| |
| $31 |
| |
| $52,970 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $51,509 |
| |
| $54,120 |
| |
| $58,043 |
|
| Income taxes | |
| $19,650 |
| |
| $4,657 |
| |
| ($696 | ) |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 108,729 | | | $ | 85,377 | | | $ | 79,367 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation and amortization | | | 93,119 | | | | 89,875 | | | | 86,872 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (3,443 | ) | | | 48,744 | | | | 15,923 | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | 5,488 | | | | (42,790 | ) | | | 41,247 | |
| Fuel inventory | | | (35,621 | ) | | | (1,003 | ) | | | 3,413 | |
| Accounts payable | | | (7,059 | ) | | | 1,906 | | | | 3,511 | |
| Taxes accrued | | | 13,535 | | | | (12,817 | ) | | | 1,779 | |
| Interest accrued | | | 456 | | | | 1,915 | | | | 2,066 | |
| Deferred fuel costs | | | 18,998 | | | | (76,064 | ) | | | 77,932 | |
| Other working capital accounts | | | (27,480 | ) | | | 46,101 | | | | (37,373 | ) |
| Provisions for estimated losses | | | (1,177 | ) | | | (1,937 | ) | | | 4,446 | |
| Other regulatory assets | | | (83,399 | ) | | | (5,780 | ) | | | (43,807 | ) |
| Pension and other postretirement liabilities | | | 39,183 | | | | (6,525 | ) | | | (6,786 | ) |
| Other assets and liabilities | | | (21,733 | ) | | | (6,895 | ) | | | (6,572 | ) |
| Net cash flow provided by operating activities | | | 99,596 | | | | 120,107 | | | | 222,018 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (165,998 | ) | | | (223,787 | ) | | | (130,907 | ) |
| Allowance for equity funds used during construction | | | 7,755 | | | | 6,655 | | | | 2,964 | |
| Proceeds from sale of assets | | | 868 | | | | 3,951 | | | | - | |
| Change in money pool receivable - net | | | - | | | | 31,435 | | | | (31,435 | ) |
| Changes in other investments - net | | | 18 | | | | 7,615 | | | | - | |
| Payment to storm reserve escrow account | | | - | | | | - | | | | (175 | ) |
| Investments in affiliates | | | 5,527 | | | | - | | | | - | |
| Other | | | - | | | | 35 | | | | 80 | |
| Net cash flow used in investing activities | | | (151,830 | ) | | | (174,096 | ) | | | (159,473 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | 268,418 | | | | 76,727 | | | | 147,996 | |
| Retirement of long-term debt | | | (180,000 | ) | | | (100,000 | ) | | | - | |
| Change in money pool payable - net | | | (31,256 | ) | | | 33,255 | | | | (66,044 | ) |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (3,300 | ) | | | (43,400 | ) | | | (51,300 | ) |
| Preferred stock | | | (2,828 | ) | | | (2,828 | ) | | | (2,828 | ) |
| Net cash flow provided by (used in) financing activities | | | 51,034 | | | | (36,246 | ) | | | 27,824 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (1,200 | ) | | | (90,235 | ) | | | 90,369 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 1,216 | | | | 91,451 | | | | 1,082 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 16 | | | $ | 1,216 | | | $ | 91,451 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 49,192 | | | $ | 51,250 | | | $ | 47,007 | |
| Income taxes | | $ | 22,094 | | | $ | 16,401 | | | $ | 23,478 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS | BALANCE SHEETS | | BALANCE SHEETS |
| ASSETS | ASSETS | | ASSETS |
| | | | | | | | |
| �� | | | |
| | | December 31, | | | December 31, |
| | | 2011 | | | 2010 | | | 2014 | | 2013 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | | | |
| Cash | | $ | 7 | | | $ | 1,207 | | |
| $1,223 |
| |
| $22 |
|
| Temporary cash investments | | | 9 | | | | 9 | | | 60,410 |
| | 9 |
|
| Total cash and cash equivalents | | | 16 | | | | 1,216 | | | 61,633 |
| | 31 |
|
| Accounts receivable: | | | | | | | | | | |
| | |
|
| Customer | | | 51,026 | | | | 58,204 | | | 78,593 |
| | 76,534 |
|
| Allowance for doubtful accounts | | | (756 | ) | | | (985 | ) | | (873 | ) | | (906 | ) |
| Associated companies | | | 51,329 | | | | 52,946 | | | 21,233 |
| | 13,794 |
|
| Other | | | 13,924 | | | | 7,500 | | | 42,009 |
| | 9,117 |
|
| Accrued unbilled revenues | | | 38,368 | | | | 41,714 | | | 43,374 |
| | 44,777 |
|
| Total accounts receivable | | | 153,891 | | | | 159,379 | | | 184,336 |
| | 143,316 |
|
| Deferred fuel costs | | | - | | | | 3,157 | | | — |
| | 38,057 |
|
| Accumulated deferred income taxes | | | 11,694 | | | | 19,308 | | | 5,198 |
| | — |
|
| Fuel inventory - at average cost | | | 42,499 | | | | 6,878 | | | 42,736 |
| | 48,899 |
|
| Materials and supplies - at average cost | | | 35,716 | | | | 34,499 | | | 37,741 |
| | 40,849 |
|
| Prepayments and other | | | 4,666 | | | | 4,902 | | | 7,315 |
| | 19,813 |
|
| TOTAL | | | 248,482 | | | | 229,339 | | | 338,959 |
| | 290,965 |
|
| | | | | | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | | 4,725 | | | | 4,753 | | | 4,642 |
| | 4,670 |
|
| Storm reserve escrow account | | | 31,844 | | | | 31,862 | | |
| Escrow accounts | | | 41,752 |
| | 51,795 |
|
| TOTAL | | | 36,569 | | | | 36,615 | | | 46,394 |
| | 56,465 |
|
| | | | | | | | | | | | | |
| UTILITY PLANT | | | | | | | | | | |
| | |
|
| Electric | | | 3,274,031 | | | | 3,174,148 | | | 3,999,918 |
| | 3,875,737 |
|
| Property under capital lease | | | 10,721 | | | | 13,197 | | | 4,185 |
| | 5,329 |
|
| Construction work in progress | | | 105,083 | | | | 147,169 | | | 67,514 |
| | 37,316 |
|
| TOTAL UTILITY PLANT | | | 3,389,835 | | | | 3,334,514 | | | 4,071,617 |
| | 3,918,382 |
|
| Less - accumulated depreciation and amortization | | | 1,210,092 | | | | 1,166,463 | | | 1,516,540 |
| | 1,413,484 |
|
| UTILITY PLANT - NET | | | 2,179,743 | | | | 2,168,051 | | | 2,555,077 |
| | 2,504,898 |
|
| | | | | | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | | | |
| | |
|
| Regulatory assets: | | | | | | | | | | |
| | |
|
| Regulatory asset for income taxes - net | | | 65,196 | | | | 63,533 | | | 49,306 |
| | 58,716 |
|
| Other regulatory assets | | | 393,387 | | | | 253,231 | | | 364,747 |
| | 318,462 |
|
| Other | | | 20,017 | | | | 22,009 | | | 19,121 |
| | 20,819 |
|
| TOTAL | | | 478,600 | | | | 338,773 | | | 433,174 |
| | 397,997 |
|
| | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 2,943,394 | | | $ | 2,772,778 | | |
| $3,373,604 |
| |
| $3,250,325 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $49,832 |
| |
| $74,144 |
|
| Other | | 63,300 |
| | 52,129 |
|
| Customer deposits | | 77,753 |
| | 74,211 |
|
| Taxes accrued | | 53,565 |
| | 53,247 |
|
| Accumulated deferred income taxes | | — |
| | 15,413 |
|
| Interest accrued | | 23,172 |
| | 20,383 |
|
| Deferred fuel costs | | 2,194 |
| | — |
|
| Other | | 17,533 |
| | 19,021 |
|
| TOTAL | | 287,349 |
| | 308,548 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 800,374 |
| | 746,939 |
|
| Accumulated deferred investment tax credits | | 6,370 |
| | 8,530 |
|
| Asset retirement cost liabilities | | 6,786 |
| | 6,401 |
|
| Accumulated provisions | | 50,142 |
| | 35,674 |
|
| Pension and other postretirement liabilities | | 135,156 |
| | 66,722 |
|
| Long-term debt | | 1,058,838 |
| | 1,053,670 |
|
| Other | | 16,038 |
| | 21,883 |
|
| TOTAL | | 2,073,704 |
| | 1,939,819 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| Preferred stock without sinking fund | | 50,381 |
| | 50,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2014 and 2013 | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | (690 | ) | | (690 | ) |
| Retained earnings | | 763,534 |
| | 752,941 |
|
| TOTAL | | 962,170 |
| | 951,577 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,373,604 |
| |
| $3,250,325 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY MISSISSIPPI, INC. | |
| BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | - | | | $ | 80,000 | |
| Accounts payable: | | | | | | | | |
| Associated companies | | | 46,311 | | | | 75,128 | |
| Other | | | 41,489 | | | | 53,417 | |
| Customer deposits | | | 68,610 | | | | 65,873 | |
| Taxes accrued | | | 45,536 | | | | 32,001 | |
| Interest accrued | | | 21,550 | | | | 21,094 | |
| Deferred fuel costs | | | 15,841 | | | | - | |
| System agreement cost equalization | | | - | | | | 36,650 | |
| Other | | | 17,474 | | | | 9,895 | |
| TOTAL | | | 256,811 | | | | 374,058 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 672,129 | | | | 680,467 | |
| Accumulated deferred investment tax credits | | | 6,372 | | | | 6,541 | |
| Obligations under capital lease | | | 8,112 | | | | 10,747 | |
| Other regulatory liabilities | | | - | | | | 262 | |
| Asset retirement cost liabilities | | | 5,697 | | | | 5,375 | |
| Accumulated provisions | | | 38,289 | | | | 39,466 | |
| Pension and other postretirement liabilities | | | 144,088 | | | | 104,912 | |
| Long-term debt | | | 920,439 | | | | 745,378 | |
| Other | | | 5,370 | | | | 22,086 | |
| TOTAL | | | 1,800,496 | | | | 1,615,234 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Preferred stock without sinking fund | | | 50,381 | | | | 50,381 | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, no par value, authorized 12,000,000 | | | | | | | | |
| shares; issued and outstanding 8,666,357 shares in 2011 and 2010 | | | 199,326 | | | | 199,326 | |
| Capital stock expense and other | | | (690 | ) | | | (690 | ) |
| Retained earnings | | | 637,070 | | | | 534,469 | |
| TOTAL | | | 835,706 | | | | 733,105 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 2,943,394 | | | $ | 2,772,778 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2011 |
| $199,326 |
| |
| ($690 | ) | |
| $637,070 |
| |
| $835,706 |
|
| Net income | — |
| | — |
| | 46,768 |
| | 46,768 |
|
| Preferred stock dividends | — |
| | — |
| | (2,828 | ) | | (2,828 | ) |
| Balance at December 31, 2012 |
| $199,326 |
| |
| ($690 | ) | |
| $681,010 |
| |
| $879,646 |
|
| Net income | — |
| | — |
| | 82,159 |
| | 82,159 |
|
| Common stock dividends | — |
| | — |
| | (7,400 | ) | | (7,400 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,828 | ) | | (2,828 | ) |
| Balance at December 31, 2013 |
| $199,326 |
| |
| ($690 | ) | |
| $752,941 |
| |
| $951,577 |
|
| Net income | — |
| | — |
| | 74,821 |
| | 74,821 |
|
| Common stock dividends | — |
| | — |
| | (61,400 | ) | | (61,400 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,828 | ) | | (2,828 | ) |
| Balance at December 31, 2014 |
| $199,326 |
| |
| ($690 | ) | |
| $763,534 |
| |
| $962,170 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| |
| STATEMENTS OF CHANGES IN COMMON EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | Common Equity | | | | |
| | | Common Stock | | | Capital Stock Expense and Other | | | Retained Earnings | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 199,326 | | | $ | (690 | ) | | $ | 470,081 | | | $ | 668,717 | |
| Net income | | | - | | | | - | | | | 79,367 | | | | 79,367 | |
| Common stock dividends | | | - | | | | - | | | | (51,300 | ) | | | (51,300 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
| Balance at December 31, 2009 | | $ | 199,326 | | | $ | (690 | ) | | $ | 495,320 | | | $ | 693,956 | |
| Net income | | | - | | | | - | | | | 85,377 | | | | 85,377 | |
| Common stock dividends | | | - | | | | - | | | | (43,400 | ) | | | (43,400 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
| Balance at December 31, 2010 | | $ | 199,326 | | | $ | (690 | ) | | $ | 534,469 | | | $ | 733,105 | |
| Net income | | | - | | | | - | | | | 108,729 | | | | 108,729 | |
| Common stock dividends | | | - | | | | - | | | | (3,300 | ) | | | (3,300 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
| Balance at December 31, 2011 | | $ | 199,326 | | | $ | (690 | ) | | $ | 637,070 | | | $ | 835,706 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $1,524,193 |
| |
| $1,334,540 |
| |
| $1,120,366 |
| |
| $1,266,470 |
| |
| $1,232,922 |
|
| Net Income |
| $74,821 |
| |
| $82,159 |
| |
| $46,768 |
| |
| $108,729 |
| |
| $85,377 |
|
| Total assets |
| $3,373,604 |
| |
| $3,250,325 |
| |
| $3,354,027 |
| |
| $2,943,394 |
| |
| $2,772,778 |
|
| Long-term obligations (a) |
| $1,112,161 |
| |
| $1,108,236 |
| |
| $1,125,229 |
| |
| $978,932 |
| |
| $806,506 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and preferred stock without sinking fund. |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Electric Operating Revenues: | |
| | |
| | |
| | |
| | |
|
| Residential |
| $585 |
| |
| $527 |
| |
| $454 |
| |
| $490 |
| |
| $509 |
|
| Commercial | 481 |
| | 432 |
| | 381 |
| | 401 |
| | 406 |
|
| Industrial | 175 |
| | 156 |
| | 140 |
| | 146 |
| | 145 |
|
| Governmental | 47 |
| | 42 |
| | 37 |
| | 37 |
| | 38 |
|
| Total retail | 1,288 |
| | 1,157 |
| | 1,012 |
| | 1,074 |
| | 1,098 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 153 |
| | 92 |
| | 23 |
| | 104 |
| | 55 |
|
| Non-associated companies | 14 |
| | 24 |
| | 24 |
| | 27 |
| | 33 |
|
| Other | 69 |
| | 62 |
| | 61 |
| | 61 |
| | 47 |
|
| Total |
| $1,524 |
| |
| $1,335 |
| |
| $1,120 |
| |
| $1,266 |
| |
| $1,233 |
|
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | |
| | |
| | |
| | |
|
| Residential | 5,672 |
| | 5,629 |
| | 5,550 |
| | 5,848 |
| | 6,077 |
|
| Commercial | 4,821 |
| | 4,815 |
| | 4,915 |
| | 4,985 |
| | 5,000 |
|
| Industrial | 2,297 |
| | 2,265 |
| | 2,400 |
| | 2,326 |
| | 2,250 |
|
| Governmental | 414 |
| | 409 |
| | 408 |
| | 415 |
| | 416 |
|
| Total retail | 13,204 |
| | 13,118 |
| | 13,273 |
| | 13,574 |
| | 13,743 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 2,657 |
| | 1,543 |
| | 232 |
| | 431 |
| | 268 |
|
| Non-associated companies | 193 |
| | 304 |
| | 265 |
| | 332 |
| | 402 |
|
| Total | 16,054 |
| | 14,965 |
| | 13,770 |
| | 14,337 |
| | 14,413 |
|
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 1,266,470 | | | $ | 1,232,922 | | | $ | 1,180,107 | | | $ | 1,464,699 | | | $ | 1,374,011 | |
| Net Income | | $ | 108,729 | | | $ | 85,377 | | | $ | 79,367 | | | $ | 61,264 | | | $ | 72,853 | |
| Total assets | | $ | 2,943,394 | | | $ | 2,772,778 | | | $ | 2,689,933 | | | $ | 2,533,746 | | | $ | 2,389,355 | |
| Long-term obligations (1) | | $ | 978,932 | | | $ | 806,506 | | | $ | 900,634 | | | $ | 752,129 | | | $ | 753,453 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and preferred stock without sinking fund. | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 490 | | | $ | 509 | | | $ | 467 | | | $ | 556 | | | $ | 500 | |
| Commercial | | | 401 | | | | 406 | | | | 395 | | | | 482 | | | | 428 | |
| Industrial | | | 146 | | | | 145 | | | | 147 | | | | 199 | | | | 185 | |
| Governmental | | | 37 | | | | 38 | | | | 37 | | | | 44 | | | | 40 | |
| Total retail | | | 1,074 | | | | 1,098 | | | | 1,046 | | | | 1,281 | | | | 1,153 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 104 | | | | 55 | | | | 52 | | | | 96 | | | | 140 | |
| Non-associated companies | | | 27 | | | | 33 | | | | 28 | | | | 36 | | | | 33 | |
| Other | | | 61 | | | | 47 | | | | 54 | | | | 52 | | | | 48 | |
| Total | | $ | 1,266 | | | $ | 1,233 | | | $ | 1,180 | | | $ | 1,465 | | | $ | 1,374 | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
| Residential | | | 5,848 | | | | 6,077 | | | | 5,358 | | | | 5,354 | | | | 5,474 | |
| Commercial | | | 4,985 | | | | 5,000 | | | | 4,756 | | | | 4,841 | | | | 4,872 | |
| Industrial | | | 2,326 | | | | 2,250 | | | | 2,178 | | | | 2,565 | | | | 2,771 | |
| Governmental | | | 415 | | | | 416 | | | | 405 | | | | 411 | | | | 421 | |
| Total retail | | | 13,574 | | | | 13,743 | | | | 12,697 | | | | 13,171 | | | | 13,538 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 431 | | | | 268 | | | | 198 | | | | 534 | | | | 1,025 | |
| Non-associated companies | | | 332 | | | | 402 | | | | 330 | | | | 401 | | | | 468 | |
| Total | | | 14,337 | | | | 14,413 | | | | 13,225 | | | | 14,106 | | | | 15,031 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
MANAGEMENT’SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Algiers Asset Transfer
PlanIn October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to Spin Offundertake a transaction that would result in the Utility’s Transmission Business
Seetransfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently support the “Planprovision of service to Spin OffEntergy Louisiana’s customers in Algiers. The transaction is expected to result in the Utility’s Transmission Business” sectiontransfer of net assets of approximately $60 million. The Algiers asset transfer is also subject to regulatory review and approval of the FERC. Entergy CorporationLouisiana also filed an application with the City Council seeking authorization to undertake the Entergy Louisiana and Subsidiaries Management’s Financial DiscussionEntergy Gulf States Louisiana business combination. The application provides that if the City Council approves the Algiers asset transfer before the business combination occurs, the City Council may not need to issue a public interest finding regarding the business combination. If the necessary approvals are obtained from the City Council and Analysisthe FERC, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In November 2014 the City Council approved a resolution establishing a procedural schedule that provides for a discussion of this matter, includinghearing on the planned retirement of debt and preferred securities.joint application in late-May 2015, with a decision to be rendered no later than June 2015.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income increased $4.9 million primarily due to lower other operation and maintenance expenses, lower taxes other than income taxes, a lower effective income tax rate, and lower interest expense, partially offset by lower net revenue.
2010 Compared to 2009
Net income remained relatively unchanged, increasing $0.6$17 million primarily due to higher net revenue and lower interest expense, almost entirelyother operation and maintenance expenses, partially offset by a higher effective income tax rate.
2013 Compared to 2012
Net income decreased $5.4 million primarily due to higher other operation and maintenance expenses, higher taxes other than income taxes, lower other income, and higher depreciationinterest expense, partially offset by higher net revenue and amortization expenses.a lower effective income tax rate.
Net Revenue
20112014 Compared to 20102013
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).charges. Following is an analysis of the change in net revenue comparing 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20102013 net revenue |
| $272.9 249.2 |
|
Retail electric priceVolume/weather | 4.5 | (16.9)
|
| Net gas revenue | 3.5 | (9.1)
|
Gas cost recovery assetTransmission revenue | 1.4 | (3.0) |
Volume/weather | | 5.4
|
| Other | 1.5 | (2.3)
|
20112014 net revenue |
| $247.0 260.1 |
|
The retail electric price variance is primarily due to formula rate plan decreases effective October 2010 and October 2011. See Note 2 to the financial statements for a discussion of the formula rate plan filing.
The net gas revenue variance is primarily due to milder weather in 2011 compared to 2010.
The gas cost recovery asset variance is primarily due to the recognition in 2010 of a $3 million gas operations regulatory asset associated with the settlement of Entergy New Orleans’s electric and gas formula rate plan case and the amortization of that asset. See Note 2 to the financial statements for additional discussion of the formula rate plan settlement.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
The volume/weather variance is primarily due to an increase of 125 GWh, or 2%, in billed electricity usage, primarily in the residential and commercial sectors, dueincluding the effect of favorable weather on residential sales in part2014 as compared to the prior year and a 4%2% increase in the average number of residential customers and a 3% increase in the average number of commercial customers, partially offset byelectric customers.
The net gas revenue variance is primarily due to the effect of less favorable weather, onprimarily in the residential sales.
Gross operating revenues
Gross operating revenues decreased primarily due to:
· | a decrease of $16.2 million in electric fuel cost recovery revenues due to lower fuel rates; |
· | a decrease of $15.4 million in gross gas revenues primarily due to lower fuel cost recovery revenues as a result of lower fuel rates and the effect of milder weather; and |
· | formula rate plan decreases effective October 2010 and October 2011, as discussed above. |
and commercial sectors, in 2014 as compared to the prior year.
The decrease was partially offset by an increase in gross wholesaletransmission revenue variance is primarily due to increased sales to affiliated customers and more favorable volume/weather,changes as discussed above.a result of participation in the MISO RTO in 2014.
20102013 Compared to 20092012
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).charges. Following is an analysis of the change in net revenue comparing 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | | |
20092012 net revenue |
| $243.0 237.9 |
|
| Volume/weather | 6.6 | 17.0
|
| Rider revenue | 2.7 |
|
| Net gas revenue | 2.6 | 14.2
|
Effect of 2009 rate case settlementRetail electric price | (1.9 | (6.6)) |
| Other | 1.3 | 5.3
|
20102013 net revenue |
| $272.9 249.2 |
|
The volume/weather variance is primarily due to an increase of 348125 GWh, or 7%3%, in billed retail electricity usage in the residential and commercial sectors primarily due to more favorable weather comparedthe effects of Hurricane Isaac, which decreased sales volume in 2012, and in part to last year.a 2% increase in the average number of both residential and commercial customers.
The rider revenue variance is primarily due to an increase in franchise tax rider revenue as a result of higher retail revenues. There is a corresponding increase in taxes other than income taxes, resulting in no effect on net income.
The net gas revenue variance is primarily due to the effect of more favorable weather, primarily in the residential and commercial sectors, in 2013 as compared to last year, along with the recognition ofprior year.
The retail electric price variance is primarily due to a gas regulatory asset associated with the settlement of Entergy New Orleans’s electric and gas formula rate plans.plan decrease effective September 2013. See Note 2 to the financial statements for furthera discussion of the formula rate plan settlement.filing.
Other Income Statement Variances
2014 Compared to 2013
Other operation and maintenance expenses decreased primarily due to:
The effecta decrease of 2009 rate case$7.7 million in compensation and benefits costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement variance results fromcharge recognized in September 2013 related to the April 2009 settlementpayment of Entergy New Orleans’s rate case,lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and includes the effects of realigning non-fuel costs associated with the operation of Grand Gulf from the fuel adjustment clause to electric base rates effective June 2009. See Note 211 to the financial statements for further discussion of the rate case settlement.benefits costs;
Other Income Statement Variances
2011 Compared to 2010
Other operation and maintenance expenses decreased primarily due to the deferral in 2011 of $13.4 million of 2010 Michoud plant maintenance costs pursuant to the settlement of Entergy New Orleans’s 2010 test year formula rate plan filing approved by the City Council in September 2011 and a decrease of $8.0 million in fossil-fueled generation expenses due to higher plant outage costs in 2010 due to a greater scope of work at the Michoud plant. See Note 2 to the financial statements for more discussion of the 2010 test year formula rate plan filing.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Taxes other than income taxes decreased primarilya decrease of $6.7 million in fossil-fueled generation expenses due to an overall lower scope of work done during plant outages as compared to prior year; and
a decrease of $2.4 million in local franchise taxes resulting from lower electric and gas retail revenues as compared with the same period in 2010.outside regulatory consultant fees.
Interest expense decreased primarily due to the repayment in May 2010 of the notes payable issued to affiliates as part of Entergy New Orleans’s plan of reorganization and the repayment, at maturity, of $30 million of 4.98% Series first mortgage bonds in July 2010.
20102013 Compared to 20092012
Other operation and maintenance expenses increased primarily due to:
· | an increase of $15.1 million in fossil expenses due to higher outagean increase of $9 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages as compared to prior year; |
· | an increase of $2.2 million in distribution expenses primarily due to increases in vegetation maintenance, overhead and underground inspections, and substation maintenance and repairs; and |
an increase of $4.4 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion; and
· | an increase of $1.9 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefits costs. |
an increase of $3.1 million in compensation and benefits costs primarily due to a decrease in the discount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge recognized in September 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates” below and Note 11 to the financial statements for further discussion of benefits costs.
The increase was partially offset by a decrease of $3 million in loss reserves and a decrease of $1.5 million due to expenses recorded in 2012 related to the Energy Smart Program.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of higher millage rates and an increase in local franchise taxes resulting from higher electric and gas retail revenues as compared withto prior year and an increase in ad valorem taxes resulting from higher assessments. Franchise taxes have no effect on net income as these taxes are recovered through the same period in 2009.franchise tax rider.
Depreciation and amortization expensesInterest expense increased primarily due to an increase in plant in service.
Other income decreased primarily due to carrying costs on Hurricane Gustav and Hurricane Ike storm restoration costs recorded in 2009.
Interest expense decreased primarily due to a decrease in the interest rate on notes payable issued to affiliates as partissuance of Entergy New Orleans’s plan of reorganization, in addition to the repayment of those notes in May 2010 and the repayment, at maturity, of $30$100 million of 4.98%3.90% Series first mortgage bonds in July 2010.June 2013 and the issuance of $30 million of 5.00% Series first mortgage bonds in November 2012, partially offset by the retirement, at maturity, of $70 million of 5.25% Series first mortgage bonds in August 2013.
Income Taxes
The effective income tax rates for 2011, 2010,2014, 2013, and 20092012 were 30.6%30%, 34.8%12.2%, and 33.5%29.8%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.
Hurricane Katrina
In August 2005, Hurricane Katrina caused catastrophic damage to Entergy New Orleans’s service territory. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs, including obtaining assistance through federal legislation for damage caused by Hurricane Katrina.
Community Development Block Grant (CDBG)
In December 2005, the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included CDBG funding that allowed state and local leaders to fund individual recovery priorities. In March 2007, the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans’s estimated costs of $465 million for its gas system rebuild (which is discussed below). Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Gas System Rebuild
In addition to the Hurricane Katrina storm restoration costs that Entergy New Orleans incurred, Entergy New Orleans expects that over a longer term rebuilding of the gas system in New Orleans will be necessary due to the massive salt water intrusion into the system caused by the flooding in New Orleans. The salt water intrusion is expected to shorten the life of the gas system, making it necessary to rebuild portions of that system over time, earlier
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
than otherwise would be expected, with the project extending many years into the future. Entergy New Orleans received insurance proceeds for a portion of the estimated future construction expenditures associated with rebuilding its gas system, and the October 2006 City Council resolution approving the settlement of Entergy New Orleans’s rate and storm-cost recovery filings requires Entergy New Orleans to record those proceeds in a designated sub-account of other deferred credits until the proceeds are spent on the rebuild project. This other deferred credit is shown as “Gas system rebuild insurance proceeds” on Entergy New Orleans’s balance sheet.
Bankruptcy Proceedings
As a result of the effects of Hurricane Katrina and the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area, on September 23, 2005, Entergy New Orleans filed a voluntary petition in bankruptcy court seeking reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans’s plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007. Included in the terms in the plan of reorganization Entergy New Orleans issued notes to affiliates. Entergy New Orleans repaid, at maturity in May 2010, these notes that represented affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 were as follows:
| | | | | 2011 | | 2010 | | 2009 | | | | | | | |
| | | | (In Thousands) | 2014 | | 2013 | | 2012 |
| | | | | | | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $54,986 | | $191,191 | | $137,444 |
| $33,489 |
| |
| $9,391 |
| |
| $9,834 |
|
| | | | | | | | | | | | | |
| Cash flow provided by (used in): | | | | | | | |
| | Operating activities | | 44,927 | | 48,965 | | 148,556 | |
| | Investing activities | | (46,019) | | (31,561) | | (59,848) | |
| | Financing activities | | (44,060) | | (153,609) | | (34,961) | |
| | Net increase (decrease) in cash and cash equivalents | | (45,152) | | (136,205) | | 53,747 | |
| Net cash provided by (used in): | | |
| | |
| | |
|
| Operating activities | | 81,064 |
| | 86,326 |
| | 52,089 |
|
| Investing activities | | (64,514 | ) | | (89,666 | ) | | (78,040 | ) |
| Financing activities | | (7,650 | ) | | 27,438 |
| | 25,508 |
|
| Net increase (decrease) in cash and cash equivalents | | 8,900 |
| | 24,098 |
| | (443 | ) |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $9,834 | | $54,986 | | $191,191 |
| $42,389 |
| |
| $33,489 |
| |
| $9,391 |
|
Operating Activities
Net cash flow provided by operating activities was relatively flat in 2011 as the receipt of $19.2 million of Community Development Block Grant funds in 2010 related to Hurricane Katrina costs was offset by a decrease of $28.8decreased $5.3 million in income tax payments in 2011. The decrease in income tax payments is in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The decrease results from lower 2010 taxable income from what was estimated2014 primarily due to revised bonus depreciation deduction and additional repair expensesthe payment of calendar year 2012 System Agreement bandwidth remedy payments of $15 million to the City of New Orleans in June 2014 for tax purposes associated withuse in the tax accounting method change filed in 2010.
Net cash flow providedstreetlight conversion program, as directed by operating activities decreased $99.6the City Council, an increase of $6.3 million in 2010 primarily due topension contributions, and income tax payments of $68.2$4.9 million made in 20102014 compared to income tax refunds of $22.1$1.4 million received in 20092013. The decrease in cash flow was offset by the timing of collections from customers. See “Critical Accountings Estimates” below and an increase in pension contributions of $11.9 million. In 2010, Entergy New Orleans made tax payments in accordance withNote 11 to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments resulted from the reversal of temporary differences for which Entergy New Orleans previously received cash tax benefits and from estimated federal income tax payments for tax year 2010. See “MANAGEMENT’S
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates” belowfinancial statements for a discussion of qualified pension and other postretirement benefits. The decrease wasbenefits funding.
Net cash provided by operating activities increased $34.2 million in 2013 primarily due to the increased recovery of fuel costs and decreased Hurricane Isaac storm spending in 2013, partially offset by a decrease of $11.5 million in income tax refunds. The income tax refunds of $13 million in 2012 resulted primarily from a decrease of previously estimated 2011 taxable income due to the receiptrecognition of $19.2 million of Community Development Block Grant funds, as discussed above.additional bonus depreciation.
Investing Activities
Net cash flow used in investing activities increased $14.5decreased $25.2 million in 20112014 primarily due to:
a decrease in fossil-fueled generation construction expenditures primarily due to spending on the Michoud turbine blade replacement projects in 2013;
a decrease in transmission construction expenditures as a result of decreased scope of work in 2014; and
money pool activity and a withdrawal in 2010 from the storm escrow account related to Hurricane Gustav costs. activity.
The increasedecrease was partially offset by a decreasereceipts from the storm reserve escrow account of $7.8 million in construction expenditures due to decreased spending on the gas system rebuild project and System Fuels repayment of Entergy New Orleans’s $3.3 million investment in System Fuels.2013.
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 $12.7$4.3 million in 20112014 compared to decreasing $44.3increasing $1.8 million in 2010.2013. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Net cash flow used in investing activities decreased $28.3increased $11.6 million in 20102013 primarily due to to:
money pool activityactivity;
an increase in transmission construction expenditures as a result of additional reliability work performed in 2013; and
an increase in fossil-fueled generation construction expenditures as a withdrawal from the storm escrow account thatresult of increased scope of work in 2013.
The increase was partially offset by a decrease in distribution construction expenditures due to higher spending related to Hurricane Gustav costs, partially offset by:Isaac in 2012.
· | higher fossil construction expenses primarily due to current year outages and the Michoud 3 generator rewind project; |
· | higher distribution construction expenditures primarily due to increased reliability work; and |
· | a decrease in Hurricane Katrina insurance proceeds received in 2010 as compared to 2009. |
DecreasesIncreases in Entergy New Orleans’s receivable from the money pool are a sourceuse of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $44.3increased $1.8 million in 20102013 compared to increasing $6.1decreasing $6.2 million in 2009.2012.
Financing Activities
Net cash flow used inEntergy New Orleans’s financing activities decreased $109.5used $7.7 million of cash in 20112014 compared to providing $27.4 million of cash in 2013 primarily due to the repayment in 2010issuance of $74.3$100 million of affiliate notes payable that were issued to affiliates as part of Entergy New Orleans’s plan of reorganization, the repayment, at maturity, of $30 million of 4.98%3.9% Series first mortgage bonds in July 2010,June 2013 and $6 million in common stock dividends paid in 2014, partially offset by the repaymentretirement of $25$70 million of 6.75%5.25% Series first mortgage bonds in December 2010, offsetAugust 2013.
Net cash provided by financing activities increased $1.9 million in 2013 primarily due to the issuance of $25$100 million of 5.10%3.90% Series first mortgage bonds in June 2013 compared to the issuance of $30 million of 5.0% Series first mortgage bonds in November 2010.
Net cash flow used in financing activities increased $118.6 million in 2010 primarily due to:
· | the repayment of $74.3 million of affiliate notes payable in May 2010; |
· | the repayment, at maturity, of $30 million of 4.98% Series first mortgage bonds in July 2010; |
· | the repayment of $25 million of 6.75% Series first mortgage bonds in December 2010; and |
· | an increase of $14.1 million in dividends paid on common stock. |
2012. The increase was partiallysubstantially offset by the issuanceretirement of $25$70 million of 5.10%5.25% Series first mortgage bonds in November 2010.August 2013.
See Note 5 to the financial statements for more details on long-term debt.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Capital Structure
Entergy New Orleans’s capitalization is balanced between equity and debt as shown in the following table. The decrease in debt to capital ratio is due to an increase in retained earnings.
| | | | December 31, 2011 | | December 31, 2010 | | | | |
| | | | | | December 31,
2014 | | December 31,
2013 |
| Debt to capital | | 45.3% | | 44.6% | 47.7 | % | | 50.0 | % |
| Effect of subtracting cash | | (1.5)% | | (9.5)% | (5.2 | %) | | (4.0 | %) |
| Net debt to net capital | | 43.8% | | 35.1% | 42.5 | % | | 46.0 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payableshort-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition. Entergy New Orleans uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluatingevaluation Entergy New Orleans’s financial condition.condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Uses of Capital
Entergy New Orleans requires capital resources for:
· | construction and other capital investments; |
· | working capital purposes, including the financing of fuel and purchased power costs; |
· | debt and preferred stock maturities or retirements; and |
Following are the amounts of Entergy New Orleans’s planned construction and other capital investments andinvestments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $— |
| |
| $— |
| |
| $40 |
|
| Transmission | 15 |
| | 10 |
| | 5 |
|
| Distribution | 35 |
| | 25 |
| | 25 |
|
| Other | 25 |
| | 30 |
| | 25 |
|
| Total |
| $75 |
| |
| $65 |
| |
| $95 |
|
Following are the amounts of Entergy New Orleans’s existing debt and lease obligations (includes estimated interest payments): and other purchase obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $11 |
| |
| $21 |
| |
| $21 |
| |
| $320 |
| |
| $373 |
|
| Operating leases |
| $2 |
| |
| $4 |
| |
| $2 |
| |
| $2 |
| |
| $10 |
|
| Purchase obligations (b) |
| $215 |
| |
| $425 |
| |
| $397 |
| |
| $579 |
| |
| $1,616 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | After 2016 | | Total |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | |
| Generation | $8 | | $33 | | N/A | | N/A | | $41 |
| Transmission | 7 | | 10 | | N/A | | N/A | | 17 |
| Distribution | 28 | | 52 | | N/A | | N/A | | 80 |
| Other | 21 | | 45 | | N/A | | N/A | | 66 |
| Total | $64 | | $140 | | N/A | | N/A | | $204 |
| Long-term debt (2) | $9 | | $83 | | $11 | | $143 | | $246 |
| Operating leases | $2 | | $3 | | $2 | | $- | | $7 |
| Purchase obligations (3) | $179 | | $329 | | $319 | | $1,627 | | $2,454 |
(1) | Includes approximately $43 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. Also includes spending for the long-term gas rebuild project. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy New Orleans, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. |
In addition to the contractual obligations given above, Entergy New Orleans currently expects to contribute approximately $4.8$10.9 million to its pension plan in 2015, and approximately $3.7 million to its other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Also in addition to the contractual obligations, Entergy New Orleans has $53.7$33 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
TheIn addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy New Orleans reflects capital requiredincludes specific investments such as environmental compliance spending; transmission projects to support existing business. The estimatedenhance reliability, reduce congestion, and enable economic growth; resource planning; generation projects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance,
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 and to the financial statements.
As an indirect,a wholly-owned subsidiary of Entergy Corporation, Entergy New Orleans pays dividends from its earnings at a percentage determined monthly. Entergy New Orleans’s long-term debt indentures containindenture contains restrictions on the payment of cash dividends or other distributions on its common and preferred stock.
Sources of Capital
Entergy New Orleans’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt and preferred stock issuances. |
debt and preferred stock issuances; andbank financing under new or existing facilities.
Entergy New Orleans may refinance, redeem, or otherwise retire debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
Entergy New Orleans’s receivables from the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| $9,074 | | $21,820 | | $66,149 | | $60,093 |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $442 | | $4,737 | | $2,923 | | $9,074 |
See Note 4 to the financial statements 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 2015. No borrowings were outstanding under the facility as of December 31, 2014. See Note 4 to the financial statements for additional discussion of the credit facility. In addition, Entergy New Orleans entered into an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of December 31, 2014, an $8.1 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility.
Entergy New Orleans obtained short-term borrowing authorization from the FERC under which it may borrow through October 2013, up2015 for short-term borrowings not to theexceed an aggregate amount of $100 million at any one time outstanding, of $100 million.outstanding. See Note 4 to the financial statements for further discussion of Entergy New Orleans’s short-term borrowing limits. The long-term securities issuances of Entergy New Orleans are limited to amounts authorized by the City Council, and the current authorization extends through July 2012.2016.
Entergy Louisiana’s Ninemile Point Unit 6 Self-Build Project
In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station. Ninemile 6 will beis a nominally-sized 550560 MW unit that is estimatedexpected to cost approximately $721$655 million to construct when spending is complete, excluding interconnection and transmission upgrades. Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35%25% of the capacity and energy generated by Ninemile 6. The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans. In February 2012 the City Council passed a resolution authorizing Entergy New Orleans to purchase 20% of the Ninemile 6 energy and capacity. If approvals are obtained fromIn March 2012 the LPSC and other permitting agencies, Ninemile 6 construction is expected to begin in 2012, and the unit is expected to commence commercial operation by mid-2015. The ALJ has established a schedule for the LPSC proceeding that includes February 27 - March 7, 2012 hearing dates.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
unanimously voted to grant the certifications requested by Entergy Gulf States Louisiana and Entergy Louisiana. Following approval by the LPSC, Entergy Louisiana issued full notice to proceed to the project’s engineering, procurement, and construction contractor. Under terms approved by the City Council, non-fuel costs associated with Ninemile 6 may be recovered through a special rider for that purpose. The unit was placed in service in December 2014.
State and Local Rate Regulation
The rates that Entergy New Orleans charges for electricity and natural gas significantly influence its financial position, results of operations, and liquidity. Entergy New Orleans is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the City Council, is primarily responsible for approval of the rates charged to customers.
Rate Cases and Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. OnIn April 2, 2009 the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of a $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted,for Entergy New Orleans, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40-40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50-50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans iswas over- or under-earning. The formula rate plan also includesincluded a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
In May 2011,2012, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports for the 20102011 test year. The filings requestedSubsequent adjustments agreed upon with the City Council Advisors indicate a $6.5$4.9 million electric rate decreasebase revenue increase and a $1.1$0.05 million gas base revenue increase as necessary under the formula rate decrease.plan. As part of the original filing, Entergy New Orleans also requested to increase annual funding for its storm reserve by approximately $5.7 million for five years. On September 26, 2012, Entergy New Orleans made a filing with the City Council that implemented the $4.9 million electric formula rate plan rate increase and the City Council’s Advisors reached a settlement that results in an $8.5 million incremental electric rate decrease and a $1.6$0.05 million gas formula rate decrease. The settlement also provides for the deferral of $13.4 million of Michoud plant maintenance expenses incurred in 2010 and the establishment of a regulatory asset that will be amortized over the period October 2011 through September 2018. The City Council approved the settlement in September 2011.plan rate increase. The new rates were effective with the first billing cycle in October 2012. In August 2013 the City Council unanimously approved a settlement of all issues in the formula rate plan proceeding. Pursuant to the terms of the settlement, Entergy New Orleans implemented an approximately $1.625 million net decrease to the electric rates that were in effect prior to the electric rate increase implemented in October 2012, with no change in gas rates. Entergy New Orleans refunded to customers approximately $6 million over the four-month period from September 2013 through December 2013 to make the electric rate decrease effective as of the first billing cycle of October 2011.2012. Entergy New Orleans had previously recorded provisions for the majority of the refund to customers, but recorded an additional $1.1 million provision in second quarter 2013 as a result of the settlement. Entergy New Orleans’s formula rate plan ended with the 2011 test year and has not been extended. Entergy New Orleans is recovering the costs of its power purchase agreement with Entergy Louisiana for 20% of the capacity and energy of the Ninemile Unit 6 generating station, which commenced operation in December 2014, through a special Ninemile Unit 6 rider.
TheA 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. In October 2013 the City Council approved the extension of the current Energy Smart program through December 2014. The City Council approved the use of $3.5 million of rough production cost equalization funds for program costs. In addition, Entergy New Orleans will be allowed to recover its lost contribution to fixed costs and to earn an incentive for meeting program goals. In January 2015 the City Council approved extending the Energy Smart program through March 2015 and using $1.2 million of rough production cost equalization funds to cover program costs for the extended period. Additionally, the City Council approved funding for the Energy Smart 2 programs from April 2015 through March 2017 using the
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
remainder of the approximately $12.4 million of 2014 rough production cost equalization funds, and with any remaining costs being recovered through the fuel adjustment clause.
Storm Cost Recovery
In October 2006, the City Council approved a rate filing settlement agreement that, among other things, authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider that began in March 2007. These storm reserve funds will beare held in a restricted escrow account.account until needed in response to a storm.
sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million. Entergy New Orleans Inc.
Management’s Financial Discussionwithdrew $17.4 million from the storm reserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs. In January 2015 the City Council issued a resolution approving the terms of a joint agreement in principle filed by Entergy New Orleans, Entergy Louisiana, and Analysisthe City Council Advisors determining, among other things, that Entergy New Orleans’s prudently-incurred storm recovery costs were $49.3 million, of which $31.7 million, net of reimbursements from the storm reserve escrow account, remains recoverable from Entergy New Orleans’s electric customers. The resolution also directs Entergy New Orleans to file an application to securitize the unrecovered Council-approved storm recovery costs of $31.7 million pursuant to the Louisiana Electric Utility Storm Recovery Securitization Act (Louisiana Act 64). In addition, the resolution found that it is reasonable for Entergy New Orleans to include in the principal amount of its potential securitization the costs to fund and replenish Entergy New Orleans’s storm reserve in an amount that achieves the Council-approved funding level of $75 million. In January 2015, in compliance with that directive, Entergy New Orleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the financing of Entergy New Orleans’s storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 64.
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
Nuclear Matters
See the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.
Environmental Risks
Entergy New Orleans’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous solid wastes, and other environmental matters. Management believes that Entergy New Orleans is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Critical Accounting Estimates
The preparation of Entergy New Orleans’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy New Orleans’s financial position or results of operations.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy New Orleans records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month, including fuel price.month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each, period and fuel price fluctuations, in addition to changes in certain components of the calculation. Effective June 2009, Entergy New Orleans reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in the unbilled calculation, which is in accordance with regulatory treatment.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsNew Orleans’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
|
| | | | | | |
Actuarial Assumption | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Projected Qualified Benefit Obligation |
| | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $451 | | $7,348 |
| Rate of return on plan assets | | (0.25%) | | $295 | | $— |
| Rate of increase in compensation | | 0.25% | | $175 | | $1,092 |
Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | | Increase/(Decrease) |
| | | | | | | |
| Discount rate | | (0.25%) | | $408 | | $5,283 |
| Rate of return on plan assets | | (0.25%) | | $249 | | - |
| Rate of increase in compensation | | 0.25% | | $170 | | $1,027 |
409
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $79 | | $1,813 |
| Health care cost trend | | 0.25% | | $269 | | $1,675 | | 0.25% | | $210 | | $1,537 |
| Discount rate | | (0.25%) | | $163 | | $2,057 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy New Orleans in 20112014 was $5.5$6.6 million. Entergy New Orleans anticipates 20122015 qualified pension cost to be $8.5$9 million. Entergy New Orleans contributed $12.2$10.5 million to its pension plans in qualified2014 and estimates 2015 pension contributions in 2011 and anticipatesto be approximately a $4.8$10.9 million, pension contribution in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costsincome for Entergy New Orleans in 2011 were $3.7 million, including $1.2 million in savings due to the estimated effect of future Medicare Part D subsidies.2014 was $1.5 million. Entergy New Orleans expects 20122015 postretirement health care and life insurance benefit costs to approximate $4.2 million, including $1 million in savings due to the estimated effectincome of future Medicare Part D subsidies.approximately $1.6 million. Entergy New Orleans expects to contribute approximately $3.7contributed $4.3 million to its other postretirement plans in 2012.2014 and expects to contribute $3.7 million in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $15 million in the qualified pension benefit obligation and $3.6 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $2.2 million and other postretirement cost by approximately $0.4 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
(page left blank intentionally)
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
New Orleans, Louisiana
We have audited the accompanying balance sheets of Entergy New Orleans, Inc. (the “Company”) as of December 31, 20112014 and 2010,2013, and the related income statements, statements of cash flows, and statements of changes in common equity (pages 356412 through 360416 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy New Orleans, Inc. as of December 31, 20112014 and 2010,2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
26, 2015
|
| | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. |
| INCOME STATEMENTS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING REVENUES | | | | | | |
| Electric | |
| $579,981 |
| |
| $525,041 |
| |
| $487,633 |
|
| Natural gas | | 110,104 |
| | 95,115 |
| | 82,107 |
|
| TOTAL | | 690,085 |
| | 620,156 |
| | 569,740 |
|
| | | | | | | |
| OPERATING EXPENSES | | |
| | |
| | |
|
| Operation and Maintenance: | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and gas purchased for resale | | 169,605 |
| | 116,715 |
| | 107,616 |
|
| Purchased power | | 259,680 |
| | 253,202 |
| | 222,193 |
|
| Other operation and maintenance | | 120,610 |
| | 136,003 |
| | 122,143 |
|
| Taxes other than income taxes | | 48,142 |
| | 48,659 |
| | 43,189 |
|
| Depreciation and amortization | | 38,884 |
| | 37,717 |
| | 36,726 |
|
| Other regulatory charges - net | | 694 |
| | 996 |
| | 1,983 |
|
| TOTAL | | 637,615 |
| | 593,292 |
| | 533,850 |
|
| | | | | | | |
| OPERATING INCOME | | 52,470 |
| | 26,864 |
| | 35,890 |
|
| | | | | | | |
| OTHER INCOME | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | 915 |
| | 920 |
| | 791 |
|
| Interest and investment income | | 79 |
| | 89 |
| | 47 |
|
| Miscellaneous - net | | 430 |
| | (1,401 | ) | | (1,453 | ) |
| TOTAL | | 1,424 |
| | (392 | ) | | (615 | ) |
| | | | | | | |
| INTEREST EXPENSE | | |
| | |
| | |
|
| Interest expense | | 13,310 |
| | 13,675 |
| | 11,344 |
|
| Allowance for borrowed funds used during construction | | (447 | ) | | (505 | ) | | (374 | ) |
| TOTAL | | 12,863 |
| | 13,170 |
| | 10,970 |
|
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 41,031 |
| | 13,302 |
| | 24,305 |
|
| | | | | | | |
| Income taxes | | 12,324 |
| | 1,619 |
| | 7,240 |
|
| | | | | | | |
| NET INCOME | | 28,707 |
| | 11,683 |
| | 17,065 |
|
| | | | | | | |
| Preferred dividend requirements and other | | 965 |
| | 965 |
| | 965 |
|
| | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $27,742 |
| |
| $10,718 |
| |
| $16,100 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| INCOME STATEMENTS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Electric | | $ | 529,228 | | | $ | 543,102 | | | $ | 535,985 | |
| Natural gas | | | 100,957 | | | | 116,347 | | | | 104,437 | |
| TOTAL | | | 630,185 | | | | 659,449 | | | | 640,422 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and | | | | | | | | | | | | |
| gas purchased for resale | | | 173,668 | | | | 169,644 | | | | 196,917 | |
| Purchased power | | | 207,604 | | | | 218,025 | | | | 198,836 | |
| Other operation and maintenance | | | 106,817 | | | | 130,917 | | | | 108,716 | |
| Taxes other than income taxes | | | 42,032 | | | | 44,749 | | | | 40,476 | |
| Depreciation and amortization | | | 35,026 | | | | 35,354 | | | | 33,943 | |
| Other regulatory charges (credits) - net | | | 1,910 | | | | (1,072 | ) | | | 1,709 | |
| TOTAL | | | 567,057 | | | | 597,617 | | | | 580,597 | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 63,128 | | | | 61,832 | | | | 59,825 | |
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | | 622 | | | | 667 | | | | 230 | |
| Interest and investment income | | | 154 | | | | 544 | | | | 3,762 | |
| Miscellaneous - net | | | (1,234 | ) | | | (2,478 | ) | | | (1,125 | ) |
| TOTAL | | | (458 | ) | | | (1,267 | ) | | | 2,867 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | | 11,114 | | | | 13,170 | | | | 16,965 | |
| Allowance for borrowed funds used during construction | | | (282 | ) | | | (320 | ) | | | (98 | ) |
| TOTAL | | | 10,832 | | | | 12,850 | | | | 16,867 | |
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 51,838 | | | | 47,715 | | | | 45,825 | |
| | | | | | | | | | | | | |
| Income taxes | | | 15,862 | | | | 16,601 | | | | 15,346 | |
| | | | | | | | | | | | | |
| NET INCOME | | | 35,976 | | | | 31,114 | | | | 30,479 | |
| | | | | | | | | | | | | |
| Preferred dividend requirements and other | | | 965 | | | | 965 | | | | 965 | |
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO | | | | | | | | | | | | |
| COMMON STOCK | | $ | 35,011 | | | $ | 30,149 | | | $ | 29,514 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. |
| STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $28,707 |
| |
| $11,683 |
| |
| $17,065 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation and amortization | | 38,884 |
| | 37,717 |
| | 36,726 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 24,388 |
| | (7,427 | ) | | 15,016 |
|
| Changes in assets and liabilities: | | |
| | |
| | |
|
| Receivables | | 20,506 |
| | (6,508 | ) | | (29,046 | ) |
| Fuel inventory | | (17 | ) | | (1,222 | ) | | 2,029 |
|
| Accounts payable | | (7,702 | ) | | 5,987 |
| | 4,828 |
|
| Interest accrued | | (60 | ) | | 578 |
| | 180 |
|
| Deferred fuel costs | | 5,252 |
| | 20,988 |
| | (9,464 | ) |
| Other working capital accounts | | (18,050 | ) | | 3,155 |
| | 12,862 |
|
| Provisions for estimated losses | | 10,877 |
| | (31 | ) | | (812 | ) |
| Other regulatory assets | | (38,405 | ) | | 64,810 |
| | (23,188 | ) |
| Pension and other postretirement liabilities | | 29,942 |
| | (51,293 | ) | | 9,773 |
|
| Other assets and liabilities | | (13,258 | ) | | 7,889 |
| | 16,120 |
|
| Net cash flow provided by operating activities | | 81,064 |
| | 86,326 |
| | 52,089 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (62,199 | ) | | (88,864 | ) | | (86,373 | ) |
| Allowance for equity funds used during construction | | 915 |
| | 920 |
| | 791 |
|
| Change in money pool receivable - net | | 4,295 |
| | (1,814 | ) | | 6,151 |
|
| Payments to storm reserve escrow account | | (7,525 | ) | | (7,663 | ) | | (8,609 | ) |
| Receipts from storm reserve escrow account | | — |
| | 7,755 |
| | 10,000 |
|
| Net cash flow used in investing activities | | (64,514 | ) | | (89,666 | ) | | (78,040 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | — |
| | 98,471 |
| | 28,422 |
|
| Retirement of long-term debt | | — |
| | (70,068 | ) | | — |
|
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (6,000 | ) | | — |
| | (1,700 | ) |
| Preferred stock | | (965 | ) | | (965 | ) | | (965 | ) |
| Other | | (685 | ) | | — |
| | (249 | ) |
| Net cash flow provided by (used in) financing activities | | (7,650 | ) | | 27,438 |
| | 25,508 |
|
| Net increase (decrease) in cash and cash equivalents | | 8,900 |
| | 24,098 |
| | (443 | ) |
| Cash and cash equivalents at beginning of period | | 33,489 |
| | 9,391 |
| | 9,834 |
|
| Cash and cash equivalents at end of period | |
| $42,389 |
| |
| $33,489 |
| |
| $9,391 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $12,477 |
| |
| $12,050 |
| |
| $10,183 |
|
| Income taxes | |
| $4,871 |
| |
| ($1,448 | ) | |
| ($12,952 | ) |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 35,976 | | | $ | 31,114 | | | $ | 30,479 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation and amortization | | | 35,026 | | | | 35,354 | | | | 33,943 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (35,276 | ) | | | (47,611 | ) | | | 54,797 | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | 24,275 | | | | (6,289 | ) | | | 20,361 | |
| Fuel inventory | | | (1,160 | ) | | | (113 | ) | | | 5,665 | |
| Accounts payable | | | (3,502 | ) | | | 3,307 | | | | (3,224 | ) |
| Taxes accrued | | | - | | | | - | | | | (18,306 | ) |
| Interest accrued | | | 12 | | | | (1,121 | ) | | | 19 | |
| Deferred fuel costs | | | 4,694 | | | | 10,923 | | | | 13,751 | |
| Other working capital accounts | | | (7,764 | ) | | | 4,174 | | | | 3,401 | |
| Provisions for estimated losses | | | 4,637 | | | | (4,785 | ) | | | 5,382 | |
| Other regulatory assets | | | (42,667 | ) | | | (10,073 | ) | | | (2,227 | ) |
| Pension and other postretirement liabilities | | | 25,202 | | | | 5,042 | | | | (5,549 | ) |
| Other assets and liabilities | | | 5,474 | | | | 29,043 | | | | 10,064 | |
| Net cash flow provided by operating activities | | | 44,927 | | | | 48,965 | | | | 148,556 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (56,600 | ) | | | (80,218 | ) | | | (61,954 | ) |
| Allowance for equity funds used during construction | | | 622 | | | | 667 | | | | 230 | |
| Insurance proceeds | | | - | | | | 115 | | | | 14,553 | |
| Investments in affiliates | | | 3,256 | | | | - | | | | - | |
| Change in money pool receivable - net | | | 12,746 | | | | 44,329 | | | | (6,056 | ) |
| Changes in other investments - net | | | (6,043 | ) | | | 3,546 | | | | (6,621 | ) |
| Net cash flow used in investing activities | | | (46,019 | ) | | | (31,561 | ) | | | (59,848 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | - | | | | 24,349 | | | | - | |
| Retirement of long-term debt | | | - | | | | (129,993 | ) | | | (728 | ) |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (42,000 | ) | | | (47,000 | ) | | | (32,900 | ) |
| Preferred stock | | | (965 | ) | | | (965 | ) | | | (965 | ) |
| Other | | | (1,095 | ) | | | - | | | | (368 | ) |
| Net cash flow used in financing activities | | | (44,060 | ) | | | (153,609 | ) | | | (34,961 | ) |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (45,152 | ) | | | (136,205 | ) | | | 53,747 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 54,986 | | | | 191,191 | | | | 137,444 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 9,834 | | | $ | 54,986 | | | $ | 191,191 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid/(received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 10,109 | | | $ | 13,550 | | | $ | 16,302 | |
| Income taxes | | $ | 39,403 | | | $ | 68,160 | | | $ | (22,054 | ) |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | ENTERGY NEW ORLEANS, INC. |
| BALANCE SHEETS | BALANCE SHEETS | | BALANCE SHEETS |
| ASSETS | ASSETS | | ASSETS |
| | | | | | | | | |
| | | December 31, | | | December 31, |
| | | 2011 | | | 2010 | | | 2014 | | 2013 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | |
| CURRENT ASSETS | | | | | | | | | | |
| Cash and cash equivalents | | | | | | | | | | |
| Cash | | $ | 486 | | | $ | 1,386 | | |
| $1,006 |
| |
| $317 |
|
| Temporary cash investments | | | 9,348 | | | | 53,600 | | | 41,383 |
| | 33,172 |
|
| Total cash and cash equivalents | | | 9,834 | | | | 54,986 | | | 42,389 |
| | 33,489 |
|
| Accounts receivable: | | | | | | | | | | |
| | |
|
| Customer | | | 29,038 | | | | 38,160 | | | 35,663 |
| | 38,872 |
|
| Allowance for doubtful accounts | | | (465 | ) | | | (734 | ) | | (262 | ) | | (974 | ) |
| Associated companies | | | 12,167 | | | | 39,037 | | | 11,693 |
| | 32,273 |
|
| Other | | | 2,603 | | | | 1,824 | | | 3,223 |
| | 2,667 |
|
| Accrued unbilled revenues | | | 17,023 | | | | 19,100 | | | 16,465 |
| | 18,745 |
|
| Total accounts receivable | | | 60,366 | | | | 97,387 | | | 66,782 |
| | 91,583 |
|
| Accumulated deferred income taxes | | | 6,419 | | | | 15,092 | | | 8,562 |
| | 12,018 |
|
| Fuel inventory - at average cost | | | 3,806 | | | | 2,646 | | | 3,016 |
| | 2,999 |
|
| Materials and supplies - at average cost | | | 9,392 | | | | 9,896 | | | 12,650 |
| | 11,696 |
|
| Prepayments and other | | | 2,679 | | | | 7,708 | | | 6,887 |
| | 4,178 |
|
| TOTAL | | | 92,496 | | | | 187,715 | | | 140,286 |
| | 155,963 |
|
| | | | | | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | | | |
| | |
|
| Non-utility property at cost (less accumulated depreciation) | | | 1,016 | | | | 1,016 | | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | | 11,996 | | | | 5,953 | | | 18,038 |
| | 10,513 |
|
| TOTAL | | | 13,012 | | | | 6,969 | | | 19,054 |
| | 11,529 |
|
| | | | | | | | | | | | | |
| UTILITY PLANT | | | | | | | | | | |
| | |
|
| Electric | | | 812,329 | | | | 822,003 | | | 936,862 |
| | 889,629 |
|
| Natural gas | | | 213,160 | | | | 206,148 | | | 228,979 |
| | 222,463 |
|
| Construction work in progress | | | 13,610 | | | | 11,669 | | | 18,866 |
| | 29,312 |
|
| TOTAL UTILITY PLANT | | | 1,039,099 | | | | 1,039,820 | | | 1,184,707 |
| | 1,141,404 |
|
| Less - accumulated depreciation and amortization | | | 525,621 | | | | 531,871 | | | 594,945 |
| | 566,948 |
|
| UTILITY PLANT - NET | | | 513,478 | | | | 507,949 | | | 589,762 |
| | 574,456 |
|
| | | | | | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | | | |
| | |
|
| Regulatory assets: | | | | | | | | | | |
| | |
|
| Deferred fuel costs | | | 4,080 | | | | 4,080 | | | 4,080 |
| | 4,080 |
|
| Other regulatory assets | | | 178,815 | | | | 135,282 | | | 175,596 |
| | 137,191 |
|
| Other | | | 4,154 | | | | 8,081 | | | 5,345 |
| | 5,577 |
|
| TOTAL | | | 187,049 | | | | 147,443 | | | 185,021 |
| | 146,848 |
|
| | | | | | | | | | | | | |
| TOTAL ASSETS | | $ | 806,035 | | | $ | 850,076 | | |
| $934,123 |
| |
| $888,796 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | |
|
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $33,170 |
| |
| $36,193 |
|
| Other | | 22,435 |
| | 27,840 |
|
| Customer deposits | | 24,681 |
| | 22,959 |
|
| Interest accrued | | 3,538 |
| | 3,598 |
|
| Deferred fuel costs | | 28,397 |
| | 23,145 |
|
| System agreement cost equalization | | — |
| | 17,040 |
|
| Other | | 6,830 |
| | 5,896 |
|
| TOTAL CURRENT LIABILITIES | | 119,051 |
| | 136,671 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 199,241 |
| | 183,636 |
|
| Accumulated deferred investment tax credits | | 864 |
| | 1,082 |
|
| Regulatory liability for income taxes - net | | 20,640 |
| | 28,711 |
|
| Asset retirement cost liabilities | | 2,511 |
| | 2,347 |
|
| Accumulated provisions | | 25,877 |
| | 15,000 |
|
| Pension and other postretirement liabilities | | 62,440 |
| | 32,497 |
|
| Long-term debt | | 225,866 |
| | 225,944 |
|
| Gas system rebuild insurance proceeds | | 23,218 |
| | 32,760 |
|
| Other | | 6,610 |
| | 4,085 |
|
| TOTAL NON-CURRENT LIABILITIES | | 567,267 |
| | 526,062 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| Preferred stock without sinking fund | | 19,780 |
| | 19,780 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2014 and 2013 | | 33,744 |
| | 33,744 |
|
| Paid-in capital | | 36,294 |
| | 36,294 |
|
| Retained earnings | | 157,987 |
| | 136,245 |
|
| TOTAL | | 228,025 |
| | 206,283 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $934,123 |
| |
| $888,796 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY NEW ORLEANS, INC. | |
| BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Accounts payable: | | | | | | |
| Associated companies | | $ | 27,042 | | | $ | 25,140 | |
| Other | | | 28,098 | | | | 30,093 | |
| Customer deposits | | | 21,878 | | | | 21,206 | |
| Interest accrued | | | 2,840 | | | | 2,828 | |
| Deferred fuel costs | | | 11,621 | | | | 6,927 | |
| System agreement cost equalization | | | - | | | | 15,510 | |
| Other | | | 4,197 | | | | 2,655 | |
| TOTAL CURRENT LIABILITIES | | | 95,676 | | | | 104,359 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 144,405 | | | | 180,290 | |
| Accumulated deferred investment tax credits | | | 1,539 | | | | 1,835 | |
| Regulatory liability for income taxes - net | | | 33,258 | | | | 40,142 | |
| Other regulatory liabilities | | | 5,726 | | | | 22 | |
| Asset retirement cost liabilities | | | 2,893 | | | | 3,396 | |
| Accumulated provisions | | | 15,843 | | | | 11,206 | |
| Pension and other postretirement liabilities | | | 74,017 | | | | 48,815 | |
| Long-term debt | | | 166,537 | | | | 167,215 | |
| Gas system rebuild insurance proceeds | | | 55,707 | | | | 75,700 | |
| Other | | | 9,489 | | | | 9,162 | |
| TOTAL NON-CURRENT LIABILITIES | | | 509,414 | | | | 537,783 | |
| | | | | | | | | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Preferred stock without sinking fund | | | 19,780 | | | | 19,780 | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, $4 par value, authorized 10,000,000 | | | | | | | | |
| shares; issued and outstanding 8,435,900 shares in 2011 | | | | | | | | |
| and 2010 | | | 33,744 | | | | 33,744 | |
| Paid-in capital | | | 36,294 | | | | 36,294 | |
| Retained earnings | | | 111,127 | | | | 118,116 | |
| TOTAL | | | 181,165 | | | | 188,154 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 806,035 | | | $ | 850,076 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| |
| STATEMENTS OF CHANGES IN COMMON EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | Common Equity | | | | |
| | | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 33,744 | | | $ | 36,294 | | | $ | 138,353 | | | $ | 208,391 | |
| Net income | | | - | | | | - | | | | 30,479 | | | | 30,479 | |
| Common stock dividends | | | - | | | | - | | | | (32,900 | ) | | | (32,900 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
| Balance at December 31, 2009 | | $ | 33,744 | | | $ | 36,294 | | | $ | 134,967 | | | $ | 205,005 | |
| Net income | | | - | | | | - | | | | 31,114 | | | | 31,114 | |
| Common stock dividends | | | - | | | | - | | | | (47,000 | ) | | | (47,000 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
| Balance at December 31, 2010 | | $ | 33,744 | | | $ | 36,294 | | | $ | 118,116 | | | $ | 188,154 | |
| Net income | | | - | | | | - | | | | 35,976 | | | | 35,976 | |
| Common stock dividends | | | - | | | | - | | | | (42,000 | ) | | | (42,000 | ) |
| Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
| Balance at December 31, 2011 | | $ | 33,744 | | | $ | 36,294 | | | $ | 111,127 | | | $ | 181,165 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
360 |
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2011 |
| $33,744 |
| |
| $36,294 |
| |
| $111,127 |
| |
| $181,165 |
|
| Net income | — |
| | — |
| | 17,065 |
| | 17,065 |
|
| Common stock dividends | — |
| | — |
| | (1,700 | ) | | (1,700 | ) |
| Preferred stock dividends | — |
| | — |
| | (965 | ) | | (965 | ) |
| Balance at December 31, 2012 |
| $33,744 |
| |
| $36,294 |
| |
| $125,527 |
| |
| $195,565 |
|
| Net income | — |
| | — |
| | 11,683 |
| | 11,683 |
|
| Preferred stock dividends | — |
| | — |
| | (965 | ) | | (965 | ) |
| Balance at December 31, 2013 |
| $33,744 |
| |
| $36,294 |
| |
| $136,245 |
| |
| $206,283 |
|
| Net income | — |
| | — |
| | 28,707 |
| | 28,707 |
|
| Common stock dividends | — |
| | — |
| | (6,000 | ) | | (6,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (965 | ) | | (965 | ) |
| Balance at December 31, 2014 |
| $33,744 |
| |
| $36,294 |
| |
| $157,987 |
| |
| $228,025 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $690,085 |
| |
| $620,156 |
| |
| $569,740 |
| |
| $630,185 |
| |
| $659,449 |
|
| Net Income |
| $28,707 |
| |
| $11,683 |
| |
| $17,065 |
| |
| $35,976 |
| |
| $31,114 |
|
| Total assets |
| $934,123 |
| |
| $888,796 |
| |
| $881,789 |
| |
| $806,035 |
| |
| $850,076 |
|
| Long-term obligations (a) |
| $245,646 |
| |
| $245,724 |
| |
| $146,080 |
| |
| $186,317 |
| |
| $186,995 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Electric Operating Revenues: | |
| | |
| | |
| | |
| | |
|
| Residential |
| $202 |
| |
| $197 |
| |
| $174 |
| |
| $176 |
| |
| $196 |
|
| Commercial | 184 |
| | 183 |
| | 164 |
| | 154 |
| | 174 |
|
| Industrial | 33 |
| | 35 |
| | 31 |
| | 30 |
| | 36 |
|
| Governmental | 66 |
| | 67 |
| | 63 |
| | 59 |
| | 70 |
|
| Total retail | 485 |
| | 482 |
| | 432 |
| | 419 |
| | 476 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 77 |
| | 27 |
| | 44 |
| | 95 |
| | 56 |
|
| Non-associated companies | 4 |
| | — |
| | — |
| | 1 |
| | 1 |
|
| Other | 14 |
| | 16 |
| | 12 |
| | 14 |
| | 10 |
|
| Total |
| $580 |
| |
| $525 |
| |
| $488 |
| |
| $529 |
| |
| $543 |
|
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | |
| | |
| | |
| | |
|
| Residential | 1,963 |
| | 1,867 |
| | 1,772 |
| | 1,888 |
| | 1,858 |
|
| Commercial | 2,046 |
| | 1,998 |
| | 1,968 |
| | 1,939 |
| | 1,899 |
|
| Industrial | 452 |
| | 481 |
| | 484 |
| | 498 |
| | 503 |
|
| Governmental | 768 |
| | 758 |
| | 785 |
| | 795 |
| | 809 |
|
| Total retail | 5,229 |
| | 5,104 |
| | 5,009 |
| | 5,120 |
| | 5,069 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 1,322 |
| | 495 |
| | 978 |
| | 1,167 |
| | 906 |
|
| Non-associated companies | 16 |
| | 13 |
| | 8 |
| | 19 |
| | 13 |
|
| Total | 6,567 |
| | 5,612 |
| | 5,995 |
| | 6,306 |
| | 5,988 |
|
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 630,185 | | | $ | 659,449 | | | $ | 640,422 | | | $ | 814,383 | | | $ | 676,927 | |
| Net Income | | $ | 35,976 | | | $ | 31,114 | | | $ | 30,479 | | | $ | 34,337 | | | $ | 24,091 | |
| Total assets | | $ | 806,035 | | | $ | 850,076 | | | $ | 995,818 | | | $ | 998,460 | | | $ | 872,141 | |
| Long-term obligations (1) | | $ | 186,317 | | | $ | 186,995 | | | $ | 187,803 | | | $ | 292,753 | | | $ | 293,692 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 176 | | | $ | 196 | | | $ | 168 | | | $ | 172 | | | $ | 142 | |
| Commercial | | | 154 | | | | 174 | | | | 166 | | | | 194 | | | | 181 | |
| Industrial | | | 30 | | | | 36 | | | | 37 | | | | 48 | | | | 47 | |
| Governmental | | | 59 | | | | 70 | | | | 70 | | | | 79 | | | | 72 | |
| Total retail | | | 419 | | | | 476 | | | | 441 | | | | 493 | | | | 442 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 95 | | | | 56 | | | | 87 | | | | 161 | | | | 103 | |
| Non-associated companies | | | 1 | | | | 1 | | | | 1 | | | | 2 | | | | 1 | |
| Other | | | 14 | | | | 10 | | | | 7 | | | | 17 | | | | 11 | |
| Total | | $ | 529 | | | $ | 543 | | | $ | 536 | | | $ | 673 | | | $ | 557 | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
| Residential | | | 1,888 | | | | 1,858 | | | | 1,577 | | | | 1,394 | | | | 1,221 | |
| Commercial | | | 1,939 | | | | 1,899 | | | | 1,813 | | | | 1,774 | | | | 1,763 | |
| Industrial | | | 498 | | | | 503 | | | | 526 | | | | 541 | | | | 568 | |
| Governmental | | | 795 | | | | 809 | | | | 805 | | | | 774 | | | | 747 | |
| Total retail | | | 5,120 | | | | 5,069 | | | | 4,721 | | | | 4,483 | | | | 4,299 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 1,167 | | | | 906 | | | | 1,528 | | | | 1,336 | | | | 995 | |
| Non-associated companies | | | 19 | | | | 13 | | | | 15 | | | | 25 | | | | 15 | |
| Total | | | 6,306 | | | | 5,988 | | | | 6,264 | | | | 5,844 | | | | 5,309 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Plan to Spin Off the Utility’s Transmission Business
See the “Plan to Spin Off the Utility’s Transmission Business” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of this matter, including the planned retirement of debt and preferred securities.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income increased by $14.6$16.9 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by a higher effective income tax rate, higher taxes other than income taxes, and higher depreciation and amortization expenses.
2013 Compared to 2012
Net income increased $15.9 million primarily due to higher net revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses and higher depreciation and amortization expenses.
2010 Compared to 2009
Net income increased by $2.4 million primarily due to higher net revenue and lower interest expense, partially offset by lower other income, higher taxes other than income taxes, and higher other operation and maintenance expenses.
Net Revenue
20112014 Compared to 20102013
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).charges. Following is an analysis of the change in net revenue comparing 20112014 to 2010.2013.
|
| | | |
| | Amount |
| | (In Millions) |
| | |
|
20102013 net revenue |
| $540.2 586.5 |
|
| Purchased power capacity | 37.5 |
|
| Retail electric price | 17.3 | 36.0
|
| Volume/weather | 11.6 | 21.3
|
Purchased power capacityTransmission revenue | (7.6 | (24.6)) |
| Reserve equalization | (18.0 | ) |
| Net wholesale revenue | (21.0 | ) |
| Other | 5.4 | 4.9
|
20112014 net revenue |
| $577.8 611.7 |
|
The purchased power capacity variance is primarily due to a decrease in expenses due to contract changes.
The retail electric price variance is primarily due to rate actions, including an annual base rate increase of $59$18.5 million, beginning August 2010, with an additional increase of $9 million beginning May 2011,effective April 2014, as a result of the settlement ofPUCT’s order in the December 2009September 2013 rate case. See Note 2 to the financial statements for further discussion of the PUCT rate case settlement.order.
The volume/weather variance is primarily due to an increase of 721884 GWh, or 4.5%5%, in billed electricity usage, including the effect of more favorable weather on residential sales and commercial sales compared to last year. Usage in theincreased industrial sector increased 8.2%usage primarily in the chemicals and refining industries.petroleum industry as a result of expansions.
The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges
Gross operating revenues increasedThe transmission revenue variance is primarily due to changes as a result of the base rate increases andparticipation in the volume/weather effect, as discussed above.MISO RTO in 2014.
Fuel and purchased power expenses increasedThe reserve equalization variance is primarily due to an increase in demand coupled with an increasereserve equalization expense as compared to the same period in deferred fuel expense2013 primarily due to the changes in the Entergy System generation mix compared to the same period in 2013 as a result of lower fuel refundsthe Entergy Arkansas’s exit from the System Agreement in 2011 versus 2010, partially offset by a decrease in the average market price of natural gas.December 2013.
Other regulatory charges decreasedThe net wholesale revenue variance is primarily due to the distributiona wholesale customer contract termination in the first quarter 2011 of $17.4 million to customers of the 2007 rough production cost equalization remedy receipts. See Note 2 to the financial statements for further discussion of the rough production cost equalization proceedings.December 2013.
20102013 Compared to 20092012
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).charges. Following is an analysis of the change in net revenue comparing 20102013 to 2009.2012.
|
| | | |
| | Amount |
| | (In Millions) |
| | |
|
20092012 net revenue |
| $485.1 551.0 |
|
| Volume/weather | 13.9 |
|
| Retail electric price | 13.3 |
|
| Fuel recovery | 6.5 |
|
| Hurricane Rita regulatory asset adjustment | 6.4 |
|
| Net wholesale revenue | 4.7 | 27.7 |
Volume/weather | | 27.2 |
Rough production cost equalization | | 18.6 |
Retail electric price | | 16.3 |
Securitization transition charge | | 15.3
|
| Purchased power capacity | (10.5 | (44.3)) |
| Other | 1.2 | (5.7)
|
20102013 net revenue |
| $540.2 586.5 |
|
The net wholesale revenue variance is primarily due to increased sales to municipal and co-op customers due to the addition of new contracts.
The volume/weather variance is primarily due to increasedan increase of 470 GWh, or 3%, in billed electricity usage, primarily in the residential and commercial sectors, resulting from a 1.5% increase in customers, coupled withincluding the effect of more favorable weather compared to last year on residential sales. Billed electricitysales and increased usage increasedin the industrial sector compared to prior year as a totalresult of 777 GWh, or 5%.an unplanned outage in the refining industry in 2012.
The rough production cost equalization variance is due to an additional $18.6 million allocation recorded in the second quarter of 2009 for 2007 rough production cost equalization receipts ordered by the PUCT to Texas retail customers over what was originally allocated to Entergy Texas prior to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 2007, as discussed in Note 2 to the financial statements.
The retail electric price variance is primarily due to rate actions, including an annual base rate increase of $59$28 million, beginning August 2010effective July 2012, as a result of the settlement ofPUCT’s order in the December 2009November 2011 rate case. See Note 2 to the financial statements for further discussion of the PUCT rate case settlement.order.
The securitization transition chargefuel recovery variance is dueprimarily the result of a $6 million adjustment to the issuance of securitization bonds. In November 2009, Entergy Texas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Texas, issued securitization bonds and with the proceeds purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The securitization transition charge is offsetdeferred fuel costs recorded in third quarter 2012 in accordance with a corresponding increaserate order from the PUCT issued in interest on long-term debt with no impact on net income.September 2012. See Note 52 to the financial statements for further discussion of the securitization bond issuance.PUCT order issued in Entergy Texas’s 2011 rate case.
The Hurricane Rita regulatory asset adjustment of $6.4 million was recorded in third quarter 2012 in accordance with the rate order from the PUCT issued in September 2012. See Note 2 to the financial statements for further discussion of the PUCT rate order.
The net wholesale revenue variance is primarily due to contract changes for municipals and co-op customers.
The purchased power capacity variance is primarily due to additional capacity purchases as well as price increases for ongoing purchased power capacity.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The purchased power capacity variance is primarily due to price increases in ongoing purchased power capacity expense and additional capacity purchases.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to an increase of $145.6 million in gross wholesale revenues as a result of the addition of new customer contracts and the increase related to volume/weather, as discussed above. The increase was partially offset by a decrease of $59.9 million in fuel cost recovery revenues primarily attributable to lower fuel rates and interim fuel refunds in the first quarter 2010 and the third and fourth quarters 2010. The interim fuel refunds and the PUCT approvals are discussed in Note 2 to the financial statements.
Fuel and purchased power expenses increased primarily due to increases in the average market prices of purchased power and natural gas, substantially offset by a decrease in deferred fuel expenses as the result of lower fuel revenues, as discussed above.
Other Income Statement Variances
20112014 Compared to 20102013
Other operation and maintenance expenses decreased primarily due to:
an decrease of $14.9 million in compensation and benefit costs primarily due to an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, other postretirement benefit plan design changes, fewer employees, and a settlement charge in 2013 related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates”belowand Note 11 to the financial statements for further discussion of benefits costs;
a decrease of $7.4 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business; and
a decrease of $7.1 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
The decrease was partially offset by an increase of $5.9 million primarily due to administration fees in 2014 related to participation in the MISO RTO.
Taxes other than income taxes increased primarily due to a reduction in the provision recorded for sales and use taxes in 2013, an increase in local franchise taxes, and an increase in ad valorem taxes. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
2013 Compared to 2012
Other operation and maintenance expenses increased primarily due to:
· | an increase of $8.5 million in transmission expenses due to a billing adjustment recorded in the fourth quarter 2011 related to prior transmission investment equalization costs (for the approximate period of 1996 - 2011) allocable to Entergy Texas under the Entergy System Agreement; |
· | an increase of $2.4 million in the over-recovery of energy efficiency revenues; and |
· | several individually insignificant items. |
The increase was partially offset by the amortization of $11 million of rate case expenses in 2010 and a decrease of $3.9$9 million in compensation and benefitsbenefit costs primarily due to a decrease in stock option expense.the discount rates used to determine net periodic pension and other postretirement benefit costs and a settlement charge, recognized in September 2013, related to the payment of lump sum benefits out of the non-qualified pension plan. See “Critical Accounting Estimates”belowand Note 11 to the financial statements for further discussion of benefits costs;
an increase of $8.8 million resulting from implementation costs, severance costs, and curtailment and special termination benefits in 2013 related to the human capital management strategic imperative. See the “Human Capital Management Strategic Imperative” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion;
an increase of $2.3 million primarily due to storm damage accruals in accordance with a rate order from PUCT issued in September 2012. See Note 2 to the financial statements for further discussion of the PUCT rate case settlement.order;
an increase of $1.7 million in distribution contract work relating primarily to vegetation maintenance; and
Taxes other than income taxes increasedan increase of $1.4 million in insurance expenses primarily due to anincreases in premiums.
The increase in local franchise taxes as a result of higher city franchise and gross receipts taxes and an increase in ad valorem taxes due to a higher 2011 assessment as compared to 2010,was partially offset by lower street rentals.by:
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
2010 Compared to 2009
Other operation and maintenance expenses increased primarily due to the amortization of $11$4.3 million of Hurricane Rita storm costs in prior year in accordance with a rate case expenses.order from the PUCT issued in September 2012. See Note 2 to the financial statements for further discussion of the PUCT rate case settlement. The increase was partially offset by order; and
a chargedecrease of $6.8$2.7 million in June 2009 resulting from the Hurricane Ikefossil-fueled expenses due to a reduced scope of work and Hurricane Gustav storm cost recovery settlement with the PUCT. See Note 2fewer outages compared to 2012.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Also, other operation and maintenance expenses include $7.4 million in 2013 and $4.8 million in 2012 of costs incurred related to the financial statements for discussion of this settlement.now-terminated plan to spin off and merge the transmission business.
Taxes other than income taxes increased primarily due to a reduction in the provision recorded for sales and use taxes an increase in local franchise taxes,2012.
Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in ad valorem taxesdepreciation rates as a result of a higher 2010 assessment as compared to 2009, partially offsetthe 2011 rate case order issued by lower millage rates.
Other income decreased primarily due to carrying costs recordedthe PUCT in 2009 on storm restoration costs as approved by Texas legislation.September 2012. See Note 2 to the financial statements for further discussion of Hurricane Ike storm cost recovery filings.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Interest expense decreasedOther income increased primarily due to lower interestthe reversal in 2012 of $6.7 million of disallowed carrying charges on deferred fuelHurricane Rita storm restoration costs andin accordance with a rate order from the pay-downPUCT issued in September 2012. See Note 2 to the financial statements for further discussion of the debt assumption agreement liability. The decrease was partially offset by the issuance of $546 million in securitization bonds in November 2009.PUCT rate order.
Income Taxes
The effective income tax rates were 38.0%39.9%, 39.0%34.2%, and 36.6%44.1% for 2011, 2010,2014, 2013, and 2009,2012, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010,2014, 2013, and 20092012 were as follows:
| | | | | 2011 | | 2010 | | 2009 | | | | | | | |
| | | | (In Thousands) | 2014 | | 2013 | | 2012 |
| | | | | | | | | (In Thousands) |
| Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $35,342 | | $200,703 | | $2,239 |
| $46,488 |
| |
| $60,236 |
| |
| $65,289 |
|
| | | | | | | | | | | | | |
| Cash flow provided by (used in): | | | | | | | |
| | Operating activities | | 238,837 | | 43,095 | | 287,533 | |
| | Investing activities | | (219,783) | | (121,439) | | (216,649) | |
| | Financing activities | | 10,893 | | (87,017) | | 127,580 | |
| | Net increase (decrease) in cash and cash equivalents | | 29,947 | | (165,361) | | 198,464 | |
| Net cash provided by (used in): | | |
| | |
| | |
|
| Operating activities | | 315,164 |
| | 237,054 |
| | 271,081 |
|
| Investing activities | | (186,540 | ) | | (164,309 | ) | | (128,904 | ) |
| Financing activities | | (144,671 | ) | | (86,493 | ) | | (147,230 | ) |
| Net decrease in cash and cash equivalents | | (16,047 | ) | | (13,748 | ) | | (5,053 | ) |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $65,289 | | $35,342 | | $200,703 |
| $30,441 |
| |
| $46,488 |
| |
| $60,236 |
|
Operating Activities
CashNet cash flow provided by operating activities increased $195.7$78.1 million in 2011 compared to 20102014 primarily due to:
· | $73.4 million of fuel cost refunds in 2011 versus $179.5 million of fuel cost refunds in 2010. See Note 2 to the financial statements for discussion of the fuel cost refunds; and |
$86.1 million of fuel cost refunds in 2013;· | income tax refunds of $13.5 million in 2011 compared to income tax payments of $48.7 million in 2010. |
System Agreement bandwidth remedy payments of $48.6 million received in the second quarter 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. Entergy Texas received approval to apply a portion of the payments to the under-collected fuel balance. The remaining balance of $24.6 million was refunded to Entergy Texas customers as of December 31, 2014; andthe timing of collections from customers.
Cash flow provided by operating activities decreased $244.4 million in 2010 comparedSee Note 2 to 2009 primarily due to:
· | the timing of collection of receivables from customers; |
· | income tax payments of $48.7 million in 2010 compared to income tax refunds of $72.3 million in 2009. In 2010, Entergy Texas made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The tax payments resulted from differences between Entergy Texas’s estimated utilization of net operating losses and actual utilization on the 2009 tax return filed in 2010; |
· | an $87.8 million fuel cost refund made in the first quarter 2010 and an $77 million fuel cost refund made in the third and fourth quarters 2010; and |
· | an increase of $14.7 million in pension contributions. See “Critical Accounting Estimates” below for further discussion of qualified pension and other postretirement benefits funding.
|
The decrease was partially offset by the absence in 2010financial statements for a discussion of Hurricane Ike restoration spending that occurred in 2009.fuel cost refunds and the System Agreement proceedings.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The increase was partially offset by:
a decrease of $54.8 million in income tax refunds in 2014 compared to 2013. Entergy Texas had income tax refunds in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds in 2013 resulted from the utilization of Entergy Texas’s taxable losses against taxable income of other members of the Entergy consolidated group; and
an increase of $10.2 million in pension contributions in 2014. See “Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
Net cash flow provided by operating activities decreased $34 million in 2013 primarily due to:
the receipt, in January 2012, of $43 million in System Agreement bandwidth remedy payments required to implement the FERC’s remedy in an October 2011 order for the period June-December 2005. As of March 31, 2013, all of the $43 million, plus interest, had been credited to Entergy Texas customers, with the final $9.5 million being credited in the first quarter 2013. See Note 2 to the financial statements for a discussion of the System Agreement proceedings;
$86.1 million of fuel cost refunds in 2013, compared to $67.2 million of fuel cost refunds in 2012. See Note 2 to the financial statements for discussion of the fuel cost refunds; and
the timing of collections of receivables from customers.
The decrease was partially offset by an increase of $55.3 million in income tax refunds. Entergy Texas had income tax refunds in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds resulted from the utilization of Entergy Texas’s taxable losses against taxable income of other members of the Entergy consolidated group.
Investing Activities
Net cash flow used in investing activities increased $98.3$22.2 million in 2011 compared to 20102014 primarily due to an increase in transmission construction expenditures and an increase in fossil-fueled generation construction expenditures due to a greater scope of projects in 2014 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 $49.5 million in 2011 compared to decreasing by $55.6 million in 2010. The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities decreased $95.2 million in 2010 compared to 2009 primarily due to money pool activity and a decrease in construction expenditures due to Hurricane Ike spending in 2009, offset by a decrease of $31.5 million in insurance proceeds and increased remittances to the securitization trust account as a result of the issuance of $546 million in securitization bonds in November 2009. See Note 5 to the financial statements for further discussion of the issuance of the securitization bonds.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased by $55.6$6 million in 20102014 compared to increasingdecreasing by $69.3$12.9 million in 2009.2013. The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Net cash used in investing activities increased $35.4 million in 2013 primarily due to:
money pool activity;
an increase in transmission construction expenditures due to reliability work performed in 2013; and
an increase in distribution construction expenditures due to an increased scope of work in 2013.
The increase was partially offset by lower fossil-fueled generation construction expenditures due to a greater scope of projects in 2012.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased by $12.9 million in 2013 compared to decreasing by $44 million in 2012.
Financing Activities
Entergy Texas’sNet cash flow used in financing activities provided $10.9increased $58.2 million in 2014 primarily due to the retirement of $150 million of cash in 2011 compared to using $87.0 million of cash in 2010 primarily due to:
· | the retirement of $199 million of debt assumption liabilities and securitization bonds in 2010 compared to the retirement of $57.4 million of securitization bonds in 2011; and |
· | a decrease of $80.6 million in common equity distributions. |
The cash provided was partially offset by the issuance of $200 million of 3.60% Series mortgage bonds in May 2010 compared to the issuance of $75 million of 4.10%7.875% Series first mortgage bonds in September 2011.
Entergy Texas’s financing activities used $87 millionJune 2014 and an increase of cash in 2010 compared to providing $127.6 million of cash in 2009 primarily due to:
· | the issuance of $545.9 million of securitization bonds in November 2009. See Note 5 to the financial statements for additional information regarding the securitization bonds; |
· | the issuance of $500 million of 7.125% Series mortgage bonds in January 2009; |
· | the issuance of $150 million of 7.875% Series mortgage bonds in May 2009; |
· | the issuance of $200 million of 3.60% Series mortgage bonds in May 2010; and |
· | the retirement of $199 million of debt assumption liabilities and securitization bonds in 2010 compared to $620 million in 2009. |
The use of cash was partially offset by:
· | the repayment of Entergy Texas’s $160 million note payable to Entergy Corporation in January 2009; |
· | the repayment of $100 million outstanding on Entergy Texas’s credit facility in February 2009; |
· | money pool activity; and |
· | a decrease of $33.1 million in common equity distributions. |
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 $50.8$45 million in 2009.
common stock
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
dividends paid, partially offset by the issuance of $135 million of 5.625% Series first mortgage bonds in May 2014. See Note 5 to the financial statements for more details on long-term debt.
Net cash flow used in financing activities decreased $60.7 million in 2013 primarily due to a decrease of $62.2 million in common stock dividends paid.
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | December 31, 2011 | | December 31, 2010 | | | | |
| | | | | | December 31,
2014 | | December 31,
2013 |
| Debt to capital | | 65.1% | | 66.8% | 62.4 | % | | 63.7 | % |
| Effect of excluding the securitization bonds | | (14.3)% | | (16.0)% | (11.8 | %) | | (12.6 | %) |
| Debt to capital, excluding securitization bonds (1) | | 50.8% | | 50.8% | |
| Debt to capital, excluding securitization bonds (a) | | 50.6 | % | | 51.1 | % |
| Effect of subtracting cash | | (1.9)% | | (1.0)% | (0.9 | %) | | (1.3 | %) |
| Net debt to net capital, excluding securitization bonds (1) | | 48.9% | | 49.8% | |
| Net debt to net capital, excluding securitization bonds (a) | | 49.7 | % | | 49.8 | % |
(1) |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and long-term debt, including the currently maturing portion and also including the debt assumption liability.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. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition.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 of Capital
Entergy Texas requires capital resources for:
· | construction and other capital investments; |
· | debt maturities or retirements; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Following are the amounts of Entergy Texas’s planned construction and other capital investments,investments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $275 |
| |
| $45 |
| |
| $100 |
|
| Transmission | 140 |
| | 165 |
| | 85 |
|
| Distribution | 105 |
| | 95 |
| | 95 |
|
| Other | 35 |
| | 35 |
| | 10 |
|
| Total |
| $555 |
| |
| $340 |
| |
| $290 |
|
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Following are the amounts of Entergy Texas’s existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $276 |
| |
| $158 |
| |
| $356 |
| |
| $1,444 |
| |
| $2,234 |
|
| Operating leases (b) |
| $6 |
| |
| $9 |
| |
| $6 |
| |
| $4 |
| |
| $25 |
|
| Purchase obligations (c) |
| $244 |
| |
| $494 |
| |
| $492 |
| |
| $213 |
| |
| $1,443 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | After 2016 | | Total |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | |
| Generation | $84 | | $92 | | N/A | | N/A | | $176 |
| Transmission | 45 | | 213 | | N/A | | N/A | | 258 |
| Distribution | 64 | | 141 | | N/A | | N/A | | 205 |
| Other | 9 | | 16 | | N/A | | N/A | | 25 |
| Total | $202 | | $462 | | N/A | | N/A | | $664 |
| Long-term debt (2) | $90 | | $198 | | $496 | | $1,811 | | $2,595 |
| Operating leases | $6 | | $9 | | $3 | | $1 | | $19 |
| Purchase obligations (3) | $92 | | $118 | | $101 | | $160 | | $471 |
(1) | Includes approximately $131 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations. |
| |
| (c) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Texas, it primarily includes unconditional fuel and purchased power obligations. |
In addition to the contractual obligations given above, Entergy Texas expects to contribute approximately $7.7$17.2 million to its pension plans and approximately $5.2$3.2 million to other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.
2015. See “TableCritical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of Contentsqualified pension and other postretirement benefits funding. Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Also in addition to the contractual obligations, Entergy Texas has $7.2$17 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Entergy’s Utility supply plan initiative will continueIn addition to seekroutine capital spending to transform itsmaintain operations, the planned capital investment estimate for Entergy Texas amounts associated with specific investments, such as the Union Power Station acquisition discussed below; NRC post-Fukushima requirements; environmental compliance spending; transmission projects to enhance reliability, reduce congestion, and enable economic growth; resource planning; generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimatedprojects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in NotesNote 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Texas pays dividends to Entergy Corporation from its earnings at a percentage determined monthly.
Union Power Station Purchase Agreement
In December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Pursuant to the agreement, Entergy Gulf States Louisiana will acquire two of the power blocks and a 50% undivided ownership interest in certain assets related to the facility, and Entergy Arkansas and Entergy Texas will each acquire one power block and a 25% undivided ownership interest in such related assets. (If Entergy Arkansas or Entergy Texas do not obtain approval for the purchase of their power blocks, Entergy Gulf States Louisiana will seek to purchase the power blocks not approved.) The base purchase price is expected to be approximately $948 million (approximately $237 million for each power block) subject to adjustments. In addition, Entergy Gulf States Louisiana anticipates selling 20% of the capacity and energy associated with its two power blocks to Entergy New Orleans through a cost-based, life-of-unit power purchase
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
agreement. The purchase is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies. These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law. In December 2014, Entergy Texas filed its application with the PUCT for approval of the acquisition. The PUCT has indicated that it will convene the hearing on the merits of this case in June 2015. Entergy Texas intends to file a rate application to seek cost recovery later in 2015. In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery. Closing is targeted to occur in late-2015.
Sources of Capital
Entergy Texas’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Texas may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred stock issuances by Entergy Texas require prior regulatory approval. Debt issuances are also subject to issuance tests set forth in its bond indenturesindenture and other agreements. Entergy Texas has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Texas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| $63,191 | | $13,672 | | $69,317 | | ($50,794) |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $306 | | $6,287 | | $19,175 | | $63,191 |
See Note 4 to the financial statements for a description of the money pool.
Entergy Texas has a credit facility in the amount of $100$150 million scheduled to expire in August 2012. NoMarch 2019. The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of December 31, 2014, there were no borrowings wereand $1.3 million of letters of credit outstanding under the facility. In addition, Entergy Texas entered into an uncommitted letter of credit facility in 2014 as a means to post collateral to support its obligations under MISO. As of December 31, 2011.2014, a $24.5 million letter of credit was outstanding under Entergy Texas’s letter of credit facility.
Entergy Texas has obtained short-term borrowing authorization through October 2013authorizations from the FERC under which it may borrowthrough October 2015 for short-term borrowings not to exceed an aggregate amount of $200 million at any one time outstanding $200 million in the aggregate.and long-term borrowings and security issuances. See Note 4 to the financial statements for further discussion of Entergy Texas’s short-term borrowing limits.
In May 2014, Entergy Texas has also obtained an order fromissued $135 million of 5.625% Series first mortgage bonds due June 2064. Entergy Texas used the FERC authorizing long-term securities issuances through July 2013.proceeds to pay, prior to maturity, a portion of its $150 million of 7.875% Series first mortgage bonds due June 2039.
Hurricane Ike and Hurricane Gustav
In September 2008, Hurricane Ike caused catastrophic damage to Entergy Texas’s service territory. The storm resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable,
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6.8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claim and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that Entergy Texas charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Texas is regulated and the rates charged to its customers are determined in regulatory proceedings. The PUCT, a governmental agency, is primarily responsible for approval of the rates charged to customers.
Filings with the PUCT
2009 Rate Case
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testimony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River Bend decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
2011 Rate Case
In November 2011, Entergy Texas filed a rate case requesting a $112 million base rate increase reflecting a 10.6% return on common equity based on an adjusted June 2011 test year. The rate case also proposed a purchased power recovery rider. The parties have agreed to a procedural schedule that contemplates a final decision by July 30, 2012, with rates relating back to June 30, 2012. On January 12, 2012, the PUCT voted not to address the purchased power recovery rider in the current rate case, but the PUCT voted to set a baseline in the rate case proceeding that would be applicable if a purchased power capacity rider is approved in a separate proceeding. In April 2012 the PUCT Staff filed direct testimony recommending a base rate increase of $66 million and a 9.6% return on common equity. The PUCT Staff, however, subsequently filed a statement of position in the proceeding indicating that it was still evaluating the position it would ultimately take in the case regarding Entergy Texas’s recovery of purchased power capacity costs and Entergy Texas’s proposal to defer its MISO transition expenses. In April 2012, Entergy Texas filed rebuttal testimony indicating a revised request for a $105 million base rate increase. A hearing was held in late-April through early-May 2012.
In September 2012 the PUCT issued an order approving a $28 million rate increase, effective July 2012. The order includes a finding that “a return on common equity (ROE) of 9.80 percent will allow [Entergy Texas] a reasonable opportunity to earn a reasonable return on invested capital.” The order also provides for increases in depreciation rates and the annual storm reserve accrual. The order also reduced Entergy Texas’s proposed purchased power capacity costs, stating that they are not known and measureable; reduced Entergy Texas’s regulatory assets associated with Hurricane Rita; excluded from rate recovery capitalized financially-based incentive compensation; included $1.6 million of MISO transition expense in base rates, and reduced Entergy’s Texas’s fuel reconciliation recovery by $4 million because it disagreed with the line-loss factor used in the calculation. After considering the progress of the proceeding in light of the PUCT order, Entergy Texas recorded in the third quarter 2012 an approximate $24 million charge to recognize that assets associated with Hurricane Rita, financially-based incentive compensation, and fuel recovery are no longer probable of recovery. Entergy Texas continues to believe that it is entitled to recover these prudently incurred costs, however, and it filed a motion for rehearing regarding these and several other issues in the PUCT’s order on October 4, 2012. Several other parties have also filed motions for rehearing of the PUCT’s order. The PUCT subsequently denied rehearing of substantive issues. Several parties, including Entergy Texas, have appealed the PUCT’s order to the Travis County District Court. A hearing was held in July 2014. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced above, which was found in favor of Entergy Texas. In November 2014, Entergy Texas appealed the Travis County District Court decision and the PUCT appealed the decision on the line-loss factor issue. Entergy Texas expects to file briefs during the first half of 2015.
2013 Rate Case
In September 2013, Entergy Texas filed a rate case requesting a $38.6 million base rate increase reflecting a 10.4% return on common equity based on an adjusted test year ending March 31, 2013. The rate case also proposed (1) a rough production cost equalization adjustment rider recovering Entergy Texas’s payment to Entergy New Orleans to achieve rough production cost equalization based on calendar year 2012 production costs and (2) a rate case expense rider recovering the cost of the 2013 rate case and certain costs associated with previous rate cases. The rate case filing also included a request to reconcile $0.9 billion of fuel and purchased power costs and fuel revenues covering the period July 2011 through March 2013. The fuel reconciliation also reflects special circumstances fuel cost recovery of approximately $22 million of purchased power capacity costs. In January 2014 the PUCT staff filed direct testimony recommending a retail rate reduction of $0.3 million and a 9.2% return on common equity. In March 2014, Entergy Texas filed an Agreed Motion for Interim Rates. The motion explained that the parties to this proceeding have agreed
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
that Entergy Texas should be allowed to implement new rates reflecting an $18.5 million base rate increase, effective for usage on and after April 1, 2014, as well as recovery of charges for rough production cost equalization and rate case expenses. In March 2014 the State Office of Administrative Hearings, the body assigned to hear the case, approved the motion. In April 2014, Entergy Texas filed a unanimous stipulation in this case. Among other things, the stipulation provides for an $18.5 million base rate increase, recovery over three years of the calendar year 2012 rough production cost equalization charges and rate case expenses, and states a 9.8% return on common equity. In addition, the stipulation finalizes the fuel and purchased power reconciliation covering the period July 2011 through March 2013, with the parties stipulating an immaterial fuel disallowance. No special circumstances recovery of purchased power capacity costs was allowed. In April 2014 the State Office of Administrative Hearings remanded the case back to the PUCT for final processing. In May 2014 the PUCT approved the stipulation. No motions for rehearing were filed during the statutory rehearing period.
In September 2014, Entergy Texas filed for a distribution cost recovery factor rider based on a law that was passed in 2011 allowing for the recovery of increases in capital costs associated with distribution plant. Entergy Texas requested collection of approximately $7 million annually from retail customers. The parties reached a unanimous settlement authorizing recovery of $3.6 million annually commencing with usage on and after January 1, 2015. A State Office of Administrative Hearings ALJ issued an order in December 2014 authorizing this recovery on an interim basis and remanded the case to the PUCT. In February 2015 the PUCT entered a final order, making the settlement final and the interim rates permanent.
Fuel and Purchased Power Cost Recovery
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges,interest, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the PUCT allocation to Texas retail customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision results in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.
In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund, including interest, for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved by the PUCT in March 2011, Entergy Texas refunded over-collections through November 2010 of approximately $73 million, including interest through the refund period. The refund was made for most customers over a three-month period that began with the February 2011 billing cycle.
In December 2011, Entergy Texas filed with the PUCT a request to refund approximately $43 million, including interest, of fuel cost recovery over-collections through October 2011. Entergy Texas and the parties to the proceeding reached an agreement that Entergy Texas willwould refund $67 million, including interest over a three-month period, which refund includesand additional over-recoveries through December 2011.2011, over a three-month period. Entergy Texas and the parties requested that interim rates consistent with the settlement be approved effective with the March 2012 billing month, and the PUCT approved the application in March 2012. Entergy Texas completed this request was granted by the presiding ALJ on February 16,refund to customers in May 2012.
In October 2012, Entergy Texas’s November 2011 rate case filing, which is discussed above, also includesTexas filed with the PUCT a request to reconcile $1.3 billionrefund approximately $78 million, including interest, of fuel cost recovery over-collections through September 2012. Entergy Texas requested that the refund be implemented over a six-month period effective with the January 2013 billing month. Entergy Texas and purchased power costs covering the parties to the proceeding reached an agreement that Entergy Texas would refund $84 million, including interest and additional over-recoveries through October 2012, to most customers over a three-month period July 2009 through June 2011.beginning January 2013. The PUCT approved the stipulation in January 2013. Entergy Texas completed this refund to customers in March 2013.
In July 2012, Entergy Texas filed with the PUCT an application to credit its customers approximately $37.5 million, including interest, resulting from the FERC’s October 2011 order in the System Agreement rough production cost equalization proceeding. See Note 2 to the financial statements for a discussion of the FERC’s October 2011 order. In September 2012 the parties submitted a stipulation resolving the proceeding. The stipulation provided that most Entergy Texas customers would be credited over a four-month period beginning October 2012. The credits were initiated with the October 2012 billing month on an interim basis, and the PUCT subsequently approved the stipulation, also in October 2012.
In August 2014, Entergy Texas filed an application seeking PUCT approval to implement an interim fuel refund of approximately $24.6 million for over-collected fuel costs incurred during the months of November 2012 through April 2014. This refund resulted from (i) applying $48.6 million in bandwidth remedy payments that Entergy Texas
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
received in May 2014 related to the June - December 2005 period to Entergy Texas’s $8.7 million under-recovered fuel balance as of April 30, 2014 and (ii) netting that fuel balance against the $15.3 million bandwidth remedy payment that Entergy Texas made related to calendar year 2013 production costs. Also in August 2014, Entergy Texas filed an unopposed motion for interim rates to implement these refunds for most customers over a two-month period commencing with September 2014. The PUCT issued its order approving the interim relief in August 2014 and Entergy Texas completed the refunds in October 2014. Parties intervened in this matter. All parties agreed that this case should be bifurcated such that the interim refunds would become final in a separate docket. The current docket would remain in place to potentially address additional rough production cost equalization-related matters that are not part of the interim refunds discussed above. In January 2015, Entergy Texas filed a request for this severance and final approval of the interim refund. Both applications are pending.
At the PUCT’s April 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity rider was good public policy. The PUCT issued an order in May 2013 adopting the rule allowing for a purchased power capacity rider, subject to an offsetting adjustment for load growth. The rule, as adopted, also includes a process for obtaining pre-approval by the PUCT of purchased power agreements. Entergy Texas has not exercised the option to recover its capacity costs under the new rider mechanism, but will continue to evaluate the benefits of utilizing the new rider to recover future capacity costs.
Federal Regulation
See “Independent Coordinator ofEntergy’s Integration Into the MISO Regional Transmission Organization,”, “System Agreement,”, “Entergy’s Proposal to Join the MISO RTO”, “Notice to SERC Reliability Corporation Regarding Reliability Standards and FERC Investigation“”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation– Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of these topics.
Nuclear Matters
See the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.
Industrial and Commercial Customers
Entergy Texas��sTexas’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Texas’s industrial customer base. Entergy Texas responds by working with industrial and commercial customers and negotiating electric service contracts to provide, under existing rate schedules, competitive rates that match specific customer needs and load profiles. Entergy Texas actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Texas does not currently expect additional significant losses to cogeneration because of the current economics of the electricity markets and Entergy Texas’s marketing efforts in retaining industrial customers.
Environmental Risks
Entergy Texas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Texas is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of Entergy Texas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Texas’s financial position or results of operations.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Texas records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period and fuel price fluctuations, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsTexas’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension and qualified projected benefit obligation cost to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Qualified Projected Benefit Obligation |
| | | Increase/(Decrease) | |
| | | | | | | | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $808 | | $10,726 | | (0.25%) | | $842 | | $13,906 |
| Rate of return on plan assets | | (0.25%) | | $647 | | - | | (0.25%) | | $697 | | $— |
| Rate of increase in compensation | | 0.25% | | $334 | | $1,830 | | 0.25% | | $322 | | $1,769 |
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $230 | | $4,221 |
| Health care cost trend | | 0.25% | | $596 | | $3,969 | | 0.25% | | $536 | | $3,884 |
| Discount rate | | (0.25%) | | $376 | | $4,520 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Costs and Funding
Total qualified pension cost for Entergy Texas in 20112014 was $4.4$8.5 million. Entergy Texas anticipates 20122015 qualified pension cost to be $10.4$12.1 million. Entergy Texas contributed $18.2$17.1 million to its qualified pension plans in 2011. Entergy Texas’s2014 and estimates 2015 pension contributions to the pension trust are currently estimated to be approximately $7.7$17.2 million, in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costsincome for Entergy Texas in 2011 were $4.1 million, including $1.5 million in savings due to the estimated effect of future Medicare Part D subsidies.2014 was $2.8 million. Entergy Texas expects 20122015 postretirement health care and life insurance benefit costsincome to approximate $6 million, including $1.3 million in savings due to the estimated effect of future Medicare Part D subsidies.$3.0 million. Entergy Texas expects to contribute approximately $5.2contributed $3.4 million to its other postretirement plans in 2012.2014 and expects to contribute approximately $3.2 million in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $30.8 million in the qualified pension benefit obligation and $8.2 million in the accumulated postretirement obligation. The new mortality assumptions increased anticipated 2015 qualified pension cost by approximately $4.3 million and other postretirement cost by approximately $1 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
To the Board of Directors and Shareholder of
Entergy Texas, Inc. and Subsidiaries
Beaumont,The Woodlands, Texas
We have audited the accompanying consolidated balance sheets of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 20112014 and 2010,2013, and the related consolidated income statements, consolidated statements of cash flows, and consolidated statements of changes in common equity (pages 374432 through 378436 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Texas, Inc. and Subsidiaries as of December 31, 20112014 and 2010,2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
| | | | | ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | | CONSOLIDATED INCOME STATEMENTS |
| | | | | | | | | | | | |
| | | For the Years Ended December 31, | | | For the Years Ended December 31, |
| | | 2011 | | | 2010 | | | 2009 | | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | | | | | | | |
| Electric | | $ | 1,757,199 | | | $ | 1,690,431 | | | $ | 1,563,823 | | |
| $1,851,982 |
| |
| $1,728,799 |
| |
| $1,581,496 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | |
| | |
| | |
|
| Operation and Maintenance: | | | | | | | | | | | | | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and | | | | | | | | | | | | | |
| gas purchased for resale | | | 352,022 | | | | 343,083 | | | | 449,335 | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | | 282,809 |
| | 207,310 |
| | 243,877 |
|
| Purchased power | | | 775,067 | | | | 743,438 | | | | 584,550 | | | 881,438 |
| | 857,512 |
| | 717,876 |
|
| Other operation and maintenance | | | 214,191 | | | | 209,699 | | | | 204,524 | | | 232,955 |
| | 253,786 |
| | 233,503 |
|
| Taxes other than income taxes | | | 69,329 | | | | 63,897 | | | | 55,480 | | | 70,439 |
| | 63,823 |
| | 59,348 |
|
| Depreciation and amortization | | | 79,263 | | | | 76,057 | | | | 74,035 | | | 99,609 |
| | 94,744 |
| | 88,307 |
|
| Other regulatory charges - net | | | 52,307 | | | | 63,683 | | | | 44,807 | | | 76,017 |
| | 77,491 |
| | 68,772 |
|
| TOTAL | | | 1,542,179 | | | | 1,499,857 | | | | 1,412,731 | | | 1,643,267 |
| | 1,554,666 |
| | 1,411,683 |
|
| | | | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | | 215,020 | | | | 190,574 | | | | 151,092 | | | 208,715 |
| | 174,133 |
| | 169,813 |
|
| | | | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | | 3,781 | | | | 5,661 | | | | 5,232 | | | 2,959 |
| | 4,647 |
| | 4,537 |
|
| Interest and investment income | | | 5,528 | | | | 7,222 | | | | 47,541 | | |
| Interest and investment income (loss) | | | 1,106 |
| | 1,369 |
| | (2,220 | ) |
| Miscellaneous - net | | | (3,047 | ) | | | (3,220 | ) | | | 544 | | | (2,345 | ) | | (3,328 | ) | | (4,264 | ) |
| TOTAL | | | 6,262 | | | | 9,663 | | | | 53,317 | | | 1,720 |
| | 2,688 |
| | (1,947 | ) |
| | | | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | |
| | |
| | |
|
| Interest expense | | | 93,554 | | | | 95,272 | | | | 106,163 | | | 88,049 |
| | 92,156 |
| | 96,035 |
|
| Allowance for borrowed funds used during construction | | | (2,609 | ) | | | (3,618 | ) | | | (2,510 | ) | | (2,062 | ) | | (3,324 | ) | | (3,258 | ) |
| TOTAL | | | 90,945 | | | | 91,654 | | | | 103,653 | | | 85,987 |
| | 88,832 |
| | 92,777 |
|
| | | | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 130,337 | | | | 108,583 | | | | 100,756 | | | 124,448 |
| | 87,989 |
| | 75,089 |
|
| | | | | | | | | | | | | | | | | | | |
| Income taxes | | | 49,492 | | | | 42,383 | | | | 36,915 | | | 49,644 |
| | 30,108 |
| | 33,118 |
|
| | | | | | | | | | | | | | | | | | | |
| NET INCOME | | $ | 80,845 | | | $ | 66,200 | | | $ | 63,841 | | |
| $74,804 |
| |
| $57,881 |
| |
| $41,971 |
|
| | | | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | |
| | |
|
| | | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $74,804 |
| |
| $57,881 |
| |
| $41,971 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation and amortization | | 99,609 |
| | 94,744 |
| | 88,307 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 2,829 |
| | 86,152 |
| | 123,167 |
|
| Changes in assets and liabilities: | | |
| | |
| | |
|
| Receivables | | 24,318 |
| | (49,252 | ) | | 32,912 |
|
| Fuel inventory | | 5,433 |
| | 53 |
| | (1,504 | ) |
| Accounts payable | | (19,854 | ) | | 29,718 |
| | 19,980 |
|
| Prepaid taxes and taxes accrued | | 57,484 |
| | (1,967 | ) | | (93,979 | ) |
| Interest accrued | | (1,489 | ) | | (920 | ) | | (929 | ) |
| Deferred fuel costs | | (15,954 | ) | | (89,241 | ) | | 28,670 |
|
| Other working capital accounts | | 9,045 |
| | 6,918 |
| | (58,691 | ) |
| Provisions for estimated losses | | 3,139 |
| | 2,470 |
| | 1,585 |
|
| Other regulatory assets | | 2,809 |
| | 197,520 |
| | 62,166 |
|
| Pension and other postretirement liabilities | | 59,725 |
| | (104,055 | ) | | 17,330 |
|
| Other assets and liabilities | | 13,266 |
| | 7,033 |
| | 10,096 |
|
| Net cash flow provided by operating activities | | 315,164 |
| | 237,054 |
| | 271,081 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (195,794 | ) | | (181,546 | ) | | (181,404 | ) |
| Allowance for equity funds used during construction | | 2,981 |
| | 4,647 |
| | 4,537 |
|
| Changes in money pool receivable - net | | 5,981 |
| | 12,888 |
| | 44,016 |
|
| Changes in securitization account | | 292 |
| | (256 | ) | | 3,960 |
|
| Other | | — |
| | (42 | ) | | (13 | ) |
| Net cash flow used in investing activities | | (186,540 | ) | | (164,309 | ) | | (128,904 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | 131,163 |
| | — |
| | — |
|
| Retirement of long-term debt | | (213,450 | ) | | (61,316 | ) | | (59,322 | ) |
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (70,000 | ) | | (25,000 | ) | | (87,180 | ) |
| Other | | 7,616 |
| | (177 | ) | | (728 | ) |
| Net cash flow used in financing activities | | (144,671 | ) | | (86,493 | ) | | (147,230 | ) |
| Net decrease in cash and cash equivalents | | (16,047 | ) | | (13,748 | ) | | (5,053 | ) |
| Cash and cash equivalents at beginning of period | | 46,488 |
| | 60,236 |
| | 65,289 |
|
| Cash and cash equivalents at end of period | |
| $30,441 |
| |
| $46,488 |
| |
| $60,236 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $85,695 |
| |
| $89,021 |
| |
| $92,632 |
|
| Income taxes | |
| ($2,653 | ) | |
| ($57,473 | ) | |
| ($2,207 | ) |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 80,845 | | | $ | 66,200 | | | $ | 63,841 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation and amortization | | | 79,263 | | | | 76,057 | | | | 74,035 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 56,219 | | | | 63,418 | | | | 4,365 | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | (39,640 | ) | | | (41,820 | ) | | | 281,710 | |
| Fuel inventory | | | (12 | ) | | | 1,085 | | | | 2,688 | |
| Accounts payable | | | (11,442 | ) | | | 23,415 | | | | (99,483 | ) |
| Taxes accrued | | | 11,760 | | | | (49,030 | ) | | | 27,986 | |
| Interest accrued | | | (582 | ) | | | 3,102 | | | | 8,473 | |
| Deferred fuel costs | | | (12,766 | ) | | | (25,318 | ) | | | 123,927 | |
| Other working capital accounts | | | 42,518 | | | | (115,753 | ) | | | (95,603 | ) |
| Provisions for estimated losses | | | (296 | ) | | | (3,390 | ) | | | (4,226 | ) |
| Other regulatory assets | | | (15,611 | ) | | | 51,637 | | | | (187,250 | ) |
| Pension and other postretirement liabilities | | | 64,686 | | | | (5,998 | ) | | | (12,594 | ) |
| Other assets and liabilities | | | (16,105 | ) | | | (510 | ) | | | 99,664 | |
| Net cash flow provided by operating activities | | | 238,837 | | | | 43,095 | | | | 287,533 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (173,462 | ) | | | (162,822 | ) | | | (188,277 | ) |
| Allowance for equity funds used during construction | | | 3,781 | | | | 5,661 | | | | 5,232 | |
| Insurance proceeds | | | - | | | | 5,293 | | | | 36,749 | |
| Change in money pool receivable - net | | | (49,519 | ) | | | 55,645 | | | | (69,317 | ) |
| Increase in other investments | | | - | | | | 2,318 | | | | - | |
| Remittances to transition charge account | | | (92,786 | ) | | | (89,939 | ) | | | (36,999 | ) |
| Payments from transition charge account | | | 92,203 | | | | 62,405 | | | | 35,963 | |
| Net cash flow used in investing activities | | | (219,783 | ) | | | (121,439 | ) | | | (216,649 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | 74,092 | | | | 198,435 | | | | 1,177,819 | |
| Retirement of long-term debt | | | (57,419 | ) | | | (199,052 | ) | | | (619,945 | ) |
| Change in money pool payable - net | | | - | | | | - | | | | (50,794 | ) |
| Repayment of loan from Entergy Corporation | | | - | | | | - | | | | (160,000 | ) |
| Changes in credit borrowings - net | | | - | | | | - | | | | (100,000 | ) |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (5,780 | ) | | | (86,400 | ) | | | (119,500 | ) |
| Net cash flow provided by (used in) financing activities | | | 10,893 | | | | (87,017 | ) | | | 127,580 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 29,947 | | | | (165,361 | ) | | | 198,464 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 35,342 | | | | 200,703 | | | | 2,239 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 65,289 | | | $ | 35,342 | | | $ | 200,703 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid/(received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 89,792 | | | $ | 87,147 | | | $ | 93,951 | |
| Income taxes | | $ | (13,538 | ) | | $ | 48,713 | | | $ | (72,322 | ) |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| |
| CONSOLIDATED BALANCE SHEETS | |
| ASSETS | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents: | | | | | | |
| Cash | | $ | 150 | | | $ | 1,719 | |
| Temporary cash investments | | | 65,139 | | | | 33,623 | |
| Total cash and cash equivalents | | | 65,289 | | | | 35,342 | |
| Securitization recovery trust account | | | 41,215 | | | | 40,632 | |
| Accounts receivable: | | | | | | | | |
| Customer | | | 68,290 | | | | 56,358 | |
| Allowance for doubtful accounts | | | (1,461 | ) | | | (2,185 | ) |
| Associated companies | | | 129,561 | | | | 53,128 | |
| Other | | | 9,573 | | | | 11,605 | |
| Accrued unbilled revenues | | | 41,573 | | | | 39,471 | |
| Total accounts receivable | | | 247,536 | | | | 158,377 | |
| Accumulated deferred income taxes | | | 88,436 | | | | 44,752 | |
| Fuel inventory - at average cost | | | 53,884 | | | | 53,872 | |
| Materials and supplies - at average cost | | | 29,810 | | | | 28,842 | |
| Prepayments and other | | | 15,203 | | | | 14,856 | |
| TOTAL | | | 541,373 | | | | 376,673 | |
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investments in affiliates - at equity | | | 783 | | | | 812 | |
| Non-utility property - at cost (less accumulated depreciation) | | | 930 | | | | 1,223 | |
| Other | | | 17,969 | | | | 17,037 | |
| TOTAL | | | 19,682 | | | | 19,072 | |
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | | 3,338,608 | | | | 3,205,566 | |
| Construction work in progress | | | 90,856 | | | | 80,096 | |
| TOTAL UTILITY PLANT | | | 3,429,464 | | | | 3,285,662 | |
| Less - accumulated depreciation and amortization | | | 1,289,166 | | | | 1,245,729 | |
| UTILITY PLANT - NET | | | 2,140,298 | | | | 2,039,933 | |
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | | 129,924 | | | | 127,046 | |
Other regulatory assets (includes securitization property of $704,896 as of December 31, 2011 and $763,841 as of December 31, 2010) | | | 1,178,067 | | | | 1,168,960 | |
| Long-term receivables - associated companies | | | 31,254 | | | | 32,596 | |
| Other | | | 18,408 | | | | 19,584 | |
| TOTAL | | | 1,357,653 | | | | 1,348,186 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 4,059,006 | | | $ | 3,783,864 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $1,733 |
| |
| $2,432 |
|
| Temporary cash investments | | 28,708 |
| | 44,056 |
|
| Total cash and cash equivalents | | 30,441 |
| | 46,488 |
|
| Securitization recovery trust account | | 37,219 |
| | 37,511 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 70,993 |
| | 76,957 |
|
| Allowance for doubtful accounts | | (672 | ) | | (443 | ) |
| Associated companies | | 57,004 |
| | 76,494 |
|
| Other | | 10,985 |
| | 10,897 |
|
| Accrued unbilled revenues | | 38,363 |
| | 43,067 |
|
| Total accounts receivable | | 176,673 |
| | 206,972 |
|
| Deferred fuel costs | | 11,861 |
| | — |
|
| Accumulated deferred income taxes | | 669 |
| | — |
|
| Fuel inventory - at average cost | | 49,902 |
| | 55,335 |
|
| Materials and supplies - at average cost | | 33,892 |
| | 34,068 |
|
| Prepaid taxes | | — |
| | 55,635 |
|
| Prepayments and other | | 29,211 |
| | 50,498 |
|
| TOTAL | | 369,868 |
| | 486,507 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Investments in affiliates - at equity | | 655 |
| | 687 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 19,085 |
| | 18,161 |
|
| TOTAL | | 20,116 |
| | 19,224 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 3,761,847 |
| | 3,616,061 |
|
| Construction work in progress | | 125,425 |
| | 94,743 |
|
| TOTAL UTILITY PLANT | | 3,887,272 |
| | 3,710,804 |
|
| Less - accumulated depreciation and amortization | | 1,454,701 |
| | 1,387,303 |
|
| UTILITY PLANT - NET | | 2,432,571 |
| | 2,323,501 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 123,407 |
| | 129,069 |
|
Other regulatory assets (includes securitization property of $521,424 as of
December 31, 2014 and $585,152 as of December 31, 2013) | | 922,087 |
| | 919,234 |
|
| Long-term receivables - associated companies | | 26,156 |
| | 27,900 |
|
| Other | | 13,880 |
| | 16,425 |
|
| TOTAL | | 1,085,530 |
| | 1,092,628 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,908,085 |
| |
| $3,921,860 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
376
434
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $200,000 |
| |
| $— |
|
| Accounts payable: | | | | |
| Associated companies | | 91,481 |
| | 112,309 |
|
| Other | | 87,910 |
| | 73,682 |
|
| Customer deposits | | 44,308 |
| | 38,721 |
|
| Taxes accrued | | 1,849 |
| | — |
|
| Accumulated deferred income taxes | | — |
| | 33,847 |
|
| Interest accrued | | 29,757 |
| | 31,246 |
|
| Deferred fuel costs | | — |
| | 4,093 |
|
| Other | | 18,238 |
| | 36,276 |
|
| TOTAL | | 473,543 |
| | 330,174 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 1,046,618 |
| | 1,022,955 |
|
| Accumulated deferred investment tax credits | | 14,735 |
| | 16,147 |
|
| Other regulatory liabilities | | 5,125 |
| | 5,194 |
|
| Asset retirement cost liabilities | | 4,610 |
| | 4,349 |
|
| Accumulated provisions | | 12,218 |
| | 9,079 |
|
| Pension and other postretirement liabilities | | 111,011 |
| | 51,253 |
|
| Long-term debt (includes securitization bonds of $565,659 as of December 31, 2014 and $629,087 as of December 31, 2013) | | 1,278,931 |
| | 1,556,939 |
|
| Other | | 69,463 |
| | 38,743 |
|
| TOTAL | | 2,542,711 |
| | 2,704,659 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2014 and 2013 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 360,385 |
| | 355,581 |
|
| TOTAL | | 891,831 |
| | 887,027 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,908,085 |
| |
| $3,921,860 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
| CONSOLIDATED BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Accounts payable: | | | | | | |
| Associated companies | | $ | 60,583 | | | $ | 69,862 | |
| Other | | | 69,160 | | | | 70,325 | |
| Customer deposits | | | 38,294 | | | | 38,376 | |
| Taxes accrued | | | 40,311 | | | | 28,551 | |
| Interest accrued | | | 33,095 | | | | 33,677 | |
| Deferred fuel costs | | | 64,664 | | | | 77,430 | |
| Pension and other postretirement liabilities | | | 1,029 | | | | 1,354 | |
| System agreement cost equalization | | | 43,290 | | | | - | |
| Other | | | 4,847 | | | | 4,222 | |
| TOTAL | | | 355,273 | | | | 323,797 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 934,990 | | | | 829,668 | |
| Accumulated deferred investment tax credits | | | 19,339 | | | | 20,936 | |
| Other regulatory liabilities | | | 11,710 | | | | 26,178 | |
| Asset retirement cost liabilities | | | 3,870 | | | | 3,651 | |
| Accumulated provisions | | | 5,024 | | | | 5,320 | |
| Pension and other postretirement liabilities | | | 137,735 | | | | 72,724 | |
Long-term debt (includes securitization bonds of $749,673 as of December 31, 2011 and $807,066 as of December 31, 2010) | | | 1,677,127 | | | | 1,659,230 | |
| Other | | | 14,583 | | | | 18,070 | |
| TOTAL | | | 2,804,378 | | | | 2,635,777 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, no par value, authorized 200,000,000 shares; | | | | | |
| issued and outstanding 46,525,000 shares in 2011 and 2010 | | | 49,452 | | | | 49,452 | |
| Paid-in capital | | | 481,994 | | | | 481,994 | |
| Retained earnings | | | 367,909 | | | | 292,844 | |
| TOTAL | | | 899,355 | | | | 824,290 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 4,059,006 | | | $ | 3,783,864 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2011 |
| $49,452 |
| |
| $481,994 |
| |
| $367,909 |
| |
| $899,355 |
|
| Net income | — |
| | — |
| | 41,971 |
| | 41,971 |
|
| Common stock dividends | — |
| | — |
| | (87,180 | ) | | (87,180 | ) |
| Balance at December 31, 2012 |
| $49,452 |
| |
| $481,994 |
| |
| $322,700 |
| |
| $854,146 |
|
| Net income | — |
| | — |
| | 57,881 |
| | 57,881 |
|
| Common stock dividends | — |
| | — |
| | (25,000 | ) | | (25,000 | ) |
| Balance at December 31, 2013 |
| $49,452 |
| |
| $481,994 |
| |
| $355,581 |
| |
| $887,027 |
|
| Net income | — |
| | — |
| | 74,804 |
| | 74,804 |
|
| Common stock dividends | — |
| | — |
| | (70,000 | ) | | (70,000 | ) |
| Balance at December 31, 2014 |
| $49,452 |
| |
| $481,994 |
| |
| $360,385 |
| |
| $891,831 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | | | | |
| | | Common Equity | | | | |
| | | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 49,452 | | | $ | 481,994 | | | $ | 368,703 | | | $ | 900,149 | |
| Net income | | | - | | | | - | | | | 63,841 | | | | 63,841 | |
| Common stock dividends | | | - | | | | - | | | | (119,500 | ) | | | (119,500 | ) |
| Balance at December 31, 2009 | | $ | 49,452 | | | $ | 481,994 | | | $ | 313,044 | | | $ | 844,490 | |
| Net income | | | - | | | | - | | | | 66,200 | | | | 66,200 | |
| Common stock dividends | | | - | | | | - | | | | (86,400 | ) | | | (86,400 | ) |
| Balance at December 31, 2010 | | $ | 49,452 | | | $ | 481,994 | | | $ | 292,844 | | | $ | 824,290 | |
| Net income | | | - | | | | - | | | | 80,845 | | | | 80,845 | |
| Common stock dividends | | | - | | | | - | | | | (5,780 | ) | | | (5,780 | ) |
| Balance at December 31, 2011 | | $ | 49,452 | | | $ | 481,994 | | | $ | 367,909 | | | $ | 899,355 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $1,851,982 |
| |
| $1,728,799 |
| |
| $1,581,496 |
| |
| $1,757,199 |
| |
| $1,690,431 |
|
| Net Income |
| $74,804 |
| |
| $57,881 |
| |
| $41,971 |
| |
| $80,845 |
| |
| $66,200 |
|
| Total assets |
| $3,908,085 |
| |
| $3,921,860 |
| |
| $4,025,781 |
| |
| $4,059,006 |
| |
| $3,783,864 |
|
| Long-term obligations (a) |
| $1,278,931 |
| |
| $1,556,939 |
| |
| $1,617,813 |
| |
| $1,677,127 |
| |
| $1,659,230 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt). |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Millions) |
| | | | | | | | | | |
| Electric Operating Revenues: | |
| | |
| | |
| | |
| | |
|
| Residential |
| $654 |
| |
| $596 |
| |
| $553 |
| |
| $638 |
| |
| $559 |
|
| Commercial | 384 |
| | 327 |
| | 325 |
| | 369 |
| | 321 |
|
| Industrial | 422 |
| | 325 |
| | 299 |
| | 352 |
| | 305 |
|
| Governmental | 26 |
| | 24 |
| | 24 |
| | 26 |
| | 23 |
|
| Total retail | 1,486 |
| | 1,272 |
| | 1,201 |
| | 1,385 |
| | 1,208 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 316 |
| | 369 |
| | 313 |
| | 262 |
| | 373 |
|
| Non-associated companies | 23 |
| | 47 |
| | 36 |
| | 74 |
| | 76 |
|
| Other | 27 |
| | 41 |
| | 31 |
| | 36 |
| | 33 |
|
| Total |
| $1,852 |
| |
| $1,729 |
| |
| $1,581 |
| |
| $1,757 |
| |
| $1,690 |
|
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | |
| | |
| | |
| | |
|
| Residential | 5,810 |
| | 5,726 |
| | 5,604 |
| | 6,034 |
| | 5,958 |
|
| Commercial | 4,471 |
| | 4,402 |
| | 4,396 |
| | 4,433 |
| | 4,271 |
|
| Industrial | 7,140 |
| | 6,404 |
| | 6,066 |
| | 6,102 |
| | 5,642 |
|
| Governmental | 277 |
| | 282 |
| | 278 |
| | 294 |
| | 271 |
|
| Total retail | 17,698 |
| | 16,814 |
| | 16,344 |
| | 16,863 |
| | 16,142 |
|
| Sales for resale: | |
| | |
| | |
| | |
| | |
|
| Associated companies | 4,763 |
| | 6,287 |
| | 5,702 |
| | 4,158 |
| | 3,758 |
|
| Non-associated companies | 200 |
| | 712 |
| | 827 |
| | 1,258 |
| | 1,300 |
|
| Total | 22,661 |
| | 23,813 |
| | 22,873 |
| | 22,279 |
| | 21,200 |
|
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 1,757,199 | | | $ | 1,690,431 | | | $ | 1,563,823 | | | $ | 2,012,258 | | | $ | 1,782,923 | |
| Net Income | | $ | 80,845 | | | $ | 66,200 | | | $ | 63,841 | | | $ | 57,895 | | | $ | 58,921 | |
| Total assets | | $ | 4,059,006 | | | $ | 3,783,864 | | | $ | 3,920,133 | | | $ | 3,984,771 | | | $ | 3,606,752 | |
| Long-term obligations (1) | | $ | 1,677,127 | | | $ | 1,659,230 | | | $ | 1,490,283 | | | $ | 1,084,368 | | | $ | 1,103,863 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | 2011 | | | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | |
| | | (Dollars In Millions) | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 638 | | | $ | 559 | | | $ | 533 | | | $ | 606 | | | $ | 544 | |
| Commercial | | | 369 | | | | 321 | | | | 337 | | | | 417 | | | | 364 | |
| Industrial | | | 352 | | | | 305 | | | | 332 | | | | 489 | | | | 414 | |
| Governmental | | | 26 | | | | 23 | | | | 23 | | | | 27 | | | | 24 | |
| Total retail | | | 1,385 | | | | 1,208 | | | | 1,225 | | | | 1,539 | | | | 1,346 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 262 | | | | 373 | | | | 294 | | | | 436 | | | | 398 | |
| Non-associated companies | | | 74 | | | | 76 | | | | 10 | | | | 6 | | | | 6 | |
| Other | | | 36 | | | | 33 | | | | 35 | | | | 31 | | | | 33 | |
| Total | | $ | 1,757 | | | $ | 1,690 | | | $ | 1,564 | | | $ | 2,012 | | | $ | 1,783 | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
| Residential | | | 6,034 | | | | 5,958 | | | | 5,453 | | | | 5,245 | | | | 5,280 | |
| Commercial | | | 4,433 | | | | 4,271 | | | | 4,165 | | | | 4,092 | | | | 4,085 | |
| Industrial | | | 6,102 | | | | 5,642 | | | | 5,570 | | | | 5,948 | | | | 5,911 | |
| Governmental | | | 294 | | | | 271 | | | | 258 | | | | 248 | | | | 246 | |
| Total retail | | | 16,863 | | | | 16,142 | | | | 15,446 | | | | 15,533 | | | | 15,522 | |
| Sales for resale: | | | | | | | | | | | | | | | | | | | | |
| Associated companies | | | 4,158 | | | | 3,758 | | | | 3,630 | | | | 3,771 | | | | 4,366 | |
| Non-associated companies | | | 1,258 | | | | 1,300 | | | | 231 | | | | 87 | | | | 89 | |
| Total | | | 22,279 | | | | 21,200 | | | | 19,307 | | | | 19,391 | | | | 19,977 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
System Energy’s principal asset currently consists of a 78.5%an ownership interest and 11.5%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.
Results of Operations
Net Income
20112014 Compared to 20102013
Net income decreased $18.4$17.3 million primarily due to an increase in thea higher effective income tax rate. A decreaserate and lower operating revenues resulting from lower rate base as compared with the same period in operating income wasthe prior year, partially offset by anhigher other regulatory credits. System Energy records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The increase in otherregulatory credits for 2014 compared to 2013 is primarily caused by increases in depreciation and accretion expenses and regulatory credits recorded in 2014 to realign the asset retirement obligation regulatory asset with regulatory treatment.
2013 Compared to 2012
Net income increased $1.8 million primarily due to higher operating income and a decrease in interest expense, which led to a slight increase inlower effective income before income taxes.tax rate, partially offset by lower other income. Operating income was lowerhigher because of lowerhigher rate base compared to 2010.2012 resulting from capital spending at Grand Gulf, including the uprate project. The lower effective income tax rate was primarily due to the reversal of a portion of the provision for uncertain tax positions. Other income was higher and interest expense was lower primarily because ofdue to AFUDC accrued on the Grand Gulf uprate project.
2010 Compared to 2009
Net income increased $33.7 million primarily due to a decreaseproject in 2012. Grand Gulf’s Spring 2012 refueling outage was completed in June 2012, and the effective income tax rate.majority of uprate-related capital improvements were completed during this outage.
Income Taxes
The effective income tax rates for 2011, 2010,2014, 2013, and 20092012 were 53.9%46.4%, 40.4%37.7%, and 66.5%40.8%, respectively. The increase in the rate for 2011 is primarily due to an intercompany settle up for federal income taxes for years prior to 2008 which include an allocation of the tax benefit of Entergy Corporation’s expenses to the subsidiaries generating taxable income for the respective years. The effects of various tax positions settled with the IRS pertaining to the 2006/2007 audit require System Energy to pay back prior benefits of the Entergy Corporation’s expenses it received when the benefits were originally allocated based upon the tax return as filed. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0%35% to the effective income tax rates.
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2011, 2010, and 2009 were as follows:
| | | | 2011 | | 2010 | | 2009 |
| | | | (In Thousands) |
| | | | | | | | |
| Cash and cash equivalents at beginning of period | | $263,772 | | $264,482 | | $102,788 |
| | | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| | Operating activities | | 430,681 | | 250,405 | | 417,877 |
| | Investing activities | | (311,397) | | (184,588) | | (149,344) |
| | Financing activities | | (197,899) | | (66,527) | | (106,839) |
| | Net increase (decrease) in cash and cash equivalents | | (78,615) | | (710) | | 161,694 |
| | | | | | | | |
| Cash and cash equivalents at end of period | | $185,157 | | $263,772 | | $264,482 |
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the years ended December 31, 2014, 2013, and 2012 were as follows:
|
| | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $127,142 |
| |
| $83,622 |
| |
| $185,157 |
|
| | | | | | |
| Net cash provided by (used in): | | | |
| | |
|
| Operating activities | 428,265 |
| | 279,638 |
| | 412,000 |
|
| Investing activities | (203,930 | ) | | (96,852 | ) | | (502,637 | ) |
| Financing activities | (128,298 | ) | | (139,266 | ) | | (10,898 | ) |
| Net increase (decrease) in cash and cash equivalents | 96,037 |
| | 43,520 |
| | (101,535 | ) |
| | | | | | |
| Cash and cash equivalents at end of period |
| $223,179 |
| |
| $127,142 |
| |
| $83,622 |
|
Operating Activities
CashNet cash flow provided by operating activities increased $180.3$148.6 million in 20112014 primarily due to income tax refunds of $100.9$10.1 million in 20112014 compared to income tax payments of $56$211.2 million in 2010. In 20112013. The increase was partially offset by spending on the Grand Gulf refueling outage in 2014 and an increase of $12.9 million in pension contributions in 2014. System Energy received cash refundsmade income tax payments in 2013 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds result from a decreaseincome tax payments in 2010 taxable income from what was previously estimated because of the recognition of additional repair expenses for tax purposes associated with a tax accounting change filed in 2010 and2013 resulted primarily from the reversal of temporary differences for which System Energy had previously made cashclaimed a tax payments.deduction. See “Critical Accounting Estimates”below and Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.
Cash flowNet cash provided by operationsoperating activities decreased $167.5$132.4 million in 20102013 primarily due to income tax payments of $56$211.2 million in 20102013, as discussed above, compared to income tax refunds of $120.4 in 2009, and an increase of $26.6$56.8 million in pension contributions. In 20102012, partially offset by spending on the Grand Gulf refueling outage in 2012. System Energy madereceived income tax paymentsrefunds in 2012 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments resulted from the reversal of temporary differences for which System Energy previously received cash tax benefits and from estimated federal income tax payments for tax year 2010. See “Critical Accounting Estimates” below forrefunds of $56.8 million in 2012 resulted primarily from a discussiondecrease of qualified pension and other postretirement benefits.previously estimated 2011 taxable income due to the recognition of additional bonus depreciation.
Investing Activities
Net cash flow used in investing activities increased $126.8$107.1 million in 20112014 primarily due to:
· | The proceeds from the transfer, in the first quarter 2010, of $100.3 million in development costs related to Entergy New Nuclear Development, LLC; |
· | An increase in construction expenditures resulting primarily from spending on the power uprate project at Grand Gulf; |
· | The repayment in 2010 of $25.6 million by Entergy New Orleans of a note issued in resolution of its bankruptcy proceedings; and |
The increase was partially offset by a decreasefluctuations in nuclear fuel purchases dueactivity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
an increase in nuclear construction expenditures primarily as a result of spending on nuclear projects during the Grand Gulf refueling outages.outage in 2014; and
money pool activity.
IncreasesDecreases in System Energy’s receivable from the money pool are a usesource of cash flow and System Energy’s
receivable from the money pool increaseddecreased by $22.5$6.9 million in 20112014 compared to increasingdecreasing by $7.4$17.7 million in 2010.2013. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Net cash used in investing activities increased $35.2decreased $405.8 million in 20102013 primarily due to an increase of $129.5 milliona decrease in construction expenditures resulting from spending on the uprate project at Grand Gulf completed during the refueling outage in 2012 and a decrease in nuclear fuel purchases due to the timing of refueling outages, and an increase in construction expendituresactivity primarily due to the Grand Gulf power uprate project.refueling outage in 2012. The increasedecrease was partially offset by:by money pool activity.
· | the proceeds from the transfer of $100.3 million in development costs related to Entergy New Nuclear Development, LLC discussed below; |
· | money pool activity; and |
· | the repayment by Entergy New Orleans of a $25.6 million note issued in resolution of its bankruptcy proceedings. |
IncreasesDecreases in System Energy’s receivable from the money pool are a usesource of cash flow, and System Energy’s receivable from the money pool increased by $7.4decreased $17.7 million in 20102013 compared to increasingdecreasing by $47.6$93.5 million in 2009.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Financing Activities2012.
CashFinancing Activities
Net cash used in financing activities increased $131.4decreased $11 million in 20112014 primarily due to to:
the issuanceredemption of $60$70 million of 5.33%6.29% Series GF notes by the nuclear fuel company variable interest entity in 2010,September 2013; and
net borrowings of $20.4 million on the repayment of $38.3 millionnuclear fuel company variable interest entity’s credit facility in commercial paper in 2011 as2014 compared to the issuance of $20.3 million in commercial paper in 2010, and the partial retirementnet repayments of $40 million of 6.2% pollution control bondson the nuclear fuel company variable interest entity’s credit facility in 2011. The increase was slightly offset by a $24 million decrease in dividend paid on common stock.
Net cash flow used in financing activities decreased $40.3 million in 2010 primarily due to:
· | the issuance in April 2010 of $60 million of 5.33% Series G notes by the nuclear fuel company variable interest entity to finance its fuel procurement activities; and |
· | commercial paper issuances by the nuclear fuel company variable interest entity to finance its fuel procurement activities. |
2013.
The decrease was partially offset by the issuance of $85 million of 3.78% Series I notes by the nuclear fuel company variable interest entity in October 2013 and an increase of $31.6 million in common stock dividends paid in 2014.
Net cash used in financing activities increased $128.4 million in 2013 primarily due to:
the issuance of $250 million of 4.10% Series first mortgage bonds in September 2012;
the issuance of $50 million of 4.02% Series H notes by the nuclear fuel company variable interest entity in February 2012; and
the redemption of $70 million of 6.29% Series F notes by the nuclear fuel company variable interest entity in September 2013.
The increase was partially offset by:
· | an increase of $24.9 million in dividends paid on common stock; and |
the redemption of $152.975 million of pollution control revenue bonds in 2012;· | an increase of $13.3 million in the January 2010 principal payment made on the Grand Gulf sale-leaseback compared to the January 2009 principal payment. |
the redemption of $70 million of 6.2% Series first mortgage bonds in October 2012;an increase in borrowings of $40 million on the nuclear fuel company variable interest entity’s credit facility in 2013 compared to the repayment of borrowings of $40 million on the nuclear fuel company variable interest entity’s credit facility in 2012; and
a decrease of $9.4 million in common stock dividends paid in 2013.
See Note 5 to the financial statements for details of long-term debt.
Capital Structure
System Energy’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | December 31, 2011 | | December 31, 2010 | | | | |
| | | | | | December 31,
2014 | | December 31,
2013 |
| Debt to capital | | 48.3% | | 51.7% | 45.7 | % | | 46.4 | % |
| Effect of subtracting cash | | (7.1)% | | (9.0)% | (8.8 | %) | | (4.6 | %) |
| Net debt to net capital | | 41.2% | | 42.7% | 36.9 | % | | 41.8 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of capital lease obligationsshort-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder’s equity. Net capital consists of
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
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.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 of Capital
System Energy requires capital resources for:
· | construction and other capital investments; |
· | debt maturities or retirements; |
· | working capital purposes, including the financing of fuel costs; and |
· | dividend and interest payments. |
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Following are the amounts of System Energy’s planned construction and other capital investments,investments.
|
| | | | | | | | | | | |
| | 2015 | | 2016 | | 2017 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $70 |
| |
| $65 |
| |
| $35 |
|
| Other | 5 |
| | 5 |
| | 5 |
|
| Total |
| $75 |
| |
| $70 |
| |
| $40 |
|
Following are the amounts of System Energy’s existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:obligations.
|
| | | | | | | | | | | | | | | | | | | |
| | 2015 | | 2016-2017 | | 2018-2019 | | After 2019 | | Total |
| | (In Millions) |
| Long-term debt (a) |
| $141 |
| |
| $132 |
| |
| $161 |
| |
| $762 |
| |
| $1,196 |
|
| Purchase obligations (b) |
| $5 |
| |
| $28 |
| |
| $30 |
| |
| $53 |
| |
| $116 |
|
| | 2012 | | 2013-2014 | | 2015-2016 | | After 2016 | | Total | |
| | (In Millions) |
| Planned construction and capital investment (1): | | | | | | | | |
| Generation | $316 | | $74 | | N/A | | N/A | | $390 | |
| Other | 2 | | 4 | | N/A | | N/A | | 6 | |
| Total | $318 | | $78 | | N/A | | N/A | | $396 | |
| Long-term debt (2) | $153 | | $225 | | $157 | | $496 | | $1,031 | |
| Purchase obligations (3) | $21 | | $23 | | $23 | | $51 | | $118 | |
(1) | Includes approximately $19 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment, or systems. |
(2)(a) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | |
| (b) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For System Energy, it includes nuclear fuel purchase obligations. |
In addition to the contractual obligations given above, System Energy expects to contribute approximately $8.9$20.8 million to its pension plans and approximately $4.1 million$475 thousand to its other postretirement plans in 20122015, although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015. See “Critical Accounting Estimates– Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pension and other postretirement benefits funding.
Also in addition to the contractual obligations, System Energy has $228.6$95.1 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
TheIn addition to routine spending to maintain operations, the planned capital investment estimate for includes specific investments and initiatives such as NRC post-Fukushima requirements and plant improvements.
System Energy reflects capital required to support the existing business of System Energy. The estimate also includes the costs of System Energy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant. On November 30, 2009, the MPSC issued a Certificate of Public ConvenienceResources, Inc.
Management’s Financial Discussion and Necessity for implementation of the uprate. A license amendment application was submitted to the NRC in September 2010. After performing more detailed project design, engineering, analysis and major materials purchases, System Energy’s current estimate of the total capital investment to be made in the course of the implementation of the Grand Gulf uprate project is approximately $754 million, including SMEPA’s share. The estimate includes spending on certain major equipment refurbishment and replacement that would have been required over the normal course of the plant’s life even if the uprate were not done. The purpose of performing this major equipment refurbishment and replacement in connection with the uprate is to avoid additional plant outages and construction costs in the future while improving plant reliability. The investment estimate may be revised in the future as System Energy evaluates the progress of the project, including the costs required to install instrumentation in the steam dryer in response to recent guidance from the NRC staff obtained during the review process for certain Requests for Additional Information (RAIs) issued by the NRC in December 2011. The NRC’s review of the project is ongoing. System Energy is responding to the recent RAIs and will seek to minimize potential cost effects or delay, if any, to the Grand Gulf uprate implementation schedule.Analysis
System Energy also invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In addition, Entergy temporarily suspended reviews of the two license applications for the sites and will explore alternative nuclear technologies for this project. In the first quarter 2010 the $100 million in construction work in progress incurred by Entergy New Nuclear Development was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi.
As a wholly-owned subsidiary, System Energy dividends its earnings to Entergy Corporation at a percentage determined monthly. Currently, all of System Energy’s retained earnings are available for distribution.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Sources of Capital
System Energy’s sources to meet its capital requirements include:
· | internally generated funds; |
· | bank financing under new or existing facilities. |
System Energy may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common stock issuances by System Energy require prior regulatory approval. Debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. System Energy has sufficient capacity under these tests to meet its foreseeable capital needs.
In February 2012, System Energy VIE issued $50 million of 4.02% Series H notes due February 2017. System Energy used the proceeds to purchase additional nuclear fuel.
System Energy has obtained a short-term borrowing authorization from the FERC under which it may borrow, through October 2013, up to the aggregate amount, at any one time outstanding, of $200 million. See Note 4 to the financial statements for further discussion of System Energy’s short-term borrowing limits. System Energy has also obtained an order from the FERC authorizing long-term securities issuances. The current long-term authorization extends through July 2013.
System Energy’s receivables from the money pool were as follows as of December 31 for each of the following years:years.
| 2011 | | 2010 | | 2009 | | 2008 |
| (In Thousands) |
| | | | | | | |
| $120,424 | | $97,948 | | $90,507 | | $42,915 |
|
| | | | | | |
| 2014 | | 2013 | | 2012 | | 2011 |
| (In Thousands) |
| $2,373 | | $9,223 | | $26,915 | | $120,424 |
See Note 4 to the financial statements for a description of the money pool.
The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $125 million scheduled to expire in June 2016. As of December 31, 2014, $20.4 million was outstanding on the variable interest entity credit facility. See Note 4 to the financial statements for additional discussion of the variable interest entity credit facilities.
System Energy obtained authorizations from the FERC through October 2015 for the following:
short-term borrowings not to exceed an aggregate amount of $200 million at any time outstanding;
long-term borrowings and security issuances; and
long-term borrowings by its nuclear fuel company variable interest entity.
See Note 4 to the financial statements for further discussion of System Energy’s short-term borrowing limits.
Nuclear Matters
System Energy owns and operates Grand Gulf. System Energy is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of Grand Gulf, System Energy may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning. Grand Gulf’s operating license is currently due to expire in November
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
2024. In October 2011, System Energy filed an application with the NRC for an extension of Grand Gulf’s operating license to 2044, which application is pending.
In June 2012 the U.S. Court of Appeals for the D.C. Circuit vacated the NRC’s 2010 update to its Waste Confidence Decision, which had found generically that a permanent geologic repository to store spent nuclear fuel would be available when necessary and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that the NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Grand Gulf. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit’s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a new final Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. The final rule remains in effect while that challenge is pending unless the court orders otherwise.
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials within the reactor coolant system. The issue is applicable to Grand Gulf and is managed in accordance with industry standard practices and guidelines that include in-service examinations, replacements, and mitigation strategies. Developments in the industry or identification of issues at the nuclear units could require unanticipated remediation efforts that cannot be quantified in advance.
After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States. The task force issued a near termnear-term (90-day) report in July 2011 that has made initial recommendations, which are currently being evaluated by the NRC. It is anticipated that the NRC will issue certain orderswere subsequently refined and requests for information to nuclear plant licensees by the end of the first quarter 2012 that will begin to implementprioritized after input from stakeholders. The task force then issued a second report in September 2011. Based upon the task force’s recommendations. Theserecommendations, the NRC issued three orders mayeffective on March 12, 2012. The three orders require U.S. nuclear operators including Entergy, to undertake plant modifications orand perform additional analyses that could,will, among other things, result in increased costsoperating and capital requirementscosts associated with operating Entergy’s nuclear plants. The NRC, with input from the industry, is continuing to determine the specific actions required by the orders. System Energy’s estimated capital expenditures for 2015 through 2017 for complying with the NRC orders are included in the planned construction and other capital investments estimates given in “
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis” above.
Environmental Risks
System Energy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that System Energy is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Critical Accounting Estimates
The preparation of System Energy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of System Energy’s financial position or results of operations.
Nuclear Decommissioning Costs
See “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
In the firstfourth quarter 2011,2014, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $38.9$99.9 million reductionincrease in its decommissioning liability, along with a corresponding reductionincrease in the related regulatory asset. asset retirement cost asset that will be depreciated over the remaining life of the unit.
In the fourth quarter 2013, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $102.3 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.
Qualified Pension and Other Postretirement Benefits
Entergy sponsorsSystem Energy’s qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently providesand other postretirement health care and life insurance benefits for substantially all employees who reach retirement age and meet certain eligibility requirements while still working for Entergy. Entergy’s reported costs, of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation | | Change in Assumption | | Impact on 2014 Qualified Pension Cost | | Impact on 2014 Projected Qualified Benefit Obligation |
| | | Increase/(Decrease) | |
| | | | | | | | | | | Increase/(Decrease) | | |
| Discount rate | | (0.25%) | | $795 | | $9,826 | | (0.25%) | | $858 | | $12,797 |
| Rate of return on plan assets | | (0.25%) | | $446 | | - | | (0.25%) | | $489 | | $— |
| Rate of increase in compensation | | 0.25% | | $330 | | $2,031 | | 0.25% | | $330 | | $1,934 |
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands):.
| | Actuarial Assumption | | Change in Assumption | | Impact on 2011 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2014 Postretirement Benefit Cost | | Impact on 2014 Accumulated Postretirement Benefit Obligation |
| | | Increase/(Decrease) | | | | Increase/(Decrease) | | |
| | | | | | | | |
| Discount rate | | | (0.25%) | | $191 | | $2,252 |
| Health care cost trend | | 0.25% | | $368 | | $2,141 | | 0.25% | | $318 | | $2,071 |
| Discount rate | | (0.25%) | | $287 | | $2,441 | |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for System Energy in 2011was $6.92014 was $12.2 million. System Energy anticipates 20122015 qualified pension cost to be $11.5$16.6 million. System Energy contributed $28.4$21.2 million to its qualified pension plans in 2011and expects2014 and estimates 2015 pension contributions to contributebe approximately $8.9$20.8 million, in 2012 although the required pension contributions will not be known with more certainty until the January 1, 20122015 valuations are completed by April 1, 2012.2015.
Total postretirement health care and life insurance benefit costs for System Energy in 20112014 were $4.1 million, including $1.4 million in savings due to the estimated effect of future Medicare Part D subsidies.$561 thousand. System Energy expects 20122015 postretirement health care and life insurance benefit costs to approximate $5.6 million, including $1.4$481 thousand. System Energy contributed $334 thousand to its other postretirement plans in 2014 and expects to contribute $475 thousand in 2015.
The retirement and mortality rate assumptions are reviewed every three-to-five years as part of an actuarial study that compares these assumptions to the actual experience of the pension and other postretirement plans. The 2014 actuarial study reviewed plan experience from 2010 through 2013. As a result of the 2014 actuarial study and the issuance of new mortality tables in October 2014 by the Society of Actuaries, changes were made to reflect modified demographic pattern expectations as well as longer life expectancies. These changes are reflected in the December 31, 2014 financial disclosures. Adoption of the new mortality assumptions for 2015 resulted in an increase at December 31, 2014 of $17.7 million in savings due to the estimated effect of future Medicare Part D subsidies. System Energy anticipates contributions for postretirement health carequalified pension benefit obligation and life insurance benefits costs to be $4.1$3.1 million in 2012.the accumulated postretirement obligation. The new mortality assumptions increasedanticipated 2015 qualified pension cost by approximately $2.7 million and other postretirement cost by approximately $0.4 million. Pension funding guidelines, as established by the Employee Retirement Income Security Act of 1974, as amended and the Internal Revenue Code of 1986, as amended, are not expected to incorporate the October 2014 Society of Actuaries new mortality assumptions until after 2015, possibly 2016.
Federal Healthcare Legislation
See the “Qualified Pension and Other Postretirement Benefits -Federal Healthcare Legislation” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
(Page left blank intentionally)
To the Board of Directors and Shareholder of
System Energy Resources, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheets of System Energy Resources, Inc. (the “Company”) as of December 31, 20112014 and 2010,2013, and the related income statements, statements of cash flows, and statements of changes in common equity (pages 388448 through 392452 and applicable items in pages 5361 through 194)234) for each of the three years in the period ended December 31, 2011.2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of System Energy Resources, Inc. as of December 31, 20112014 and 2010,2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2011,2014, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
|
| | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| | | | | | | |
| OPERATING REVENUES | | | | | | |
| Electric | |
| $664,364 |
| |
| $735,089 |
| |
| $622,118 |
|
| | | | | | | |
| OPERATING EXPENSES | | |
| | |
| | |
|
| Operation and Maintenance: | | |
| | |
| | |
|
| Fuel, fuel-related expenses, and gas purchased for resale | | 84,658 |
| | 103,358 |
| | 62,918 |
|
| Nuclear refueling outage expenses | | 23,309 |
| | 29,551 |
| | 21,824 |
|
| Other operation and maintenance | | 156,502 |
| | 174,772 |
| | 149,346 |
|
| Decommissioning | | 41,835 |
| | 35,472 |
| | 33,019 |
|
| Taxes other than income taxes | | 25,160 |
| | 25,537 |
| | 19,468 |
|
| Depreciation and amortization | | 142,583 |
| | 176,387 |
| | 154,561 |
|
| Other regulatory credits - net | | (30,799 | ) | | (13,068 | ) | | (10,429 | ) |
| TOTAL | | 443,248 |
| | 532,009 |
| | 430,707 |
|
| | | | | | | |
| OPERATING INCOME | | 221,116 |
| | 203,080 |
| | 191,411 |
|
| | | | | | | |
| OTHER INCOME | | |
| | |
| | |
|
| Allowance for equity funds used during construction | | 5,069 |
| | 7,784 |
| | 26,102 |
|
| Interest and investment income | | 11,037 |
| | 9,844 |
| | 10,134 |
|
| Miscellaneous - net | | (529 | ) | | (804 | ) | | (617 | ) |
| TOTAL | | 15,577 |
| | 16,824 |
| | 35,619 |
|
| | | | | | | |
| INTEREST EXPENSE | | |
| | |
| | |
|
| Interest expense | | 58,384 |
| | 38,173 |
| | 45,214 |
|
| Allowance for borrowed funds used during construction | | (1,335 | ) | | (786 | ) | | (7,165 | ) |
| TOTAL | | 57,049 |
| | 37,387 |
| | 38,049 |
|
| | | | | | | |
| INCOME BEFORE INCOME TAXES | | 179,644 |
| | 182,517 |
| | 188,981 |
|
| | | | | | | |
| Income taxes | | 83,310 |
| | 68,853 |
| | 77,115 |
|
| | | | | | | |
| NET INCOME | |
| $96,334 |
| |
| $113,664 |
| |
| $111,866 |
|
| | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
|
| |
| INCOME STATEMENTS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Electric | | $ | 563,411 | | | $ | 558,584 | | | $ | 554,007 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and | | | | | | | | | | | | |
| gas purchased for resale | | | 76,353 | | | | 69,962 | | | | 63,877 | |
| Nuclear refueling outage expenses | | | 16,314 | | | | 17,398 | | | | 19,186 | |
| Other operation and maintenance | | | 136,495 | | | | 124,690 | | | | 120,707 | |
| Decommissioning | | | 31,460 | | | | 31,374 | | | | 29,451 | |
| Taxes other than income taxes | | | 21,425 | | | | 23,412 | | | | 24,246 | |
| Depreciation and amortization | | | 142,543 | | | | 138,641 | | | | 140,056 | |
| Other regulatory credits - net | | | (11,781 | ) | | | (12,040 | ) | | | (17,525 | ) |
| TOTAL | | | 412,809 | | | | 393,437 | | | | 379,998 | |
| | | | | | | | | | | | | |
| OPERATING INCOME | | | 150,602 | | | | 165,147 | | | | 174,009 | |
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | | 22,359 | | | | 9,892 | | | | 12,484 | |
| Interest and investment income | | | 8,294 | | | | 12,639 | | | | 4,507 | |
| Miscellaneous - net | | | (699 | ) | | | (518 | ) | | | (1,813 | ) |
| TOTAL | | | 29,954 | | | | 22,013 | | | | 15,178 | |
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | | 48,117 | | | | 51,912 | | | | 47,570 | |
| Allowance for borrowed funds used during construction | | | (6,711 | ) | | | (3,425 | ) | | | (4,192 | ) |
| TOTAL | | | 41,406 | | | | 48,487 | | | | 43,378 | |
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | | 139,150 | | | | 138,673 | | | | 145,809 | |
| | | | | | | | | | | | | |
| Income taxes | | | 74,953 | | | | 56,049 | | | | 96,901 | |
| | | | | | | | | | | | | |
| NET INCOME | | $ | 64,197 | | | $ | 82,624 | | | $ | 48,908 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| |
| STATEMENTS OF CASH FLOWS | |
| | | | | | | | | | |
| | | For the Years Ended December 31, | |
| | | 2011 | | | 2010 | | | 2009 | |
| | | (In Thousands) | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Net income | | $ | 64,197 | | | $ | 82,624 | | | $ | 48,908 | |
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 229,715 | | | | 219,552 | | | | 169,507 | |
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 14,923 | | | | (1,536 | ) | | | 211,297 | |
| Changes in assets and liabilities: | | | | | | | | | | | | |
| Receivables | | | (5,512 | ) | | | (728 | ) | | | (2,296 | ) |
| Accounts payable | | | 17,275 | | | | (14,351 | ) | | | 11,574 | |
| Taxes accrued and prepaid taxes | | | 160,494 | | | | 1,327 | | | | 5,413 | |
| Interest accrued | | | (38,305 | ) | | | 3,503 | | | | 2,667 | |
| Other working capital accounts | | | 11,260 | | | | (15,287 | ) | | | 11,672 | |
| Provisions for estimated losses | | | - | | | | (2,009 | ) | | | (16 | ) |
| Other regulatory assets | | | 10,874 | | | | (4,948 | ) | | | (4,824 | ) |
| Pension and other postretirement liabilities | | | 34,474 | | | | 29,797 | | | | 3,440 | |
| Other assets and liabilities | | | (68,714 | ) | | | (47,539 | ) | | | (39,465 | ) |
| Net cash flow provided by operating activities | | | 430,681 | | | | 250,405 | | | | 417,877 | |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Construction expenditures | | | (234,753 | ) | | | (156,766 | ) | | | (90,778 | ) |
| Proceeds from the transfer of development costs | | | - | | | | 100,280 | | | | - | |
| Allowance for equity funds used during construction | | | 22,359 | | | | 9,892 | | | | 12,484 | |
| Nuclear fuel purchases | | | (59,755 | ) | | | (129,504 | ) | | | - | |
| Proceeds from sale of nuclear fuel | | | 12,420 | | | | - | | | | 180 | |
| Changes in other investments | | | - | | | | 25,560 | | | | - | |
| Proceeds from nuclear decommissioning trust fund sales | | | 203,444 | | | | 322,789 | | | | 392,959 | |
| Investment in nuclear decommissioning trust funds | | | (232,636 | ) | | | (349,398 | ) | | | (416,597 | ) |
| Change in money pool receivable - net | | | (22,476 | ) | | | (7,441 | ) | | | (47,592 | ) |
| Net cash flow used in investing activities | | | (311,397 | ) | | | (184,588 | ) | | | (149,344 | ) |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from the issuance of long-term debt | | | - | | | | 55,385 | | | | - | |
| Retirement of long-term debt | | | (78,161 | ) | | | (41,715 | ) | | | (28,440 | ) |
| Changes in credit borrowings - net | | | (38,264 | ) | | | 20,003 | | | | - | |
| Dividends paid: | | | | | | | | | | | | |
| Common stock | | | (76,000 | ) | | | (100,200 | ) | | | (75,300 | ) |
| Other | | | (5,474 | ) | | | - | | | | (3,099 | ) |
| Net cash flow used in financing activities | | | (197,899 | ) | | | (66,527 | ) | | | (106,839 | ) |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | (78,615 | ) | | | (710 | ) | | | 161,694 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at beginning of period | | | 263,772 | | | | 264,482 | | | | 102,788 | |
| | | | | | | | | | | | | |
| Cash and cash equivalents at end of period | | $ | 185,157 | | | $ | 263,772 | | | $ | 264,482 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | | | | | |
| Interest - net of amount capitalized | | $ | 40,719 | | | $ | 35,540 | | | $ | 48,005 | |
| Income taxes | | $ | (100,889 | ) | | $ | 55,963 | | | $ | (120,352 | ) |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| | | |
| | | For the Years Ended December 31, |
| | | 2014 | | 2013 | | 2012 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | |
| Net income | |
| $96,334 |
| |
| $113,664 |
| |
| $111,866 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 254,199 |
| | 293,537 |
| | 235,881 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 79,835 |
| | 29,996 |
| | 43,651 |
|
| Changes in assets and liabilities: | | |
| | |
| | |
|
| Receivables | | 37,345 |
| | (29,226 | ) | | (12,557 | ) |
| Accounts payable | | (6,372 | ) | | 6,685 |
| | (10,511 | ) |
| Prepaid taxes and taxes accrued | | 12,146 |
| | (170,356 | ) | | 89,022 |
|
| Interest accrued | | 21,371 |
| | (3,794 | ) | | (2,157 | ) |
| Other working capital accounts | | (11,688 | ) | | 24,863 |
| | (22,917 | ) |
| Other regulatory assets | | (64,262 | ) | | 79,345 |
| | (44,004 | ) |
| Pension and other postretirement liabilities | | 49,741 |
| | (63,206 | ) | | 2,898 |
|
| Other assets and liabilities | | (40,384 | ) | | (1,870 | ) | | 20,828 |
|
| Net cash flow provided by operating activities | | 428,265 |
| | 279,638 |
| | 412,000 |
|
| INVESTING ACTIVITIES | | |
| | |
| | |
|
| Construction expenditures | | (63,774 | ) | | (51,584 | ) | | (450,236 | ) |
| Allowance for equity funds used during construction | | 5,069 |
| | 7,784 |
| | 26,102 |
|
| Nuclear fuel purchases | | (181,209 | ) | | (65,691 | ) | | (194,314 | ) |
| Proceeds from sale of nuclear fuel | | 61,076 |
| | 26,522 |
| | 52,708 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 392,872 |
| | 215,467 |
| | 349,427 |
|
| Investment in nuclear decommissioning trust funds | | (424,814 | ) | | (247,042 | ) | | (379,833 | ) |
| Change in money pool receivable - net | | 6,850 |
| | 17,692 |
| | 93,509 |
|
| Net cash flow used in investing activities | | (203,930 | ) | | (96,852 | ) | | (502,637 | ) |
| FINANCING ACTIVITIES | | |
| | |
| | |
|
| Proceeds from the issuance of long-term debt | | — |
| | 85,000 |
| | 297,908 |
|
| Retirement of long-term debt | | (46,743 | ) | | (111,479 | ) | | (262,867 | ) |
| Changes in credit borrowings - net | | 20,404 |
| | (39,986 | ) | | 39,986 |
|
| Dividends paid: | | |
| | |
| | |
|
| Common stock | | (101,930 | ) | | (70,286 | ) | | (79,700 | ) |
| Other | | (29 | ) | | (2,515 | ) | | (6,225 | ) |
| Net cash flow used in financing activities | | (128,298 | ) | | (139,266 | ) | | (10,898 | ) |
| Net increase (decrease) in cash and cash equivalents | | 96,037 |
| | 43,520 |
| | (101,535 | ) |
| Cash and cash equivalents at beginning of period | | 127,142 |
| | 83,622 |
| | 185,157 |
|
| Cash and cash equivalents at end of period | |
| $223,179 |
| |
| $127,142 |
| |
| $83,622 |
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
| | |
| | |
|
| Cash paid (received) during the period for: | | |
| | |
| | |
|
| Interest - net of amount capitalized | |
| $27,834 |
| |
| $32,178 |
| |
| $34,012 |
|
| Income taxes | |
| ($10,065 | ) | |
| $211,210 |
| |
| ($56,808 | ) |
| See Notes to Financial Statements. | | |
| | |
| | |
|
389
449
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $789 |
| |
| $62,561 |
|
| Temporary cash investments | | 222,390 |
| | 64,581 |
|
| Total cash and cash equivalents | | 223,179 |
| | 127,142 |
|
| Accounts receivable: | | |
| | |
|
| Associated companies | | 60,907 |
| | 104,419 |
|
| Other | | 5,717 |
| | 6,400 |
|
| Total accounts receivable | | 66,624 |
| | 110,819 |
|
| Materials and supplies - at average cost | | 80,049 |
| | 85,118 |
|
| Deferred nuclear refueling outage costs | | 26,580 |
| | 7,853 |
|
| Prepayments and other | | 2,312 |
| | 1,727 |
|
| TOTAL | | 398,744 |
| | 332,659 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Decommissioning trust funds | | 679,840 |
| | 603,896 |
|
| TOTAL | | 679,840 |
| | 603,896 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,244,902 |
| | 4,124,647 |
|
| Property under capital lease | | 573,784 |
| | 570,872 |
|
| Construction work in progress | | 50,382 |
| | 29,061 |
|
| Nuclear fuel | | 251,376 |
| | 188,824 |
|
| TOTAL UTILITY PLANT | | 5,120,444 |
| | 4,913,404 |
|
| Less - accumulated depreciation and amortization | | 2,819,688 |
| | 2,699,263 |
|
| UTILITY PLANT - NET | | 2,300,756 |
| | 2,214,141 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 105,882 |
| | 115,492 |
|
| Other regulatory assets | | 335,613 |
| | 261,740 |
|
| Other | | 9,251 |
| | 15,996 |
|
| TOTAL | | 450,746 |
| | 393,228 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,830,086 |
| |
| $3,543,924 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| |
| BALANCE SHEETS | |
| ASSETS | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash and cash equivalents: | | | | | | |
| Cash | | $ | 30,961 | | | $ | 903 | |
| Temporary cash investments | | | 154,196 | | | | 262,869 | |
| Total cash and cash equivalents | | | 185,157 | | | | 263,772 | |
| Accounts receivable: | | | | | | | | |
| Associated companies | | | 172,943 | | | | 147,180 | |
| Other | | | 7,294 | | | | 5,070 | |
| Total accounts receivable | | | 180,237 | | | | 152,250 | |
| Materials and supplies - at average cost | | | 86,333 | | | | 84,077 | |
| Deferred nuclear refueling outage costs | | | 9,479 | | | | 22,627 | |
| Prepaid taxes | | | - | | | | 68,039 | |
| Prepayments and other | | | 1,111 | | | | 1,142 | |
| TOTAL | | | 462,317 | | | | 591,907 | |
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | | 423,409 | | | | 387,876 | |
| TOTAL | | | 423,409 | | | | 387,876 | |
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | | 3,438,424 | | | | 3,362,422 | |
| Property under capital lease | | | 491,023 | | | | 489,175 | |
| Construction work in progress | | | 357,826 | | | | 210,536 | |
| Nuclear fuel | | | 157,967 | | | | 155,282 | |
| TOTAL UTILITY PLANT | | | 4,445,240 | | | | 4,217,415 | |
| Less - accumulated depreciation and amortization | | | 2,518,190 | | | | 2,417,811 | |
| UTILITY PLANT - NET | | | 1,927,050 | | | | 1,799,604 | |
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | | 124,777 | | | | 126,642 | |
| Other regulatory assets | | | 287,796 | | | | 296,715 | |
| Other | | | 20,016 | | | | 21,326 | |
| TOTAL | | | 432,589 | | | | 444,683 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 3,245,365 | | | $ | 3,224,070 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| | | |
| | | December 31, |
| | | 2014 | | 2013 |
| | | (In Thousands) |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $76,310 |
| |
| $48,653 |
|
| Short-term borrowings | | 20,404 |
| | — |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 6,252 |
| | 12,778 |
|
| Other | | 33,096 |
| | 31,862 |
|
| Taxes accrued | | 23,267 |
| | 11,121 |
|
| Accumulated deferred income taxes | | 14,175 |
| | 2,310 |
|
| Interest accrued | | 33,196 |
| | 11,825 |
|
| Other | | 2,365 |
| | 2,312 |
|
| TOTAL | | 209,065 |
| | 120,861 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 808,171 |
| | 737,973 |
|
| Accumulated deferred investment tax credits | | 49,313 |
| | 54,786 |
|
| Other regulatory liabilities | | 371,110 |
| | 349,846 |
|
| Decommissioning | | 757,918 |
| | 616,157 |
|
| Pension and other postretirement liabilities | | 129,152 |
| | 79,411 |
|
| Long-term debt | | 634,496 |
| | 708,783 |
|
| Other | | 350 |
| | — |
|
| TOTAL | | 2,750,510 |
| | 2,546,956 |
|
| | | | | |
| Commitments and Contingencies | |
|
| |
|
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2014 and 2013 | | 789,350 |
| | 789,350 |
|
| Retained earnings | | 81,161 |
| | 86,757 |
|
| TOTAL | | 870,511 |
| | 876,107 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,830,086 |
| |
| $3,543,924 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
| SYSTEM ENERGY RESOURCES, INC. | |
| BALANCE SHEETS | |
| LIABILITIES AND EQUITY | |
| | | | | | | |
| | | December 31, | |
| | | 2011 | | | 2010 | |
| | | (In Thousands) | |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Currently maturing long-term debt | | $ | 110,163 | | | $ | 33,740 | |
| Short-term borrowings | | | - | | | | 38,264 | |
| Accounts payable: | | | | | | | | |
| Associated companies | | | 8,032 | | | | 6,520 | |
| Other | | | 63,331 | | | | 38,447 | |
| Taxes accrued | | | 92,455 | | | | - | |
| Accumulated deferred income taxes | | | 3,428 | | | | 8,508 | |
| Interest accrued | | | 17,776 | | | | 56,081 | |
| Other | | | 2,591 | | | | 2,258 | |
| TOTAL | | | 297,776 | | | | 183,818 | |
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | | 652,418 | | | | 617,012 | |
| Accumulated deferred investment tax credits | | | 57,865 | | | | 54,755 | |
| Other regulatory liabilities | | | 214,745 | | | | 201,364 | |
| Decommissioning | | | 445,352 | | | | 452,782 | |
| Pension and other postretirement liabilities | | | 139,719 | | | | 105,245 | |
| Long-term debt | | | 636,885 | | | | 796,728 | |
| Other | | | 42 | | | | - | |
| TOTAL | | | 2,147,026 | | | | 2,227,886 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| COMMON EQUITY | | | | | | | | |
| Common stock, no par value, authorized 1,000,000 shares; | | | | | |
| issued and outstanding 789,350 shares in 2011 and 2010 | | | 789,350 | | | | 789,350 | |
| Retained earnings | | | 11,213 | | | | 23,016 | |
| TOTAL | | | 800,563 | | | | 812,366 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | | $ | 3,245,365 | | | $ | 3,224,070 | |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Years Ended December 31, 2014, 2013, and 2012 |
| | | | |
| | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | |
| Balance at December 31, 2011 |
| $789,350 |
| |
| $11,213 |
| |
| $800,563 |
|
| Net income | — |
| | 111,866 |
| | 111,866 |
|
| Common stock dividends | — |
| | (79,700 | ) | | (79,700 | ) |
| Balance at December 31, 2012 |
| $789,350 |
| |
| $43,379 |
| |
| $832,729 |
|
| Net income | — |
| | 113,664 |
| | 113,664 |
|
| Common stock dividends | — |
| | (70,286 | ) | | (70,286 | ) |
| Balance at December 31, 2013 |
| $789,350 |
| |
| $86,757 |
| |
| $876,107 |
|
| Net income | — |
| | 96,334 |
| | 96,334 |
|
| Common stock dividends | — |
| | (101,930 | ) | | (101,930 | ) |
| Balance at December 31, 2014 |
| $789,350 |
| |
| $81,161 |
| |
| $870,511 |
|
| | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
|
| |
| STATEMENTS OF CHANGES IN COMMON EQUITY | |
| For the Years Ended December 31, 2011, 2010, and 2009 | |
| | | | | | | | | | |
| | | Common Equity | | | | |
| | | Common Stock | | | Retained Earnings | | | Total | |
| | | (In Thousands) | |
| | | | | | | | | | |
| Balance at December 31, 2008 | | $ | 789,350 | | | $ | 66,984 | | | $ | 856,334 | |
| Net income | | | - | | | | 48,908 | | | | 48,908 | |
| Common stock dividends | | | - | | | | (75,300 | ) | | | (75,300 | ) |
| Balance at December 31, 2009 | | $ | 789,350 | | | $ | 40,592 | | | $ | 829,942 | |
| Net income | | | - | | | | 82,624 | | | | 82,624 | |
| Common stock dividends | | | - | | | | (100,200 | ) | | | (100,200 | ) |
| Balance at December 31, 2010 | | $ | 789,350 | | | $ | 23,016 | | | $ | 812,366 | |
| Net income | | | - | | | | 64,197 | | | | 64,197 | |
| Common stock dividends | | | - | | | | (76,000 | ) | | | (76,000 | ) |
| Balance at December 31, 2011 | | $ | 789,350 | | | $ | 11,213 | | | $ | 800,563 | |
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | | |
| | | 2011 | | | 2010 | | | 2009 | | | 2008 | | | 2007 | |
| | | (Dollars In Thousands) | |
| | | | | | | | | | | | | | | | |
| Operating revenues | | $ | 563,411 | | | $ | 558,584 | | | $ | 554,007 | | | $ | 528,998 | | | $ | 553,193 | |
| Net Income | | $ | 64,197 | | | $ | 82,624 | | | $ | 48,908 | | | $ | 91,067 | | | $ | 136,081 | |
| Total assets | | $ | 3,245,365 | | | $ | 3,224,070 | | | $ | 3,135,651 | | | $ | 2,945,390 | | | $ | 2,858,760 | |
| Long-term obligations (1) | | $ | 636,885 | | | $ | 796,728 | | | $ | 728,253 | | | $ | 832,697 | | | $ | 824,824 | |
| Electric energy sales (GWh) | | | 9,293 | | | | 8,692 | | | | 9,898 | | | | 8,475 | | | | 8,440 | |
| | | | | | | | | | | | | | | | | | | | | |
| (1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
393 |
| | | | | | | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | 2011 | | 2010 |
| | (Dollars In Thousands) |
| | | | | | | | | | |
| Operating revenues |
| $664,364 |
| |
| $735,089 |
| |
| $622,118 |
| |
| $563,411 |
| |
| $558,584 |
|
| Net Income |
| $96,334 |
| |
| $113,664 |
| |
| $111,866 |
| |
| $64,197 |
| |
| $82,624 |
|
| Total assets |
| $3,830,086 |
| |
| $3,543,924 |
| |
| $3,623,516 |
| |
| $3,245,365 |
| |
| $3,224,070 |
|
| Long-term obligations (a) |
| $634,496 |
| |
| $708,783 |
| |
| $671,945 |
| |
| $636,885 |
| |
| $796,728 |
|
| Electric energy sales (GWh) | 9,219 |
| | 9,794 |
| | 6,602 |
| | 9,293 |
| | 8,692 |
|
| | | | | | | | | | |
| (a) Includes long-term debt (excluding currently maturing debt). |
Information regarding the registrant’s properties is included in Part I. Item 1. - Business under the sections titled “Utility- Property and Other Generation Resources” and “Entergy Wholesale Commodities- Property” in this report.
Details of the registrant’s material environmental regulation and proceedings and other regulatory proceedings and litigation that are pending or those terminated in the fourth quarter of 20112014 are discussed in Part I. Item 1. - Business under the sections titled “Retail Rate Regulation”, “Environmental Regulation”, and “Litigation” and "“Impairment of Long-Lived Assets"” in Note 1 to the financial statements in this report.
Not applicable.
Executive Officers
|
| | | | | | |
| Name | | Age | | Position | | Period |
J. Wayne LeonardLeo P. Denault (a) | 61 | 55 | | Chairman of the Board and Chief Executive Officer of Entergy Corporation | | 2006-Present |
| | Chief Executive Officer and Director of Entergy Corporation | | 1999-Present2013-Present |
| | | | | |
Richard J. Smith (a) | 60 | President, Entergy Wholesale Commodity Business of Entergy Corporation | | 2010-Present |
| | Executive Vice President and Chief OperatingFinancial Officer of Entergy Corporation | | 2007-20102004-2013 |
| | | Group President, Utility Operations of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans | | 2001-2007 |
| | | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, and System Energy | | 2001-20072004-2013 |
| | | | Director of Entergy Texas | | 2007-2013 |
| | | | Director of Entergy New Orleans | | 2011-2013 |
| | | | | | | |
Gary J. TaylorWilliam M. Mohl (a)(b) | 58 | 55 | | President, Entergy Wholesale Commodities | | 2013-Present |
| | | | President and Chief Executive Officer of Entergy Gulf States Louisiana and Entergy Louisiana | | 2010-2013 |
| | | | Director of Entergy Gulf States Louisiana and Entergy Louisiana | | 2010-2013 |
| | | | Vice President, System Planning of Entergy Services, Inc. | | 2007-2010 |
| | | | | | |
| Theodore H. Bunting, Jr. (a) | | 56 | | Group President Utility Operations of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas | | 2007-Present2012-Present |
| | | | President, Chief Executive Officer, and Director of System Energy | | 2014-Present |
| | | | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2008-Present |
| | Executive Vice President and Chief Nuclear Officer of Entergy Corporation | | 2004-2007 |
| | Director, President and Chief Executive Officer of System Energy | | 2003-20072012-Present |
| | | | | |
Leo P. Denault (a) | 52 | Executive Vice President and Chief Financial Officer of Entergy Corporation | | 2004-Present |
| | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi and System Energy | | 2004-Present |
| | Director of Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2011-Present |
| | | | |
Name | Age | Position | | Period |
Mark T. Savoff (a) | 55 | Executive Vice President and Chief Operating Officer of Entergy Corporation | | 2010-Present |
| | Executive Vice President, Operations of Entergy Corporation | | 2004-2010 |
| | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana and Entergy Mississippi | | 2004-Present |
| | Director of Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2011-Present |
| | Executive Vice President of Entergy Services, Inc. | | 2003-Present |
| | | | |
Roderick K. West (a) | 43 | Executive Vice President and Chief Administrative Officer of Entergy Corporation | | 2010-Present |
| | President and Chief Executive Officer of Entergy New Orleans | | 2007-2010 |
| | Director of Entergy New Orleans | | 2005-2011 |
| | Director, Metro Distribution Operation of Entergy Services, Inc. | | 2005-2006 |
| | | | |
E. Renae Conley (a) | 54 | Executive Vice President, Human Resources and Administration of Entergy Corporation | | 2011-Present |
| | Executive Vice President of Entergy Corporation | | 2010-2011 |
| | Director of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-2010 |
| | President and Chief Executive Officer of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-2010 |
| | | | |
John T. Herron (a) | 58 | President and Chief Executive Officer Nuclear Operations/ Chief Nuclear Officer of Entergy Corporation | | 2009-Present |
| | Executive Vice President and Chief Nuclear Officer of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana and Entergy Texas | | 2010-Present |
| | President, Chief Executive Officer and Director of System Energy | | 2009-Present |
| | Senior Vice President, Nuclear Operations | | 2007-2009 |
| | Senior Vice President, Chief Operating Officer of Entergy Nuclear Northeast | | 2003-2007 |
| | | | |
Robert D. Sloan (c) | 64 | Executive Vice President, General Counsel and Secretary of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy | | 2004-2012 |
| | Executive Vice President, General Counsel and Secretary of Entergy Texas | | 2007-2012 |
| | | | |
Theodore H. Bunting, Jr. (a) | 53 | Senior Vice President and Chief Accounting Officer of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy | | 2007-Present2007-2012 |
|
| | | | | | |
| Name | | Acting principal financial officerAge | | Position | | Period |
| Marcus V. Brown (a) | | 53 | | Executive Vice President and General Counsel of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas, | | 2008-Present |
| | Vice President and Chief Financial Officer, Nuclear Operations of System Energy | | 2004-20072013-Present |
| | | | | |
Marcus V. Brown (a)(d) | 50 | Senior Vice President and General Counsel of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy | | 2012-Present2012-2013 |
Name | Age | Position | | Period |
| | | Vice President and Deputy General Counsel of Entergy Services, Inc. | | 2009-2012 |
| | | | Associate General Counsel of Entergy Services, Inc. | | 2007-2009 |
| | | | | | | |
Terry R. Seamons (e)Andrew S. Marsh (a) | 70 | Senior43 | | Executive Vice President Organizational Developmentand Chief Financial Officer of Entergy Corporation | | 2011-20122013-Present |
| | | | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy | | 2013-Present |
| | | | Chief Financial Officer of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy | | 2014-Present |
| | | | Vice President, System Planning of Entergy Services, Inc. | | 2010-2013 |
| | | | Vice President, Planning and Financial Communications of Entergy Services, Inc. | | 2007-2010 |
| | | | | | |
| Mark T. Savoff (a) | | 58 | | Executive Vice President and Chief Operating Officer of Entergy Corporation | | 2010-Present |
| | | | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi | | 2004-Present |
| | | | Director of Entergy Texas | | 2007-Present |
| | | | Director of Entergy New Orleans | | 2011-Present |
| | | | Executive Vice President, Operations of Entergy Corporation | | 2004-2010 |
| | | | | | |
| Roderick K. West (a) | | 46 | | Executive Vice President and Chief Administrative Officer of Entergy Corporation | | 2010-Present |
| | | | President and Chief Executive Officer of Entergy New Orleans | | 2007-2010 |
| | | | Director of Entergy New Orleans | | 2005-2011 |
| | | | | | |
| Jeffrey S. Forbes (a) | | 58 | | Executive Vice President, Nuclear Operations/Chief Nuclear Officer of Entergy Corporation | | 2013-Present |
| | | | Executive Vice President and Chief Nuclear Officer of Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Louisiana | | 2013-Present |
| | | | Executive Vice President and Chief Nuclear Officer of System Entergy | | 2014-Present |
| | | | Director of System Energy | | 2013-Present |
| | | | President and Chief Executive Officer of System Energy | | 2013-2014 |
| | | | Senior Vice President, -Nuclear Operations of Entergy Services, Inc. | | 2011-2013 |
| | | | Senior Vice President and Chief Operating Officer of Entergy Operations, Inc. | | 2003-2011 |
|
| | | | | | |
| Name | | Age | | Position | | Period |
| Alyson M. Mount (a) | | 44 | | Senior Vice President and Chief Accounting Officer of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy | | 2012-Present |
| | | | Vice President Corporate Controller of Entergy Services, Inc. | | 2010-2012 |
| | | | Director, Corporate Reporting and Accounting Policy of Entergy Services, Inc. | | 2002-2010 |
| | | | | | |
| Donald W. Vinci (a) | | 56 | | Senior Vice President, Human Resources and AdministrationChief Diversity Officer of Entergy Corporation | | 2007-20112013-Present |
| | | | Vice President, and Managing DirectorHuman Capital Management of RHR, InternationalEntergy Services, Inc. | | 1984-20072013 |
| | | | Vice President, Gas Distribution Business of Entergy Services, Inc. | | 2010-2013 |
| | | | Vice President, Business Development of Entergy Services, Inc. | | 2008-2010 |
| |
| (a) | In addition, this officer is an executive officer and/or director of various other wholly owned subsidiaries of Entergy Corporation and its operating companies. |
(b) | Mr. Taylor has advised Entergy that he intends to retire from the positions indicated effective May 31, 2012. |
(c) | Mr. Sloan served as Executive Vice President, General Counsel and Secretary of Entergy Corporation through January 27, 2012 and in the other positions indicated through February 3, 2012. Through February 3, 2012, Mr. Sloan also served as an executive officer and/or director of various other wholly owned subsidiaries of Entergy Corporation and its operating companies. |
(d) | Mr. Brown has served as Senior Vice President and General Counsel of Entergy Corporation from January 27, 2012 and as Senior Vice President and General Counsel of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and System Energy since February 3, 2012. |
(e) | Mr. Seamons retired from Entergy effective January 2012. Prior to his retirement, Mr. Seamons was an executive officer and/or director of various other wholly owned subsidiaries of Entergy Corporation and its operating companies. |
Each officer of Entergy Corporation is elected yearly by the Board of Directors. Each officer’s age and title is provided as of December 31, 2014.
PART II
Entergy Corporation
The shares of Entergy Corporation’s common stock are listed on the New York Stock and Chicago Stock Exchanges under the ticker symbol ETR.
The high and low prices of Entergy Corporation’s common stock for each quarterly period in 20112014 and 20102013 were as follows:
|
| | | | | | | |
| | 2014 | | 2013 |
| | High | | Low | | High | | Low |
| | (In Dollars) |
| First | 67.02 | | 60.40 | | 65.39 | | 61.09 |
| Second | 82.30 | | 66.41 | | 72.10 | | 63.12 |
| Third | 82.48 | | 70.70 | | 72.60 | | 61.66 |
| Fourth | 92.02 | | 76.51 | | 68.63 | | 60.22 |
| | 2011 | | 2010 |
| | High | | Low | | High | | Low |
| | (In Dollars) |
| | | | | | | | |
| First | 74.50 | | 64.72 | | 83.09 | | 75.25 |
| Second | 70.40 | | 65.15 | | 84.33 | | 71.28 |
| Third | 69.14 | | 57.60 | | 80.80 | | 70.35 |
| Fourth | 74.00 | | 62.66 | | 77.90 | | 68.65 |
Consecutive quarterly cash dividends on common stock were paid to stockholders of Entergy Corporation in 20112014 and 2010.2013. Quarterly dividends of $0.83 per share were paid in 2011. In 2010, a dividend of $0.75 per share was paid in the first quarter2014 and dividends of $0.83 per share were paid in the last three quarters.2013.
As of January 31, 2012,2015, there were 35,09630,762 stockholders of record of Entergy Corporation.
Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
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 (2)
|
| | | | | | | | |
10/01/2011-10/31/2011 | | - | | $- | | - | | $350,052,918 |
11/01/2011-11/30/2011 | | - | | $- | | - | | $350,052,918 |
12/01/2011-12/31/2011 | | - | | $- | | - | | $350,052,918 |
Total | | - | | $- | | - | | |
|
| | | | | | | | | | | | | | | |
| 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 (2) |
| | | | | | | | | | |
| 10/01/2014 | -10/31/2014 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
| 11/01/2014 | -11/30/2014 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
| 12/01/2014 | -12/31/2014 | | 1,906,300 |
| |
| $86.56 |
| | 1,906,300 |
| |
| $350,052,918 |
|
| Total | | | 1,906,300 |
| |
| $86.56 |
| | 1,906,300 |
| | |
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 an additionala $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities. In addition, in the first quarter 2014, Entergy withheld 55,076 shares of its common stock at $61.29 per share and 43,246 shares of its common stock at $63.03 per share to pay income taxes due upon vesting of restricted stock granted as part of its long-term incentive program.
| |
| (1) | See Note 12 to the financial statements for additional discussion of the stock-based compensation plans. |
| |
| (2) | Maximum amount of shares that may yet be repurchased relates only to the $500 million plan 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. |
Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
There is no market for the common stock of Entergy Corporation’s wholly owned subsidiaries. Cash dividends on common stock paid by the Registrant Subsidiaries during 20112014 and 2010,2013, were as follows:
|
| | | | | | | |
| | 2014 | | 2013 |
| | (In Millions) |
| Entergy Arkansas |
| $10.0 |
| |
| $15.0 |
|
| Entergy Gulf States Louisiana |
| $166.9 |
| |
| $119.9 |
|
| Entergy Louisiana |
| $320.6 |
| |
| $356.3 |
|
| Entergy Mississippi |
| $61.4 |
| |
| $7.4 |
|
| Entergy New Orleans |
| $6.0 |
| |
| $— |
|
| Entergy Texas |
| $70.0 |
| |
| $25.0 |
|
| System Energy |
| $101.9 |
| |
| $70.3 |
|
| | | 2011 | | 2010 |
| | | (In Millions) |
| | | | | |
| Entergy Arkansas | | $117.8 | | $173.4 |
| Entergy Gulf States Louisiana | | $302.0 | | $124.3 |
| Entergy Louisiana | | $358.2 | | $- |
| Entergy Mississippi | | $3.3 | | $43.4 |
| Entergy New Orleans | | $42.0 | | $47.0 |
| Entergy Texas | | $5.8 | | $86.4 |
| System Energy | | $76.0 | | $100.2 |
Information with respect to restrictions that limit the ability of the Registrant Subsidiaries to pay dividends is presented in Note 7 to the financial statements.
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC. AND SUBSIDIARIES, ENTERGY GULF STATES LOUISIANA, L.L.C.,ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC. AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.” which follow each company’s financial statements in this report, for information with respect to selected financial data and certain operating statistics.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Refer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC. AND SUBSIDIARIES, ENTERGY GULF STATES, LOUISIANA,L.L.C., ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC. AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.” which follow each company’s financial statements in this report, for information with respect to selected financial data
Item 7A. Quantitative and certain operating statistics.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsQualitative Disclosures About Market Risk
Refer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES ENTERGY ARKANSAS, INC. AND SUBSIDIARIES, ENTERGY GULF STATES, LOUISIANA, L.L.C., ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC. AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.”-
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Refer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES - Market and Credit Risk Sensitive Instruments.”
Refer to “TABLE OF CONTENTS - Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.”
Item 9. Changes In and Disagreements With Accountants On Accounting and Financial Disclosure
No event that would be described in response to this item has occurred with respect to Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, or System Energy.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of December 31, 2011,2014, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The managements of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) are responsible for establishing and maintaining adequate internal control over financial reporting for the Registrants. Each Registrant’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of each Registrant’s financial statements presented in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Each Registrant’s management assessed the effectiveness of each Registrant’s internal control over financial reporting as of December 31, 2011.2014. In making this assessment, each Registrant’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. The 2013 COSO Framework was utilized for management’s assessment.
Based on each management’s assessment and the criteria set forth by the 2013 COSO Framework, each Registrant’s management believes that each Registrant maintained effective internal control over financial reporting as of December 31, 2011.2014.
The Registrants’report of Deloitte & Touche LLP, Entergy Corporation’s independent registered public accounting firm, has issued an attestation report on each Registrant’sregarding Entergy Corporation’s internal control over financial reporting.reporting is included herein on page 529. The report of Deloitte & Touche LLP is not applicable to Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy because these Registrants are non-accelerated filers.
Changes in Internal Controls over Financial Reporting
Under the supervision and with the participation of the Registrants’each Registrant’s management, including theirits respective PEOsPEO and PFOs, the RegistrantsPFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended December 31, 20112014 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the internal control over financial reporting of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2011,2014, based on criteria established in Internal Control —Integrated-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanyingItem 9A, Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2014, based on the criteria established in Internal Control —Integrated-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20112014 of the Corporation and our report dated February 27, 201226, 2015 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 201226, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Arkansas, Inc. and Subsidiaries
Little Rock, Arkansas
We have audited the internal control over financial reporting of Entergy Arkansas, Inc. and Subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
Entergy Gulf States Louisiana, L.L.C.
Baton Rouge, Louisiana
We have audited the internal control over financial reporting of Entergy Gulf States Louisiana, L.L.C. (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
Entergy Louisiana, LLC and Subsidiaries
Baton Rouge, Louisiana
We have audited the internal control over financial reporting of Entergy Louisiana, LLC and Subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.
Jackson, Mississippi
We have audited the internal control over financial reporting of Entergy Mississippi, Inc. (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
New Orleans, Louisiana
We have audited the internal control over financial reporting of Entergy New Orleans, Inc. (the “Company”) as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Entergy Texas, Inc. and Subsidiaries
Beaumont, Texas
We have audited the internal control over financial reporting of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
System Energy Resources, Inc.
Jackson, Mississippi
We have audited the internal control over financial reporting of System Energy Resources, Inc. (the “Company”) as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2011 of the Company and our report dated February 27, 2012 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 27, 2012
PART III
Item 10. Directors and Executive Officers of the Registrants(Entergy (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Information required by this item concerning directors of Entergy Corporation is set forth under the heading “Item 1 – Election of Directors” contained in the Proxy Statement of Entergy Corporation, to be filed in connection with its Annual Meeting of Stockholders to be held May 4, 2012,8, 2015, and is incorporated herein by reference.
All officers and directors listed below held the specified positions with their respective companies as of the date of filing this report, unless otherwise noted.
|
| | | | | | |
| Name | | Age | | Position | | Period |
| | | | |
| ENTERGY ARKANSAS, INC. |
| | | | | | |
| Directors | | | | |
| | | | |
| Hugh T. McDonald | 53 | 56 | | President and Chief Executive Officer of Entergy Arkansas | | 2000-Present |
| | | | Director of Entergy Arkansas | | 2000-Present |
| | | | | | | |
Leo P. DenaultTheodore H. Bunting, Jr. | | | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Andrew S. Marsh | | | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| Officers | | | | |
| | | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. HerronJeffrey S. Forbes | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne LeonardAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Hugh T. McDonald | | See information under the Entergy Arkansas Directors Section above. | | |
| Alyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. TaylorDonald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. |
| | | | |
| Directors | | | | |
| | | | |
William M. MohlPhillip R. May, Jr. | 52 | Director of Entergy Gulf States Louisiana and Entergy Louisiana | | 2010-Present2013-Present |
| | | President and Chief Executive Officer of Entergy Gulf States Louisiana and Entergy Louisiana | | 2010-Present2013-Present |
| | | Vice President, System PlanningRegulatory Services of Entergy Services, Inc. | | 2007-2010 |
| | Vice President, Commercial Operations of Entergy Services, Inc. | | 2005-20072002-2013 |
| | | | | |
Leo P. DenaultTheodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Andrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
William M. Mohl | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY LOUISIANA, LLC |
| | | | |
Directors | | | | |
| | | | |
William M. Mohl | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
| Officers | | | | |
| | | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. HerronJeffrey S. Forbes | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne LeonardAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
William M. MohlPhillip R. May, Jr. | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
| Alyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. TaylorDonald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY MISSISSIPPI, INC. |
| | | | |
| ENTERGY LOUISIANA, LLC |
| Directors | | | | |
| | | | | |
HaleyPhillip R. Fisackerly | 46 | President and Chief Executive Officer of Entergy MississippiMay, Jr. | | 2008-Present |
| | Director ofSee information under the Entergy Mississippi | | 2008-Present |
| | Vice President, Nuclear Government Affairs of Entergy Services, Inc. | | 2007-2008 |
| | Vice President, Customer Service of Entergy Mississippi | | 2002-2007 |
| | Gulf States Louisiana Directors Section above. | | |
Leo P. DenaultTheodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Andrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| Officers | | | | |
| | | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Haley R. Fisackerly | | See information under the Entergy Mississippi Directors Section above. | | |
John T. HerronJeffrey S. Forbes | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne LeonardAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Phillip R. May, Jr. | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
| Alyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. TaylorDonald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
ENTERGY NEW ORLEANS,MISSISSIPPI, INC. |
| Directors | | | | |
| Haley R. Fisackerly | 49 | President and Chief Executive Officer of Entergy Mississippi | | 2008-Present |
| | Director of Entergy Mississippi | | 2008-Present |
| | | | | |
DirectorsTheodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Charles L. Rice, Jr. | 47 | President and Chief Executive Officer of Entergy New Orleans | | 2010-Present |
| | Director of Entergy New Orleans | | 2010-Present |
| | Director, Utility Strategy of Entergy Services, Inc. | | 2009-2010 |
| | Law Partner in the firm of Barrasso, Usdin, Kupperman, Freeman & Sarver, L.L.C. | | 2005-2009 |
| | | | |
Leo P. DenaultAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| Officers | | | | |
| | | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. HerronHaley R. Fisackerly | | See information under the Entergy Mississippi Directors Section above. | | |
| Andrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne LeonardAlyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
Charles L. Rice, Jr. | | See information under the Entergy New Orleans Directors Section above. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. TaylorDonald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
ENTERGY TEXAS,NEW ORLEANS, INC. |
| Directors | | | | |
| Charles L. Rice, Jr. | 50 | President and Chief Executive Officer of Entergy New Orleans | | 2010-Present |
| | Director of Entergy New Orleans | | 2010-Present |
| | Director, Utility Strategy of Entergy Services, Inc. | | 2009-2010 |
| | Partner, Barrasso, Usdin, Kupperman, Freeman & Sarver, L.L.C. | | 2005-2009 |
| | | | | |
DirectorsTheodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Joseph F. Domino | 63 | Director of Entergy Texas | | 2007-Present |
| | President and Chief Executive Officer of Entergy Texas | | 2007-Present |
| | Director of Entergy Gulf States | | 1999-2007 |
| | President and Chief Executive Officer - TX of Entergy Gulf States | | 1998-2007 |
| | | | |
Leo P. DenaultAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| Officers | | | | |
| | | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae ConleyLeo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Andrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Alyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Charles L. Rice, Jr. | | See information under the Entergy New Orleans Directors Section above. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Donald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| ENTERGY TEXAS, INC. |
| Directors | | | | |
| Sallie T. Rainer | 53 | Director of Entergy Texas | | 2012-Present |
| | President and Chief Executive Officer of Entergy Texas | | 2012-Present |
| | Vice President, Federal Policy of Entergy Services, Inc. | | 2011-2012 |
| | Director, Regulatory Affairs and Energy Settlements of Entergy Services, Inc. | | 2006-2011 |
| | | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Andrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
|
| | | | |
| Officers | | | | |
| | | | |
| Marcus V. Brown | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Joseph F. Domino | | See information under the Entergy Texas Directors Section above. | | |
John T. HerronAndrew S. Marsh | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne LeonardAlyson M. Mount | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Sallie T. Rainer | | See information under the Entergy Texas Directors Section above. | | |
| Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. TaylorDonald W. Vinci | | See information under the Entergy Corporation Officers Section in Part I. | | |
| Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
Each director and officer of the applicable Entergy company is elected yearly to serve by the unanimous consent of the sole stockholder with the exception of the directors and officers of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC, who are elected yearly to serve by the unanimous consent of the sole common membership owners, EGS Holdings, Inc. and Entergy Louisiana Holdings, respectively. Entergy Corporation’s directors are elected annually at the annual meeting of shareholders. Entergy Corporation’s officers are elected at the annual organizational meeting of the Board of Directors.
Corporate Governance Guidelines and Committee Charters
Each of the Audit, Corporate Governance, and Personnel Committees of Entergy Corporation’s Board of Directors operates under a written charter. In addition, the full Board has adopted Corporate Governance Guidelines. Each charter and the guidelines are available through Entergy’s website (www.entergy.com) or upon written request.
Audit Committee of the Entergy Corporation Board
The following directors are members of the Audit Committee of Entergy Corporation’s Board of Directors:
Steven V. Wilkinson (Chairman)
Maureen S. Bateman
Stuart L. Levenick
Blanche L. Lincoln
All Audit Committee members are independent. For purposes ofIn addition to the general independence of members of therequirements, all Audit Committee an independent director also may not accept directly or indirectly any consulting, advisory or other compensatory fee from Entergy or be affiliated with Entergy as defined inmembers must meet the heightened independence standards imposed by the SEC rules.and NYSE. All Audit Committee members possess the level of financial literacy and accounting or related financial management expertise required by the NYSE rules. Steven V. Wilkinson qualifies as an “audit committee financial expert,” as that term is defined in the SEC rules.
Code of Ethics
The Board of Directors has adopted a Code of Business Conduct and Ethics for Members of the Board of Directors. The code is available through Entergy’s website (www.entergy.com) or upon written request. The Board has also adopted a Code of Business Conduct and Ethics for Employees that includes Special Provision Relating to Principal Executive Officer and Senior Financial Officers. The Code of Business Conduct and Ethics for Employees is to be read in conjunction with Entergy’s omnibus code of integrity under which Entergy operates called the Code of Entegrity as well as system policies. All employees are required to abide by the Codes. Non-bargaining employees are required to acknowledge annually that they understand and abide by the Code of Entegrity. The Code of Business Conduct and Ethics for Employees and the Code of Entegrity are available through Entergy’s website (www.entergy.com) or upon written request.
Source of Nominations to the Board of Directors; Nominating Procedure
The Corporate Governance Committee has adopted a policy on consideration of potentialdoes not have any single method for identifying director nominees. The Committeecandidates but will consider nominees fromcandidates suggested by a varietywide range of sources including nominees suggesteddirector candidates recommended by shareholders, executive officers, fellow boardEntergy Corporation’s shareholders. Shareholders wishing to recommend a candidate to the Corporate Governance Committee should do so by submitting the recommendation in writing to Entergy Corporation’s Secretary at 639 Loyola Avenue, P.O. Box 61000, New Orleans, LA 70161, and it will be forwarded to the Corporate Governance Committee members or a third party firm retained for that purpose. It applies their consideration. Any recommendation should include:
the same procedures to all nominees regardlessnumber of shares of Entergy Corporation held by the shareholder;
the name and address of the sourcecandidate;
a brief biographical description of the nomination.
Any party wishing to makecandidate, including his or her occupation for at least the last five years, and a nomination should provide a written resumestatement of the proposedqualifications of the candidate, detailing relevant experiencetaking into account the qualification requirements set forth above; and
the candidate’s signed consent to serve as a director if elected and to be named in the Proxy Statement.
Once the Corporate Governance Committee receives the recommendation, it may request additional information from the candidate about the candidate’s independence, qualifications, and other information that would assist the Corporate Governance Committee in evaluating the candidate, as well as a list of references.certain information that must be disclosed about the candidate in the Proxy Statement, if nominated. The Corporate Governance Committee will reviewapply the resume and may contact references. It will decide based on the resume and references whethersame standards in considering director candidates recommended by shareholders as it applies to proceed to a more detailed investigation. If the Committee determines that a more detailed investigation of the candidate is warranted, it will invite the candidate for a personal interview, conduct a background check on the candidate, and assess the ability of the candidate to provide any special skills or characteristics identified by the Committee or the Board.other candidates.
Section 16(a) Beneficial Ownership Reporting Compliance
Information called for by this item concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders to be held on May 4, 2012,8, 2015, under the heading “Section 16(a) Beneficial Ownership Reporting Compliance”, which information is incorporated herein by reference.
ENTERGY CORPORATION
Information concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement under the headings "Compensation“Compensation Discussion and Analysis," "Executive” “Executive Compensation Tables," "Nominees” “Nominees for the Board of Directors,"” and "Non-Employee“Non-Employee Director Compensation,"” all of which information is incorporated herein by reference.
ENTERGY ARKANSAS, ENTERGY GULF STATES LOUISIANA, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, AND ENTERGY TEXAS
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this section, the salariescompensation earned by the following Named Executive Officers in 2014 is discussed. Each officer’s title is provided as of December 31, 2014.
|
| |
| Name | Title |
| Leo P. Denault | Chairman of the Board and Chief Executive Officer |
| Haley R. Fisackerly | President, Entergy Mississippi |
| Andrew S. Marsh | Executive Vice President and Chief Financial Officer Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas |
| Phillip R. May, Jr. | President, Entergy Gulf States Louisiana and Entergy Louisiana |
| Hugh T. McDonald | President, Entergy Arkansas |
| Alyson M. Mount | Senior Vice President and Chief Accounting Officer Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas |
| Sallie T. Rainer | President, Entergy Texas |
| Charles L. Rice, Jr. | President, Entergy New Orleans |
| Mark T. Savoff | Executive Vice President and Chief Operating Officer |
| Roderick K. West | Executive Vice President and Chief Administrative Officer |
Mr. Denault, Mr. Marsh, Ms. Mount, Mr. Savoff, and otherMr. West serve as executive officers of Entergy Corporation. No additional compensation elementswas paid in 20112014 to the ChiefMr. Denault, Mr. Marsh, Ms. Mount, Mr. Savoff, or Mr. West for their service as Named Executive Officers ("CEOs"), the Principal Financial Officer ("PFO"), the three other most highly compensated executive officers other than the CEO and PFO (collectively, the "Named Executive Officers") of each of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas (the "Subsidiaries"“Subsidiaries”) are discussed and analyzed. Entergy believes the executive pay programs described herein and. Ms. Mount is included in the accompanying tables have played a material role in its ability to drive strong financial results and to attract and retain a highly experienced and successful management team. The purposeExecutive Compensation section of this section is to provide investors with material information necessary to understandForm 10-K because she served as the compensation policies for the Named Executive Officers. This section should be read in combination with the more detailed compensation tables and other data presented elsewhere in this report. For information regarding the compensation of the named executive officers of Entergy Corporation, see the Proxy Statement of Entergy Corporation.
The Named Executive Officers are identified in the Summary Compensation Table immediately following this Compensation Discussion and Analysis. Mr. Leonard, Mr. Denault and Mr. Taylor also serve as executive officers of Entergy Corporation. Mr. Leonard, Mr. Denault and Mr. Taylor do not receive additional compensation for serving as Named Executive Officers of the Subsidiaries. For more information about the officersprincipal financial officer of the Subsidiaries see Part III, Item 10for a portion of this report.2014.
Executive Compensation Best Practices
On an ongoing basis, with the assistance of the Personnel Committee’s independent executive compensation consultant, the Personnel Committee reviews and evaluates Entergy’s overall approach to its executive compensation programs. It undertakes this review to ensure that Entergy’s programs continue to be in line with best practices of other companies in the industry as well as other Fortune 500 companies. As a result of this process, in the past two years the Personnel Committee has:
· | Eliminated “gross up” payments by Entergy with respect to excise taxes due on the payment of severance benefits to the named executive officers in the case of a change in control. See “Benefits, Perquisites, Agreements and Post-Termination Plans - Retention Agreements and Other Compensation Arrangements.” |
· | Adopted a “clawback” policy providing for the recoupment by the Company of incentive compensation in certain circumstances. See “Compensation Program Administration - Executive Compensation Governance.” |
· | Adopted a “double trigger” (requiring both a change in control and an involuntary job loss or substantial diminution of duties) for the acceleration of awards under the 2007 and 2011 Equity Ownership and Long-Term Cash Incentive Plans. |
· | Adopted a policy prohibiting hedging transactions in Entergy’s common stock by any officer, director or employee. See “Compensation Program Administration - Executive Compensation Governance.” |
CD&A Highlights
· | Reduced the maximum payout under the Long-Term Performance Unit Program (for top quartile performance) from 250% to 200% of target beginning with the 2011-2013 performance period, combined with an increase in the minimum payout (for third quartile performance) from 10% to 25% of target; there continues to be no payout for bottom quartile performance. |
Executive Compensation Programs and Practices· | Modified the form of payout for the Long-Term Performance Unit Program, beginning with the 2012- 2014 performance period, to provide that participants will receive their awards in shares of Entergy common stock rather than in cash, with officers required to retain these shares until they satisfy their stock ownership requirements. |
· | Increased the portion of long-term compensation that is derived from performance units from 50% to 60% and decreased the portion that is derived from restricted stock and stock option grants to 40%. |
· | Eliminated club dues as a perquisite for the members of the Office of Chief Executive and eliminated gross-up payments on perquisites, except for relocation benefits. |
· | Discontinued financial counseling as a perquisite for all executive officers, with the value of this discontinued perquisite not being replaced in the executive’s compensation. |
· | Adopted a policy that prohibits Entergy Corporation or its affiliates from engaging the independent compensation consultant that provides executive and director compensation services to the Personnel and Corporate Governance Committees or its affiliates to provide other services to Entergy with an aggregate value in excess of $120,000 in any year. In 2011, the independent consultant to the Committees did not provide any services to Entergy beyond consulting to the Personnel Committee. |
The Personnel Committee also considered in 2011, and will considerEntergy Corporation regularly reviews its executive compensation programs to align them with commonly viewed best practices in the future, the resultsmarket. Following are some highlights of the vote of the shareholders on the annual advisory vote on executive compensation. Given the approximately 97% level of support for Entergy’s executive compensation at the 2011 Annual Meeting, the Committee believes that Entergy’s shareholders are generally very satisfied with the pay practices and the Committee did not make any change to Entergy Corporation’s executive compensation program in response to this advisory vote.practices:
2011 Performance and CompensationThings Entergy Corporation Does
Require a “double trigger” for severance payments or equity acceleration in the event of a change in control
Maintain a “clawback” policy that goes beyond Sarbanes-Oxley requirements
Cap the maximum payout at 200% of target under the Long-Term Performance Unit Program and under the Annual Incentive Plan for members of the Office of the Chief Executive
Require minimum vesting periods for equity based awards
Target the long-term compensation mix to give more weight to performance units than to time-based restricted stock and stock options combined
Settle 100% of long-term performance unit payouts in shares of Entergy stock
Require executives to hold substantially all equity compensation received from Entergy Corporation until stock ownership guidelines are met
Prohibit directors and officers from pledging or entering into hedging or other derivative transactions with respect to their Entergy Corporation shares
Things Entergy Corporation Doesn’t Do
No 280(G) tax “gross up” payments in the event of a change in control
No option repricing or cash buy-outs for underwater options under the equity plans
No agreements providing for severance payments to executive officers that exceed 2.99 times annual base salary and annual incentive awards without shareholder approval
No unusual or excessive perquisites
New officers are excluded from participation in the System Executive Retirement Plan
No grants of supplemental service credit for newly-hired officers under any of Entergy Corporation's non-qualified retirement plans
Pay for Performance Philosophy. Entergy’sPhilosophy
Entergy Corporation’s executive compensation programs for Named Executive Officers are based on a philosophy of pay-for-performance whichthat is embodied in the design of theits annual and long-term incentive plans. The annual incentive plan incentivizes and rewards the achievement of operational and financial metrics that are deemed by the Board to be consistentIn keeping with the overall goals and strategic direction that the Board has set for Entergy. For 2011, these metrics were earnings per share and operating cash flow. The long-term incentive plan was comprised for many years of options and performance unit awards, and in 2011, Entergy added restricted stock awards to the program. The value of these instruments to the executive is directly tied to the performancethis philosophy approximately 80% of the stock price, thereby aligning the interestsannual target compensation of the executives and the stockholders.Entergy Corporation’s Chief Executive Officer is “at risk,” equity or performance-based compensation.
2011 Performance and Significant Achievements. The businesses delivered strong financial and operational performance in 2011, achieving record as reported earnings per share for the seventh year in a row and strong operating cash flow, despite substantially lagging our peer group in total shareholder return. We believe the efforts in 2011 also have positioned the Company for future success, as reflected in the following significant achievements and recognitions:2014 Incentive Pay Outcomes
· | Achieved record as reported earnings of $7.55 per share and operating cash flow of approximately $3.1 billion; |
· | Returned to shareholders nearly $800 million through dividends and net share repurchases; |
· | Proposed the transfer of control of the utility operating companies’ transmission assets to the Midwest Independent System Operator Regional Transmission Organization after a comprehensive review and analysis indicated up to $1.4 billion in potential net customer savings over the first 10 years; |
· | Entered into agreements for the spin-off and merger with ITC Holdings Corp. of the Company’s transmission business; |
· | Obtained 20-year license renewal from the Nuclear Regulatory Commission for Vermont Yankee nuclear facility; |
· | Acquired the Rhode Island State Energy Center combined cycle gas turbine (CCGT) plant; |
· | Completed the acquisition of the Acadia power station with full cost recovery; |
· | Executed agreements and made appropriate regulatory filings to support the acquisitions of the Hinds and Hot Spring generating facilities and the Ninemile 6 new build CCGT project; |
· | Completed securitization for costs associated with the Little Gypsy project; |
· | Successfully resolved formula rate plans; |
· | Maintained reliability of bulk electric system through 2011 ice events, tornadoes and record flooding; |
· | Retained an evaluation in the ‘excellence’ category compared to peers for our Pilgrim and Vermont Yankee nuclear facilities, making a total of five plants in Entergy’s nuclear fleet currently with this evaluation; |
· | Hedged over 29 TWh of future nuclear energy production; |
· | Completed record runs at our Pilgrim and Cooper nuclear facilities; |
· | Included on the Dow Jones Sustainability North America Index, marking the tenth consecutive year on either the DJSI World Index or DJSI North America Index, or both; and |
· | Received multiple awards and recognition for economic development, community relations, corporate citizenship, climate protection, customer service and nuclear practices. |
Application of Pay-for-Performance Philosophy. Pay outcomes for the Named Executive Officers during 2011 clearly2014 demonstrated the application of thethis pay-for-performance philosophy. The annual incentive program is
Annual Incentive Plan Awards
Awards under Entergy Corporation’s Annual Incentive Plan are tied to theits financial performance through the Entergy Achievement Multiplier, (thewhich is the performance metric used to determine the funding of awards under the Annual Incentive Plan), which isplan. For 2014, the Entergy Achievement Multiplier was determined based in equal part on Entergy’sEntergy Corporation’s success in achieving theits operational earnings per share and operating cash flow goals. These goals were approved by the Personnel Committee at the beginning of the year based on Entergy substantiallyCorporation’s financial plan and the Board’s overall goals for Entergy Corporation and were consistent with its published earnings guidance.
For 2014, the Personnel Committee, based on the recommendation of the Finance Committee, determined that management exceeded theits operational earnings per share goal of $6.60 in 2011 by $0.95$5.00 per share while falling short of theby $0.83 per share and exceeded its operational operating cash flow goal of $3.35$3.43 billion by $221approximately $517 million. ThisBased on the targets previously determined by the Committee, Entergy Corporation’s outstanding financial performance in 2014 would have resulted in an Entergy Achievement Multiplier of 128%200% of target. From a qualitative standpoint, the Committee also took into account management’s strong performance executing on Entergy Corporation’s strategies in 2014 and various accomplishments and challenges in 2014. Included in those challenges was a decline in Entergy Corporation’s employee safety performance, as a result of which the Committee decided to exercise its discretion to reduce the calculated Entergy Achievement Multiplier to 195%. This resulted in payouts under the Annual Incentive Plan to the Named Executive Officers who are members of the executive’s target annual incentive plan compensation, withOffice of the Chief Executive, including Entergy Corporation’s Chief Executive Officer, receiving anat 195% of each officer’s target award, equalwhich the Personnel Committee considered to 154%be appropriate in light of his base salarymanagement’s performance and the other Named Executive Officers each receiving awards equal to between 50% and 90% of their base salaries. For additional information regarding the Annual Incentive Compensation program see “Short-Term Compensation - Non-Equity Incentive Plans (Cash Bonus).”outstanding results achieved in 2014.
Long-Term Performance Unit Program Payouts
This contrasts with the performance under the long-term incentives, which are directly tied to total shareholder return. Under the Long-Term Performance Unit Program, a substantial portion of targeted executive officer pay is tied directly to Entergy Corporation’s relative total shareholder return. Under this program, Entergy Corporation measures performance over a three yearthree-year period by assessing Entergy'sEntergy’s total shareholder return in relation to the total shareholder return of the companies included in the Philadelphia Utility Index, with payouts under the plan tied directly to Entergy’sbased solely on Entergy Corporation’s performance in relationrelative to the other companies in the index over theindex. Entergy Corporation measures performance period. Relativebased on relative total shareholder return is used as the measure of performance under this program because it encourages the executives to deliver superior shareholder value in relation to Entergy’sEntergy Corporation’s peers and rewards not just stock price appreciation, but also the ability to deliver significant dividends to shareholders. Notwithstandingshareholders, and takes into account market fluctuations in the strong overall operationalutility sector.
Entergy Corporation’s total shareholder return, which had substantially lagged the returns of its peer group in 2012, improved significantly in 2013 and, financial performancefor 2014, was near the top of the Philadelphia Utility Index. As a result, following a review by the Finance Committee and the Personnel Committee of Entergy Corporation’s total shareholder return in 2011,relation to the total shareholder return wasof the companies in the bottomPhiladelphia Utility Index, the Personnel Committee determined that Entergy Corporation’s relative total shareholder return fell within the third quartile of the Philadelphia Utility Index for the 2009-20112012-2014 performance period, which resultedresulting in a zero payout forpayouts of 64.64% of target. Such payouts were made 100% in shares of Entergy Corporation stock that are required to be held by the performance units granted in 2009. Moreover, many ofexecutives until they satisfy the executive stock options granted to the Named Executive Officers in recent years have no intrinsic value, due to declines in Entergy’s stock price since they were granted. For additional information regarding the long-term compensation program, see “Long-Term Compensation - Performance Unit Program.”ownership guidelines.
Objectives of the Executive Compensation ProgramWhat Entergy Corporation Pays and Why
· | The greatest part of the compensation of the Named Executive Officers should be in the form of "at risk" performance-based compensation in order to focus the executives on the achievement of superior results. |
Pay for Performance Philosophy
TheEntergy Corporation’s executive compensation programs are designedbased on a philosophy of pay-for-performance that is embodied in the design of its annual and long-term incentive plans. Entergy Corporation believes the executive pay programs described in this section and in the accompanying tables have played a material role in its ability to ensuredrive strong financial and operational results and to attract and retain a highly experienced and successful management team. The Annual Incentive Plan incentivizes and rewards the achievement of operational financial metrics that a significant percentageare deemed by the Personnel Committee to be consistent with the overall goals and strategic direction that the Board has approved for Entergy Corporation. Entergy Corporation’s long-term incentive programs further align the interests of its executives and its shareholders by directly tying the value of the total compensationequity awards granted to executives under these programs to the performance of the Named Executive Officers is contingent on achievement of performance goals that driveEntergy Corporation’s stock price and its total shareholder returnreturn. By incentivizing officers to achieve important financial and resultoperational objectives and create long-term shareholder value, these programs play a key role in increases in Entergy Corporation's common stock price. For example, eachcreating sustainable value for the benefit of the annual cash incentive and long-term performance unit programs is designed to pay out only if Entergy achieves pre-established performance goals. If minimum established performance goals are not achieved, no payouts are made under the incentive programs. Assuming achievement of these performance goals at target levels, approximately 80% of the annual target total compensation (excluding non-qualified supplemental retirement income)all of Entergy Corporation's Chief Executive Officer is at risk because it is performance-based compensationstakeholders, including its owners, customers, employees, and the remaining 20% iscommunities.
represented by base salary. For Mr. Denault and Mr. Taylor, assuming achievement of performance goals at the target levels, approximately 65% of the annual target total compensation (excluding non-qualified supplemental retirement income) is at risk because it is performance-based compensation with the remaining 35% represented by base salary. For substantially all of the other Named Executive Officers, assuming achievement of performance goals at the target levels, at least 50% of the annual target total compensation (excluding non-qualified supplemental retirement income) is at risk because it is performance-based compensation with the remaining 50% represented by base salary. Entergy Corporation's Chief Executive Officer's total compensation is at greater risk than the other Named Executive Officers, reflecting both market practice and acknowledging the leadership role of the Chief Executive Officer in setting company policies and strategies.
· | A substantial portion of the Named Executive Officers' compensation should be delivered in the form of equity awards. |
To align the economic interests of the Named Executive Officers with the shareholders ofHow Entergy Corporation Entergy believes a substantial portion of its total compensation should be in the form of equity-based awards. In 2011, awards were granted in the form of restricted stock, stock options and performance units. Stock options and restricted stock generally will be subject to time-based vesting. Performance units pay out only if Entergy Corporation achieves specified performance targets with the amount of payout contingent on the level of performance achieved and Entergy’s common stock price. These awards focus and reward executive officers on building shareholder value. Further, beginning with the 2012-2014 performance period, the performance unit program will help to provide an even greater portion of the officer’s total compensation in equity, as these awards will be settled in shares of Entergy common stock rather than in cash.
· | The compensation programs of Entergy Corporation and the Subsidiaries should enable the companies to attract, retain and motivate executive talent by offering competitive compensation packages. |
It is in the shareholders' best interests that Entergy Corporation and the Subsidiaries attract and retain talented executives by offering compensation packages that are competitive. Entergy Corporation's Personnel Committee has sought to develop compensation programs that deliver total target compensation in the aggregate at approximately the 50th percentile of the market data.
The Starting PointSets Target Pay
To develop a competitive compensation program, the Personnel Committee annually reviews base salary and other compensation data from two sources:
· | Survey Data: The Committee uses published and private compensation survey data to develop marketplace compensation levels for executive officers. The data, which is compiled by the Committee's independent compensation consultant, compares the current compensation opportunities provided to each of the executive officers against the compensation opportunities provided to executives holding similar positions at companies with corporate revenues consistent with the revenues of Entergy Corporation. For non-industry specific positions such as a chief financial officer, the Committee reviews general industry data for total cash compensation (base salary and annual incentive). For management positions that are industry-specific such as Group President, Utility Operations, the Committee reviews data from energy services companies for total cash compensation. However, for long-term incentives, all positions are reviewed relative to utility market data. The survey data reviewed by the Committee covers approximately 400 public and private companies in general industry and approximately over 60 investor-owned companies in the energy services sector. In evaluating compensation levels against the survey data, the Committee considers only the aggregated survey data. The identity of the companies comprising the survey data is not disclosed to, or considered by, the Committee in its decision-making process and, thus, is not considered material by the Committee. |
The Committee uses published and private compensation survey data to develop marketplace compensation levels for the executive officers. The data, which are compiled by Pay Governance, LLC, the Committee’s independent compensation consultant, compare the current compensation opportunities provided to each of the executive officers against the compensation opportunities provided to executives holding similar positions at companies with corporate revenues similar to Entergy Corporation’s. For non-industry specific positions such as a chief financial officer, the Committee reviews general industry data for total cash compensation (base salary and annual incentive) since the market for talent is broader than the utility sector. For management positions that are industry-specific such as Group President, Utility Operations, the Committee reviews data from utility companies for total cash compensation. However, for long-term incentives, all positions are reviewed relative to utility market data. The survey data reviewed by the Committee cover hundreds of companies across a broad range of industries and over 60 investor-owned utility companies in the utility sector. In evaluating compensation levels against the survey data, the Committee considers only the aggregated survey data. The identities of the companies participating in compensation survey data are not disclosed to, or considered by, the Committee in its decision-making process and, thus, are not considered material by the Committee. The Committee uses thethis survey data to develop compensation opportunities that are designed to deliver total target compensation at approximately the 50th percentile of the surveyed companies. ThisThe survey data is used asare the primary data used for purposes of determiningassessing target compensation. For this purpose,As a result, Mr. Denault, Entergy Corporation’s Chief Executive Officer, is compensated at a higher level than the Committee reviews the results of the survey data (organized in tabular format) comparing each of theother Named Executive Officer'sOfficers, reflecting market practices that compensate chief executive officers at greater potential compensation relativelevels with more pay “at risk” than other named executive officers, due to the 25th, 50th (or median)greater responsibilities and 75th percentileaccountability required of a Chief Executive Officer. In most cases, the surveyed companies. The Committee considers its objectives to have been met if Entergy Corporation'sCorporation’s Chief Executive Officer and the eight (8) other executive officers who constitute what is referredEntergy Corporation refers to as theits Office of the Chief Executive each have a target compensation packageopportunity that falls within the range of 85 - 115 percentile85%-115% of the 50th percentile of the companies in the survey data. In 2011, inPromoted officers or officers who are new to their roles may be transitioned into the aggregate the target compensation of all of the Named Executive Officers fell within this range.targeted market range over time. Actual compensation received by an individual officer may be above or below the 50th percentiletargeted range based on an individual officer'sofficer’s skills, performance, experience and responsibilities, Entergy Corporationcorporate performance, and internal pay equity. For 2014, the total target compensation of each of the Named Executive Officers fell within the targeted range except for three officers whose total target compensation fell below the targeted range.
· | Proxy Analysis: Although the survey data described above is the primary data source used in determining compensation, the Committee reviews data derived from proxy statements as an additional point of analysis. The proxy data isProxy Analysis
Although the survey data described above are the primary data used in determining compensation, the Committee reviews data derived from the proxy statements of companies included in the Philadelphia Utility Index as an additional point of comparison. The proxy data are used to compare the compensation levels of the Named Executive Officers with the compensation levels of the corresponding top five highest paid executive officers of the companies included in the Philadelphia Utility Index, as reported in their proxy statements, based on pay rank and without regard to roles and responsibilities, except with respect to the Chief Executive Officer and Chief Financial Officer, for whom comparable roles are used. The Personnel Committee uses this analysis to evaluate the overall reasonableness of the Entergy Corporation’s compensation programs. The following companies were included in the Philadelphia Utility Index at the time the proxy data from the 2014 filings of the Index were compiled:
| | | | | | | Ÿ | AES Corporation | Ÿ | El Paso International | | Ÿ | Ameren Corporation | Ÿ | Exelon Corporation | | Ÿ | American Electric Power Co. Inc. | Ÿ | FirstEnergy Corporation | | Ÿ | CenterPoint Energy Inc. | Ÿ | NextEra Energy | | Ÿ | Consolidated Edison Inc. | Ÿ | Northeast Utilities | | Ÿ | Covanta Holding Corporation | Ÿ | PGE Corporation | | Ÿ | Dominion Resources Inc. | Ÿ | Public Service Enterprise Group, Inc. | | Ÿ | DTE Energy Company | Ÿ | Southern Company | | Ÿ | Duke Energy Corporation | Ÿ | Xcel Energy | | Ÿ | Edison International | | |
Executive Compensation Elements
The following table summarizes the elements of target direct compensation granted or paid to the executive officers under the 2014 executive compensation program. The program uses a mix of fixed and variable compensation elements and provides alignment with both short- and long-term business goals through annual and long-term incentives. Incentives are designed to drive overall corporate performance, specific business unit strategies, and individual performance using performance and operational measures the Committee believes correlate to shareholder value and align with Entergy Corporation’s strategic vision and operating priorities. The Committee establishes the performance measures and ranges of performance for the variable compensation elements. An individual’s award is based primarily on corporate performance, market-based compensation levels, and individual performance.
| | | | | | | Element | Key Characteristics | Why This Element Is Paid | How This Amount Is Determined | 2014 Decisions | | Base Salary | Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate. | Provides a base level of competitive cash compensation for executive talent. | Experience, job scope, market data, individual performance, and internal pay equity. | All of the namedNamed Executive Officers received increases in their base salaries ranging from 2%-5%. | | Annual Incentive Awards | Variable compensation component payable in cash based on performance against goals established annually. | Motivate and reward executives for performance on key financial and operational measures during the year. | Target opportunity is determined based on job scope, market data, and internal equity. For 2014, awards were determined based on success in meeting operational earnings per share and operating cash flow targets, subject to downward adjustment at the Personnel Committee’s discretion. | The CEO’s target annual incentive award for 2014 was 120% of base salary, and target awards were in the range of 40%-70% of base salary for the other Named Executive Officers.
Strong operational and financial performance resulted in awards in the range of 130%-195% of target for each of the Named Executive Officers, after downward adjustment for failure to meet Board expectations as to safety performance. | | Stock Options | Non-qualified stock options are granted at fair market value, have a ten year term and vest over 3 years - 33 1/3% on each anniversary of the grant date.
| Reward executives for absolute value creation and coupled with restricted stock provide competitive compensation, retain executive talent, and increase the executive officers’ ownership in Entergy Corporation’s common stock. | Job scope, market data, individual performance, and Entergy Corporation performance. | Stock options granted in 2014 represented approximately 12% of total target compensation for Entergy Corporation’s Chief Executive Officer and approximately 7%-10% for the other Named Executive Officers. |
| | | | | | | Element | Key Characteristics | Why This Element Is Paid | How This Amount Is Determined | 2014 Decisions | | Restricted Stock Awards | Restricted stock awards vest over 3 years - 33 1/3% on each anniversary of the grant date, have voting rights and accrue dividends during the vesting period.
| Coupled with stock options, align interests of executives with long-term shareholder value, provide competitive compensation, retain executive talent, and increase the executive officers’ ownership of Entergy Corporation’s common stock. | Job scope, market data, individual performance, and Entergy Corporation performance.
| Restricted stock granted in 2014 represented approximately 12% of total target compensation for Entergy Corporation’s Chief Executive Officer and approximately 7%-10% for the other Named Executive Officers.
| | Long-Term Performance Unit Program | Each performance unit equals the value of one share of Entergy Corporation’s common stock. Performance is measured at the end of a three-year performance period. Each unit also earns the equivalent of the dividends paid during the performance period. Performance units granted under the Long-Term Performance Unit Program are settled in shares of Entergy common stock rather than in cash. | Focuses the executive officers againston building long-term shareholder value and increases the compensation levelsexecutive officers’ ownership of Entergy Corporation’s common stock.
| Payout based on Entergy Corporation’s total shareholder return relative to the corresponding top five highest paid executive officers fromtotal shareholder return of the companies in the Philadelphia UtilitiesUtility Index. The Personnel Committee does not
| Performance unit grants for the 2014 to 2016 performance cycle represented approximately 34% of total target Entergy’s executive compensation elements againstfor Entergy Corporation’s Chief Executive Officer and approximately 22%-31% for the companies includedother Named Executive Officers.
Strong relative total shareholder return for 2014 resulted in third quartile performance for the index, but rather, uses2012 to 2014 performance period, yielding a payout of 64.64% of target for the proxy analysis to evaluate the reasonableness of the compensation program. The proxy market data compare Entergy executive officers to other proxy officers based on pay rank without regard to roles and responsibilities. These companies are:Named Executive Officers. |
·AES Corporation
| ·Exelon Corporation
| ·Ameren Corporation
| ·FirstEnergy Corporation
| ·American Electric Power Co. Inc.
| ·NextEra Energy
| ·CenterPoint Energy Inc.
| ·Northeast Utilities
| ·Consolidated Edison Inc.
| ·PG&E Corporation
| ·Dominion Resources Inc.
| ·Progress Energy, Inc.
| ·DTE Energy Company
| ·Public Service Enterprise Group, Inc.
| ·Duke Energy Corporation
| ·Southern Company
| ·Edison International
| ·Xcel Energy
|
Elements of the Compensation Program
The major components of the 2011 executive compensation program are presented below:
Entergy’s executive compensation package consists of a combination of short-term and long-term compensation elements. Short-term compensation included base pay and annual cash incentive awards and long-term compensation included stock options, restricted stock and performance units. All of the incentive plans are linked to Entergy’s financial and stock performance or its total shareholder return in relation to its peers. The executive compensation program is approved by Entergy’s Personnel Committee, which consists entirely of independent board members.
The executive compensation programs reflect a balanced compensation approach to incentivizing and rewarding performance by combining a market-based base salary with reasonable annual and long-term incentive compensation programs. These incentive compensation programs are designed to reward the executive officers if they attain specified annual and long-term goals while taking an appropriate level of risk.
Compensation decisions for each executive officer are made after taking into account all elements of the officer’s compensation. In making compensation decisions, Entergy applies the same compensation policies to all of the executive officers; however, the application of these policies results in different compensation amounts to individual executive officers because of: (i) differences in roles and responsibilities; (ii) differences in market-based compensation levels for specific officer positions; (iii) the assessment of individual performance; (iv) internal equity; and (v) variations in business unit performance.
Short-Term Compensation
Base salary is a component of each Named Executive Officer's compensation package because theThe Personnel Committee believes it is appropriate that some portion of the compensation that is provided to these officers is stable. Also, base salary remains the most common form of payment throughout all industries. Its use ensures a competitive compensation package for the Named Executive Officers.
The Committee (in the case of Mr. Leonard, Mr. Denault and Mr. Taylor) determinedetermines the base salaries for theseall of the Named Executive Officers including whether to grant annual merit increases in base salarywho are members of the Office of the Chief Executive based on competitive compensation data, performance considerations, and advice provided by the following factors:
· | Entergy Corporation, business unit and individual performance duringCommittee’s independent compensation consultant. For the other Named Executive Officers, their salaries are established by their immediate supervisors using the same criteria. The Committee also considers internal pay equity; however, the prior year; |
· | Internal pay equity and the executive pay structure; |
· | The Committee's assessment of other elements of compensation provided to the Named Executive Officers; and |
· | Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself. |
The use of "internal pay equity" in setting merit increases assists the Committee in determining whether a change in an executive officer's role and responsibilities relative to other executive officers requires an adjustment in the officer's salary. The Committee has not established any predetermined formula against which the base salary of one Named Executive Officer is measured against another officer or employee.
In 2011,2014, all of the Named Executive Officers received merit increases in their base salaries in the range ofranging from 2 to 45 percent. The increases in base salary were made in light of current economic conditions and the projected growth in executive salaries in 20112014 based on general industry surveys obtained from human resources consulting firms.the market data previously discussed in this CD&A under “What Entergy Corporation Pays and Why - How Entergy Corporation Sets Target Pay,” as well as an internal pay equity comparison.
The following table sets forth the 20112013 and 2014 base salaries for the Named Executive Officers. Changes in base salaries for 2014 were effective in April of each of the years shown.
| Named Executive Officer | 2010 Base Salary | 2011 Base Salary | | J. Wayne Leonard | $1,291,500 | $1,323,800 | | Leo P. Denault | $630,000 | $ 655,200 | | Gary J. Taylor | $570,000 | $ 592,800 | | Theodore H. Bunting, Jr. | $350,448 | $ 359,209 | | Joseph F. Domino | $317,754 | $ 324,104 | | Haley R. Fisackerly | $275,000 | $ 283,250 | | Hugh T. McDonald | $322,132 | $ 330,185 | | William M. Mohl | $325,000 | $ 335,550 | | Charles L. Rice, Jr. | $240,000 | $ 247,200 |
Mr. Leonard’s base salary is larger than the other Named Executive Officers because of his leadership role in setting company policies and strategic planning and reflects market practice for salaries for chief executive officers of similarly sized companies.April.
· | Non-Equity Incentive Plan (Cash Bonus) |
| | | | | | | Named Executive Officer | | 2013 Base Salary | | 2014 Base Salary | | Leo P. Denault | | $1,085,000 | | $1,110,000 | | Haley R. Fisackerly | | $296,174 | | $302,934 | | Andrew S. Marsh | | $500,000 | | $517,500 | | Phillip R. May, Jr. | | $330,000 | | $338,250 | | Hugh T. McDonald | | $345,220 | | $352,121 | | Alyson M. Mount | | $286,700 | | $301,100 | | Sallie T. Rainer | | $291,000 | | $298,275 | | Charles L. Rice, Jr. | | $257,144 | | $262,287 | | Mark T. Savoff | | $632,251 | | $644,896 | | Roderick K. West | | $612,726 | | $628,044 |
Performance-basedAnnual Incentive Plan
Entergy Corporation includes performance-based incentives are included in the Named Executive Officers'Officers’ compensation packages because Entergyit believes performance-based incentives encourage the Named Executive Officers to pursue objectives consistent with the overall goals and strategic direction that the Entergy Board has setapproved for Entergy Corporation and the Subsidiaries. Annual incentive plans are commonly used by companies in a variety of industry sectors to compensate their executive officers for achieving financial and operational goals.Corporation.
The Named Executive Officers participate in a performance-based cash bonus plan known asUnder the Executive Annual Incentive Plan, or Executive Incentive Plan. Under the plan, Entergy Corporation uses a performance metric known as the Entergy Achievement Multiplier to determine the percentage of target annual plan awardsopportunities that will be paid each year to each Named Executive Officer. Each yearOfficer, subject to adjustment based on individual performance. For 2014, the Personnel Committee reviewsmaintained the performance measures used to determine the Entergy Achievement Multiplier. In December 2010, the Personnel Committee decided to retain the performance measures used in 2010. Accordingly, the 2011 performance measures used to determine the Entergy Achievement Multiplier were consolidated earnings per share and operating cash flow, with each measure weighted equally. The Committee selected these performance measures because:
· | earnings per share and operating cash flow have both a correlative and causal relationship to shareholder value over the long-term; |
· | earnings per share and operating cash flow targets are aligned with externally-communicated goals; and |
· | earnings per share and operating cash flow results are readily available in earning releases and SEC filings. |
In addition, these measures are used by a number of other companies, including the companies in the Philadelphia Utility Index, as components of their incentive programs. For example, approximately 72 percent of the industry peer group companies use earnings per share as an incentive measure.
The Committee sets minimum,following target and maximum achievementaward levels under the Executive Incentive Plan. Payouts for performance between minimum and target achievement levels and between target and maximum levels are calculated using straight line interpolation. If Entergy does not achieve its minimum achievement levels, no payout occurs under the Executive Incentive Plan. In general, the Committee seeks to establish target achievement levels such that the relative difficulty of achieving the target level is consistent from year to year. Over the past five years ending with 2011, the average Entergy Achievement Multiplier was 136% of target.
In December 2010, the Committee set the 2011 target awards for incentives to be paid for 2011 under the Executive Incentive Plan. As a percentage of base salary for the target awards for certain of Entergy named executive officers were set as follows: J. Wayne Leonard, CEO of Entergy Corporation (120%); Leo P. Denault,Named Executive Vice President and Chief Financial Officer (70%); and Gary J. Taylor, Group President Utility Operations (70%). The Committee based its decision on the target awardsOfficers:
120% for Mr. DenaultDenault; 70% for Mr. Marsh, Mr. Savoff, and Mr. Taylor on the recommendation of Entergy’s Chief Executive Officer.West;
60% for Mr. May and Ms. Mount;
In setting these target awards, the Personnel Committee considered several factors, including:50% for Mr. McDonald; and
· | Analysis provided by the Committee's independent compensation consultant as to compensation practices at the industry peer group companies and the general market for companies the size of Entergy Corporation; |
· | Competitiveness of the compensation plans and Entergy’s ability to attract and retain top executive talent; |
· | The individual performance of each Entergy named executive officer (other than the Chief Executive Officer of Entergy Corporation) as evaluated by the Chief Executive Officer of Entergy Corporation; |
· | Target bonus levels in the market for comparable positions; |
· | The desire to ensure that a substantial portion of total compensation is performance-based; |
· | The relative importance of the short-term performance goals established pursuant to the Executive Incentive Plan; |
· | Internal pay equity and the executive pay structure;
|
· | The Committee's assessment of other elements of compensation provided to the Named Executive Officers; and |
· | Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself.
|
40% for Mr. Fisackerly, Ms. Rainer, and Mr. Rice.
The Committeetarget opportunities established a higher target percentage for Mr. Leonard comparedthese officers were comparable to the othertarget opportunities historically set for these positions and levels of responsibility. The Named Executive Officers who are members of the Office of the Chief Executive may earn a payout ranging from 0% to reflect200% of their target opportunity calculated as described in the following factors:
· | Market practices that compensate chief executive officers at greater potential compensation levels with more "pay at risk" than other executive officers. |
· | The Personnel Committee's assessment of Mr. Leonard's strong performance based on the Board's annual performance evaluation, in which the Board reviews and assesses Mr. Leonard's performance based on critical factors such as: leadership, strategic planning, financial results, succession planning, communications with all of Entergy’s stakeholders, external relations with the communities and industries in which Entergy Corporation operates and his relationship with the Board. |
The target awards for the other Named Executive Officers were set as follows: Joseph F. Domino, CEO - Entergy Texas (50%); Hugh T. McDonald, CEO - Entergy Arkansas (50%); Haley Fisackerly, CEO - Entergy Mississippi (40%); William M. Mohl (60%), CEO - Entergy Gulf States and Entergy Louisiana; Charles L. Rice, Jr. (40%), CEO - Entergy New Orleans and Theodore H. Bunting, Jr. - Principal Accounting Officer - the Subsidiaries (60%).
table below. The target awards for the Named Executive Officers (other than the Entergy named executive officers)Corporation Named Executive Officers) were set by their respective supervisors (subject to ultimate approval of Entergy’sEntergy Corporation’s Chief Executive Officer) who allocated a potential incentive pool established by the Personnel Committee among various of their direct and indirect reports. In setting the target awards, the supervisor took into account considerations similar to those used by the Personnel Committee in setting the target awards for Entergy’s Named Executive Officers.
Target awards are set based on an executive officer’s current position and executive management level within the Entergy organization. Executive management levels at Entergy range from Level 1 thoroughthrough Level 4. At December 31, 2014, Mr. Denault held a Level 1 position, Messrs. Marsh, Savoff, and Mr. Taylor holdWest held positions in Level 2, whereas Mr. BuntingMs. Mount and Mr. Mohl hold positions inMay held Level 3 positions and Mr. Domino, Mr. Fisackerly, Mr. McDonald and Mr. Rice holdthe remaining Named Executive Officers held positions in Level 4. Accordingly, their respective incentive targets differ one from another based on the external market data developed by the Committee’s independent compensation consultant and the other factors noted above.
Each year the Personnel Committee reviews the performance measures used to determine the Entergy Achievement Multiplier. In December 2010,2013, the Personnel Committee decided to retain for 2014 the performance measures used for determining the 2013 Entergy Achievement Multiplier. These measures were operational earnings per share and operating cash flow, with each measure weighted equally. The Committee considered a variety of other potential measures, but determined that operational earnings per share and operating cash flow continued to be the
best metrics to use because, among other things, they are objective measures that Entergy Corporation’s investors consider to be important in evaluating its financial performance and because Entergy Corporation’s goals in that regard are broadly communicated both internally and externally. This provides both discipline and transparency that the Committee believes are important objectives of any well designed incentive compensation plan.
The Personnel Committee also engages in a rigorous process each year to establish the targets for the Annual Incentive Plan with a goal of establishing target achievement levels that are consistent with Entergy Corporation’s strategy and business objectives for the upcoming year, as reflected in its financial plan, and sufficient to drive results that represent a high level of achievement for Entergy Corporation, taking into consideration the applicable business environment and specific challenges facing it. These targets are approved based on a comprehensive review by the full Board of Entergy Corporation’s financial plan, including changes in commodity market conditions and other key drivers of anticipated changes in performance from the preceding year. The Committee further confirms that the targets it approves are aligned with the earnings guidance that will be communicated to the financial markets, which assures that the internal targets approved for purposes of Entergy Corporation’s incentive compensation plans are aligned with the external expectations set and communicated to its shareholders.
In December 2013, after full Board review of management’s 2014 financial plan for Entergy Corporation and engaging in the process discussed above, the Committee determined the ExecutiveAnnual Incentive Plan targets to be used for purposes of establishingdetermining annual bonuses for 2011. 2014. In keeping with its past practice, the Committee also determined that for purposes of measuring performance against such targets, the Committee would exclude the effect on as-reported results of activities related to special items that would be excluded in determining operational results, and the effect of any major storms that may occur during the year.
The following table shows the Annual Incentive Plan targets established by the Personnel Committee in December 2013, and 2014 results:
Annual Incentive Plan Targets and Results | | | | | | | | Performance Goals(1) | | | | Minimum | Target | Maximum | 2014 Results | | Operational Earnings Per Share ($) | $4.50 | $5.00 | $5.50 | $5.83 | | Operational Operating Cash Flow ($ billion) | $3.02 | $3.43 | $3.84 | $3.947 | | Payout as % of Target | 25% | 100% | 200% | 195%(2) |
| | | (1) | Payouts for performance between minimum and target achievement levels and between target and maximum levels are calculated using straight-line interpolation. There is no payout for performance below minimum. |
| | | (2) | Reflects downward adjustment by Personnel Committee, as further described below. |
In January 2015, the Finance and Personnel Committees reviewed Entergy Corporation’s financial results against the performance objectives reflected in the table above. Based on the Finance Committee’s determinationrecommendation, the Personnel Committee determined that management exceeded its operational earnings per share goal of $5.00 per share by $0.83 per share and exceeded its operational operating cash flow goal of $3.43 billion by approximately $517 million. Operational results excluded from as-reported results special items recorded for (i) expenses associated with the shutdown in December 2014 of the target levelsVermont Yankee Nuclear Power Station and the related settlement agreement reached with the State of Vermont in 2014, and (ii) expenses for the implementation of the Human Capital Management strategic imperative in 2014. The exclusion of these items was made after full Board reviewconsistent with the Committee’s decision to approve the annual incentive plan targets for 2014 on the basis of management’s 2011Entergy Corporation’s operational financial results, because such results form the basis for Entergy Corporation’s financial plan and guidance to investors and are the primary basis on which its financial performance is evaluated by investors.
Based on the targets previously determined by the Committee, Entergy Corporation’s outstanding financial performance in 2014 exceeded the maximum target achievement approved by the Committee, and would have resulted
in an Entergy Achievement Multiplier of 200%. However, in determining the Entergy Achievement Multiplier, the Committee also took into account management’s strong performance executing on Entergy Corporation’s strategies in 2014 and various accomplishments and challenges in 2014. Included in those challenges was a decline in Entergy Corporation’s employee safety performance from 2013, which included an increase in OSHA recordable accidents from the preceding year and two electrical contact incidents involving critical safety rule violations. The Committee concluded that despite management’s outstanding performance overall and Entergy Corporation’s strong financial performance for the year, this decline in safety performance warranted a downward adjustment in the Entergy Corporation, uponAchievement Multiplier to 195%.
Based on the foregoing evaluation of management performance and the recommendation of the Finance Committee, and after the Committee’s determination that the established targets aligned with Entergy Corporation’s anticipated 2011 financial performance as reflected in the financial plan. The targets established to measure management performance against as reported results were:
| | Minimum | Target | Maximum | | Earnings Per Share ($) | $6.10 | $6.60 | $7.10 | Operating Cash Flow ($ in Billions) | $2.97 | $3.35 | $3.70 |
In January 2012, after reviewing earnings per share and operating cash flow results against the performance objectives in the above table, the Committee determined that Entergy Corporation had exceeded as reported earnings per share target of $6.60 by $0.95 in 2011 while falling short of the operating cash flow goal of $3.35 billion by $221 million in 2011. In accordance with the terms of the Annual Incentive Plan, in January 2012, the Personnel Committee certified the 2012an Entergy Achievement Multiplier at 128% of target.
Under the terms of the Management Effectiveness Program, the Entergy Achievement Multiplier is automatically increased by 25 percent195% for 2014 for the members of the Office of the Chief Executive if the pre-established underlying performance goals established by the Personnel Committee are satisfied at the end of the performance period, subject to the Personnel Committee's discretion to adjust the automatic multiplier downward or eliminate it altogether. In accordance with Section 162(m) of the Internal Revenue Code, the multiplier which Entergy refers to as the Management Effectiveness Factor is intended to provide the Committee a mechanism to take into consideration specific achievement factors relating to the overall performance of Entergy Corporation. In January 2012, the Committee eliminated the Management Effectiveness Factor with respect to the 2011 incentive awards, reflecting the Personnel Committee's determination thatExecutive. After the Entergy Achievement Multiplier in and of itself without the Management Effectiveness Factor, was consistent with the performance levels achieved by management.
The annual incentive awardsestablished to determine overall funding for the NamedAnnual Incentive Plan, Entergy Corporation’s Chief Executive Officers (other than Mr. Leonard, Mr. Denault and Mr. Taylor) are awarded from anOfficer allocated incentive pool approved byaward funding to the Committee. From this pool, each Named Executive Officer’s supervisor determinesbusiness units based on their business unit results (referred to as the annual incentive payment“line of business multiplier). Individual awards were determined based on the Entergy Achievement Multiplier. The supervisor has the discretion to increase or decrease the multiple used to determine an incentive award based online of business multiplier as well as individual officer performance taking into account customer, operational, and business unit performance. The incentive awards are subject to the ultimate approval of Entergy’s Chief Executive Officer.safety measures.
The following table shows the ExecutiveAnnual Incentive Plan payments as a percentage of base salary for 2011 based on an Entergy Achievement Multiplier of 128% as well as the incentive awards forpayouts to each Named Executive Officer:Officer for 2014.
| Named Executive Officer | Target | Percentage Base Salary | 2011 Annual Incentive Award | | J. Wayne Leonard | 120% | 154% | $2,033,356 | | Leo P. Denault | 70% | 90% | $ 587,059 | | Gary J. Taylor | 70% | 90% | $ 531,148 | | Theodore H. Bunting, Jr. | 60% | 111% | $ 400,000 | | Joseph F. Domino | 50% | 66% | $ 215,000 | | Haley R. Fisackerly | 40% | 53% | $ 150,000 | | Hugh T. McDonald | 50% | 65% | $ 210,000 | | William M. Mohl | 60% | 79% | $ 265,000 | | Charles L. Rice, Jr. | 40% | 53% | $ 130,000 |
Nuclear Retention Plan
Some of Entergy’s executive officers, including Mr. Taylor, participate in a retention plan for officers and other leaders with special expertise in the nuclear industry. The Committee authorized this retention plan to attract and retain management talent in the nuclear power field, a field that requires unique technical and other expertise that is in great demand in the utility industry. This type of retention plan is not an uncommon practice among companies that operate nuclear power plants. Mr. Taylor’s participation in the plan covers a three-year period that began on January 1, 2009 and terminated with the January 2012 payment. In January 2010, 2011 and 2012, in accordance with the terms and conditions of the plan, Mr. Taylor received a cash bonus equal to 30% of his base salary as of January 1, 2009. Mr. Taylor’s participation in the plan (with respect to the period covered and percentage of base salary paid) is consistent with the level of participation of other employees who participate in the Plan. Mr. Taylor has advised Entergy Corporation that he intends to resign from his position as Group President, Utility Operations, effective May 31, 2012. | | | | | | | Named Executive Officer | Base Salary | Target as Percentage of Base Salary | Payout as Percentage of Base Salary | 2014 Annual Incentive Award | | Leo P. Denault | $1,110,000 | 120% | 234% | $2,597,400 | | Haley R. Fisackerly | $302,934 | 40% | 64% | $193,878 | | Andrew S. Marsh | $517,500 | 70% | 137% | $706,388 | | Phillip R. May, Jr. | $338,250 | 60% | 78% | $263,835 | | Hugh T. McDonald | $352,121 | 50% | 65% | $228,879 | | Alyson M. Mount | $301,100 | 60% | 108% | $325,188 | | Sallie T. Rainer | $298,275 | 40% | 58% | $171,500 | | Charles L. Rice, Jr. | $262,275 | 40% | 64% | $167,864 | | Mark T. Savoff | $644,896 | 70% | 137% | $880,283 | | Roderick K. West | $628,044 | 70% | 137% | $857,280 |
Long-Term Incentive Compensation
Entergy’sEntergy Corporation’s goal for its long-term incentive compensation is to focus and rewardthe executive officers foron building shareholder value and to increase the executive officers’ ownership of Entergy Corporation’s common stock in order to more closely align their interest with those of its shareholders. In its long-term incentive compensation program, Entergy Corporation common stock. In the long-term incentive programs, Entergy uses a mix of performance units, restricted stock, and stock options. Performance units reward the Named Executive Officers on the basis of total shareholder return, which is a measure of stock price appreciation and dividend payments, and stock price relativein relation to the companies in the Philadelphia Utility Index. Restricted stock ties the executive officers’ long-term financial interest to the long-term financial interests of theEntergy Corporation’s shareholders. Stock options provide a direct incentive for increasingto increase the pricevalue of Entergy CorporationCorporation’s common stock. In addition, restricted stock units have occasionally been awarded for retention purposes orgeneral, Entergy Corporation seeks to offset forfeited compensation in order to attract officers and managers from other companies. The targetallocate the total value of long-term incentive compensation granted is allocated 60% to performance units and 40% to a combination equally divided, of stock options and restricted stock, equally divided in value, all based on their grant date fair values. Awards for individual Named Executive Officers may vary from this target as a result of individual performance, promotions, and internal pay equity.
EachAll of the performance units, shares of restricted stock, and stock options granted to the Named Executive Officers in 20112014 were awarded under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation, which is referred to as the 2007 Equity Ownership Plan. At Entergy’s 2011 Annual Meeting, Entergy’s shareholders approved theCorporation’s 2011 Equity Ownership Plan and Long TermLong-Term Cash Incentive Plan or 2011 Equity Ownership Plan. Any equity award granted after that date will be granted under the 2011 Equity Ownership Plan.
Incentive Plan (“2011 Equity Ownership Plan”), which requires both a change in control and an involuntary job loss or substantial diminution of duties (a “double trigger”) for the acceleration of these awards upon a change in control.
· | Performance Unit Program |
Entergy Corporation issues performance unit awards to the Named Executive Officers under its Long-Term Performance Unit Program. Historically, eachEach performance unit equalsrepresents the cash value of one share of Entergy CorporationCorporation’s common stock at the end of the three-year performance period. Each unit also earns the cash equivalent of theperiod, plus dividends paidaccrued during the performance period. Dividends accrued duringThe Personnel Committee approves payout opportunities for the program at the outset of each performance period, are paid out only toand the extent the performance measures are achieved and a payout under the program for that period occurs. The Long-Term Performance Unit Program is structured to reward Named Executive Officers only if performance goals setapproved by the Personnel Committee are met. The Personnel Committee has no discretion to make awards if minimum performance goals are not achieved. Beginning with the 2012-2014 performance period, upon vesting, the
The performance units granted under the Long-Term Performance Unit Program will beand accrued dividends on any shares earned during the performance period are settled in shares of Entergy Corporation common stock rather than cash. Accrued dividends on anyAll shares earned under the plan will also be converted and paid in shares of Entergy Corporation common stock. Entergy modified the form of payment to align the method of payment with market practice and to encourage the executives to own shares of Entergy Corporation common stock. Executives are required to retain after-tax shares issuedout under the Long-Term Performance Unit Program are required to be retained by the officers until they have achieved their prescribed level ofapplicable executive stock ownership under the stock ownership guidelines.requirements are met.
The Long-Term Performance Unit Program providesspecifies a minimum, target, and maximum achievement level. Performance is measuredlevel, the achievement of which will determine the number of performance units that may be earned by each participant. Entergy Corporation measures performance by assessing Entergy Corporation'sCorporation’s total shareholder return relative to the total shareholder return of the companies in the Philadelphia Utility Index. The Personnel Committee identified the Philadelphia Utility Index as the appropriate industry peer group for total shareholder return performancethis purpose because the companies representedincluded in this index, closelyin the aggregate, approximate Entergy Corporation in terms of sizebusiness and scale. The Personnel Committee chose relative total shareholder return as a measure of performance because it assessesreflects Entergy Corporation'sCorporation’s creation of shareholder value relative to other electric utilities over the performance period. It also takes into account dividends paid by the companies in this index and normalizes certain events that affect the industry as a whole. Minimum, target, and maximum performance levels are determined by reference to the percentile ranking of Entergy Corporation'sCorporation’s total shareholder return against the total shareholder return of the companies in the Philadelphia Utility Index. The range of potential payouts under the program is shown below.
| | | | | | Performance Level | Minimum | Target | Maximum | | Total Shareholder Return | Bottom of Third Quartile | 50th percentile | Top Quartile | | Payout | 25% of target | 100% of target | 200% of Target |
There is no payout for performance below the 25th percentile. Payouts between minimum and target and between target and maximum are calculated by interpolating between the bottom position of the third quartile and the median or between the median and the bottom position of the top quartile, respectively. For top quartile performance, a maximum payout of 200% of target is earned. At any given time, a participant in the Long-Term Performance Unit Program may be participating in up to three performance periods. Currently, participants are participating in the 2010-2012,2013-2015, the 2011-20132014-2016, and the 2012-20142015-2017 performance periods.
The 2011-2013 Performance Unit Program GrantGrants.. Subject to achievement of the applicable performance levels, the Personnel Committee established the following target amounts of 26,000 performance units for Mr. Leonard; and 5,900 performance unitsunit payout opportunities for each of Mr. Denaultthe 2012-2014, 2013-2015, and Mr. Taylor for the 2011-20132014-2016 performance period. The target amounts for the otherperiods. Each Named Executive Officers are as follows: 2,500Officer received a larger number of performance units for Mr. Buntingin 2013 and Mr. Mohl; 1,200 performance units for each of Mr. Domino, Mr. McDonald, Mr. Fisackerly and Mr. Rice. The range of payouts under2014 than were granted to officers at their respective levels in the program is shown below.
Performance Levels: | Minimum | Target | Maximum | Total Shareholder Return | 25th percentile
| 50th percentile
| 75th percentile
| Payouts | 25% of Target | 100% of Target | 200% of Target |
There is no payout for performance belowpreceding years to reflect the 25th percentile. Payouts between minimum and target and target and maximum are calculated using straight line interpolation. Beginning with the 2011-2013 performance period, Entergy reduced the maximum payout under the Long-Term Performance Unit Program from 250% to 200% of target and increased the minimum payout from 10% to 25% of target to better align with market practice.
The Personnel Committee sets payout opportunities for the Long-Term Performance Unit Programlower stock price at the outsettime of each performance period. In determining payout opportunities, the Committee considers several factors, including:award as compared to the preceding year and a slight increase in targeted long-term value required to result in awards approximating the 50th percentile of the utility market data.
· | The advice of the Committee's independent compensation consultant regarding compensation practices at the industry peer group companies; |
| | | | | | Named Executive Officer | 2012-2014 Target Opportunity | 2013-2015 Target Opportunity | 2014-2016 Target Opportunity | Leo P. Denault(1) | 19,136 | 37,156 | 40,000 | | Haley R. Fisackerly | 1,500 | 1,900 | 2,200 | Andrew S. Marsh(1) | 3,992 | 7,442 | 9,400 | Phillip R. May, Jr.(1) | 2,075 | 2,969 | 3,100 | | Hugh T. McDonald | 1,500 | 1,900 | 2,200 | | Alyson M. Mount | 2,067 | 3,000 | 3,100 | | Sallie T. Rainer | 1,292 | 1,900 | 2,200 | | Charles L. Rice, Jr. | 1,500 | 1,900 | 2,200 | | Mark T. Savoff | 5,400 | 7,600 | 9,400 | | Roderick K. West | 5,400 | 7,600 | 9,400 |
· | Competitiveness of Entergy’s compensation plans | | (1) | Messrs. Denault, Marsh, and their ability to attract and retain top executive talent; |
· | Target long-term compensation values in the market for similar jobs; |
· | The desire to ensure, as described above, that a substantial portion of total compensation is performance-based; |
· | The relative importance of the long-term performance goals established pursuant to the Performance Unit Program; |
· | Internal pay equity and the executive pay structure; |
· | The Committee’s assessment of other elements of compensation provided to the Named Executive Officers; and |
· | Entergy’s Chief Executive Officer’s recommendationMay received pro-rated awards for the Named Executive Officers other than himself.2012-2014 and 2013-2015 performance cycles as a result of their promotions in 2013. |
The Committee established a higher target amount for Mr. Leonard compared to the other Named Executive Officers based on the following factors:
· | Mr. Leonard's leadership and contributions to Entergy Corporation's success as measured by, among other things, the overall performance of Entergy Corporation. |
· | Market practices that compensate chief executive officers at greater potential compensation levels with more "pay at risk" than other named executive officers. |
Payout for the 2009-20112012-2014 Performance Period. For the 2009-2011 performance period, the target amounts were:
· | 22,500 performance units for Mr. Leonard; |
· | 4,800 performance units for Mr. Denault and Mr. Taylor; |
· | 2,000 performance units for Mr. Bunting; |
· | 1,450 performance units for Mr. Mohl; |
· | 900 performance units each for Mr. Domino, Mr. Fisackerly and Mr. McDonald; and |
· | 450 performance units for Mr. Rice. |
Participants could earn performance units based on relative total shareholder return and on the following range of payouts:
Performance Level | Minimum | Target | Maximum | Total Shareholder Return | 25th percentile
| 50th percentile
| 75th percentile
| Payouts | 10% of target | 100% of target | 250% of Target |
In January 2012,2015, the Committee assessedreviewed the Entergy Corporation’s total shareholder return for the 2009-20112012-2014 performance period in order to determine the actual number of performance unitspayout to be paid to Performance Unit Program participants for the 2009-20112012-2014 performance period. The Committee compared the Company'sEntergy Corporation’s total shareholder return against the total shareholder return of the companies that comprise the Philadelphia Utility Index. Based on this comparison,Index, with the performance measures and range of potential payouts for the 2012-2014 performance similar to the range of payouts discussed above for the 2014-2016 performance period. As recommended by the Finance Committee, concludedthe Personnel Committee determined that Entergy Corporation’s performancerelative total shareholder return fell within the third quartile of the Philadelphia Utility Index for the 2009-20112012-2014 performance period, rankedresulting in the bottom quartile. This resulted in no payout under the Performance Unit Program for the performance period.
The Personnel Committee and, in the case of the Named Executive Officers (other than Mr. Leonard, Mr. Denault and Mr. Taylor), Entergy’s Chief Executive Officer and the Named Executive Officer’s supervisor consider several factors in determining the amount of stock options it will grantpayouts to the Named Executive Officers including:of 64.64% of target. Beginning with the 2012-2014 performance period, payouts under the performance unit program are made in shares of Entergy common stock. For the 2012-2014 performance period, the following numbers of shares of Entergy common stock were issued:
· | Individual performance; |
Mr. Denault - 13,777 shares;· | Prevailing market practice in stock option grants; |
Mr. Marsh - 2,874 shares;Mr. Savoff and Mr. West - 3,888 shares; 424Ms. Mount - 1,462 shares;
Mr. Fisackerly, Mr. McDonald, and Mr. Rice - 1,080 shares; and· | The targeted long-term value created by the use of stock options; |
· | Internal pay equity and the executive pay structure; |
· | The number of participants eligible for stock options, and the resulting "burn rate" (i.e., the number of stock options authorized divided by the total number of shares outstanding) to assess the potential dilutive effect; and
|
· | The Committee's assessment of other elements of compensation provided to the Named Executive Officers based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself. |
Ms. Rainer - 914 shares.
For stock option awards to the Named Executive Officers (other than Mr. Leonard), the Committee's assessment of individual performance of each Named Executive Officer in consultation with Entergy Corporation's Chief Executive Officer, which involves a review of each officer’s performance, roleStock Options and responsibilities, strengths and developmental opportunities and is the most important factor in determining the number of options awarded. The Committee also considers the significant achievements of Entergy for the prior year.Restricted Stock
The following table sets forth the number of stock options granted to each Named Executive Officer in 2011. The exercise price for each option was $72.79, which was the closing price of Entergy Corporation common stock on the date of grant.
Named Executive Officer | Stock Options | J. Wayne Leonard | 70,000 | Leo P. Denault | 25,000 | Gary J. Taylor | 20,000 | Theodore H. Bunting, Jr. | 6,800 | Joseph F. Domino | 2,900 | Haley R. Fisackerly | 2,900 | Hugh T. McDonald | 2,900 | Willliam M. Mohl | 6,100 | Charles L. Rice | 2,900 |
The option grants awarded to the Named Executive Officers (other than Mr. Leonard) ranged in number between 2,900 and 25,000 shares and were determined based on the factors described above. In the case of Mr. Leonard, who received 70,000 stock options, the Committee took special note of his performance as Entergy Corporation's Chief Executive Officer. The number of options granted to the Named Executive Officers decreased from prior year grants as a result of the addition of awards of restricted stock in 2011 as part of the executives’ long-term incentive compensation. Forty percent of the target value of the long-term incentive compensation for 2011 was allocated to the grant of stock options and restricted stock equally divided in value, based on their grant date values. Entergy added restricted stock to the long-term compensation because Entergy believes it enhances retention, mitigates the burn rate and assists in building stock ownership.
For additional information regarding stock options awarded in 2011 to eachas part of the Named Executive Officers, see the 2011 Grants of Plan-Based Awards table.
Under Entergy’s equity plans, all stock options must have an exercise price equal to the closing fair market value of Entergy Corporation common stock on the date of grant. In 2008, Entergy Corporation implemented guidelines that require an executive officer to achieve and maintain a level of Entergy Corporation stock ownership equal to a multiple of his or her salary. Until an executive officer satisfies the applicable stock ownership guidelines of Entergy Corporation common stock, the executive officer (including a Named Executive Officer) upon exercising any stock option granted on or after January 1, 2003, must retain at least 75% of the after-tax net profit from such stock option exercise in the form of Entergy Corporation common stock. The equity ownership plans prohibit the repricing of “underwater” stock options without shareholder approval.
Entergy Corporation has not adopted a formal policy regarding the granting of options at times when it is in possession of material non-public information. However, Entergy Corporation generally grants options to Named Executive Officers only during the month of January in connection with its annual executive compensation decisions. On occasion, it may grant options to newly hired employees or existing employees for retention or other limited purposes.
During 2011, the Personnel Committee approved a change in the long-term incentive awardsprogram to include awards of restricted stock to theits executive officers. The grant of restricted stock awards replaced a portion ofAs previously discussed, the stock option awards historically granted to the executive officers. Entergy believes this change enhances retention, mitigates the burn rate and assists in building ownership of the common stock.
The restricted stock awards are intended to:
· | Align the interests of executive officers with the interests of shareholders by tying executive officers’ long-term financial interests to the long-term financial interests of shareholders; |
· | Act as a retention mechanism for the key executives officers; and |
· | Maintain a market competitive position for total compensation. |
Shares of restricted stock vest over a three-year period, have voting rights and accrue dividends during the vesting period. Upon vesting, shares of Entergy common stock will be distributed along with the dividends that have accrued on the vested shares. Officers subject to the stock ownership guidelines will be required to retain vested shares until they satisfy the stock ownership guidelines.
The Personnel Committee considers several factors in determining the amountnumber of stock options and shares of restricted stock it will grant to the Named Executive Officers, including:
· | Individual performance; |
· | Prevailing market practice in restricted stock grants; |
· | The targeted long-term value created by the use of restricted stock; |
· | Internal pay equityincluding individual performance, prevailing market practice, targeted long-term value created by the use of stock options and the executive pay structure; |
· | The number of participants eligible for restricted stock, and the resulting "burn rate" (i.e., the number of restricted shares authorized divided by the total number of shares outstanding) to assess the potential dilutive effect; and |
· | The Committee's assessment of other elements of compensation provided to the Named Executive Officers based upon the Chief Executive Officer’s recommendations for the Named Executive Officers other than himself.
|
For restricted stock, awards,and the Committee'spotential dilutive effect of stock option and restricted stock grants. The Committee’s assessment of individual performance of each Named Executive Officer in consultation with the Chief Executive Officer, involves a review of each officer’s performance, role and responsibilities, strengths and developmental opportunities is the most important factor in determining the number of shares of restricted stock awarded.and stock options awarded, except with respect to the Chief Executive Officer for whom comparative market data is the most important factor. Mr. Denault's 2014 awards are comparable to historical awards granted to Entergy Corporation's Chief Executive Officer and reflects the decreased stock price at the time of grant. The Committee, in consultation with Entergy Corporation’s Chief Executive Officer, reviews each other Named Executive Officer’s performance, role and responsibilities, strengths, and developmental opportunities. Stock option and restricted stock awards for Entergy Corporation’s Chief Executive Officer are determined solely by the Personnel Committee on the basis of the same considerations. For all equity awards, the Committee also considers theEntergy Corporation’s significant achievements of Entergy for the prior year.
The following table sets forth the number of stock options and shares of restricted stock granted to each Named Executive Officer in 2011. Named Exeutive Officer | Shares of Restricted Stock | J. Wayne Leonard | 11,500 | Leo P. Denault | 5,000 | Gary J. Taylor | 3,000 | Theodore H. Bunting, Jr. | 1,750 | Joseph F. Domino | 900 | Haley R. Fisackerly | 900 | Hugh T. McDonald | 900 | William M. Mohl | 1,100 | Charles L. Rice | 650 |
The shares of restrictedEntergy’s common stock awarded to the named executive officers (other than the Chief Executive Officer) ranged in number between 650 and 5,000 shares and were determined based on the factors described above. In the casedate of Entergy’s Chief Executive Officer, who received 11,500 shares of restricted stock in 2011, the Committee took special note of Mr. Leonard’s performance as Entergy Corporation’s Chief Executive Officer.grant.
| | | | | Named Executive Officer | Stock Options | Shares of Restricted Stock | | Leo P. Denault | 106,000 | 13,900 | | Haley R. Fisackerly | 5,800 | 1,400 | | Andrew S. Marsh | 35,000 | 4,900 | | Phillip R. May, Jr. | 8,000 | 1,800 | | Hugh T. McDonald | 5,500 | 1,300 | | Alyson M. Mount | 8,500 | 1,800 | | Sallie T. Rainer | 5,800 | 1,400 | | Charles L. Rice, Jr. | 5,200 | 1,150 | | Mark T. Savoff | 27,500 | 4,200 | | Roderick K. West | 36,000 | 6,000 |
Benefits, Perquisites, Agreements and Post-Termination Plans
Retirement Plans
· | Pension Plan, Pension Equalization Plan and System Executive Retirement Plan |
The Named Executive Officers are eligible to participate in the Pension Plan, Pension Equalization Plan and System Executive Retirement Plan. The Committee believes that these plans are an important part of the Named Executive Officers' compensation program. These plans are important in the recruitment of top talent in the competitive market, as these types of supplemental plans are typically found in companies of similar size to Entergy. These plans serve a critically important role in the retention of the senior executives, as benefits from these plans generally increase for each year that these executives remain employed by an Entergy system company. The plans thereby encourage the most senior executives to remain employed by Entergy and continue their work on behalf of Entergy’s shareholders.
The Named Executive Officers participate in an Entergy Corporation-sponsored tax qualified final average pay defined benefit pension plan that covers a broad group of employees. This pension plan is a funded, tax-qualified, noncontributory defined benefit pension plan. Benefits under the pension plan are based upon an employee's years of service with an Entergy system company and the employee's average monthly rate of “Eligible Earnings” (which generally includes the employee’s salary and eligible incentive awards, other than incentive awards paid under the Executive Incentive Plan) for the highest consecutive 60 months during the 120 months preceding termination of employment. Benefits under the tax-qualified plan are payable monthly after attainment of at least age 55 and after separation from an Entergy system company. The amount of annual earnings that may be considered in calculating benefits under the tax-qualified pension plan is limited by federal law.
Benefits under the tax-qualified pension plan in which theIn addition, each Named Executive Officer participates are calculated as an annuity payable at age 65 and equal to 1.5% of a participant's Eligible Earnings multiplied by years of service. Years of service under the pension plan formula cannot exceed 40. Contributions to the pension plan are made entirely by the employer and are paid into a trust fund from which the benefits of participants will be paid.
Entergy Corporation sponsorsin the Pension Equalization Plan, which is available to a select group of management and highly compensated employees, including the Named Executive Officers (other than Entergy’s Chief Executive Officer). The Pension Equalization Plan is a non-qualified unfunded supplemental retirementrestoration plan, that provides for the payment to participants from an Entergy System employer's general assets a single lump sum cash distribution upon separation from service generally equal to the actuarial present value of the difference between the amount that would have been payable as an annuity under the tax-qualified pension plan, but for Internal Revenue Code limitations on pension benefits and earnings that may be considered in calculating tax-qualified pension benefits, and the amount actually payable as an annuity under the tax-qualified pension plan. The Pension Equalization Plan also takes into account as “Eligible Earnings” any incentive awards paid under the Executive Incentive Plan.
Entergy Corporation also sponsors the System Executive Retirement Plan, which is available to Entergy’s approximately 60 officers, includinga non-qualified supplemental retirement plan. Both plans are sponsored by Entergy Corporation. Under the Named Executive Officers (other than Entergy’s Chief Executive Officer). Participation interms of the Pension Equalization Plan and System Executive Retirement Plan, requires individual approval by the plan administrator. Anan employee participating in both the System Executive Retirement Plan and the Pension Equalization Planplans is eligible to receive only the greater of the two single-sum benefits computed in accordance with the terms of, and conditions of each plan.
LikeEffective July 1, 2014, the Pension Equalization Plan was amended to provide that employees who participate in Entergy Corporation’s new cash balance pension plan are not eligible to participate in the Pension Equalization Plan. These employees instead will participate in a new cash balance restoration plan. In addition, the Pension Equalization Plan and all other non-qualified plans sponsored by Entergy Corporation were amended, as necessary, to eliminate the grant of supplemental credited service to new executive officers under any of those plans. The plan amendments were authorized by the Personnel Committee after reviewing comparative market data to better align Entergy Corporation’s retirement plans with emerging market practice. Also to better align with emerging market practice, effective July 1, 2014, the System Executive Retirement Plan is designed to provide forand the payment to participants from an Entergy System employer’s general assets a single-sum cash distribution upon separation from service. The single-sum benefit is generally equal to the actuarial present value of a specified percentage of the participant’s “Final Average Monthly Compensation” (which is generally 1/36th of the sum of the participant's annual rate of base salary and Executive Incentive Plan award for the 3 highest years during the last 10 years preceding termination of employment), after first being reduced by the value of the participant’s tax-qualified Pension Plan benefit and typically any prior employer pension benefit available to the participant.
While the System ExecutiveSupplemental Retirement Plan has a replacement schedule from one year of service to the maximum of 30 years of service, the table below offers a sample ratio at 20 and 30 years of service.
Years of Service | Executives at Management Level 1 | Executives at Management Level 3 and above | Executives at Management Level 4 | | 20 years | 55.0% | 50.0% | 45.0% | | 30 years | 65.0% | 60.0% | 55.0% |
Mr. Leonard's retention agreement (as further discussed below) provides that, in lieu of his participation in the Pension Equalization Plan and the System Executive Retirement Plan, upon the termination of his employment (unless such termination is for Cause, as defined in the agreement), he will be entitled to receive a benefit equal to 60% of his Final Average Compensation (as described in the description of the System Executive Retirement Plan above) calculated as a single life annuity and payable as an actuarial equivalent lump sum. This benefit will be reduced by other benefits to which he is entitled from any Entergy Corporation-sponsored pension plan or prior employer pension plans. The terms of Mr. Leonard's Supplemental Retirement Benefit were negotiated at the time his employment with Entergy Corporation commenced and Subsidiaries were designed to, among other things, offset the loss of benefits resulting from Mr. Leonard's resignation from his prior employer. At the time that Entergy recruited Mr. Leonard, he had accumulated twenty-five years of seniority with his prior employer and had served as an executive officer for that employer for over ten years and in an officer-level capacity for over fifteen years.
The Entergy System company employer of Mr. Taylor and Mr. Denault has agreed to provide service credit to each of them under either the Pension Equalization Plan or the System Executive Retirement Plan. Entergy System company employers typically offer these service credit benefits as one element of the total compensation package offeredclosed to new mid-level or senior executives that are recruited from other companies. By offering these executives "credited service," Entergy Corporation is able to compete more effectively to hire these employees by mitigating the potential loss of their pension benefits resulting from accepting employment within the Entergy system.participants.
See the 20112014 Pension Benefits tableTable for additional information regarding the operation of the plans described under this caption.
The Named Executive Officers are eligible to participate in an Entergy Corporation-sponsored Savings Plan that covers a broad group of employees. ThisThe Savings Plan is a tax-qualified 401(k) retirement savings plan, wherein total combined before-tax and after-tax contributions may not exceed 30 percent30% of a participant'sparticipant’s base salary up to certain contribution limits defined by law. In addition, under the Savings Plan, the participant's employer of Savings Plan participants, who participate in the final average pay defined benefit pension plan, matches an amount equal to seventy cents for each dollar contributed by participating employees, including the Named Executive Officers, onwith respect to the first six percent of their Earnings (as defined ineligible earnings under the Savings Plan)plan for that pay period. Entergy Corporation maintains the Savings Plan for employees of participating Entergy System companies, including the Named Executive Officers, because it wishes to encourage employees to save some percentage of their cash compensation for their eventual retirement. The Savings Plan permits employees to make such savings in a manner that is relatively tax efficient. This type of savings plan is also a critical element in attracting and retaining talent in a competitive market.
· | Executive Deferred Compensation |
479
Executive Deferred Compensation Plan
The Named Executive Officers are eligible to defer up to 100% of their ExecutiveAnnual Incentive Plan and Long-Term Performance Unit Program awards into either or both of the Entergy-sponsoredEntergy Corporation-sponsored Executive Deferred Compensation Plan and the equity plan.2011 Equity Plan. In addition, they are eligible to defer up to 100% of their base salary into the Executive Deferred Compensation Plan.
Entergy provides these benefits because the Committee believes it is standard market practice to permit officers to defer the cash portion of their compensation. The CommitteeCorporation believes that providing this benefit is important as a retention and recruitment tool asbecause many, if not all, of the companies with which they competeit competes for executive talent provide a similar arrangement to their senior executive officers. See the senior employees.
All deferral amounts represent an unfunded liability2014 Non-qualified Deferred Compensation discussion for additional information regarding the operation of the employer. Amounts deferred into the equity plan are deemed invested in phantom shares of Entergy Corporation common stock. Amounts deferred under the Executive Deferred Compensation Plan are deemed invested in one or more of the available investment options (generally mutual funds) offered under the Savings Plan.
Entergy does not "match" amounts that are deferred by employees pursuant to the Executive Deferred Compensation Plan or equity plan. With the exception of allowing for the deferral of federal and state taxes, no additional benefits are provided to the Named Executive Officer for deferring any of the above payments. Any increase in value of the deferred amounts results solely from the increase in value of the deemed investment options selected by the Named Executive Officer (phantom Entergy stock or mutual funds available under the Savings Plan).
Additionally, Mr. Leonard currently has a deferred account balance under a frozen Defined Contribution Restoration Plan. These amounts are deemed invested in the options available under this plan.
· | Health & Welfare Benefits |
The Named Executive Officers are eligible to participate in various health and welfare benefits available to a broad group of employees. These benefits include medical, dental, and vision coverage, life and accidental death and dismemberment insurance, business travel accident insurance, and long-term disability insurance. Eligibility, coverage levels, potential employee contributions, and other plan design features are the same for the Named Executive Officers as for the broad employee population.
· | Executive Long-Term Disability Program
|
Executive Disability Plan
All of the executive officers, including the Named Executive Officers, are eligible to participate in the Executive Disability Plan of Entergy Corporation-sponsored Executive Long-Term Disability program.Corporation and Subsidiaries. Individuals who elect to participate in this plan and become disabled under the terms of the plan are eligible for 65 percent65% of the difference between their base salary and $275,000$276,923 (i.e. the base salary that produces the maximum $15,000 monthly disability payment under the Entergy Corporation's general long-term disability plan).
Entergy Corporation provides the Named Executive Officers with a limited number of perquisites and other personal benefits as part of providing a competitive executive compensation program and for employee retention. The Personnel Committee reviews all perquisites, including the personal use of corporate aircraft, on an annual basis. In 2011,2014, the Named Executive Officers were offered the following personal benefits: corporate aircraft usage, relocation assistance, annual physical exams, and housing benefits and annual mandatory physical exams. In 2011, Entergy discontinued providing personal financial counseling, club dues forevent tickets. Named Executive Officers who are not members of the Office of Chief Executive were provided in 2014 with club dues and tax gross up paymentspayment on any perquisites, except for relocation benefits. The Named Executive Officers did not receive any additional compensation for the lost value of these discontinuedsome perquisites. For security and business convenience reasons, Entergy permits itsCorporation’s Chief Executive Officer is allowed to use its corporate aircraft at itsEntergy Corporation’s expense for personal use. The other Named Executive Officers may use corporate aircraft for personal travel subject to the approval of Entergy Corporation'sCorporation’s Chief Executive Officer. From time to time, tickets to cultural and sporting events are made available to employees, including the Named Executive Officers, for business purposes. If not utilized for business purposes, the tickets are made available to employees, including the Named Executive Officers, for personal use. Entergy Corporation does not provide personal financial counseling. Relocation benefits to executive officers, including tax gross-up payments, are similar to those provided to all eligible employees. For additional information regarding perquisites, see the "All“All Other Compensation"Compensation” column in the Summary Compensation Table.
· | RetentionPost-Termination Agreements and other Compensation Arrangements |
The Committee believes that retention and transitional compensation arrangements are an important part of overall compensation. The Committee believes that these arrangements help to secure the continued employment and dedication of the Named Executive Officers, notwithstanding any concern that they might have at the time of a change in control regarding their own continued employment. In addition, the Committee believes that these arrangements are important as recruitment and retention devices, as all or nearly all of the companies with which Entergy Corporation and the Subsidiaries competecompetes for executive talent have similar arrangements in place for theirits senior employees.
To achieve these objectives, Entergy Corporation has established a System Executive Continuity Plan under which each of the Named Executive Officers (other than Entergy’s Chief Executive Officer and Chief Financial Officer) is entitled to receive "change“change in control"control” payments and benefits if such officer's
officer’s employment is involuntarily terminated.terminated in connection with a change in control of Entergy Corporation. Severance payments under the System Executive Continuity Plan are based on a multiple of the sum of an executive officer’s annual base salary plus his or her average ExecutiveAnnual Incentive Plan award at target for the two fiscal years immediately preceding the fiscal year in which the termination of employment occurs. Under no circumstances can this multiple exceed 2.99 times the sum of (a) the executive officer’s annual base salary as in effect at any time within one year prior to the commencement of a change in control period or if higher, immediately prior to a circumstance constituting good reason plus (b) his or her annual incentive, calculated using the average annual target opportunity derived under the Annual Incentive Plan for the two calendar years immediately preceding the calendar year in which the officer’s termination occurs, or if higher of: (i) the annual incentive award actually awarded to the executive officereceived under the ExecutiveAnnual Incentive Plan for the fiscal year immediately preceding the fiscal year in which the termination of employment occurs or (ii) the average Executive Incentive Plan award for the two fiscal years immediately preceding the fiscal year in which the termination of employment occurs. Entergy Corporation has strivedstrives to ensure that the benefits and payment levels under the System Executive Continuity Plan are consistent with market practices. The executiveExecutive officers, including the Named Executive Officers, will not receive any tax gross upgross-up payments on any severance benefits received under this plan. For more information regarding the System Executive Continuity Plan, see “System Executive Continuity Plan."
In certain cases, the Committee may approve the execution of a retention agreement with an individual executive officer. These decisions are made on a case by case basis to reflect specific retention needs or other factors, including market practice. If a retention agreement is entered into with an individual officer, the Committee considers the economic value associated with that agreement in making overall compensation decisions for the affectedthat officer. Entergy Corporation has voluntarily adopted a policy that any employment or severance arrangementsagreements providing severance benefits in excess of 2.99 times the sum of an officer'sofficer’s annual base salary and bonusannual incentive award (other than the value of the vesting or payment of an outstanding equity-based award or the pro rata vesting or payment of an outstanding long-term incentive award) must be approved by itsEntergy Corporation’s shareholders.
At present, Entergy Corporation has entered intoa retention agreementsagreement with Mr. Leonard, Entergy’s Chief Executive Officer, and Mr. Denault, Entergy’s Chief Financial Officer.Denault. In general, theseMr. Denault’s retention agreements provideagreement provides for "change in control"severance payments and other benefits in the event of termination of employment other than for cause or on account of death or disability in lieu of those provided under the System Executive Continuity Plan. TheAs with any severance benefits paid under the System Executive Continuity Plan, Mr. Denault will not receive tax gross-up payments on any severance benefits he may receive under his agreement. Mr. Denault’s retention agreementsagreement was entered into with Mr. Leonardin 2006 when he was Entergy Corporation’s Chief Financial Officer and Mr. Denaultwas designed to reflect among other things, the competition for chief executive officer and chief financial officer talent in the market placemarketplace at that time and the Committee'sCommittee’s assessment of the critical role of these officersthis position plays in executing Entergy Corporation'sCorporation’s long-term financial and other strategic objectives. Based on the market data provided by its former independent compensation consultant, the Personnel Committee believes the benefits and payment levels under theseMr. Denault’s retention agreementsagreement are consistent with market practices. As with any severance benefits paid under the System Executive continuity, and to align with best practices, in December 2011, both Mr. Leonard and Mr. Denault will not receive any tax gross up payments on any severance benefits they may receive under these agreements.
For additional information regarding the System Executive Continuity Plan and theMr. Denault’s retention agreementsagreement described above, see "Potential“2014 Potential Payments uponUpon Termination or Change in Control."
Compensation Program Administration
Executive Compensation GovernancePolicies and Practices
Entergy Corporation strives strive to ensure that theits compensation philosophy and practices are in line with the best practices of companies in the utility industry as well as Fortune 500 companies.other companies in the S&P 500. Some of these practices include the following:
| 1. | Entergy’s ultimate objective is to deliver long-term value to shareholders as well as other stakeholders such as customers and employees. Entergy continually reviews and adjusts the pay programs so that the primary focus is on long-term success. Executives understand that successful long-term decision making will allow them to be paid their target compensation. Short term decisions that impair the long term value will reduce an executive’s compensation over the long term. To further this objective, beginning with the 2012-2014 performance period of the Long-Term Performance Unit Program, performance awards will be settled 100 percent in Entergy common stock upon vesting with all shares required to be retained until the officer satisfies their ownership requirements. In 2011, Entergy also increased the portion of long-term compensation that will be derived from performance units from 50% to 60% and decreased the portion that will be derived from other equity awards to 40%. Entergy added restricted stock awards to the long-term compensation program because it believes the use of restricted stock enhances retention, mitigates the burn rate and assists in building ownership of its common stock. Entergy believes that these actions further align the interest of the executive officers with those of the shareholders. |
Clawback Provisions
| 2. | The adoption of the Entergy Corporation Policy Regarding Recoupment of Certain Compensation. ThisEntergy Corporation has adopted a clawback policy that covers all individuals subject to Section 16 of the Exchange Act, including all of the members of the Office of the Chief Executive. Under the policy, the Committee will require reimbursement of incentives paid to these executive officers who are subject to Section 16 of the Exchange Act. Under the policy, the Committee will require reimbursement of incentives paid these executives where: |
· | the payment was predicated upon the achievement of certain financial results with respect to the applicable performance period that were subsequently the subject of a material restatement other than a restatement due to changes in accounting policy(i) the payment was predicated upon the achievement of certain financial results with respect to the applicable performance period that were subsequently determined to be the subject of a material restatement other than a restatement due to changes in accounting policy; or (ii) a material miscalculation of a performance award
occurs, whether or not the financial statements were restated and, in either such case, a lower payment would have been made to the executive officer based upon the restated financial results or correct calculation; or a material miscalculation of a performance award occurs whether or not the financial statements were restated; |
· | in the Board of Directors’ view, the elected officer engaged in fraud that caused or partially caused the need for the restatement or caused a material miscalculation of a performance award whether or not the financial statements were restated; and |
· | a lower payment would have been made to the elected officer based upon the restated financial results or miscalculation. |
in the Board of Directors’ view, the executive officer engaged in fraud that caused or partially caused the need for a restatement or caused a material miscalculation of a performance award, in each case, whether or not the financial statements were restated.
The amount the Committee requires to be reimbursed is equal to the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or correct calculation. Further, following a material restatement of itsthe financial statements, Entergy Corporation will seek to recover any compensation received by theits Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Section 304 of the Sarbanes-Oxley Act of 20022002.
Stock Ownership Guidelines and Share Retention Requirements
For many years, Entergy Corporation has had stock ownership guidelines for executives, including the Named Executive Officers. These guidelines are designed to align the executives’ long-term financial interests with those of shareholders. Annually, the Personnel Committee monitors the executive officers’ compliance with these guidelines. The ownership guidelines are as follows:
| | 3. | | Role | FormalizationValue of the timing and process for reviewing the executive compensation consultant services and fees. Annually, the Committee reviews the relationship with its compensation consultant including services provided, quality of those services and fees associated with services during the fiscal yearCommon Stock to ensure executive compensation consultant independence is maintained. To ensure the independence of the Committee’s compensation consultant, Entergy’s Board adopted a policy that any consultant (including its affiliates) retained by the Board of Directors or any Committee of the Board of Directors to provide advice or recommendations on the amount or form of executive and director compensation should not be retained by Entergy Corporation or any of its affiliates to provide other services in an aggregate amount that exceeds $120,000. In 2011, Pay Governance did not provide any services to the Entergy other than its services to the Personnel Committee.Owned |
| Chief Executive Officer | 4.6 times base salary | | Executive Vice Presidents | Adoption of an anti-hedging policy that prohibits officers, directors and employees from entering into hedging or monetization transactions involving Entergy Corporation common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to the Entergy’s stock or transactions involving “short-sales” of Entergy’s stock. The Entergy Board adopted this policy to require officers, directors and employees to continue to own Entergy Corporation common stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with Entergy’s other shareholders.3 times base salary | | Senior Vice Presidents | 2 times base salary | | Vice Presidents | 1 time base salary |
ReviewingFurther, to ensure compliance with the guidelines, until an executive officer satisfies the stock ownership guidelines, the officer must retain:
all net after-tax shares paid out under the Long-Term Performance Unit Program; all net after-tax shares of Entergy Corporation’s restricted stock received upon vesting; and at least 75% of the after-tax net shares received upon the exercise of Entergy Corporation stock options, except for stock options granted before January 1, 2014, as to which the executive officer must retain at least 75% of the after-tax net shares until the earlier of achievement of the stock ownership guidelines or five years from the date of exercise.
Trading Controls and Anti-Pledging and Anti-Hedging Policies
Executive Compensation Programsofficers, including the Named Executive Officers, are required to receive the permission of Entergy Corporation’s General Counsel prior to entering into any transaction involving Entergy Corporation securities, including gifts, other than the exercise of employee stock options. Trading is generally permitted only during open trading windows occurring immediately following the release of earnings. Employees, who are subject to trading restrictions, including the Named Executive Officers, may enter into trading plans under Rule 10b5-1 of the Exchange Act, but these trading plans may be entered into only during an open trading window and Establishing Compensation Levels.must be approved by Entergy Corporation. The Named Executive Officer bears full responsibility if he or she violates company policy by permitting shares to be bought or sold without pre-approval or when trading is restricted.
Entergy Corporation also prohibits its directors and executive officers, including the Named Executive Officers, from pledging any Entergy Corporation’s securities or entering into margin accounts involving Entergy securities. It prohibits these transactions because of the potential that sales of Entergy Corporation’s securities could occur outside trading periods and without the required approval of the General Counsel.
Entergy Corporation also has adopted an anti-hedging policy that prohibits officers, directors, and employees from entering into hedging or monetization transactions involving its common stock. Prohibited transactions include,
without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to the Entergy Corporation’s stock or transactions involving “short-sales” of its stock. Entergy Corporation's Board of Directors adopted this policy to require officers, directors, and employees to continue to own Entergy Corporation stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with those of Entergy Corporation’s other shareholders. Roles and Responsibilities
Role of the Personnel Committee
The Personnel Committee has overall responsibility for approving the compensation program for the Named Executive Officers and makes all final compensation decisions regarding Entergy’s named executive officers.the Named Executive Officers. The Committee works with theEntergy Corporation’s executive management to ensure that the compensation policies and practices are consistent with Entergy’sEntergy Corporation’s values and support the successful recruitment, development, and retention of executive talent so itEntergy Corporation can achieve theits business objectives and optimize theits long-term financial returns. Each year, Entergy Corporation’s Senior Vice President, Human Resources and Chief Diversity Officer presents the proposed compensation model for the following year, including the compensation elements, mix of elements and measures for each element and consults with Entergy Corporation’s Chief Executive Officer on recommended compensation for senior executives. The Committee evaluates executive pay each year to ensure that the compensation policies and practices are consistent with Entergy’sEntergy Corporation’s philosophy. The Personnel Committee is responsible for, among its other duties, the following actions related to Entergy Corporation's named executive officers:
· | developing and implementing compensation policies and programs for the executive officers, including any employment agreement with an executive officer; |
· | evaluating the performance of Entergy Corporation's Chairman and Chief Executive Officer; and |
· | reporting, at least annually, to the Board on succession planning, including succession planning for Entergy Corporation's Chief Executive Officer. |
Certain aspects of the compensation of officers who are not Entergy Corporation named executive officers, Mr. Bunting, Mr. Domino, Mr. Fisackerly, Mr. McDonald, Mr. Mohl and Mr. Rice are not directly determined by the Personnel Committee. While the Committee does determine the number of performance units to be granted to these Named Executive Officers, the Committee does not determine the actual annual incentive target for these Named Executive Officers. Rather, the Committee establishes an overall available annual incentive pool for these officers and establishes the specific goal targets and ranges, the officers’ respective supervisor determines the actual incentive payment, in each case, subject to the ultimate approval of Entergy’s Chief Executive Officer. Further, Entergy’s Chief Executive Officer and the officer’s supervisor have ultimate responsibility for adjusting the salary of these Named Executive Officers as deemed appropriate. The officer’s supervisor and Entergy’s Chief Executive Officer also determine how many stock option and restricted stock awards are to be allocated to the Named Executive Officers fromOfficers:
developing and implementing compensation policies and programs for hiring, evaluating, and setting compensation for the executive officers, including any employment agreement with an available pool established byexecutive officer; evaluating the Personnel Committeeperformance of Entergy Corporation’s Chairman and Chief Executive Officer; and reporting, at least annually, to the Board on succession planning, including succession planning for similarly situated officers, though the Personnel Committee ultimately approves the options granted.Chief Executive Officer. Role of the Chief Executive Officer
The Personnel Committee solicits recommendations from Mr. Leonard, Entergy Corporation'sCorporation’s Chief Executive Officer with respect to compensation decisions for Mr. Denault and Mr. Taylor. Thethe other Named Executive Officers. Entergy Corporation’s Chief Executive Officer provides the Personnel Committee also relies on the recommendationswith an assessment of the senior human resources executives with respectperformance of each of the other Named Executive Officers and recommends compensation levels to compensation decisions, policies and practices. Entergy’s Chief Executive Officer’s role is limited to:
· | providing the Committee with an assessment of the performance of Mr. Denault and Mr. Taylor; and |
· | recommending base salary, annual merit increases, stock option, restricted stock and annual cash incentive plan compensation amounts for these officers. |
be awarded to each of them. In addition, the Committee may request that Mr. Leonardthe Chief Executive Officer provide management feedback and recommendations on changes in the design of compensation programs, such as special retention plans or changes in the structure of bonus programs. Mr. LeonardHowever, Entergy Corporation’s Chief Executive Officer does not play any role with respect to any matter affecting his own compensation, nor does he have any role determining or recommending the amount, or form of, director compensation. The Personnel Committee also relies on the recommendations of senior human resources executives with respect to compensation decisions, policies, and practices.
As noted above, under “Role of Personnel Committee,” Mr. Leonard also plays a role in determining the Subsidiary NamedEntergy Corporation’s Chief Executive Officers’ base salary, their annual incentive target and the number of stock options they receive.
Mr. LeonardOfficer may attend meetings of the Personnel Committee only at the invitation of the chair of the Personnel Committee and cannot call a meeting of the Committee. However,In addition, he is not in attendance at the portion of any meeting when the Committee determines and approves the compensation to be paid to the Named Executive Officers. Since he is not a member of the Committee, he has no vote on matters submitted to the Committee. During 2011,2014, Mr. LeonardDenault attended 56 meetings of the Personnel Committee.
Role of the Compensation Consultant
TheEntergy Corporation’s Personnel Committee has the sole authority from the Entergy Board of Directors for the appointment, compensation, and oversight of its outside compensation consultant. In 2011,2014, the Personnel Committee retained Pay Governance LLC as its independent compensation consultant to assist it in, among other things, evaluating different compensation programs, and developing market data to assess the compensation programs. Under the terms
During 2011,2014, Pay Governance assisted the Committee with its responsibilities related to Entergy’sEntergy Corporation’s compensation programs for its executives. Specifically, theThe Committee directed Pay Governance to: (i) regularly attend meetings of the Committee,Committee; (ii) conduct studies of competitive compensation practices,practices; (iii) identify Entergy’s market surveys and proxy peer group,group; (iv) review base salary, annual incentives, and long-term incentive compensation opportunities relative to competitive practices,practices; and (v) develop conclusions and recommendations related to the executive compensation plan of Entergy for consideration by the Committee. A senior consultant from Pay Governance attended all Personnel Committee meetings to which he was invited in 2011.2014.
Compensation Consultant Independence
To maintain the independence of the Personnel Committee’s compensation consultant, the Board has adopted a policy that any consultant (including its affiliates) retained by the Board of Directors or any Committee of the Board of Directors to provide advice or recommendations on the amount or form of executive and director compensation should not be retained by Entergy Corporation or any of its affiliates to provide other services in an aggregate amount that exceeds $120,000 in any year. In 2014, the Personnel Committee’s independent compensation consultant, Pay Governance LLC, did not provide any other services to Entergy Corporation other than its services to the Personnel Committee. Annually, the Committee reviews the relationship with its compensation consultant including services provided, quality of those services, and fees associated with services in 2011.its evaluation of the executive compensation consultant’s independence. The Committee also assesses Pay Governance’s independence under NYSE rules and has concluded that no conflict of interests exists that would prevent Pay Governance from independently advising the Personnel Committee.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code limits the tax deductibility by a publicly held corporation of compensation in excess of $1 million paid to athe Chief Executive Officer or any of its other Named Executive Officers (other than the chief financial officer),who may be Section 162(m) covered employees, unless that compensation is "performance-based compensation"“performance-based compensation” within the meaning of Section 162(m). The Personnel Committee considers deductibility under Section 162(m) as it structures the compensation packages that are provided to Entergy’sits Named Executive Officers. Likewise, the Personnel Committee considers financial accounting consequences as it structures the compensation packages that are provided to the Named Executive Officers. However, the Personnel Committee and the Board believe that it is in the best interest of Entergy Corporation that the Personnel Committee retains the flexibility and discretion to make compensation awards, whether or not deductible. This flexibility is necessary to foster achievement of performance goals established by the Personnel Committee, as well as other corporate goals that the Committee deems important to Entergy Corporation and the Subsidiaries'Corporation’s success, such as encouraging employee retention and rewarding achievement.achievement of key goals.
Likewise, the Personnel Committee considers financial accounting consequences as it structures the compensation packages that are provided to Entergy’s Named Executive Officers. However, the Personnel Committee and the Entergy Board of Directors believe that it is in the best interest of Entergy that the Personnel Committee retains the flexibility and discretion to make compensation awards regardless of their financial accounting consequences.
PERSONNEL COMMITTEE REPORT
The "PersonnelPersonnel Committee Report"Report included in the Entergy Corporation Proxy Statement is incorporated by reference, but will not be deemed to be "filed"“filed” in this Annual Report on Form 10-K. None of the Subsidiaries has a compensation committee or other board committee performing equivalent functions. The board of directors of each of the Subsidiaries is comprised of individuals who are officers or employees of Entergy Corporation or one of the Subsidiaries. These boards do not make determinations regarding the compensation paid to executive officers of the Subsidiaries.
EXECUTIVE COMPENSATION TABLES
20112014 Summary Compensation TableTables
The following table summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscal yearsyear ended December 31, 2011, 20102014, and 2009.to the extent required by SEC rules, for the fiscal years ended 2013 and 2012. For information on the principal positions held by each of the Named Executive Officers, see Item 10, “Directors and Executive Officers of the Registrants.” The compensation set forth in the table represents the aggregate compensation paid by all Entergy System companies. None of the Entergy System companies has entered into any employment agreements with any of the Named Executive Officers (other than the retention agreements described in “Potential“2014 Potential Payments upon Termination or Change in Control”). For additional information regarding the material terms of the awards reported in the following tables, including a general description of the formula or criteria to be applied in determining the amounts payable, see “Compensation Discussion and Analysis.”
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | Name and Principal Position | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total | | | | | | | | | | | | | | | | | | | | | | Theodore H. Bunting, Jr. | | 2011 | | $356,884 | | $ - | | $351,108 | | $78,064 | | $400,000 | | $632,100 | | $14,094 | | $1,832,250 | | Acting principal financial | | 2010 | | $350,448 | | $ - | | $237,864 | | $194,155 | | $525,000 | | $392,300 | | $22,609 | | $1,722,376 | | officer – Entergy Arkansas, | | 2009 | | $361,388 | | $ - | | $174,380 | | $143,280 | | $335,000 | | $535,700 | | $23,065 | | $1,572,813 | | Entergy Gulf States Louisiana, | | | | �� | | | | | | | | | | | | | | | | Entergy Louisiana, Entergy | | | | | | | | | | | | | | | | | | | | Mississippi, Entergy New | | | | | | | | | | | | | | | | | | | | Orleans, Entergy Texas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Leo P. Denault | | 2011 | | $648,512 | | $ - | | $891,941 | | $287,000 | | $587,059 | | $980,400 | | $16,756 | | $3,411,668 | | Executive Vice President and | | 2010 | | $630,000 | | $ - | | $573,036 | | $669,500 | | $758,520 | | $528,600 | | $52,276 | | $3,211,932 | | CFO – Entergy Corp. | | 2009 | | $654,231 | | $ - | | $418,512 | | $537,300 | | $507,150 | | $837,200 | | $60,688 | | $3,015,081 | | | | | | | | | | | | | | | | | | | | | | Joseph F. Domino | | 2011 | | $322,418 | | $ - | | $172,899 | | $33,292 | | $215,000 | | $573,500 | | $19,207 | | $1,336,316 | | CEO - Entergy Texas | | 2010 | | $317,754 | | $ - | | $108,120 | | $61,594 | | $317,754 | | $224,500 | | $33,476 | | $1,063,198 | | | | 2009 | | $329,976 | | $10,000 | | $78,471 | | $53,730 | | $111,373 | | $322,100 | | $45,396 | | $951,046 | | | | | | | | | | | | | | | | | | | | | | Haley R. Fisackerly | | 2011 | | $280,885 | | $ - | | $172,899 | | $33,292 | | $150,000 | | $295,700 | | $16,603 | | $949,379 | | CEO – Entergy Mississippi | | 2010 | | $274,999 | | $ - | | $108,120 | | $120,510 | | $192,500 | | $190,000 | | $39,370 | | $925,499 | | | | 2009 | | $274,999 | | $8,250 | | $78,471 | | $45,372 | | $138,000 | | $168,300 | | $35,675 | | $749,067 | | | | | | | | | | | | | | | | | | | | | | J. Wayne Leonard | | 2011 | | $1,315,229 | | $ - | | $3,163,825 | | $803,600 | | $2,033,356 | | $2,749,700 | | $65,061 | | $10,130,771 | | Chairman of the Board and | | 2010 | | $1,291,500 | | $ - | | $2,411,076 | | $1,807,650 | | $2,665,656 | | $ - | | $104,185 | | $8,280,067 | | CEO - Entergy Corp. | | 2009 | | $1,341,174 | | $ - | | $10,067,775 | | $1,492,500 | | $1,782,270 | | $499,800 | | $200,040 | | $15,383,559 | | | | | | | | | | | | | | | | | | | | | | Hugh T. McDonald | | 2011 | | $327,892 | | $ - | | $172,899 | | $33,292 | | $210,000 | | $485,000 | | $28,320 | | $1,257,403 | | CEO-Entergy Arkansas | | 2010 | | $322,132 | | $ - | | $108,120 | | $61,594 | | $297,972 | | $205,000 | | $54,990 | | $1,049,808 | | �� | | 2009 | | $324,610 | | $10,000 | | $78,471 | | $53,730 | | $128,066 | | $252,500 | | $67,221 | | $914,598 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Name and
Principal Position | | Year | | Salary (1)(2) | | Bonus (3) | | Stock Awards (4) | | Option Awards (5) | | Non-Equity Incentive Plan Compensation (6) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (7) | |
All
Other
Compensation (8) | | Total | | Leo P. Denault | | 2014 | |
| $1,103,173 |
| |
| $— |
| |
| $3,564,463 |
| |
| $923,260 |
| |
| $2,597,400 |
| |
| $3,578,200 |
| |
| $57,538 |
| |
| $11,824,034 |
| | Chairman of the | | 2013 | |
| $1,039,253 |
| |
| $— |
| |
| $3,780,189 |
| |
| $400,000 |
| |
| $1,770,720 |
| |
| $630,800 |
| |
| $44,690 |
| |
| $7,665,652 |
| | Board and CEO - | | 2012 | |
| $669,564 |
| |
| $— |
| |
| $647,594 |
| |
| $282,600 |
| |
| $448,779 |
| |
| $972,400 |
| |
| $22,657 |
| |
| $3,043,594 |
| | Entergy Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Haley R. Fisackerly | | 2014 | |
| $300,941 |
| |
| $— |
| |
| $236,190 |
| |
| $50,518 |
| |
| $193,878 |
| |
| $281,100 |
| |
| $33,311 |
| |
| $1,095,938 |
| | CEO - Entergy | | 2013 | |
| $294,090 |
| |
| $10,000 |
| |
| $214,624 |
| |
| $48,000 |
| |
| $142,368 |
| |
| $— |
| |
| $28,058 |
| |
| $737,140 |
| | Mississippi | | 2012 | |
| $287,296 |
| |
| $30,000 |
| |
| $186,225 |
| |
| $43,332 |
| |
| $139,000 |
| |
| $284,900 |
| |
| $26,781 |
| |
| $997,534 |
| | | | | | | | | | | | | | | | | | | | | | Andrew S. Marsh | | 2014 |
|
| $512,721 |
|
|
| $— |
|
|
| $940,837 |
|
|
| $304,850 |
|
|
| $706,388 |
|
|
| $750,900 |
|
|
| $26,722 |
|
|
| $3,242,418 |
| | Executive Vice | | 2013 | |
| $477,846 |
| |
| $— |
| |
| $921,927 |
| |
| $256,000 |
| |
| $476,000 |
| |
| $157,700 |
| |
| $213,663 |
| |
| $2,503,136 |
| | President and CFO - | | | | | | | | | | | | | | | | | | | | Entergy Corp. | | | | | | | | | | | | | | | | | | | | Acting principal | | | | | | | | | | | | | | | | | | | | financial officer | | | | | | | | | | | | | | | | | | | | Entergy Arkansas, | | | | | | | | | | | | | | | | | | | | Entergy Gulf States | | | | | | | | | | | | | | | | | | | | Louisiana, Entergy | | | | | | | | | | | | | | | | | | | | Louisiana, Entergy | | | | | | | | | | | | | | | | | | | | Mississippi, Entergy | | | | | | | | | | | | | | | | | | | | New Orleans, | | | | | | | | | | | | | | | | | | | | Entergy Texas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Phillip R. May, Jr. | | 2014 | |
| $335,997 |
| |
| $— |
| |
| $321,902 |
| |
| $69,680 |
| |
| $263,835 |
| |
| $546,000 |
| |
| $20,641 |
| |
| $1,558,055 |
| | CEO - Entergy Gulf | | 2013 |
|
| $321,860 |
|
|
| $5,000 |
|
|
| $325,813 |
|
|
| $48,000 |
|
|
| $238,223 |
|
|
| $— |
|
|
| $16,547 |
|
|
| $955,443 |
| | States Louisiana and | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | Entergy Louisiana | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | | | | | | | | | | | Hugh T. McDonald | | 2014 | |
| $350,104 |
| |
| $— |
| |
| $229,873 |
| |
| $47,905 |
| |
| $228,879 |
| |
| $400,800 |
| |
| $48,766 |
| |
| $1,306,327 |
| | CEO - Entergy | | 2013 | |
| $342,791 |
| |
| $10,000 |
| |
| $214,624 |
| |
| $48,000 |
| |
| $191,562 |
| |
| $— |
| |
| $48,326 |
| |
| $855,303 |
| | Arkansas | | 2012 | |
| $334,891 |
| |
| $30,000 |
| |
| $193,355 |
| |
| $43,332 |
| |
| $202,000 |
| |
| $452,900 |
| |
| $38,819 |
| |
| $1,295,297 |
|
| | | | | | | | | | | | | | | | | | |
435
485
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Name and
Principal Position | | Year | | Salary (1)(2) | | Bonus (3) | | Stock Awards (4) | | Option Awards (5) | | Non-Equity Incentive Plan Compensation (6) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (7) | |
All
Other
Compensation (8) | | Total | | Alyson M. Mount | | 2014 | |
| $297,166 |
| |
| $— |
| |
| $321,902 |
| |
| $74,035 |
| |
| $325,188 |
| |
| $369,400 |
| |
| $21,549 |
| |
| $1,409,240 |
| | Former acting | | 2013 | |
| $284,896 |
| |
| $— |
| |
| $312,360 |
| |
| $71,200 |
| |
| $245,000 |
| |
| $69,200 |
| |
| $14,553 |
| |
| $997,209 |
| | principal financial | | 2012 | |
| $252,389 |
| |
| $— |
| |
| $320,401 |
| |
| $— |
| |
| $210,000 |
| |
| $384,700 |
| |
| $11,556 |
| |
| $1,179,046 |
| | officer Entergy | | | | | | | | | | | | | | | | | | | | Arkansas, Entergy | | | | | | | | | | | | | | | | | | | | Gulf States Louisiana | | | | | | | | | | | | | | | | | | | | Entergy Louisiana, | | | | | | | | | | | | | | | | | | | | Entergy Mississippi, | | | | | | | | | | | | | | | | | | | | Entergy New | | | | | | | | | | | | | | | | | | | | Orleans, Entergy | | | | | | | | | | | | | | | | | | | | Texas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Sallie T. Rainer | | 2014 | |
| $296,288 |
| |
| $— |
| |
| $236,190 |
| |
| $50,518 |
| |
| $171,500 |
| |
| $504,000 |
| |
| $32,250 |
| |
| $1,290,746 |
| | CEO - Entergy | | 2013 | |
| $286,692 |
| |
| $10,000 |
| |
| $214,624 |
| |
| $46,400 |
| |
| $140,184 |
| |
| $57,800 |
| |
| $22,779 |
| |
| $778,479 |
| | Texas | | 2012 | |
| $251,907 |
| |
| $30,000 |
| |
| $215,262 |
| |
| $— |
| |
| $128,000 |
| |
| $581,300 |
| |
| $13,714 |
| |
| $1,220,183 |
| | | | | | | | | | | | | | | | | | | | | | Charles L. Rice, Jr. | | 2014 | |
| $260,880 |
| |
| $— |
| |
| $220,398 |
| |
| $45,292 |
| |
| $167,864 |
| |
| $135,700 |
| |
| $31,402 |
| |
| $861,536 |
| | CEO - Entergy New | | 2013 | |
| $255,786 |
| |
| $10,000 |
| |
| $201,704 |
| |
| $40,000 |
| |
| $112,446 |
| |
| $67,900 |
| |
| $24,078 |
| |
| $711,914 |
| | Orleans | | 2012 | |
| $250,781 |
| |
| $30,000 |
| |
| $175,530 |
| |
| $43,332 |
| |
| $115,000 |
| |
| $96,900 |
| |
| $24,422 |
| |
| $735,965 |
| | | | | | | | | | | | | | | | | | | | | | Mark T. Savoff | | 2014 | |
| $641,443 |
| |
| $— |
| |
| $896,618 |
| |
| $239,525 |
| |
| $880,283 |
| |
| $733,800 |
| |
| $49,902 |
| |
| $3,441,571 |
| | Executive Vice | | 2013 | |
| $628,913 |
| |
| $— |
| |
| $677,616 |
| |
| $200,000 |
| |
| $601,903 |
| |
| $197,400 |
| |
| $33,141 |
| |
| $2,338,973 |
| | President and Chief | | 2012 | |
| $616,583 |
| |
| $— |
| |
| $540,644 |
| |
| $169,560 |
| |
| $412,203 |
| |
| $664,500 |
| |
| $35,775 |
| |
| $2,439,265 |
| | Operating Officer - | | | | | | | | | | | | | | | | | | | | Entergy Corp. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Roderick K. West | | 2014 | |
| $623,854 |
| |
| $— |
| |
| $1,010,324 |
| |
| $313,560 |
| |
| $857,280 |
| |
| $782,400 |
| |
| $43,648 |
| |
| $3,631,066 |
| | Executive Vice | | 2013 | |
| $606,381 |
| |
| $— |
| |
| $2,318,926 |
| |
| $320,000 |
| |
| $583,315 |
| |
| $147,800 |
| |
| $27,045 |
| |
| $4,003,467 |
| | President and Chief | | 2012 | |
| $584,540 |
| |
| $— |
| |
| $647,594 |
| |
| $282,600 |
| |
| $391,791 |
| |
| $991,000 |
| |
| $46,097 |
| |
| $2,943,622 |
| | Administrative | | | | | | | | | | | | | | | | | | | | Officer - Entergy Corp. | | | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | Name and Principal Position | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total | | | | | | | | | | | | | | | | | | | | | | William M. Mohl | | 2011 | | $332,751 | | $ - | | $303,794 | | $70,028 | | $265,000 | | $388,900 | | $26,668 | | $1,387,141 | | CEO-Entergy Louisiana and | | 2010 | | $299,193 | | $ - | | $216,240 | | $120,510 | | $380,250 | | $166,718 | | $148,767 | | $1,331,678 | | CEO-Entergy Gulf States | | | | | | | | | | | | | | | | | | | | Louisiana | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Charles L. Rice, Jr. | | 2011 | | $245,312 | | $ - | | $154,702 | | $33,292 | | $130,000 | | $78,400 | | $20,594 | | $662,300 | | CEO-Entergy New Orleans | | 2010 | | $203,879 | | $9,962 | | $90,064 | | $ - | | $192,000 | | $30,944 | | $18,708 | | $545,557 | | | | | | | | | | | | | | | | | | | | | | Gary J. Taylor | | 2011 | | $586,750 | | $171,000 | | $746,361 | | $229,600 | | $531,148 | | $854,500 | | $24,209 | | $3,143,568 | | Group President, | | 2010 | | $570,000 | | $171,000 | | $573,036 | | $535,600 | | $686,280 | | $438,800 | | $92,680 | | $3,067,396 | | Utility Operations | | 2009 | | $591,924 | | $105,000 | | $418,512 | | $358,200 | | $458,850 | | $706,600 | | $87,946 | | $2,727,032 | | Entergy Corp. | | | | | | | | | | | | | | | | | | |
| | | (1) | The amounts in column (c) represent the actual base salary paid to the Named Executive Officer. The 20112014 changes in base salaries noted in the Compensation Discussion and Analysis were effective in April 2011. The2014. |
| | | (2) | Mr. Marsh was not a Named Executive Officers are paid on a bi-weekly basis and during 2009 there was an extra pay period.officer in 2012. |
| | (2)(3) | The amounts in column (d) in 2013 and 2012 for Mr. TaylorFisackerly, Mr. McDonald, Ms. Rainer, and Mr. Rice and in 2013 for Mr. May represent thea cash bonus paid in recognition of their work supporting the move to him pursuant to the Nuclear Retention Plan. See “Non-Equity Incentive Plans – Nuclear Retention Plan” in Compensation Discussion and Analysis.MISO. |
| | (3)(4) | The amounts in column (e) represent the aggregate grant date fair value of restricted stock, restricted units, and performance units granted under the 20072011 Equity Ownership Plan calculated in accordance with FASB ASC Topic 718, without taking into account estimated forfeitures. The grant date fair value of the restricted stock and the restricted units is based on the closing price of Entergy Corporation common stock on the date of grant. The grant date fair value of performance units is based on the probable outcome of the applicable performance conditions, measured using a Monte Carlo simulation valuation model. The simulation model applies a risk-free interest rate and an expected volatility assumption. The risk-free rate is assumed to equal the yield on a three-year treasury bond on the grant date. Volatility is based on historical volatility for the 36-month period preceding the grant date. If the highest achievement level is attained, the maximum amounts that will be received with respect to the 2011 performance units are as follows: Mr. Bunting, $363,950; Mr. Denault, $858,922; Mr. Domino, $174,696; Mr. Fisackerly, $174,696; Mr. Leonard, $3,785,080; Mr. McDonald, $174,696; Mr. Mohl, $363,950; Mr. Rice, $174,696; and Mr. Taylor, $858,922. |
that will be received with respect to the performance units granted in 2014 are as follows: Mr. Denault, $5,053,600; Mr. Fisackerly, $277,948; Mr. Marsh, $1,187,596; Mr. May, $391,654; Mr. McDonald, $277,948; Ms. Mount, $391,654; Ms. Rainer, $277,948; Mr. Rice, $277,948; Mr. Savoff, $1,187,596; and Mr. West, $1,187,596. | | (4)(5) | The amounts in column (f) represent the aggregate grant date fair value of stock options granted under the 20072011 Equity Ownership Plan calculated in accordance with FASB ASC Topic 718. For a discussion of the relevant assumptions used in valuing these awards, see Note 12 to the Financial Statements.financial statements. |
| | (5)(6) | The amounts in column (g) represent cash payments made under the ExecutiveAnnual Incentive Plan. |
(6) | | | (7) | The amounts in column (h) include the annual actuarial increase in the present value of the Named Executive Officer’sOfficers’ benefits under all pension plans established by Entergy Corporation using interest rate and mortality rate assumptions consistent with those used in Entergy Corporation’s financial statements and includesinclude amounts which the Named Executive Officers may not currently be entitled to receive because such amounts are not vested (see “2010“2014 Pension Benefits”). None of the increase is attributable to above-market or preferential earnings on non-qualified deferred compensation (see “2011“2014 Non-qualified Deferred Compensation”). For 2010 the aggregate change in the actuarial present value of Mr. Leonard’s pension benefits was a decrease of $539,200. |
| | (7)(8) | The amounts set forth in column (i) for 20112014 include (a) matching contributions by Entergy Corporation under the Savings Plan to each of the Named Executive Officers; (b) dividends paid on restricted stock when vested; (c) life insurance premiums; (c)(d) tax gross up payments relating to relocation benefits;on club dues; and (d)(e) perquisites and other compensation. The amounts are listed in the following table: |
Named Executive Officer | Company Contribution – Savings Plan | Life Insurance Premium | Tax Gross Up Payments | Perquisites and Other Compensation | Total | | Theodore H. Bunting, Jr. | $10,290 | $3,804 | $ - | $ - | $14,094 | | Leo P. Denault | $10,290 | $4,002 | $ - | $2,464 | $16,756 | | Joseph F. Domino | $10,290 | $5,995 | $ - | $2,922 | $19,207 | | Haley R. Fisackerly | $9,338 | $417 | $ - | $6,848 | $16,603 | | J. Wayne Leonard | $10,290 | $11,484 | $ - | $43,287 | $65,061 | | Hugh T. McDonald | $10,290 | $3,486 | $ - | $14,544 | $28,320 | | William M. Mohl | $10,290 | $3,539 | $3,770 | $9,069 | $26,668 | | Charles L. Rice, Jr. | $10,290 | $3,168 | $ - | $7,136 | $20,594 | | Gary J. Taylor | $10,290 | $7,316 | $ - | $6,603 | $24,209 |
Effective January 2011, Entergy Corporation eliminated tax gross up payments on all perquisites, except for relocation benefits. | | | | | | | | | | | | | | | | | | | | Named Executive Officer | Company Contribution – Savings Plan | Dividends Paid on Restricted Stock | Life Insurance Premium | Tax Gross Up Payments | Perquisites and Other Compensation | Total | | Leo P. Denault |
| $10,920 |
|
| $31,934 |
|
| $7,482 |
|
| $— |
|
| $7,202 |
|
| $57,538 |
| | Haley R. Fisackerly |
| $10,890 |
|
| $7,150 |
|
| $995 |
|
| $3,893 |
|
| $10,383 |
|
| $33,311 |
| | Andrew S. Marsh |
| $10,919 |
|
| $10,816 |
|
| $3,157 |
|
| $— |
|
| $1,830 |
|
| $26,722 |
| | Phillip R. May, Jr. |
| $10,920 |
|
| $6,655 |
|
| $2,646 |
|
| $— |
|
| $420 |
|
| $20,641 |
| | Hugh T. McDonald |
| $10,920 |
|
| $7,366 |
|
| $6,976 |
|
| $8,073 |
|
| $15,431 |
|
| $48,766 |
| | Alyson M. Mount |
| $10,920 |
|
| $7,598 |
|
| $297 |
|
| $— |
|
| $2,734 |
|
| $21,549 |
| | Sallie T. Rainer |
| $10,920 |
|
| $6,047 |
|
| $3,137 |
|
| $2,955 |
|
| $9,191 |
|
| $32,250 |
| | Charles L. Rice, Jr. |
| $10,920 |
|
| $5,779 |
|
| $4,870 |
|
| $1,743 |
|
| $8,090 |
|
| $31,402 |
| | Mark T. Savoff |
| $10,920 |
|
| $18,486 |
|
| $7,482 |
|
| $— |
|
| $13,014 |
|
| $49,902 |
| | Roderick K. West |
| $10,920 |
|
| $24,208 |
|
| $2,610 |
|
| $— |
|
| $5,910 |
|
| $43,648 |
|
Perquisites and Other Compensation
The amounts set forth in column (i) include perquisites and other personal benefits that Entergy Corporation provides to the Named Executive Officers as part of providing a competitive executive compensation program and for employee retention. Beginning in January 2011, Entergy Corporation discontinued providing personal financial counseling and club dues for members of the Office of Chief Executive and in 2011, the Named Executive Officers were offered the following personal benefits: corporate aircraft usage, relocation and housing benefits and annual mandatory physical exams. The following perquisites and other compensation were provided by Entergy Corporation in 2011 with the financial counseling and club dues reflecting perquisites received in 2010, but paid in 2011.2014.
| | | | | | Named Executive Officer | Financial
Counseling
| Club
Dues
| Personal Use of Corporate Aircraft | Relocation
Club Dues | Executive Physicals | Event Tickets | Theodore H. Bunting,Leo P. Denault | X | | X | | | Haley R. Fisackerly | | X | X | | | Andrew S. Marsh | | | X | X | | Phillip R. May, Jr. | | | | | | Leo P. Denault | x | | | | x | Joseph F. Domino | x | | | | x | Haley R. Fisackerly | x | x | | | | J. Wayne Leonard | x | | x | | xX | | Hugh T. McDonald | x | x | X | | | WilliamAlyson M. Mohl | x | xMount | | x | X | | | Sallie T. Rainer | X | X | | | | Charles L. Rice, Jr. | | xX | X | X | | Mark T. Savoff | X | | X | x | Gary J. TaylorRoderick K. West | x | x | xX | | xX | X |
For security and business reasons, Entergy Corporation permits Mr. Leonardits Chief Executive Officer to use its corporate aircraft for personal use at the expense of Entergy Corporation. The other Named Executive Officers may use the corporate aircraft for personal travel subject to the approval of Entergy Corporation’s Chief Executive Officer. The aggregate incremental aircraft usage cost associated with Mr. Leonard’samounts included in column (i) for the personal use of the corporate aircraft, includingreflect the costs associated with travel to outside board meetings, was $36,823 for fiscal year 2011. These amounts are reflected in column (i) and the total above. The incremental cost to Entergy Corporation for use of the corporate aircraft, is baseddetermined on the basis of the variable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications, and fees, including flight planning, ground handling, and landing permits.
In addition, Entergy Corporation offers its executives comprehensive physical exams at Entergy Corporation's expense. Tickets to cultural and sporting events are purchased for business purposes, and if not utilized for business purposes, the tickets are made available to the employees, including the Named Executive Officers, for personal use. Entergy Corporation also provides relocation benefits to a broad base of employees which include assistance with moving expenses, purchase and sale of homes, and transportation of household goods. None of the other perquisites referenced above exceeded $25,000 for any of the other Named Executive Officers.
20112014 Grants of Plan-Based Awards
The following table summarizes award grants during 20112014 to the Named Executive Officers.
| | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | | | | | | | (a) Name | | (b) Grant Date | | (c) Thresh- old ($) | | (d) Target ($) | | (e) Maximum ($) | | (f) Threshold (#) | | (g) Target (#) | | (h) Maximum (#) | | (i) All Other Stock Awards: Number of Shares of Stock or Units (#) (3) | | (j) All Other Option Awards: Number of Securities Under- lying Options (#) (4) | | (k) Exercise or Base Price of Option Awards ($/Sh) | | (l) Grant Date Fair Value of Stock and Option Awards (5) | | | | | | | | | | | | | | | | | | | | | | | | | Theodore H. Bunting, Jr. | | 1/27/11 | | - | | $215,525 | | $431,050 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 625 | | 2,500 | | 5,000 | | | | | | | | $223,725 | | | | 1/27/11 | | | | | | | | | | | | | | 1,750 | | | | | | $127,383 | | | | 1/27/11 | | | | | | | | | | | | | | | | 6,800 | | $72.79 | | $78,064 | | | | | | | | | | | | | | | | | | | | | | | | | | Leo P. Denault | | 1/27/11 | | - | | $458,640 | | $917,280 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 1,475 | | 5,900 | | 11,800 | | | | | | | | $527,991 | | | | 1/27/11 | | | | | | | | | | | | | | 5,000 | | | | | | $363,950 | | | | 1/27/11 | | | | | | | | | | | | | | | | 25,000 | | $72.79 | | $287,000 | | | | | | | | | | | | | | | | | | | | | | | | | | Joseph F. Domino | | 1/27/11 | | - | | $162,052 | | $324,104 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 300 | | 1,200 | | 2,400 | | | | | | | | $107,388 | | | | 1/27/11 | | | | | | | | | | | | | | 900 | | | | | | $65,511 | | | | 1/27/11 | | | | | | | | | | | | | | | | 2,900 | | $72.79 | | $33,292 | | | | | | | | | | | | | | | | | | | | | | | | | | Haley R. Fisackerly | | 1/27/11 | | - | | $113,300 | | $226,600 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 300 | | 1,200 | | 2,400 | | | | | | | | $107,388 | | | | 1/27/11 | | | | | | | | | | | | | | 900 | | | | | | $65,511 | | | | 1/27/11 | | | | | | | | | | | | | | | | 2,900 | | $72.79 | | $33,292 | | | | | | | | | | | | | | | | | | | | | | | | | | J. Wayne Leonard | | 1/27/11 | | - | | $1,588,560 | | $3,177,120 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 6,500 | | 26,000 | | 52,000 | | | | | | | | $2,326,740 | | | | 1/27/11 | | | | | | | | | | | | | | 11,500 | | | | | | $837,085 | | | | 1/27/11 | | | | | | | | | | | | | | | | 70,000 | | $72.79 | | $803,600 | | | | | | | | | | | | | | | | | | | | | | | | | | Hugh T. McDonald | | 1/27/11 | | - | | $161,000 | | $322,000 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 300 | | 1,200 | | 2,400 | | | | | | | | $107,388 | | | | 1/27/11 | | | | | | | | | | | | | | 900 | | | | | | $65,511 | | | | 1/27/11 | | | | | | | | | | | | | | | | 2,900 | | $72.79 | | $33,292 | | | | | | | | | | | | | | | | | | | | | | | | | | William M. Mohl | | 1/27/11 | | - | | $201,330 | | $402,660 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 625 | | 2,500 | | 5,000 | | | | | | | | $223,725 | | | | 1/27/11 | | | | | | | | | | | | | | 1,100 | | | | | | $80,069 | | | | 1/27/11 | | | | | | | | | | | | | | | | 6,100 | | $72.79 | | $70,028 | | | | | | | | | | | | | | | | | | | | | | | | | | Charles L. Rice, Jr. | | 1/27/11 | | - | | $98,880 | | $197,760 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 300 | | 1,200 | | 2,400 | | | | | | | | $107,388 | | | | 1/27/11 | | | | | | | | | | | | | | 650 | | | | | | $47,314 | | | | 1/27/11 | | | | | | | | | | | | | | | | 2,900 | | $72.79 | | $33,292 | | | | | | | | | | | | | | | | | | | | | | | | | | Gary J. Taylor | | 1/27/11 | | - | | $414,960 | | $829,920 | | | | | | | | | | | | | | | | | | 1/27/11 | | | | | | | | 1,475 | | 5,900 | | 11,800 | | | | | | | | $527,991 | | | | 1/27/11 | | | | | | | | | | | | | | 3,000 | | | | | | $218,370 | | | | 1/27/11 | | | | | | | | | | | | | | | | 20,000 | | $72.79 | | $229,600 | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | | | | | | | | (a) | | (b) | | (c) | (d) | (e) | | (f) | (g) | (h) | | (i) | | (j) | | (k) | | (l) | | Name | | Grant Date | |
Thresh- old | Target | Maximum | | Thresh-old | Target | Maximum | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Under- lying Options | | Exercise or Base Price of Option Awards | | Grant Date Fair Value of Stock and Option Awards | | | | | | ($) | ($) | ($) | | (#) | (#) | (#) | | (#) (3) | | (#) (4) | | ($/Sh) | | ($) (5) | | Leo P. | | 1/30/14 | | — | $1,332,000 | $2,664,000 | | | | | | | | | | | | | | Denault | | 1/30/14 | | | | | | 10,000 |
| 40,000 |
| 80,000 |
| | | | | | | | $2,686,400 | | | | 1/30/14 | | | | | | | | | | 13,900 |
| | | | | | $878,063 | | | | 1/30/14 | | | | | | | | | | | | 106,000 |
| | $63.17 | | $923,260 | | | | | | | | | | | | | | | | | | | | | | Haley R. | | 1/30/14 | | — | $121,174 | $242,347 | | | | | | | | | | | | | | Fisackerly | | 1/30/14 | | | | | | 550 |
| 2,200 |
| 4,400 |
| | | | | | | | $147,752 | | | | 1/30/14 | | | | | | | | | | 1,400 |
| | | | | | $88,438 | | | | 1/30/14 | | | | | | | | | | | | 5,800 |
| | $63.17 | | $50,518 | | | | | | | | | | | | | | | | | | | | | | Andrew S. | | 1/30/14 |
| — | $362,250 | $724,500 |
|
|
|
|
|
|
|
|
| | | | | | | | Marsh | | 1/30/14 |
|
|
|
|
| 2,350 |
| 9,400 |
| 18,800 |
|
|
|
| | | | | | $631,304 | | | | 1/30/14 | | | | | | | | | | 4,900 |
| | | | | | $309,533 | | | | 1/30/14 | | | | | | | | | | | | 35,000 |
| | $63.17 | | $304,850 | | | | | | | | | | | | | | | | | | | | | | Phillip R. | | 1/30/14 | | — | $202,950 | $405,900 | | | | | | | | | | | | | | May, Jr. | | 1/30/14 | | | | | | 775 |
| 3,100 |
| 6,200 |
| | | | | | | | $208,196 | | | | 1/30/14 | | | | | | | | | | 1,800 |
| | | | | | $113,706 | | | | 1/30/14 | | | | | | | | | | | | 8,000 |
| | $63.17 | | $69,680 | | | | | | | | | | | | | | | | | | | | | | Hugh T. | | 1/30/14 | | — | $176,060 | $352,121 | | | | | | | | | | | | | | McDonald | | 1/30/14 | | | | | | 550 |
| 2,200 |
| 4,400 |
| | | | | | | | $147,752 | | | | 1/30/14 | | | | | | | | | | 1,300 |
| | | | | | $82,121 | | | | 1/30/14 | | | | | | | | | | | | 5,500 |
| | $63.17 | | $47,905 | | | | | | | | | | | | | | | | | | | | | | Alyson M. | | 1/30/14 | | — | $180,660 | $361,320 | | | | | | | | | | | | | | Mount | | 1/30/14 | | | | | | 775 |
| 3,100 |
| 6,200 |
| | | | | | | | $208,196 | | | | 1/30/14 | | | | | | | | | | 1,800 |
| | | | | | $113,706 | | | | 1/30/14 | | | | | | | | | | | | 8,500 |
| | $63.17 | | $74,035 | | | | | | | | | | | | | | | | | | | | | | Sallie T. | | 1/30/14 | | — | $119,310 | $238,620 | | | | | | | | | | | | | | Rainer | | 1/30/14 | | | | | | 550 |
| 2,200 |
| 4,400 |
| | | | | | | | $147,752 | | | | 1/30/14 | | | | | | | | | | 1,400 |
| | | | | | $88,438 | | | | 1/30/14 | | | | | | | | | | | | 5,800 |
| | $63.17 | | $50,518 |
438
489
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | | | | | | | | (a) | | (b) | | (c) | (d) | (e) | | (f) | (g) | (h) | | (i) | | (j) | | (k) | | (l) | | Name | | Grant Date | |
Thresh- old | Target | Maximum | | Thresh-old | Target | Maximum | | All Other Stock Awards: Number of Shares of Stock or Units | | All Other Option Awards: Number of Securities Under- lying Options | | Exercise or Base Price of Option Awards | | Grant Date Fair Value of Stock and Option Awards | | | | | | ($) | ($) | ($) | | (#) | (#) | (#) | | (#) (3) | | (#) (4) | | ($/Sh) | | ($) (5) | | Charles L. | | 1/30/14 | | — | $104,915 | $209,829 | | | | | | | | | | | | | | Rice, Jr. | | 1/30/14 | | | | | | 550 |
| 2,200 |
| 4,400 |
| | | | | | | | $147,752 | | | | 1/30/14 | | | | | | | | | | 1,150 |
| | | | | | $72,646 | | | | 1/30/14 | | | | | | | | | | | | 5,200 |
| | $63.17 | | $45,292 | | | | | | | | | | | | | | | | | | | | | | Mark T. | | 1/30/14 | | — | $451,427 | $902,854 | | | | | | | | | | | | | | Savoff | | 1/30/14 | | | | | | 2,350 |
| 9,400 |
| 18,800 |
| | | | | | | | $631,304 | | | | 1/30/14 | | | | | | | | | | 4,200 |
| | | | | | $265,314 | | | | 1/30/14 | | | | | | | | | | | | 27,500 |
| | $63.17 | | $239,525 | | | | | | | | | | | | | | | | | | | | | | Roderick K. | | 1/30/14 | | — | $439,631 | $879,262 | | | | | | | | | | | | | | West | | 1/30/14 | | | | | | 2,350 |
| 9,400 |
| 18,800 |
| | | | | | | | $631,304 | | | | 1/30/14 | | | | | | | | | | 6,000 |
| | | | | | $379,020 | | | | 1/30/14 | | | | | | | | | | | | 36,000 |
| | $63.17 | | $313,560 |
| | | (1) | The amounts in columns (c), (d), and (e) represent minimum, target, and maximum payment levels under the Annual Incentive Plan. The actual amounts awarded are reported in column (g) of the Summary Compensation Table. |
| | | (2) | The amounts in columns (f), (g), and (h) represent the minimum, target, and maximum payment levels under the Long-Term Performance Unit Program. Performance under the program is measured by Entergy Corporation’s total shareholder return relative to the total shareholder returns of the companies included in the Philadelphia Utility Index. If Entergy Corporation’s total shareholder return is not at least 25% of that for the Philadelphia Utility Index, there is no payout. Subject to achievement of performance targets, each unit will be converted into the cash equivalent of one share of Entergy Corporation’s common stock on the last day of the performance period (December 31, 2013.2016.) Accrued dividends on the shares earned will also be paid in Entergy Corporation common stock. |
| | | (3) | The amounts in column (i) represent shares of restricted stock granted under the 20072011 Equity Ownership Plan. Shares of restricted stock vest over a three-year period,one-third on each of the first through third anniversaries of the grant, have voting rights, and accrue dividends during the vesting period. |
| | | (4) | The amounts in column (j) represent options to purchase shares of Entergy Corporation’s common stock. The options vest one-third on each of the first through third anniversaries of the grant date and have a ten-year term from the date of grant. The options were granted under the 20072011 Equity Ownership Plan. |
| | | (5) | The amounts in column (l) are valued based on the aggregate grant date fair value of the award calculated in accordance with FASB ASC Topic 718 and, in the case of the performance units, are based on the probable outcome of the applicable performance conditions. See Notes 24 and 35 to the Summary Compensation Table for a discussion of the relevant assumptions used in calculating the grant date fair value. |
20112014 Outstanding Equity Awards at Fiscal Year-End
The following table summarizes, for each Named Executive Officer, unexercised options, restricted stock that has not vested, and equity incentive plan awards for each Named Executive Officer outstanding as of the end of 2011.
| | | Option Awards | | Stock Awards | (a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | | | | | | | | | | | | | | | | | | | Theodore H. | | - | | 6,800(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | Bunting, Jr. | | 4,833 | | 9,667(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 8,000 | | 4,000(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 18,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 10,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 5,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 2,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 1,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | 625(4) | | $45,656 | | | | | | | | | | | | | | | | | | 220(5) | | $16,071 | | | | | | | | | | | | | | 1,750(6) | | $127,838 | | | | | | | | | | | | | | | | | | | | | | | | | | Leo P. Denault | | - | | 25,000(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 16,666 | | 33,334(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 30,000 | | 15,000(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 50,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 60,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 35,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 34,995 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | 338 | | - | | | | $52.40 | | 2/11/2012 | | | | | | | | | | | | 6,802 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | | | 10,493 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,475(4) | | $107,749 | | | | | | | | | | | | | | | | | | 530(5) | | $38,717 | | | | | | | | | | | | | | 5,000(6) | | $365,250 | | | | | | | | | | | | | | | | | | 16,000(7) | | $1,168,800 | | | | |
2014.
| | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | Name | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | | | (#) | | (#) | | (#) | | ($) | | | | (#) | | ($) | | (#) | | ($) | | Leo P. | | — |
| | 106,000(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Denault | | 16,666 |
| | 33,334(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 20,000 |
| | 10,000(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 25,000 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 50,000 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 45,000 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 50,000 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 60,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 50,000 |
| | — |
| | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 80,000(4) | | $6,998,400 | | | | | | | | | | | | | | | | | | 74,312(5) | | $6,500,814 | | | | | | | | | | | | | | 13,900(6) | | $1,215,972 | | | | | | | | | | | | | | | | | | 4,000(7) | | $349,920 | | | | | | | | | | | | | | | | | | 1,334(8) |
| $116,698 | | | | | | | | | | | | | | | | | | | | | | | | | | Haley R. | | — |
| | 5,800(1) |
| | | | $63.17 |
| 1/30/2024 | | | | | | | | | | Fisackerly | | — |
| | 4,000(2) |
| | | | $64.60 |
| 1/31/2023 | | | | | | | | | | | | — |
| | 1,534(3) |
| | | | $71.30 |
| 1/26/2022 | | | | | | | | | | | | 2,900 |
| | — |
| | | | $72.79 |
| 1/27/2021 | | | | | | | | | | | | 9,000 |
| | — |
| | | | $77.10 |
| 1/28/2020 | | | | | | | | | | | | 3,800 |
| | — |
| | | | $77.53 |
| 1/29/2019 | | | | | | | | | | | | 5,000 |
| | — |
| | | | $108.20 |
| 1/24/2018 | | | | | | | | | | | | 2,500 |
| | — |
| | | | $91.82 |
| 1/25/2017 | | | | | | | | | | | | | | | | | |
|
|
| | | | | | 4,400(4) | | $384,912 | | | | | | | | | | | | | | | | | | 3,800(5) | | $332,424 | | | | | | | | | | | | | | 1,400(6) | | $122,472 | | | | | | | | | | | | | | | | | | 934(7) | | $81,706 | | | | | | | | | | | | | | | | | | 400(8) | | $34,992 | | | | | | | | | | | | | | | | | | | | | | | | |
440
491
| | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | Name | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | | | (#) | | (#) | | (#) | | ($) | | | | (#) | | ($) | | (#) | | ($) | | Andrew S. | | — |
| | 35,000(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Marsh | | 10,666 |
| | 21,334(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 6,666 |
| | 3,334(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 4,000 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 9,100 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 8,000 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 10,000 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 5,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 5,500 |
| | — |
| | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,800(4) | | $1,644,624 | | | | | | | | | | | | | | | | | | 14,884(5) | | $1,302,052 | | | | | | | | | | | | | | 4,900(6) | | $428,652 | | | | | | | | | | | | | | | | | | 2,667(7) | | $223,309 | | | | | | | | | | | | | | | | | | 467(8) | | $40,853 | | | | | | | | | | | | | | | | | | | | | | | | | | Phillip R. | | — |
| | 8,000(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | May, Jr. | | 2,000 |
| | 4,000(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 3,066 |
| | 1,534(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 2,900 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 6,000 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 4,700 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 6,500 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 5,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 4,500 |
| | — |
| | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 6,200(4) | | $542,376 | | | | | | | | | | | | | | | | | | 5,938(5) | | $519,456 | | | | | | | | | | | | | | 1,800(6) | | $157,464 | | | | | | | | | | | | | | | | | | 934(7) | | $81,706 | | | | | | | | | | | | | | | | | | 400(8) | | $34,992 | | | | |
| | | Option Awards | | Stock Awards | (a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | Joseph F. Domino | | - | | 2,900(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 1,533 | | 3,067(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 3,000 | | 1,500(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 7,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 12,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | 10,500 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | | | | | | | | | | | | | | | | | 300(4) | | $21,915 | | | | | | | | | | | | | | | | | | 100(5) | | $7,305 | | | | | | | | | | | | | | 900(6) | | $65,745 | | | | | | | | | | | | | | | | | | | | | | | | | | Haley R. Fisackerly | | - | | 2,900(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 3,000 | | 6,000(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 2,533 | | 1,267(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 5,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 2,500 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 1,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 300(4) | | $21,915 | | | | | | | | | | | | | | | | | | 100(5) | | $7,305 | | | | | | | | | | | | | | 900(6) | | $65,745 | | | | | | | | | | | | | | | | | | | | | | | | | | J. Wayne Leonard | | - | | 70,000(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 45,000 | | 90,000(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 83,333 | | 41,667(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 175,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 255,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 210,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 165,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 220,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | 195,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | | | | | | | | | | | | | | | | | 6,500(4) | | $474,825 | | | | | | | | | | | | | | | | | | 2,230(5) | | $162,902 | | | | | | | | | | | | | | 11,500(6) | | $840,075 | | | | | | | | | | | | | | | | | | 50,000(8) | | $3,652,500 | | | | | | | | | | | | | | | | | | | | | | | | | | Hugh T. McDonald | | - | | 2,900(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 1,533 | | 3,067(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 3,000 | | 1,500(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 7,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 12,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 12,522 | | - | | | | $73.25 | | 2/11/2012 | | | | | | | | | | | | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | | | | | | | | | | | | | | | 300(4) | | $21,915 | | | | | | | | | | | | | | | | | | 100(5) | | $7,305 | | | | | | | | | | | | | | 900(6) | | $65,745 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | Name | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | | | (#) | | (#) | | (#) | | ($) | | | | (#) | | ($) | | (#) | | ($) | | Hugh T. | | — |
| | 5,500(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | McDonald | | 2,000 |
| | 4,000(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 3,066 |
| | 1,534(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 2,900 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 4,600 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 4,500 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 7,000 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 12,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 7,500 |
| | — |
| | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 4,400(4) | | $384,912 | | | | | | | | | | | | | | | | | | 3,800(5) | | $332,424 | | | | | | | | | | | | | | 1,300(6) | | $113,724 | | | | | | | | | | | | | | | | | | 934(7) | | $81,706 | | | | | | | | | | | | | | | | | | 434(8) | | $37,966 | | | | | | | | | | | | | | | | | | | | | | | | | | Alyson M. | | — |
| | 8,500(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Mount | | — |
| | 5,934(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 4,500 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 5,400 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | 6,200(4) | | $542,376 | | | | | | | | | | | | | | | | | | 6,000(5) | | $524,880 | | | | | | | | | | | | | | 1,800(6) | | $157,464 | | | | | | | | | | | | | | | | | | 1,200(7) | | $104,976 | | | | | | | | | | | | | | | | | | 500(8) | | $43,740 | | | | | | | | | | | | | | | | | | | | | | | | | | Sallie T. | | — |
| | 5,800(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Rainer | | 1,933 |
| | 3,867(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 2,500 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 1,200 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 2,300 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 2,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 2,500 |
| | — |
| | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | | | | | | | | | | | | | | | 4,400(4) | | $384,912 | | | | | | | | | | | | | | | | | | 3,800(5) | | $332,424 | | | | | | | | | | | | | | 1,400(6) | | $122,472 | | | | | | | | | | | | | | | | | | 934(7) | | $81,706 | | | | | | | | | | | | | | | | | | 434(8) | | $37,966 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | Name | | Number of Securities Underlying Unexercised Options Exercisable | | Number of Securities Underlying Unexercised Options Unexercisable | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested | | Market Value of Shares or Units of Stock That Have Not Vested | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested | | | | (#) | | (#) | | (#) | | ($) | | | | (#) | | ($) | | (#) | | ($) | | Charles L. | | — |
| | 5,200(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Rice, Jr. | | 1,666 |
| | 3,334(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 3,066 |
| | 1,534(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 2,900 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 4,400(4) | | $384,912 | | | | | | | | | | | | | | | | | | 3,800(5) | | $332,424 | | | | | | | | | | | | | | 1,150(6) | | $100,602 | | | | | | | | | | | | | | | | | | 800(7) | | $69,984 | | | | | | | | | | | | | | | | | | 350(8) | | $30,618 | | | | | | | | | | | | | | | | | | | | | | | | | | Mark T. | | — |
| | 27,500(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | Savoff | | 8,333 |
| | 16,667(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 12,000 |
| | 6,000(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 17,000 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 30,000 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 30,000 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 27,000 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 35,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,800(4) | | $1,644,624 | | | | | | | | | | | | | | | | | | 15,200(5) | | $1,329,696 | | | | | | | | | | | | | | 4,200(6) | | $367,416 | | | | | | | | | | | | | | | | | | 1,867(7) | | $163,325 | | | | | | | | | | | | | | | | | | 834(8) | | $72,958 | | | | | | | | | | | | | | | | | | | | | | | | | | Roderick | | — |
| | 36,000(1) |
| | | | $63.17 | | 1/30/2024 | | | | | | | | | | K. West | | 13,333 |
| | 26,667(2) |
| | | | $64.60 | | 1/31/2023 | | | | | | | | | | | | 20,000 |
| | 10,000(3) |
| | | | $71.30 | | 1/26/2022 | | | | | | | | | | | | 17,000 |
| | — |
| | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 7,000 |
| | — |
| | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 5,000 |
| | — |
| | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 8,000 |
| | — |
| | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 12,000 |
| | — |
| | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | 18,800(4) | | $1,644,624 | | | | | | | | | | | | | | | | | | 15,200(5) | | $1,329,696 | | | | | | | | | | | | | | 6,000(6) | | $524,880 | | | | | | | | | | | | | | | | | | 3,334(7) | | $291,658 | | | | | | | | | | | | | | | | | | 1,334(8) | | $116,698 | | | | | | | | | | | | | | | | | | 21,000(9) | | $1,837,080 | | | | |
| | | Option Awards | | Stock Awards | (a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | | | | | | | | | | | | | | | | | | | William M. Mohl | | - | | 6,100(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 3,000 | | 6,000(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 5,000 | | 2,500(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 9,300 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 3,500 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 5,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 3,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | | | | | | | | | | | | | | | 625(4) | | $45,656 | | | | | | | | | | | | | | | | | | 200(5) | | $14,610 | | | | | | | | | | | | | | 1,100(6) | | $80,355 | | | | | | | | | | | | | | | | | | | | | | | | | | Charles L. Rice, Jr. | | - | | 2,900(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | | | | | | | | | | | | | | | 300(4) | | $21,915 | | | | | | | | | | | | | | | | | | 83(5) | | $6,063 | | | | | | | | | | | | | | 650(6) | | $47,483 | | | | | | | | | | | | | | | | | | | | | | | | | | Gary J. Taylor | | - | | 20,000(1) | | | | $72.79 | | 1/27/2021 | | | | | | | | | | | | 13,333 | | 26,667(2) | | | | $77.10 | | 1/28/2020 | | | | | | | | | | | | 20,000 | | 10,000(3) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | | | 35,000 | | - | | | | $108.20 | | 1/24/2018 | | | | | | | | | | | | 60,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | | | | | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | | | 35,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | | | 40,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | | | 26,900 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | | | | | | | | | | | | | | | | | 1,475(4) | | $107,749 | | | | | | | | | | | | | | | | | | 530(5) | | $38,717 | | | | | | | | | | | | | | 3,000(6) | | $219,150 | | | | |
494
| | | (1) | Consists of options that vested or will vest as follows: 1/3 of the options granted vest on each of 1/27/2012,30/2015, 1/27/201330/2016 and 1/27/2014.30/2017. |
| | | | | (2) | Consists of options that vested or will vest as follows: 1/2 of the remaining unexercisable options vest on each of 1/28/201231/2015 and 1/28/2013.31/2016. |
| | | | | (3) | The remaining unexercisable options vested on 1/29/2012.26/2015. |
| | | | | (4) | Consists of performance units that will vest on December 31, 20132016 based on Entergy Corporation’s total shareholder return performance over the 2011 – 20132014-2016 performance period, as described under “Long-Term“What We Pay and Why- Executive Compensation –Elements - Long-Term Incentive Compensation - Performance Unit Program” in Compensation Discussion and Analysis. |
| | | | (5) | Consists of performance units that will vest on December 31, 20122015 based on Entergy Corporation’s total shareholder return performance over the 2010 – 20122013-2015 performance period. |
| | | | (6) | Consists of shares of restricted stock granted under the 2007 Equity Ownership Plan that vested or will vest as follows: 1/3 of the shares of restricted stock granted vest on each of 1/27/2012,30/2015, 1/27/201330/2016 and 1/27/2014.30/2017. |
| | | | | (7) | Consists of shares of restricted stock that vested or will vest as follows: 1/2 of the shares of restricted stock granted vest on each of 1/31/2015 and 1/31/2016. |
| | | (8) | Consists of shares of restricted stock that vested on 1/26/2015. |
| | | (9) | Consists of restricted units granted under the 2007 Equity Ownership Plan. 8,000 units vested on January 25, 2012 and an additional 8,000 will vest on January 25, 2013. | | | | (8) | Consists of restricted units granted under the 20072011 Equity Ownership Plan which will vest on December 3, 2012. | | | May 1, 2018. |
20112014 Option Exercises and Stock Vested
The following table provides information concerning each exercise of stock options and each vesting of stock during 20112014 for the Named Executive Officers. | | | | | | | | | | | | | | | | | | Options Awards | | Stock Awards | | (a) | | (b) | | (c) | | (d) | | (e) | | Name | | Number of Shares Acquired on Exercise | | Value Realized on Exercise | | Number of Shares Acquired on Vesting | | Value Realized on Vesting | | | | (#) | | ($) | | (#) | | ($) | | Leo P. Denault | | 35,000 |
| |
| $477,575 |
| | 17,370(1) | |
| $1,423,990 |
| | | | | | | | | | | | Haley R. Fisackerly | | 6,066 |
| |
| $61,983 |
| | 2,136(1) | |
| $164,281 |
| | | | | | | | | | | | Andrew S. Marsh | | 7,000 |
| |
| $78,385 |
| | 4,715(1) | |
| $369,715 |
| | | | | | | | | | | | Phillip R. May, Jr. | | 7,000 |
| |
| $75,732 |
| | 2,458(1) | |
| $193,263 |
| | | | | | | | | | | | Hugh T. McDonald | | 10,000 |
| |
| $53,055 |
| | 2,169(1) | |
| $166,520 |
| | | | | | | | | | | | Alyson M. Mount | | 24,466 |
| |
| $67,906 |
| | 2,670(1) | |
| $202,276 |
| | | | | | | | | | | | Sallie T. Rainer | | 2,500 |
| |
| $31,434 |
| | 1,901(1) | |
| $145,240 |
| | | | | | | | | | | | Charles L. Rice, Jr. | | — |
| |
| $— |
| | 1,937(1) | |
| $150,599 |
| | | | | | | | | | | | Mark T. Savoff | | 50,000 |
| |
| $534,219 |
| | 6,257(1) | |
| $495,030 |
| | | | | | | | | | | | Roderick K. West | | 2,001 |
| |
| $28,988 |
| | 7,490(1) | |
| $577,597 |
|
| | | Options Awards | | Stock Awards | (a) Name | | (b) Number of Shares Acquired on Exercise (#) | | (c) Value Realized on Exercise ($) | | (d) Number of Shares Acquired on Vesting (#) | | (e) Value Realized on Vesting ($) | | | | | | | | | | | | Theodore H. Bunting, Jr. | | - | | $ - | | - | | $ - | | | | | | | | | | | | Leo P. Denault | | - | | $ - | | 8,000(1) | | $588,000 | | | | | | | | | | | | Joseph F. Domino | | - | | $ - | | - | | $ - | | | | | | | | | | | | Haley R. Fisackerly | | - | | $ - | | - | | $ - | | | | | | | | | | | | J. Wayne Leonard | | 330,600 | | $8,218,518 | | 50,000(2) | | $3,482,000 | | | | | | | | | | | | Hugh T. McDonald | | 12,000 | | $292,748 | | - | | $ - | | | | | | | | | | | | William M. Mohl | | - | | $ - | | - | | $ - | | | | | | | | | | | | Charles L. Rice, Jr. | | - | | $ - | | - | | $ - | | | | | | | | | | | | Gary J. Taylor | | 34,600 | | $867,087 | | - | | $ - |
| | | (1) | Represents the January 25, 2011 cash settlementvalue of 8,000 restrictedperformance units grantedfor the 2012-2014 performance period (payable solely in shares based on the closing stock price of the Company on the dates of vesting) under the 2007 Equity Ownership Plan. | (2) | RepresentsPerformance Unit Program and the December 3, 2011 cash settlementvesting of 50,000shares of restricted units granted under the 2007 Equity Ownership Plan.stock in 2014. |
20112014 Pension Benefits
The following table shows the present value as of December 31, 2011,2014, of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each Named Executive Officer, under the retirement plans sponsored by Entergy Corporation, determined using interest rate and mortality rate assumptions set forth in Note 11 to the Financial Statements. Informationfinancial statements. Additional information regarding these retirement plans is included in Compensation Discussion & Analysis under the heading, “Benefits, Perquisites, Agreements, and Post-Retirement Plans - Pension Plan, Pension Equalization Plan,Plans" and System Executive Retirement Plan.”following this table. In addition, this section includes information regarding early retirement options under the plans. Name | | Plan Name | | Number of Years Credited Service | | Present Value of Accumulated Benefit | | Payments During 2011 | | Theodore H. Bunting, Jr. | | Non-qualified System Executive Retirement Plan | | 23.86 | | $2,256,400 | | $ - | | | | Qualified defined benefit plan | | 23.86 | | $567,800 | | $ - | | | | | | | | | | | Leo P. Denault (1) | | Non-qualified System Executive Retirement Plan | | 27.83 | | $4,611,200 | | $ - | | | | Qualified defined benefit plan | | 12.83 | | $293,000 | | $ - | | | | | | | | | | | Joseph F. Domino (2) | | Non-qualified System Executive Retirement Plan | | 41.56 | | $1,947,900 | | $ - | | | | Qualified defined benefit plan | | 38.13 | | $1,462,700 | | $ - | | | | | | | | | | | | Haley R. Fisackerly | | Non-qualified System Executive Retirement Plan | | 16.08 | | $631,400 | | $ - | | | | Qualified defined benefit plan | | 16.08 | | $288,000 | | $ - | | | | | | | | | | | J. Wayne Leonard (3) | | Non-qualified supplemental retirement plan benefit | | 13.68 | | $26,343,300 | | $ - | | | | Qualified defined benefit plan | | 13.68 | | $477,000 | | $ - | | | | | | | | | | | Hugh T. McDonald (2) | | Non-qualified System Executive Retirement Plan | | 29.93 | | $1,328,800 | | $ - | | | | Qualified defined benefit plan | | 28.44 | | $691,300 | | $ - | | | | | | | | | | | | William M. Mohl | | Non-qualified System Executive Retirement Plan | | 9.44 | | $755,400 | | $ - | | | | Qualified defined benefit plan | | 9.44 | | $217,200 | | $ - | | | | | | | | | | | | Charles L. Rice, Jr. | | Non-qualified System Executive Retirement Plan | | 2.47 | | $69,300 | | $ - | | | | Qualified defined benefit plan | | 2.47 | | $43,800 | | $ - | | | | | | | | | | | Gary J. Taylor (4) | | Non-qualified System Executive Retirement Plan | | 21.80 | | $4,556,500 | | $ - | | | | Qualified defined benefit plan | | 11.80 | | $364,600 | | $ - | | | | | | | | | | |
| | | | | | | | | | | | | | | Name | | Plan Name | | Number of Years Credited Service | | Present Value of Accumulated Benefit | | Payments During 2014 | Leo P. Denault (1) | | Non-qualified System Executive Retirement Plan | | 30.83 |
| |
| $9,539,500 |
| |
| $— |
| | | | Qualified defined benefit plan | | 15.83 |
| |
| $546,100 |
| |
| $— |
| | | | | | | | | | | | Haley R. Fisackerly | | Non-qualified System Executive Retirement Plan | | 19.08 |
| |
| $843,300 |
| |
| $— |
| | | | Qualified defined benefit plan | | 19.08 |
| |
| $538,700 |
| |
| $— |
| | | | | | | | | | | | Andrew S. Marsh | | Non-qualified System
Executive Retirement Plan | | 16.37 |
| |
| $1,621,700 |
| |
| $— |
| | | | Qualified defined
benefit plan | | 16.37 |
| |
| $354,600 |
| |
| $— |
| | | | | | | | | | | | Phillip R. May, Jr. | | Non-qualified System
Executive Retirement Plan | | 28.56 |
| |
| $1,346,100 |
| |
| $— |
| | | | Qualified defined
benefit plan | | 28.56 |
| |
| $888,600 |
| |
| $— |
| | | | | | | | | | | Hugh T. McDonald (2) | | Non-qualified System Executive Retirement Plan | | 32.93 |
| |
| $1,615,100 |
| |
| $— |
| | | | Qualified defined benefit plan | | 31.44 |
| |
| $1,142,200 |
| |
| $— |
| | | | | | | | | | | | Alyson M. Mount | | Non-qualified System Executive Retirement Plan | | 12.35 |
| |
| $696,600 |
| |
| $— |
| | | | Qualified defined benefit plan | | 12.35 |
| |
| $294,100 |
| |
| $— |
| | | | | | | | | | | Sallie T. Rainer (2) | | Non-qualified System Executive Retirement Plan | | 30.38 |
| |
| $818,800 |
| |
| $— |
| | | | Qualified defined benefit plan | | 28.52 |
| |
| $981,100 |
| |
| $— |
| | | | | | | | | | | | Charles L. Rice, Jr. | | Non-qualified System Executive Retirement Plan | | 5.47 |
| |
| $256,200 |
| |
| $— |
| | | | Qualified defined benefit plan | | 5.47 |
| |
| $157,400 |
| |
| $— |
|
| | | | | | | | | | | | | | | Name | | Plan Name | | Number of Years Credited Service | | Present Value of Accumulated Benefit | | Payments During 2014 | | Mark T. Savoff | | Non-qualified System Executive Retirement Plan | | 11.06 |
| |
| $3,329,000 |
| |
| $— |
| | | | Qualified defined benefit plan | | 11.06 |
| |
| $437,600 |
| |
| $— |
| | | | | | | | | | | | Roderick K. West | | Non-qualified System Executive Retirement Plan | | 15.75 |
| |
| $2,830,500 |
| |
| $— |
| | | | Qualified defined benefit plan | | 15.75 |
| |
| $387,700 |
| |
| $— |
|
| | | (1) | During 2006, Mr. Denault entered into an agreement granting an additional 15 years of service under the non-qualified System Executive Retirement Plan if he continues to work for an Entergy System company employer untiland, after age 55.55, retires with the permission of his employer or his employment is terminated due to death or disability. The additional 15 years of service increases the present value of his benefit by $1,641,200.$2,246,700. |
| | | (2) | Service under the non-qualified System Executive Retirement Plan is granted from date of hire. Qualified plan benefit service is granted from the later of date of hire or plan participation date. |
(3) | Pursuant to his retention agreement, Mr. Leonard is entitled to a non-qualified supplemental retirement benefit in lieu of participation in Entergy Corporation’s non-qualified supplemental retirement plans such as the System Executive Retirement Plan or the Pension Equalization Plan. Mr. Leonard may separate from employment without a reduction in his non-qualified supplemental retirement benefit. | (4) | Mr. Taylor entered into an agreement granting an additional 10 years of service under the System Executive Retirement Plan resulting in a $1,306,200 increase in the present value of his benefit. Mr. Taylor has advised Entergy Corporation that he intends to resign from his position as Group President, Utility Operations, effective May 31, 2012. |
Qualified Retirement Benefits
The qualified retirement plan in which the Named Executive Officers participate is a funded, tax-qualified, noncontributory defined benefit pension plan that provides benefits to most of the non-bargaining unit employees of Entergy System companies.Companies. All Named Executive Officers are participants in this plan. TheBenefits under the tax-qualified pension plan provides a monthly benefitare calculated as an annuity payable for the participant’s lifetime beginning at age 65 and generally equal to 1.5% of a participant’s Final Average Monthly Earnings (FAME) multiplied by years of service (not to exceed 40). “Earnings” for purposes of calculating FAME generally includes the participant’s five-year finalemployee’s base salary and eligible annual incentive award and excludes all other bonuses. FAME is calculated using the employee’s average monthly eligibleEarnings for the 60 consecutive months in which the employee’s earnings times such participant’s yearswere highest during the 120 month period immediately preceding the employee’s retirement and includes up to 5 annual bonuses paid during the 60 month period. Benefits under the tax-qualified plan are payable monthly after attainment of service.at least age 55 and after separation from an Entergy System company. The amount of annual earnings that may be considered in calculating benefits under the tax-qualified pension plan is limited by federal law. Participants are 100% vested in their benefit upon completing 5 years of vesting service.service or upon attainment of age 65 while an active employee participant in the plan. Contributions to the pension plan are made entirely by the Entergy System employer and are paid into a trust fund from which the benefits of participants will be paid.
Normal retirement under the plan is age 65. Employees who terminate employment prior to age 55 may receive a reduced deferred vested retirement benefit payablecommencing as early as age 55 that is actuarially equivalent tobased on the normal retirement benefit (i.e., reduced(reduced by 7% per year for the first 5 years precedingcommencement precedes age 65, and reduced by 6% for each additional year thereafter)commencement precedes age 65). Employees who are at least age 55 with 10 years of vesting service upon termination fromof employment are entitled to a subsidized early retirement benefit beginning as early as age 55. The subsidized early retirement benefit is equal to the normal retirement benefit reduced by 2% per year for each year that early retirement precedes age 65.
Mr. Domino,Denault, Mr. LeonardMcDonald, and Mr. TaylorSavoff are eligible for subsidized early retirement benefits.
Non-qualified Retirement Benefits
The Named Executive Officers are eligible to participate in certain non-qualified retirement benefit plans that provide retirement income, including the Pension Equalization Plan and the System Executive Retirement Plan. Each of these plans is an unfunded non-qualified defined benefit pension plan that provides benefits to key management employees. In these plans, eachas described below, and in Compensation Discussion and Analysis, an executive is typically enrolled in one or more plans but only paid the amount due under the plan that provides the highest benefit. In general, upon disability, participants in the Pension Equalization Plan and the System Executive Retirement Plan remain eligible for continued service credits until the earlier of recovery, separation from service due to disability, or retirement.retirement eligibility. Generally, spouses of participants who die before commencement of benefits may be eligible for a portion of the participant’s accrued benefit.
The Pension Equalization Plan
All of the Named Executive Officers (with the exception of Mr. Leonard) are participantsparticipate in both the Pension Equalization Plan and the System Executive Retirement Plan.
The benefit provisions are substantially the same as the qualifiedPension Equalization Plan The Pension Equalization Plan is a non-qualified unfunded restoration retirement plan that provides for the payment to participants from Entergy Corporation's general assets of a single lump sum cash distribution upon separation from service generally equal to the actuarial present value of the difference between the amount that would have been payable as an annuity under the tax-qualified pension plan, but provide two additional benefits: (a) “restorative benefits” intended to offsetfor Internal Revenue Code limitations on certainpension benefits and earnings that may be considered in connection withcalculating tax-qualified pension benefits, and the qualified retirement planamount actually payable as an annuity under the tax-qualified pension plan. The Pension Equalization Plan also takes into account as eligible earnings certain incentive awards paid under the Annual Incentive Plan and (b)includes supplemental credited service (if granted to an individual participant).a participant in calculating his or her benefit. Participants receive their Pension Equalization Plan benefit in the form of a single sum cash distribution. The benefits under this plan are offset by benefits payable from the qualified retirement plan and may be offset by prior employer benefits. Participants receive their Pension Equalization Plan benefit in the form of a single sum cash distribution. The Pension Equalization Plan benefit attributable to supplemental credited service is not vested until age 65. Subject to the approvalprior written consent of the Entergy System companyCompany employer (which consent is deemed given if the participant’s employment is terminated within twenty-four months following a change in control by the employer without “Cause” or by the participant for “Good Reason,” as each is defined in the plan), an employee with supplemental credited service who terminates employment prior to age 65 may be vested in his or her benefit, with payment of the lump sum benefit generally at separation from service unless delayed six months under Internal Revenue Code Section 409A. Benefits payable prior to age 65 are subject to the same reductions as qualified plan benefits.
supplemental credited service was approved and accepted in writing by the plan administrator prior to July 1, 2014. In addition, the Pension Equalization Plan was amended effective July 1, 2014 to provide that employees who participate in the Entergy Corporation’s cash balance pension plan adopted June 30, 2014 are not eligible to participate in the Pension Equalization Plan and instead are eligible to participate in a new cash balance restoration plan.
The System Executive Retirement Plan
All Named Executive Officers (except Mr. Leonard) are participants in the System Executive Retirement Plan. The System Executive Retirement Plan is a non-qualified supplemental retirement plan that provides for a single sum payment at age 65, as further described in Compensation Discussion65. Like the Pension Equalization Plan, the System Executive Retirement Plan is designed to provide for the payment to participants from Entergy Corporation’s general assets of a single-sum cash distribution upon the participant’s separation from service. The single-sum benefit is generally equal to the actuarial present value of a specified percentage of the participant’s “Final Average Monthly Compensation” (which is generally 1/36th of the sum of the participant’s annual rate of base salary and Analysis. Annual Incentive Plan award for the 3 highest years during the last 10 years preceding termination of employment), after first being reduced by the value of the participant’s tax-qualified retirement plan benefit and typically any prior employer pension benefit available to the participant.
While the System Executive Retirement Plan has a replacement ratio schedule from one year of service to the maximum of 30 years of service, the table below offers a sample ratio at 20 and 30 years of service.
| | | | | | | | Years of Service | | Executives at Management Level 1 | | Executives at Management Levels 2 and 3 | | Executives at Management Level 4 | | 20 Years | | 55.0% | | 50.0% | | 45.0% | | 30 years | | 65.0% | | 60.0% | | 55.0% |
The System Executive Retirement Plan benefit is not vested until age 65. Subject to the approvalprior written consent of the Entergy System company employer, an employee who terminates his or her employment prior to age 65 may be vested in the System Executive Retirement Plan benefit, with payment of the lump sum benefit generally at separation from service unless delayed six months under Internal Revenue Code Section 409A. Benefits payable prior to age 65 are subject to the same reductions as qualified plan benefits. Further, in the event of a change in control, participants whose employment is terminated without “Cause” or by the employee for “Good Reason,” as each is defined in the Planplan are also eligible for a subsidized lump sum benefit payment, even if they do not currently meet the age or service requirements for early retirement under that plan or have company permission to separate from employment. Such lump sum benefit is payable generally at separation from service unless delayed 6 months under Internal Revenue Code Section 409A.
Mr. Leonard’s Non-qualified Supplemental Retirement Benefit
Mr. Leonard’s retention agreement provides that if his employment with the Company is terminated for any reason other than for cause (as defined below under “Potential Payments Upon Termination or Change in Control”), he will be entitled to a non-qualified supplemental retirement benefit in lieu of participation in Entergy Corporation’s non-qualified supplemental retirement plans such as the System Executive Retirement Plan or the Pension Equalization Plan. Mr. Leonard’s non-qualified supplemental retirement benefit is calculated as a single life annuity equal to 60% of his final three-year average compensation (as described in the description of the System Executive Retirement Plan included in Compensation Discussion and Analysis), reduced to account for benefits payable to Mr. Leonard under Entergy Corporation’s and a former employer’s qualified pension plans. The benefit is payable in a single lump sum. Because Mr. Leonard has already attained the age of 55, he is currently entitled under his retention agreement to his non-qualified supplemental retirement benefit if he were to leave Entergy System company employment other than as the result of a termination for cause.
Additional Information
For a description of the material terms and conditions of payments and benefits available under the retirement plans, including each plan’s normal retirement payment and benefit, benefit formula and eligibility standards, specific elements of compensation included in applying the payment and benefit formula, and Entergy Corporation’s policies with regard to granting extra years of credited service, see “Compensation Discussion and Analysis -- Benefits, Perquisites, Agreements and Post-Termination Plans -- Pension Plan, Pension Equalization Plan and System Executive Retirement Plan.” For a discussion of the relevant assumptions used in valuing these liabilities, see Note 11 to the Financial Statements.
20112014 Non-qualified Deferred Compensation
The Executive Deferred Compensation Plan, the Amended and Restated 19982007 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the 1998 Equity Ownership Plan), the 2007 Equity OwnershipLong-Term Cash Incentive Plan, and the 2011 Equity Ownership Plan allow for the deferral of compensation for the Named Executive Officers. As of December 31, 20112014, none of the Named Executive Officers had deferred compensation balances under the equity ownership plans or the Executive Deferred Compensation Plan. For additional information, see “Benefits, Perquisites, Agreements and Post-Termination Plans - Executive Deferred Compensation” in Compensation Discussion and Analysis. All Named Executive Officers are eligible to participate in the deferral programs.
As of December 31, 2011,2014, Mr. LeonardSavoff and Mr. May had a deferred account balancebalances under a frozen Defined Contribution Restoration Plan. These amounts are deemed invested, as chosen by the participant, in certain T. Rowe Price investment funds that are also available to participants under the qualified Savings Plan. Mr. Savoff and Mr. May have elected to receive the deferred account balances after they retire. The Defined Contribution Restoration Plan, until it was frozen in 2005, credited eligible employees’ deferral accounts with employer contributions to the extent contributions under the qualified savings plan in which the employee participated were subject to limitations imposed by the Internal Revenue Code.
All deferrals are credited to the applicable Entergy System company employer’s non-funded liability account. Depending on the plan under which the deferral is made, the Named Executive Officers may elect investment in either phantom Entergy Corporation common stock or one or more of several investment options available under the Savings Plan. Within limitations of the program, participating Named Executive Officers may move funds from one deemed investment option to another. The participating Named Executive Officers do not have the ability to withdraw funds from the deemed investment accounts except within the terms provided in their deferral elections. Within the limitations prescribed by law as well as the plan, participating Named Executive Officers with deferrals under the Executive Deferred Compensation Plan and/or the equity plans have the option to make a successive deferral of these funds. Assuming a Named Executive Officer does not elect a successive deferral, the Entergy System company employer of the participant is obligated to pay the amount credited to the participant’s account at the earlier of deferral receipt date or separation from service. These payments are paid out of the general assets of the employer and are payable in a lump sum.
Defined Contribution Restoration Plan Name (a) | | Executive Contributions in 2011 (b) | | Registrant Contributions in 2011 (c) | | Aggregate Earnings in 2011 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2011 (f) | | | | | | | | | | | | | | J. Wayne Leonard | | $ - | | $ - | | $17,233 | | $ - | | $227,331 |
| | | | | | | | | | | | | | | | | | | | | | | Name | | Executive Contributions in 2014 | | Registrant Contributions in 2014 | | Aggregate Earnings in 2014 (1) | | Aggregate Withdrawals/ Distributions | | Aggregate Balance at December 31, 2014 | | (a) | | (b) | | (c) | | (d) | | (e) | | (f) | | | | | | | | | | | | | | Phillip R. May, Jr. | |
| $— |
| |
| $— |
| |
| $359 |
| |
| $— |
| |
| $1,721 |
| | | | | | | | | | | | | | Mark T. Savoff | |
| $— |
| |
| $— |
| |
| $8,224 |
| |
| $— |
| |
| $26,685 |
|
| | | (1) | Amounts in this column are not included in the Summary Compensation Table. |
2014 Potential Payments upon Termination or Change in Control
Estimated Payments
Entergy Corporation has plans and other arrangements that provide compensation to a Named Executive Officer if his or her employment terminates under specified conditions, including following a change in control of Entergy Corporation. In addition, Entergy Corporation has entered into a retention agreement with Mr. Denault that provides for payments upon certain employment termination events. There are no plans or agreements that would provide for payments to any of the Named Executive Officers solely upon a change in control.
The tables below reflect the amount of compensation each of the Named Executive Officers would have received if his or her employment with an Entergy System company had been terminated under various scenarios as of December 31, 2011.2014. For purposes of these tables, theEntergy Corporation assumed that its stock price was $73.05,$87.48, the closing market price on December 30, 2011, the last business day of the most recently ended fiscal year.that date.
Theodore H. Bunting, Jr
Senior Vice President, Chief Accounting Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Senior Vice President, Chief Accounting Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | | | | | | | | | | | | | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $1,149,469 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | --- | $107,164 | $107,164 | $160,710 | $160,710 | | 2011-2013 Performance Unit Program | --- | --- | --- | --- | $60,851 | $60,851 | --- | $127,838 | Unvested Stock Options(4) | --- | --- | --- | --- | $1,768 | $1,768 | --- | $1,768 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $41,398 | $41,398 | --- | $134,191 | | | | | | | | | | | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | $25,686 | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, if Mr. Bunting's employment were terminated under certain conditions relating to a change in control, Mr. Bunting also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2011 Pension Benefits." If Mr. Bunting's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan.
|
(2) | In the event of a qualifying termination related to a change in control, Mr. Bunting would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of two times the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 60% target opportunity and a base salary of $359,209 was assumed. | (3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Bunting would have been entitled, pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Bunting's award was calculated as follows:
2010 - 2012 Plan – 2,200 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Bunting would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Bunting’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (2,100 units) and the 2008-2010 Performance Unit Program (1,400 units) and multiplying the average number of units (1,750 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $127,838 for the forfeited performance units.
In the event of Mr. Bunting’s death or disability not related to a change in control, Mr. Bunting would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Bunting's awards were calculated as follows:
2010 - 2012 Plan – 1,467 (2,200 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 833 (2,500 *12/36) performance units at target, assuming a stock price of $73.05
| (4) | In the event of his death, disability or a change in control, all of Mr. Bunting's unvested stock options granted prior to December 30, 2010 would immediately vest. In the event of his death, disability or qualifying termination related to a change in control, all of Mr. Bunting’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Bunting exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the applicable exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Bunting’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Bunting’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. |
| | | | | | | | | | | | | | | | | | | | | Benefits and Payments Upon Termination | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement | Disability | Death | Change in Control | Termination Related to a Change in Control | Leo P. Denault (1)(2) | | | | | | | | | | | | | | | | | | | Severance Payment(5) | — | — |
| $8,613,353 |
| — | — | — | — |
| $8,613,353 |
| Performance Units:(7) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — |
| $2,112,642 |
|
| $2,166,880 |
|
| $2,112,642 |
|
| $2,112,642 |
| — |
| $2,112,642 |
| | 2014-2016 Performance Unit Program | — | — |
| $2,112,642 |
|
| $1,166,371 |
|
| $2,112,642 |
|
| $2,112,642 |
| — |
| $2,112,642 |
| Unvested Stock Options(9) | — | — |
| $3,501,327 |
|
| $3,501,327 |
|
| $3,501,327 |
|
| $3,501,327 |
| — |
| $3,501,327 |
| Unvested Restricted Stock(11) | — | — |
| $1,791,514 |
| — |
| $1,791,514 |
|
| $1,791,514 |
| — |
| $1,791,514 |
| Welfare Benefits(13) | — | — | — | — | — | — | — | | | | | | | | | | | | Haley Fisackerly (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $424,107 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $110,837 |
|
| $110,837 |
| — |
| $96,228 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $64,123 |
|
| $64,123 |
| — |
| $96,228 |
| Unvested Stock Options(10) | — | — | — | — |
| $257,327 |
|
| $257,327 |
| — |
| $257,327 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $117,836 |
|
| $117,836 |
| — |
| $258,479 |
| Welfare Benefits(14) | — | — | — | — | — | — | — |
| $18,324 |
| | | | | | | | | | | Andrew S. Marsh (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $2,398,354 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $433,988 |
|
| $433,988 |
| — |
| $489,888 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $274,075 |
|
| $274,075 |
| — |
| $489,888 |
| Unvested Stock Options(10) | — | — | — | — |
| $1,392,890 |
|
| $1,392,890 |
| — |
| $1,392,890 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $298,482 |
|
| $298,482 |
| — |
| $752,247 |
| Welfare Benefits(14) | — | — | — | — | — | — | — |
| $27,486 |
| | | | | | | | | | | Phillip R. May, Jr. (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $1,014,750 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $173,210 |
|
| $173,210 |
| — |
| $205,578 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $90,367 |
|
| $90,367 |
| — |
| $205,578 |
| Unvested Stock Options(10) | — | — | — | — |
| $310,809 |
|
| $310,809 |
| — |
| $310,809 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $129,120 |
|
| $129,120 |
| — |
| $295,063 |
| Welfare Benefits(14) | — | — | — | — | | | — |
| $27,486 |
|
449
501
| | | | | | | | | | | | | | | | | | | Benefits and Payments Upon Termination | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement | Disability | Death | Change in Control | Termination Related to a Change in Control | Hugh T. McDonald (1)(3) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $528,181 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — |
| $110,837 |
|
| $110,837 |
|
| $110,837 |
| — |
| $96,228 |
| | 2014-2016 Performance Unit Program | — | — | — |
| $64,123 |
|
| $64,123 |
|
| $64,123 |
| — |
| $96,228 |
| Unvested Stock Options(10) | — | — | — |
| $250,034 |
|
| $250,034 |
|
| $250,034 |
| — |
| $250,034 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $118,273 |
|
| $118,273 |
| — |
| $252,776 |
| Welfare Benefits(13) | — | — | — | — | — | — | — | | | | | | | | | | | | Alyson M. Mount (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $963,520 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $174,960 |
|
| $174,960 |
| — |
| $205,578 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $90,367 |
|
| $90,367 |
| — |
| $205,578 |
| Unvested Stock Options(10) | — | — | — | — |
| $342,390 |
|
| $342,390 |
| — |
| $342,390 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $150,203 |
|
| $150,203 |
| — |
| $330,801 |
| Welfare Benefits(14) | — | — | — | — | — | — | — |
| $9,148 |
| | | | | | | | | | | Sallie T. Rainer (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $417,585 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $110,837 |
|
| $110,837 |
| — |
| $96,228 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $64,123 |
|
| $64,123 |
| — |
| $96,228 |
| Unvested Stock Options(10) | — | — | — | — |
| $229,467 |
|
| $229,467 |
| — |
| $229,467 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $121,072 |
|
| $121,072 |
| — |
| $261,921 |
| Welfare Benefits(14) | — | — | — | — | — | — | — |
| $18,234 |
| | | | | | | | | | | Charles R. Rice, Jr (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $367,201 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $110,837 |
|
| $110,837 |
| — |
| $96,228 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $64,123 |
|
| $64,123 |
| — |
| $96,228 |
| Unvested Stock Options(10) | — | — | — | — |
| $227,488 |
|
| $227,488 |
| — |
| $227,488 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $100,340 |
|
| $100,340 |
| — |
| $217,649 |
| Welfare Benefits(14) | — | — | — | — | — | — | — |
| $18,324 |
|
| | | | | | | | | | | | | | | | | | | | | Benefits and Payments Upon Termination | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement | Disability | Death | Change in Control | Termination Related to a Change in Control | Mark T. Savoff (1)(3) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $3,278,006 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — |
| $443,261 |
|
| $443,261 |
|
| $443,261 |
| — |
| $489,888 |
| | 2014-2016 Performance Unit Program | — | — | — |
| $274,075 |
|
| $274,075 |
|
| $274,075 |
| — |
| $489,888 |
| Unvested Stock Options(10) | | | |
| $1,146,938 |
|
| $1,146,938 |
|
| $1,146,938 |
| — |
| $1,146,938 |
| Unvested Restricted Stock(12) | — | — | — |
|
| $278,099 |
|
| $278,099 |
| — |
| $648,346 |
| Welfare Benefits(13) | — | — | — | — | — | — | — | — | | | | | | | | | | | Roderick K. West (4) | | | | | | | | | | | | | | | | | | | Severance Payment(6) | — | — | — | — | — | — | — |
| $3,192,348 |
| Performance Units:(8) | | | | | | | | | | 2013-2015 Performance Unit Program | — | — | — | — |
| $443,261 |
|
| $443,261 |
| — |
| $489,888 |
| | 2014-2016 Performance Unit Program | — | — | — | — |
| $274,075 |
|
| $274,075 |
| — |
| $489,888 |
| Unvested Stock Options(10) | | | | |
| $1,647,093 |
|
| $1,647,093 |
| — |
| $1,647,093 |
| Unvested Restricted Stock(12) | — | — | — | — |
| $440,199 |
|
| $440,199 |
| — |
| $1,004,859 |
| Welfare Benefits(14) | — | — | — | — | — |
| | — |
| $27,486 |
| Unvested Restricted Units(15) | — | — |
| $1,837,080 |
| — | — | — | — |
| $1,837,080 |
|
(5) | In the event of his death or disability, Mr. Bunting would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. Bunting would immediately vest in all unvested restricted stock. | (6) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Bunting would be eligible to receive Entergy-subsidized COBRA benefits for 18 months. | (7)(1) | As of December 31, 2011, compensation2014, Mr. Denault, Mr. McDonald, and benefits available to Mr. Bunting under this scenarioSavoff are substantially the same as available with a voluntary resignation. As of December 31, 2011, Mr. Bunting is not retirement eligible.eligible and would retire rather than voluntarily resign. |
Pension Benefits | | (8)(2) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payment upon a change in control.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
Leo P. Denault
Executive Vice President and Chief Financial Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Executive Vice President and Chief Financial Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
| | Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(9) | Disability | Death | Change in Control(10) | Termination Related to a Change in Control | | | | | Severance Payment(2) | --- | --- | $3,330,382 | --- | --- | --- | --- | $3,330,382 | | | Performance Units:(3) | | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | $306,810 | --- | $306,810 | $306,810 | --- | $306,810 | | | 2011-2013 Performance Unit Program | --- | --- | $306,810 | --- | $306,810 | $306,810 | --- | $306,810 | | | Unvested Stock Options(4) | --- | --- | $6,500 | --- | $6,500 | $6,500 | --- | $6,500 | | | Unvested Restricted Stock(5) | --- | --- | $383,402 | --- | $383,402 | $383,402 | -- | $383,402 | | | Unvested Restricted Units(6) | --- | | $1,168,800 | --- | $1,168,800 | $1,168,800 | -- | $1,168,800 | | | | | | | | | | | | | | COBRA Benefits(7) | --- | --- | $25,686 | --- | --- | --- | --- | --- | | | Medical and Dental Benefits(8) | --- | --- | --- | --- | --- | --- | --- | $25,686 | | | 280G Tax Gross-up(11) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, Mr. Denault also would have been entitled to receive his vested pension benefits. If Mr. Denault’s employment were terminated under certain conditions relating to a change in control, he would also be eligible for early retirement benefits. For a description of these benefits, see “2011“2014 Pension Benefits.” In addition, Mr. Denault is subject to the following provisions: |
·Retention Agreement. Mr. Denault’s retention agreement provides that, unless his employment is terminated for cause, he will be granted an additional 15 years of service under the System Executive Retirement Plan if he continues to work for an Entergy System company employer and after age 55, retires with the permission of his employer or his employment is terminated due to death or disability. If Mr. Denault’s employment is terminated for cause, he will forfeit his benefit under the System Executive Retirement Plan.
Under his retention agreement, if Mr. Denault’s employment is terminated by Mr. Denault for good reason or by Entergy Corporation not for cause (regardless of whether there is a change in control) or on account of disability, Mr. Denault would be eligible for subsidized retirement and the additional 15 years of service upon his separation of service even if he does not have permission to separate from employment. | | | (3) | In addition to the payments and benefits in the table, Mr. McDonald and Mr. Savoff each would have been eligible to retire and entitled to receive his vested pension benefits. For a description of the pension benefits available see, “2014 Pension Benefits.” In the event of a termination by Entergy Corporation without cause or by the executive for good reason in connection with a change in control, Mr. McDonald and Mr. Savoff each would be eligible for subsidized early retirement benefits under the System Executive Retirement Plan even if he continuesdoes not have permission to work for an Entergy System company employer until age 55. Becauseseparate from employment. If Mr. McDonald’s and Mr. Savoff’s |
employment were terminated for cause, he would not receive a benefit under the System Executive Retirement Plan. | | | (4) | In addition to the payments and benefits in the table, if a Named Executive Officer's, other than Messrs. Denault, had not reachedMcDonald, and Savoff, employment was terminated under certain conditions relating to a change in control, he or she also would have been entitled to receive his or her vested pension benefits upon attainment of age 55 as of December 31, 2010, he is only entitled to this supplemental credited service and would have been eligible for early retirement benefits under the System Executive Retirement Plan supplementalcalculated using early retirement reduction factors. For a description of the pension benefits, insee “2014 Pension Benefits.” If the event of his death or disability.·SystemNamed Executive Retirement Plan. If Mr. Denault’sOfficers’, other than Messrs. Denault, McDonald, and Savoff, employment were terminated for cause, he or she would forfeit his or her benefit under the System Executive Retirement Plan. In the event of a termination related to a change in control, pursuant to the terms of the System Executive Retirement Plan, Mr. Denault would be eligible for subsidized retirement (but not the additional 15 years of service) upon his separation of service even if he does not then meet the age or service requirements for early retirement under the System Executive Retirement Plan or have company permission to separate from employment.
|
Severance Payments | | (2)(5) | In the event of a termination (not due to death or disability) by Mr. Denault for good reason or by Entergy Corporation not for cause (regardless of whether there is a change in control), Mr. Denault would be entitled to receive, pursuant to his retention agreement, a lump sum severance payment equal to the product of 2.99 times the sum of (a) his annual base salary as in effect at any time within one year prior to the effective date of the Agreement (i.e., 2007)retention agreement or, if higher, immediately prior to a circumstance constituting good reason plus (b) the greater of (i) his actual annual incentive award under the Annual Incentive Plan for the calendar year immediately preceding the calendar year in which Mr. Denault’s termination date occurs or (ii) Mr. Denault’s Annual Incentive Plan target award for the calendar year in which the effective date of the Agreement occurred (i.e., 2007).retention agreement occurred. For purposes of this table, we have calculated the award was calculated using a base salary of $655,200$1,110,000 and his preceding year’s actual annual incentive award, $1,770,720. |
| | | (6) | In the event of a termination (not due to death or disability) by the executive for good reason or by Entergy Corporation not for cause during the period beginning upon the occurrence of a “potential change in control” (as defined in the System Executive Continuity Plan) and ending on the 2nd anniversary of a change in control, each Named Executive Officer, other than Mr. Denault, would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of for Mr. Marsh, Mr. Savoff, and Mr. West 2.99 times, for Mr. May and Ms. Mount 2 times and Mr. Fisackerly, Mr. McDonald, Ms. Rainer, and Mr. Rice 1 time the sum of (a) his or her annual base salary as in effect at any time within one year prior to the commencement of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his or her annual incentive, calculated using the average annual target awardopportunity derived under the Annual Incentive Plan for the two calendar years immediately preceding the calendar year in his or her termination occurs. For purposes of 70%.this table, it assumes the following target opportunity and base salary: | |
| | | | | Named Executive Officer | Target Opportunity | Base Salary | | Haley R. Fisackerly | 40% | $302,934 | | Andrew S. Marsh | 55% | $517,500 | | Phillip R. May | 50% | $338,250 | | Hugh T. McDonald | 50% | $352,121 | | Alyson M. Mount | 60% | $301,100 | | Sallie T. Rainer | 40% | $298,275 | | Charles L. Rice, Jr. | 40% | $262,287 | | Mark T. Savoff | 70% | 644,896 | | Roderick K. West | 70% | 628,044 |
Performance Units (3) | | | (7) | In the event of a termination due to death or disability, by Mr. Denault for good reason, or by Entergy Corporation not for cause (in all cases, regardless of whether there is a change in control), Mr. Denault would have forfeited his performance units for all open performance periods and would have been entitled to receive a single-sumsingle-lump sum severance payment pursuant to his retention agreement that would not be based on any outstanding performance periods. The payment would be calculated using the average annual number of performance |
units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Denault’s severance payment was calculated by taking an average of the target performance units from the 2010-2012 Performance Unit Program (22,300 units) and the 2011-2013 Performance Unit Program (26,000 units). This average number of units (24,150 units) multiplied by the closing price of Entergy stock on December 31, 2014 ($87.48) would equal a severance payment of $2,112,642 for the forfeited performance units. In the event of Mr. Denault’s retirement not related to a change in control, Mr. Denault would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Denault’s awards were calculated as follows: 2013 - 2015 Plan - 24,770 (24/36*37,156) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 13,333 (12/36*40,000) performance units at target, assuming a stock price of $87.48 | | | (8) | In the event of a qualifying termination related to a change in control, each Named Executive Officer, other than Mr. Denault, would have forfeited his or her performance units for the 2013-2015 and 2014-2016 performance periods and would have been entitled to receive, pursuant to the 2011 Equity Ownership Plan, a single-lump sum severance payment that would not be based on any outstanding performance periods. For both the 2013-2015 and the 2014-2016 performance periods, the payment would have been calculated using the average annual number of performance units he or she would have been entitled to receive under each Performance Unit Program with respect to the two most recent performance periods preceding (but not including) the calendar year in which his or her termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Denault's severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (4,500 units) and the 2008-2010 Performance Unit Program (3,900 units) and multiplying the average number of units (4,200 units)multiplied by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $306,810 for the forfeited performance units. | 31, 2014. |
For purposes of the table, the value of the severance payment for Mr. Fisackerly, Mr. McDonald, Ms. Rainer and Mr. Rice was calculated by taking an average of the target performance units from the 2010-2012 Performance Unit Program (1,000 units) and the 2011-2013 Performance Unit Program (1,200 units). This average number of units (1,100) multiplied by the closing price of Entergy stock on December 31, 2014 ($87.48) would equal a severance payment of for the forfeited performance units equal to $96,228. The value of severance payment for Mr. May and Ms. Mount was calculated by taking an average of the target performance units from the 2010-2012 Performance Unit Program (2,200 units) and the 2011-2013 Performance Unit Program (2,500 units). This average number of units (2,350) multiplied by the closing price of Entergy stock on December 31, 2014 ($87.48) would equal a severance payment of for the forfeited performance units equal to $205,578. The value of severance payment for Mr. Marsh, Mr. Savoff, and Mr. West was calculated by taking an average of the target performance units from the 2010-2012 Performance Unit Program (5,300 units) and the 2011-2013 Performance Unit Program (5,900 units). This average number of units (5,600) multiplied by the closing price of Entergy stock on December 31, 2014 ($87.48) would equal a severance payment of for the forfeited performance units equal to $489,888. In the event of death or disability, or retirement in the case of Mr. McDonald or Mr. Savoff, each Named Executive Officer, other than Mr. Denault, would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his or her number of months of participation in each open Performance Unit Program performance cycle, in accordance with his or her grant agreement under the Performance Unit Program. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of the awards were calculated as follows:
Mr. Fisackerly’s, Mr. McDonald’s, Ms. Rainer’s and Mr. Rice’s awards: 2013 - 2015 Plan - 1,267 (24/36*1,900) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 733 (12/36*2,200) performance units at target, assuming a stock price of $87.48 Mr. Marsh’s awards: 2013 - 2015 Plan - 4,961 (24/36*7,442) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 3,133 (12/36*9,400) performance units at target, assuming a stock price of $87.48 Mr. May’s awards: 2013 - 2015 Plan - 1,980 (24/36*2,969) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 1,033 (12/36*3,100) performance units at target, assuming a stock price of $87.48 Ms. Mount’s awards: 2013 - 2015 Plan - 2,000 (24/36*3,000) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 1,033 (12/36*3,100) performance units at target, assuming a stock price of $87.48 Mr. Savoff’s and Mr. West’s awards: 2013 - 2015 Plan - 5,067 (24/36*7,600) performance units at target, assuming a stock price of $87.48 2014 - 2016 Plan - 3,133 (12/36*9,400) performance units at target, assuming a stock price of $87.48 Unvested Stock Options (4) | | | (9) | In the event of hisMr. Denault’s retirement, death or disability (pursuant to the 2011 Equity Ownership Plan) or upon termination by Mr. Denault for good reason or by Entergy Corporation not for cause (regardless of whether there is a change in control), pursuant to his retention agreement, all of Mr. Denault’s unvested stock options would immediately vest. In addition, he would be entitled to exercise any unexercised options during a ten-year term extending from the grant date of the options. For purposes of this table, it wasis assumed that Mr. Denault exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011,31, 2014, and the exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Denault’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Denault’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. |
| | (5)(10) | In the event of death or disability or qualifying termination related to a change in control or retirement in the case of Mr. McDonald or Mr. Savoff, all of the unvested stock options of each Named Executive Officer, other than Mr. Denault, would immediately vest pursuant to the 2011 Equity Ownership Plan. In addition, each would be entitled to exercise his or her stock options for the remainder of the ten-year period extending from the grant date of the options. For purposes of this table, it is assumed that the Named Executive Officers, other than Mr. Denault, exercised their options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2014, and the applicable exercise price of each option share. |
Unvested Restricted Stock | | | (11) | Pursuant to his retention agreement, in the event of Mr. Denault's death or disability or upon termination by Mr. Denault for good reason or by Entergy Corporation not for cause (regardless of whether there is a change in control), all of Mr. Denault’s unvested restricted stock would immediately vest. |
| | (6)
| Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of a change in control, Mr. Denault’s death or disability, or termination of employment by Mr. Denault for good reason or by Entergy not for cause (regardless of whether there is a change in control).
| | (7) | Pursuant to his retention agreement, in the event of a termination by Mr. Denault for good reason or by Entergy not for cause, Mr. Denault would be eligible to receive Entergy-subsidized COBRA benefits for 18 months.
| | (8) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Denault would be eligible to receive Entergy-subsidized medical and dental benefits for 18 months.
| | (9) | As of December 31, 2011, Mr. Denault is not eligible for retirement.
| | (10) | The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments upon a change in control.
| | (11) | In December 2010, Mr. Denault voluntarily agreed to amend his retention agreement to eliminate excise tax gross up payments. | |
Under the terms of Mr. Denault’s retention agreement, Entergy may terminate his employment for cause upon Mr. Denault’s:
· | continuing failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Personnel Committee; |
· | willfully engaging in conduct that is demonstrably and materially injurious to Entergy; |
· | conviction of or entrance of a plea of guilty or nolo contendere to a felony or other crime that has or may have a material adverse effect on his ability to carry out his duties or upon Entergy’s reputation;
|
· | material violation of any agreement that he has entered into with Entergy; or |
· | unauthorized disclosure of Entergy’s confidential information. |
Mr. Denault may terminate his employment for good reason upon:
· | the substantial reduction in the nature or status of his duties or responsibilities; |
· | a reduction of 5% or more in his base salary as in effect on the date of the retention agreement; |
· | the relocation of his principal place of employment to a location other than the corporate headquarters; |
· | the failure to continue to allow him to participate in programs or plans providing opportunities for equity awards, stock options, restricted stock, stock appreciation rights, incentive compensation, bonus and other plans on a basis not materially less favorable than enjoyed at the time of the retention agreement (other than changes similarly affecting all senior executives); |
· | the failure to continue to allow him to participate in programs or plans with opportunities for benefits not materially less favorable than those enjoyed by him under any of the pension, savings, life insurance, medical, health and accident, disability or vacation plans at the time of the retention agreement (other than changes similarly affecting all senior executives); or |
· | any purported termination of his employment not taken in accordance with his retention agreement. |
Mr. Denault may terminate his employment for good reason in the event of a change in control upon:
· | the substantial reduction or alteration in the nature or status of his duties or responsibilities; |
· | a reduction in his annual base salary; |
· | the relocation of his principal place of employment to a location more than 20 miles from his current place of employment; |
· | the failure to pay any portion of his compensation within seven days of its due date; |
· | the failure to continue in effect any compensation plan in which he participates and which is material to his total compensation, unless other equitable arrangements are made; |
· | the failure to continue to provide benefits substantially similar to those that he currently enjoys under any of the pension, savings, life insurance, medical, health and accident or disability plans, or Entergy taking of any other action which materially reduces any of those benefits or deprives him of any material fringe benefits that he currently enjoys; |
· | the failure to provide him with the number of paid vacation days to which he is entitled in accordance with the normal vacation policy; or |
· | any purported termination of his employment not taken in accordance with his retention agreement |
Joseph F. Domino
President & CEO - Entergy Texas
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO – Entergy Texas would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | | | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $486,156 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | $48,724 | $48,724 | $48,724 | $73,050 | $73,050 | | 2011-2013 Performance Unit Program | --- | --- | --- | $29,220 | $29,220 | $29,220 | --- | $62,093 | Unvested Stock Options(4) | --- | --- | --- | $754 | $754 | $754 | --- | $754 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $21,302 | $21,302 | | $69,012 | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | --- | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, Mr. Domino would have been eligible to retire and entitled to receive his vested pension benefits. For a description of the pension benefits available see "2011 Pension Benefits." In the event of a termination related to a change in control, pursuant to the terms of the System Executive Retirement Plan, Mr. Domino would be eligible for subsidized early retirement even if he does not have company permission to separate from employment. If Mr. Domino’s employment were terminated for cause, he would not receive a benefit under the System Executive Retirement Plan. | (2)(12) | In the event of a qualifying termination related to a change in control, Mr. Domino would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of one time the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Annual Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 50% target opportunity and a base salary of $324,104 was assumed. |
(3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Domino would have been entitled, pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Domino's award was calculated as follows:
2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Domino would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Domino’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (1,000 units) and the 2008-2010 Performance Unit Program (700 units) and multiplying the average number of units (850 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $ $62,093 for the forfeited performance units.
In the event of Mr. Domino’s death, disability or retirement not related to a change in control, Mr. Domino would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Domino's awards were calculated as follows:
2010 - 2012 Plan – 667 (1,000 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 400 (1,200 * 12/36) performance units at target, assuming a stock price of $73.05
| (4) | In the event of his retirement, death, disability or a change in control, all of Mr. Domino’s unvested stock options granted prior to December 31, 2010 would immediately vest. In the event of his retirement, death, disability or qualifying termination related to a change in control, all of Mr. Domino’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for a ten-year term extending from the grant date of the options. For purposes of this table, it was assumed that Mr. Domino exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Domino’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Domino’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. | (5) | In the event of his death or disability (pursuant to the 2011 Equity Ownership Plan), each Named Executive Officer, other than Mr. DominoDenault, would immediately vest in a pro-rated portion of thehis or her unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). pursuant to the 2011 Equity Ownership Plan. The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Dategrant date anniversary date and the date of his or her death or Disability.disability. In the event of his or her qualifying termination related to a change in control, the Named Executive Officers, other than Mr. DominoDenault, would immediately vest in all of their unvested restricted stock. |
Welfare Benefits (6) | | | (13) | Upon retirement, Mr. DominoDenault, Mr. McDonald, and Mr. Savoff would be eligible for retiree medical and dental benefits, at the same level as all other retirees. Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Domino would not be eligible to receive Entergy subsidized COBRA benefits. |
termination related to a change in control, Messrs. Denault, McDonald, and Savoff would not be eligible to receive Entergy Corporation subsidized COBRA benefits. (7) | As of December 31, 2011, Mr. Domino is retirement eligible and would retire rather than voluntarily resign. Given that scenario, the compensation and benefits available to Mr. Domino under retirement are substantially the same as available with a voluntary resignation. | (8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payments.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
Haley R. Fisackerly
President & CEO - Entergy Mississippi
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO - Entergy Mississippi would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | | | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $396,550 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | --- | $48,724 | $48,724 | $73,050 | $73,050 | | 2011-2013 Performance Unit Program | --- | --- | --- | --- | $29,220 | $29,220 | --- | $62,093 | Unvested Stock Options(4) | --- | --- | --- | --- | $754 | $754 | --- | $754 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $21,302 | $21,302 | --- | $69,012 | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | $17,124 | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, if Mr. Fisackerly's employment were terminated under certain conditions relating to a change in control, Mr. Fisackerly also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2011 Pension Benefits." If Mr. Fisackerly's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. | | (2) | In the event of a qualifying termination related to a change in control, Mr. Fisackerly would be entitled to receive pursuant to the System Executive Continuity Plan, a lump sum severance payment equal to the product of one time the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 40% target opportunity and a base salary of $283,250 was assumed. | | (3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Fisackerly would have been entitled, pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Fisackerly’s award was calculated as follows:
2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Fisackerly would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Fisackerly’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (1,000 units) and the 2008-2010 Performance Unit Program (700 units) and multiplying the average number of units (850 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $ $62,093 for the forfeited performance units.
In the event of Mr. Fisackerly’s death or disability not related to a change in control, Mr. Fisackerly would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Fisackerly's awards were calculated as follows:
2010 - 2012 Plan – 667 (1,000 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 400 (1,200 * 12/36) performance units at target, assuming a stock price of $73.05
| |
(4) | In the event of his death, disability or a change in control, all of Mr. Fisackerly's unvested stock options granted prior to December 30, 2010 would immediately vest. In the event of his death, disability or qualifying termination related to a change in control, all of Mr. Fisackerly’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Fisackerly exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the applicable exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Fisackerly’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Fisackerly’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. | (5) | In the event of his death or disability, Mr. Fisackerly would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. Fisackerly would immediately vest in all unvested restricted stock. | (6)(14) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. FisackerlyMarsh, Mr. May, Ms. Mount and Mr. West would be eligible to receive Entergy-Entergy Corporation subsidized COBRA benefits for 18 months and Mr. Fisackerly, Ms. Rainer, and Mr. Rice would be eligible to receive Entergy Corporation subsidized COBRA benefits for 12 months. | | (7) | As of December 31, 2011, compensation and benefits available to Mr. Fisackerly under this scenario are substantially the same as available with a voluntary resignation. As of December 31, 2011, Mr. Fisackerly is not retirement eligible. | | (8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payments.
| | (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. | |
J. Wayne Leonard
Chairman and Chief Executive Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which Entergy's Chairman and Chief Executive Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(9) | Disability | Death | Change in Control(10) | Termination Related to a Change in Control | | | Annual Incentive Payment(2) | --- | --- | --- | --- | --- | --- | --- | $3,177,120 | Severance Payment(3) | --- | --- | --- | --- | --- | --- | --- | $8,707,956 | Performance Units:(4) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | $1,086,034 | $1,086,034 | $1,086,034 | --- | $1,471,958 | | 2011-2013 Performance Unit Program | --- | --- | --- | $633,124 | $633,124 | $633,124 | --- | $1,471,958 | Unvested Stock Options(5) | --- | --- | --- | $18,200 | $18,200 | $18,200 | --- | $18,200 | Unvested Restricted Stock(6) | --- | --- | --- | --- | $272,198 | $272,198 | --- | $881,825 | Unvested Restricted Units (7) | --- | --- | $3,652,500 | --- | $3,652,500 | $3,652,500 | --- | $3,652,500 | | | | | | | | | | | Medical and Dental Benefits(8) | --- | --- | --- | --- | --- | --- | --- | --- | 280G Tax Gross-up(11) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, Mr. Leonard would have been eligible to retire and entitled to receive his vested pension benefits. However, a termination “for cause” would have resulted in forfeiture of Mr. Leonard’s supplemental retirement benefit. Mr. Leonard is not entitled to additional pension benefits upon the occurrence of a change in control. For additional information regarding these vested benefits and awards, see “2011 Pension Benefits.” | (2) | In the event of a qualifying termination related to a change in control, Mr. Leonard would have been entitled under his retention agreement to receive a lump sum severance payment equal to Mr. Leonard’s average maximum annual bonus opportunity under the Annual Incentive Plan for Entergy’s two calendar years immediately preceding the calendar year in which his termination occurs. For purposes of this table, the award was calculated at 200% of target opportunity and the base salary was assumed to be $1,323,800. |
Restricted Stock Units (3) | In the event of a qualifying termination related to a change in control, Mr. Leonard would have been entitled to receive pursuant to his retention agreement a lump sum severance payment equal to the product of 2.99 times the sum of his (a) annual base salary plus (b) his target Annual Incentive Plan award for any fiscal year (other than the fiscal year in which his date of termination occurs) ending after the effective date of his retention agreement. | (4)(15) | In the event of a qualifying termination related to a changeMr. West’s 21,000 restricted units vest 100% in control, including a termination by Mr. Leonard for good reason, by Entergy other than cause, disability or death, Mr. Leonard would have forfeited his performance units for all open performance periods and would have been entitled to receive a single sum severance payment pursuant to his retention agreement that would not be based on any outstanding performance periods. The payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Leonard's severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (23,800 units) and the 2008-2010 Performance Unit Program (16,500 units) and multiplying the average number of units (20,150 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $1,471,958 for the forfeited performance units.
In the event of Mr. Leonard’s death, disability or retirement not related to a change in control, Mr. Leonard would not have forfeited his performance units for all open performance period, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
2010 - 2012 Plan – 14,867 (22,300 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 8,667 (26,000 * 12/36) performance units at target, assuming a stock price of $73.05
| (5) | In the event of retirement, death, disability or a qualifying termination related to a change in control, all of Mr. Leonard’s unvested stock options would immediately vest. In addition, Mr. Leonard would be entitled to exercise any outstanding options during a ten-year term extending from the grant date of the options. For purposes of this table, it was assumed that Mr. Leonard exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Leonard’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Leonard’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. | (6) | In the event of a qualifying termination related to a change in control, all of Mr. Leonard’s unvested restricted stock would immediately vest. In the event of Mr. Leonard’s death or disability, restrictions would lift on a pro-rated portion of his unvested restricted shares that were scheduled to become vested on the immediately following twelve -month grant date anniversary, based on the number of days worked during such twelve-month period. | (7) | 2018. Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of a qualifying termination related tofor a reason other than cause, total disability, or death. The units will vest upon termination within 24 months of a change in control termination by Mr. Leonard for good reason, by Entergy other than forwithout cause or by reason of his deathMr. West with good reason. If Mr. West voluntarily resigns or disability.is terminated for cause, he would forfeit these units. |
Mr. Denault’s Retention Agreement (8) | Upon retirement Mr. Leonard would be eligible for retiree medical and dental benefits at the same level as all other retirees. Pursuant to his retention agreement, in the event of a termination related to a change in control, Mr. Leonard would not be eligible to receive additional subsidized COBRA benefits. | (9) | As of December 31, 2011, Mr. Leonard is retirement eligible and would retire rather than voluntarily resign. Given this scenario, the compensation and benefits available to Mr. Leonard under retirement are substantially the same as available upon voluntary resignation. | (10) | The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments upon a change in control. | (11) | In December 2010, Mr. Leonard voluntarily agreed to amend his retention agreement to eliminate excise tax gross up payments. |
Under the terms of Mr. Leonard'sDenault’s retention agreement, Entergy Corporation may terminate his employment for cause upon Mr. Leonard's:Denault’s: continuing failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Personnel Committee; · | willful and continued failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Board; or |
willfully engaging in conduct that is demonstrably and materially injurious to Entergy Corporation;· | willfully engaging in conduct that is demonstrably and materially injurious to us and which results in a conviction of or entrance of a plea of guilty or nolo contendere (essentially a form of plea in which the accused refuses to contest the charges) to a felony.
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In the event of a change in control, plea of guilty or nolo contendere to a felony or other crime that has or may have a material adverse effect on his ability to carry out his duties or upon Entergy Corporation’s reputation;
material violation of any agreement that he has entered into with Entergy Corporation; or unauthorized disclosure of Entergy Corporation’s confidential information. Mr. LeonardDenault may terminate his employment for good reason upon: the substantial reduction in the nature or status of his duties or responsibilities from those in effect immediately prior to the date of the retention agreement, other than de minimis acts that are remedied after notice from Mr. Denault; · | the substantial reduction or alteration in the nature or status of his duties or responsibilities; |
a reduction of 5% or more in his base salary as in effect on the date of the retention agreement;the relocation of his principal place of employment to a location other than the corporate headquarters; · | a reduction in his annual base salary; |
the failure to continue to allow him to participate in programs or plans providing opportunities for equity awards, stock options, restricted stock, stock appreciation rights, incentive compensation, bonus, and other plans on a basis not materially less favorable than enjoyed at the time of the retention agreement (other than changes similarly affecting all senior executives);the failure to continue to allow him to participate in programs or plans with opportunities for benefits not materially less favorable than those enjoyed by him or her under any of Entergy Corporation’s pension, savings, life insurance, medical, health and accident, disability, or vacation plans at the time of the retention agreement (other than changes similarly affecting all senior executives); or · | the relocation of his principal place of employment to a location more than 20 miles from his current place of employment; |
· | the failure to pay any portion of his compensation within seven days of its due date; |
· | the failure to continue in effect any compensation plan in which he participates and which is material to his total compensation, unless other equitable arrangements are made; |
· | the failure to continue to provide benefits substantially similar to those that he currently enjoys under any of the pension, savings, life insurance, medical, health and accident or disability plans, or the taking of any other action which materially reduces any of those benefits or deprives him of any material fringe benefits that he currently enjoys; |
· | the failure to provide him with the number of paid vacation days to which he is entitled in accordance with the normal vacation policy; or |
· | any purported termination of his employment not taken in accordance with his retention agreement. |
Hugh T. McDonald
President & CEO, Entergy Arkansas
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President & CEO, Entergy Arkansas would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $495,277 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | --- | $48,724 | $48,724 | $73,050 | $73,050 | | 2011-2013 Performance Unit Program | --- | --- | --- | --- | $29,220 | $29,220 | --- | $62,093 | Unvested Stock Options(4) | --- | --- | --- | --- | $754 | $754 | --- | $754 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $21,302 | $21,302 | --- | $69,012 | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | $17,124 | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, if Mr. McDonald's employment were terminated under certain conditions relating to a change in control, Mr. McDonald also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2011 Pension Benefits." If Mr. McDonald's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. | (2) | In the event of a qualifying termination related to a change in control, Mr. McDonald would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of one time the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 50% target opportunity and a base salary of $330,185 was assumed. |
(3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. McDonald would have been entitled to receive pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. McDonald’s award was calculated as follows:
2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. McDonald would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. McDonald’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (1,000 units) and the 2008-2010 Performance Unit Program (700 units) and multiplying the average number of units (850 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $ $62,093 for the forfeited performance units.
In the event of Mr. McDonald’s death or disability not related to a change in control, Mr. McDonald would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. McDonald’s awards were calculated as follows:
2010 - 2012 Plan – 667 (1,000 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 400 (1,200 * 12/36) performance units at target, assuming a stock price of $73.05
| (4) | In the event of his death, disability or a change in control, all of Mr. McDonald's unvested stock options granted prior to December 30, 2010 would immediately vest. In the event of his death, disability or qualifying termination related to a change in control, all of Mr. McDonald’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. McDonald exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the applicable exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. McDonald’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. McDonald’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. | (5) | In the event of his death or disability, Mr. McDonald would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. McDonald would immediately vest in all unvested restricted stock. | (6) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. McDonald would be eligible to receive Entergy-subsidized COBRA benefits for 12 months. |
(7) | As of December 31, 2011, compensation and benefits available to Mr. McDonald under this scenario are substantially the same as available with a voluntary resignation. As of December 31, 2011, Mr. McDonald is not retirement eligible. | (8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying termination in order to accelerate vesting or trigger severance payments.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
William M. Mohl
President and CEO, Entergy Louisiana
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO, Entergy Louisiana would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $1,006,650 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | --- | $97,376 | $97,376 | $146,100 | $146,100 | | 2011-2013 Performance Unit Program | --- | --- | --- | --- | $60,851 | $60,851 | --- | $127,838 | Unvested Stock Options(4) | --- | --- | --- | --- | $1,586 | $1,586 | --- | $1,586 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $26,060 | $26,060 | --- | $84,349 | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | $19,124 | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, if Mr. Mohl's employment were terminated under certain conditions relating to a change in control, Mr. Mohl also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2011 Pension Benefits." If Mr. Mohl's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. | (2) | In the event of a qualifying termination related to a change in control, Mr. Mohl would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of two times the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 50% target opportunity and a base salary of $335,550 was assumed. | (3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Mohl would have been entitled, pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Mohl's award was calculated as follows:
2010 - 2012 Plan – 2,000 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Mohl would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Mohl’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (2,100 units) and the 2008-2010 Performance Unit Program (1,400 units) and multiplying the average number of units (1,750 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $127,838 for the forfeited performance units.
In the event of Mr. Mohl’s death or disability not related to a change in control, Mr. Mohl would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Mohl's awards were calculated as follows:
2010 - 2012 Plan – 1,333 (2,000 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 833 (2,500 *12/36) performance units at target, assuming a stock price of $73.05
|
(4) | In the event of his death, disability or a change in control, all of Mr. Mohl's unvested stock options granted prior to December 30, 2010 would immediately vest. In the event of his death, disability or qualifying termination related to a change in control, all of Mr. Mohl’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Mohl exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the applicable exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Mohl’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Mohl’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. | (5) | In the event of his death or disability, Mr. Mohl would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. Mohl would immediately vest in all unvested restricted stock. | (6) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Mohl would be eligible to receive Entergy-subsidized COBRA benefits for 18 months. | (7) | As of December 31, 2011, compensation and benefits available to Mr. Mohl under this scenario are substantially the same as available with a voluntary resignation. As of December 31, 2011, Mr. Mohl is not retirement eligible. | (8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payments.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
Charles L. Rice, Jr.
President & CEO - Entergy New Orleans
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO - Entergy New Orleans would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $321,360 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | --- | $48,724 | $48,724 | $60,851 | $60,851 | | 2011-2013 Performance Unit Program | --- | --- | --- | --- | $29,220 | $29,220 | --- | $62,093 | Unvested Stock Options(4) | --- | --- | --- | --- | $754 | $754 | --- | $754 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $15,409 | $15,409 | --- | $49,842 | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | $888 | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, if Mr. Rice's employment were terminated under certain conditions relating to a change in control, Mr. Rice also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2011 Pension Benefits." If Mr. Rice's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. | (2) | In the event of a qualifying termination related to a change in control, Mr. Rice would be entitled to receive pursuant to the System Executive Continuity Plan, a lump sum severance payment equal to the product of one time the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 30% target opportunity and a base salary of $247,200 was assumed. |
(3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Rice would have been entitled to receive pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Rice’s award was calculated as follows:
2010 - 2012 Plan – 833 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Rice would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Rice’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (1,000 units) and the 2008-2010 Performance Unit Program (700 units) and multiplying the average number of units (850 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $ $62,093 for the forfeited performance units.
In the event of Mr. Rice’s death or disability not related to a change in control, Mr. Rice would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Rice’s awards were calculated as follows:
2010 - 2012 Plan – 555 (833 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 400 (1,200 * 12/36) performance units at target, assuming a stock price of $73.05
| (4) | In the event of his death, disability or a change in control, all of Mr. Rice's unvested stock options granted prior to December 30, 2010 would immediately vest. In the event of his death, disability or qualifying termination related to a change in control, all of Mr. Rice’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Rice exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the applicable exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Rice’s 2011 unvested options and such options are reported in the table. Mr. Rice has no other unvested stock options prior to 2011. | (5) | In the event of his death or disability, Mr. Rice would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. Rice would immediately vest in all unvested restricted stock. | (6) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Rice would be eligible to receive Entergy-subsidized COBRA benefits for 12 months. | (7) | As of December 31, 2011, compensation and benefits available to Mr. Rice under this scenario are substantially the same as available with a voluntary resignation. As of December 31, 2011, Mr. Rice is not retirement eligible. |
(8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payments.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
Gary J. Taylor
Group President, Utility Operations
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Group President, Utility Operations would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2011:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(7) | Disability | Death | Change in Control(8) | Termination Related to a Change in Control | | | | | | | | | | | | | Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $3,013,202 | Performance Units:(3) | | | | | | | | | | 2010-2012 Performance Unit Program | --- | --- | --- | $258,086 | $258,086 | $258,086 | $387,165 | $387,165 | | 2011-2013 Performance Unit Program | --- | --- | --- | $143,689 | $143,689 | $143,689 | --- | $306,810 | Unvested Stock Options(4) | --- | --- | --- | $5,200 | $5,200 | $5,200 | --- | $5,200 | Unvested Restricted Stock(5) | --- | --- | --- | --- | $71,008 | $71,008 | --- | $230,041 | | | | | | | | | | | Medical and Dental Benefits(6) | --- | --- | --- | --- | --- | --- | --- | --- | 280G Tax Gross-up(9) | --- | --- | --- | --- | --- | --- | --- | --- |
(1) | In addition to the payments and benefits in the table, Mr. Taylor would have been eligible to retire and entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see “2011 Pension Benefits.” In the event of a termination related to a change in control, pursuant to the terms of the System Executive Retirement Plan, Mr. Taylor would be eligible for subsidized early retirement even if he does not have company permission to separate from employment. If Mr. Taylor’s employment were terminated for cause, he would not receive a benefit under the System Executive Retirement Plan. | (2) | In the event of a qualifying termination related to a change in control, Mr. Taylor would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to the product of 2.99 times the sum of (a) his annual base salary as in effect at any time within one year prior to the commencement of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) his annual incentive, calculated using the average annual target opportunity derived under the Annual Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 70% target opportunity and a base salary of $592,800 was assumed. | (3) | In the event of a change in control (regardless of whether he experienced a qualifying termination), Mr. Taylor would have been entitled, pursuant to the 2007 Equity Ownership Plan, to receive for the 2010-2012 performance period a lump sum payment relating to his performance units. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Taylor's award was calculated as follows:
2010 - 2012 Plan – 5,300 performance units at target, assuming a stock price of $73.05
In the event of a qualifying termination related to a change in control, Mr. Taylor would have forfeited his performance units for the 2011-2013 performance period and would have been entitled to receive, pursuant to the 2007 Equity Ownership Plan, a single-sum severance payment that would not be based on any outstanding performance periods. For the 2011-2013 performance period, the payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Taylor’s severance payment was calculated by taking an average of the target performance units from the 2007-2009 Performance Unit Program (4,500 units) and the 2008-2010 Performance Unit Program (3,900 units) and multiplying the average number of units (4,200 units) by the closing price of Entergy common stock on December 30, 2011 ($73.05) resulting in a severance payment of $306,810 for the forfeited performance units.
In the event of Mr. Taylor’s death, disability or retirement not related to a change in control, Mr. Taylor would not have forfeited his performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his number of months of participation in each open Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the value of Mr. Taylor's awards were calculated as follows:
2010 - 2012 Plan – 3,533 (5,300 * 24/36) performance units at target, assuming a stock price of $73.05
2011 - 2013 Plan – 1,967 (5,900 * 12/36) performance units at target, assuming a stock price of $73.05
| (4) | In the event of his retirement, death, disability or a change in control, all of Mr. Taylor’s unvested stock options granted prior to December 31, 2010 would immediately vest. In the event of his retirement, death, disability or qualifying termination related to a change in control, all of Mr. Taylor’s unvested stock options granted on or after December 30, 2010 would immediately vest. In addition, he would be entitled to exercise his stock options for a ten-year term extending from the grant date of the options. For purposes of this table, it was assumed that Mr. Taylor exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 30, 2011, and the exercise price of each option share. As of December 31, 2011, the closing stock price exceeded the exercise price for Mr. Taylor’s 2011 unvested options and accordingly, such options are reported in the table; all other stock options with respect to the accelerated vesting of Mr. Taylor’s stock options were “underwater” as of December 31, 2011 and are excluded from the table. |
(5) | In the event of his death or disability, Mr. Taylor would immediately vest in a pro-rated portion of the unvested restricted stock that was otherwise scheduled to become vested on the immediately following twelve (12)-month grant date anniversary date (as well as dividends declared on the pro-rated portion of such restricted stock). The pro-rated vested portion would be determined based on the number of days between the most recent preceding twelve (12)-month Grant Date anniversary date and the date of his death or Disability. In the event of his qualifying termination related to a change in control, Mr. Taylor would immediately vest in all unvested restricted stock. | (6) | Upon retirement, Mr. Taylor would be eligible for retiree medical and dental benefits at the same level as all other retirees. Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Taylor would not be eligible to receive Entergy-subsidized COBRA benefits. | (7) | As of December 31, 2011, Mr. Taylor is retirement eligible and would retire rather than voluntarily resign. Given that scenario, the compensation and benefits available to Mr. Taylor under retirement are substantially the same as available with a voluntary resignation. Mr. Taylor has advised Entergy that he intends to resign from his position as Group President, Utility Operations, effective May 31, 2012.
| (8) | With respect to grants made under the 2007 Equity Ownership Plan prior to December 30, 2010, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of Entergy and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:
·All unvested stock options would become immediately exercisable; and
·Severance benefits in place of performance units become payable as described in footnote 3 above.
The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted on or after December 30, 2010 require a qualifying involuntary termination in order to accelerate vesting or trigger severance payments.
| (9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross up payments. |
In the following sections, additional information is provided regarding certain of the scenarios described in the tables above:
Termination Related to a Change in Control
Under the System Executive Continuity Plan, theThe Named Executive Officers will be entitled to the benefits described in the tables above under the System Executive Continuity Plan in the event of a termination related to a change in control if a change in control occurs and their employment is terminated by an Entergy System company other than for cause or if they terminate their employment for good reason, in each case within a period commencing 90 days prior tobeginning on the occurrence of a potential change in control and ending 24 months following the effective date of a change in control.
A change in control includes the following events:
The purchase of 30% or more of either Entergy Corporation common stock or the combined voting power of its voting securities;
· | The purchase of 30% or more of either the common stock or the combined voting power of the voting securities, the merger or consolidation of Entergy Corporation (unless Entergy Corporation's boardthe merger or consolidation of Entergy Corporation (unless its Board members constitute at least a majority of the board members of the surviving entity); |
· | the merger or consolidation of Entergy Corporation (unless Entergy Corporation's board members constitute at least a majority of the board members of the surviving entity); |
· | the liquidation, dissolution or sale of all or substantially all of Entergy Corporation's assets; or |
· | a change in the composition of Entergy Corporation's board such that, during any two-year period, the individuals serving at the beginning of the period no longer constitute a majority of Entergy Corporation's board at the end of the period. |
The proposed separation of the non-utility nuclear businessboard members of the surviving entity);
the liquidation, dissolution, or sale of all or substantially all of Entergy Corporation’s assets; or a change in a tax-free spin-off tothe composition of Entergy Corporation's shareholders does notCorporation’s Board such that, during any two-year period, the individuals serving at the beginning of the period no longer constitute a "Changemajority of the Board at the end of the period. A potential change in Control"control includes the following events: Entergy Corporation or an affiliate enters into an agreement the consummation of which would constitute a change in control; the Board adopts resolutions determining that, for purposes of the System Executive Continuity Plan.Plan, a potential change in control has occurred;
an Entergy System Company or other person or entity publicly announces an intention to take actions that would constitute a change in control; or
any person or entity becomes the beneficial owner (directly or indirectly) of outstanding shares of common stock of Entergy Corporation may terminate aconstituting 20% of the voting power or value of Entergy Corporation’s outstanding common stock. A Named Executive Officer'sOfficer’s employment may be terminated for cause under the System Executive Continuity Plan if he or she:
willfully and continuously fails to substantially perform his or her duties after receiving a 30-day written demand for performance from the Board;
· | fails to substantially perform his duties for a period of 30 days after receiving notice from the board; |
· | engages in conduct that is materially injurious to Entergy Corporation or any of its subsidiaries; is convicted or pleads guilty or nolo contendere to a felony or other crime that materially and adversely affects his or her ability to perform his or her duties or Entergy Corporation’s reputation; materially violates any agreement with Entergy Corporation or any of its subsidiaries; or discloses any of Entergy Corporation or any of its subsidiaries; |
· | is convicted or pleads guilty to a felony or other crime that materially and adversely affects his or her ability to perform his or her duties or Entergy Corporation's reputation; |
· | violates any agreement with Entergy Corporation or any of its subsidiaries; or |
· | discloses any of Entergy Corporation's confidential information without authorization. |
A Named Executive Officer may terminate his or her employment with an Entergy CorporationSystem Company for good reason under the System Executive Continuity Plan if, without the Named Executive Officer'shis or her consent: the nature or status of his or her duties and responsibilities is substantially altered or reduced compared to the period prior to the change in control;
his or her salary is reduced by 5% or more; · | the nature or status of his or her duties and responsibilities is substantially altered or reduced compared to the periodhe or she is required to be based outside of the continental United States at somewhere other than his or her primary work location prior to the change in control; |
· | his or her salary is reduced by 5% or more; |
any of his or her compensation plans are discontinued without an equitable replacement;· | hehis or her benefits or number of vacation days are substantially reduced; or she is required to be based outside of the continental United States at somewhere other than the primary work location prior to the change in control; |
· | any of his or her compensation plans are discontinued without an equitable replacement; |
· | his or her benefits or number of vacation days are substantially reduced; or |
· | his or her employer purports to terminate his or her employment is purported to be terminated other than in accordance with the System Executive Continuity Plan. |
In addition to participation in the System Executive Continuity Plan, upon the completion of a transaction resulting in a change in control of Entergy Corporation, benefits already accrued under the System Executive Retirement Plan, and Pension Equalization Plan, and Supplemental Retirement Plan, if any, will become fully vested if the executive is involuntarily terminated without cause or the executive terminates his or her employment for good reason within two years after the occurrence of a change in control. Any awards granted under the equity ownership plans will become fully vested if the executive is involuntarily terminated without cause or terminates employment for good reason. Any awards grantedreason within two years after the occurrence of a change in control. In 2010, Entergy Corporation eliminated tax gross up payments for any severance benefits paid under the Equity Ownership Plan will become fully vested upon a Change in Control without regard to whether the executive is involuntarily terminated without cause or terminates employment for good reason.
System Executive Continuity Plan.
Under certain circumstances described below, the payments and benefits received by a Named Executive Officer pursuant to the System Executive Continuity Plan may be forfeited and, in certain cases, subject to repayment. Benefits are no longer payable under the System Executive Continuity Plan, and unvested performance units under the Performance Unit Program are subject to forfeiture, if the executive:
accepts employment with Entergy Corporation or any of its subsidiaries;
· | accepts employment with Entergy Corporation or any of its subsidiaries; |
elects to receive the benefits of another severance or separation program;· | elects to receive the benefits of another severance or separation program; |
removes, copies, or fails to return any property belonging to Entergy Corporation or any of its subsidiaries;· | removes, copiesdiscloses non-public data or information concerning Entergy Corporation or any of its subsidiaries; or fails to return any property belonging to Entergy Corporation or any of its subsidiaries; |
· | discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries; or |
· | violates theirviolates his or her non-competition provision, which generally runs for two years but extends to three years if permissible under applicable law. |
Furthermore, if the executive discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries or violates theirhis or her non-competition provision, he or she will be required to repay any benefits previously received under the System Executive Continuity Plan.
Termination for Cause
If a Named Executive Officer'sOfficer’s employment is terminated for "cause"“cause” (as defined in the System Executive Continuity PlansPlan and described above under "Termination“Termination Related to a Change in Control"Control”), he or she is generally entitled to the same compensation and separation benefits described below under "Voluntary Resignation"“Voluntary Resignation,” except that all options mayare no longer be exercisable.
Voluntary Resignation
If a Named Executive Officer voluntarily resigns from anhis or her Entergy System company employer, he or she is entitled to all accrued benefits and compensation as of the separation date, including qualified pension benefits (if any) and other post-employment benefits on terms consistent with those generally available to other salaried employees. In the case of voluntary resignation, the officer would forfeit all unvested stock options, shares of restricted stock, and restricted units as well as any perquisites to which he or she is entitled as an officer. In addition, the officer would forfeit, except as described below, his or her right to receive incentive payments under any outstanding performance periods under the Long-Term Performance Unit Program or the ExecutiveAnnual Incentive Plan. If the officer resigns after the completion of an ExecutiveAnnual Incentive Plan or Long-Term Performance Unit Program performance period, he or she could receive a payout under the Long-Term Performance Unit Program based on the outcome of the
performance cycle and could, at the Entergy Corporation'sCorporation’s discretion, receive an annual incentive payment under the ExecutiveAnnual Incentive Plan. Any vested stock options held by the officer as of the separation date will expire the earlier of ten years from date of grant or 90 days from the last day of active employment.
Retirement
Under Entergy Corporation'sCorporation’s retirement plans, a Named Executive Officer'sOfficer’s eligibility for retirement benefits is based on a combination of age and years of service. Normal retirement is defined as age 65. Early retirement is defined under the qualified retirement plan as minimum age 55 with 10 years of service and in the case of the System Executive Retirement Plan and the supplemental credited service under the Pension Equalization Plan, the consent of the Entergy System company employer.
Upon a Named Executive Officer'sOfficer’s retirement, he or she is generally entitled to all accrued benefits and compensation as of the separation date, including qualified pension benefits and other post-employment benefits consistent with those generally available to salaried employees. The annual incentive payment under the ExecutiveAnnual Incentive Plan is pro-rated based on the actual number of days employed during the performance year in which the retirement date occurs. Similarly, payments under the Performance Unit Program for those retiring with a minimum of 12 months of participation are pro-rated based on the actual numberfull months of days employed,participation, in each outstanding performance cycle, in which the retirement date occurs. In each case, payments are delivered at the conclusion of each annual or performance cycle, consistent with the timing of payments to active participants in the ExecutiveAnnual Incentive Plan and the Performance Unit Program, respectively.
Unvested stock options issued under the Equity Ownership PlanEntergy Corporation’s equity ownership plans vest on the retirement date and expire ten years from the grant date of the options. Any restricted stock and restricted stock units held (other than those issued under the Performance Unit Program) held by the executive upon his or her retirement are forfeited, and perquisites (other than short-term financial counseling services) are not available following the separation date.
Disability
If a Named Executive Officer'sOfficer’s employment is terminated due to disability, he or she generally is entitled to the same compensation and separation benefits described above under "Retirement,"“Retirement,” except that restricted stock units may be subject to specific disability benefits (as noted, where applicable, in the tables above).
Death
If a Named Executive Officer dies while actively employed by an Entergy System company employer, he or she generally is entitled to the same compensation and separation benefits described above under "Retirement," except that:“Retirement,” including: all unvested stock options will vest immediately; vested stock options will expire ten years from the grant date; and
· | all unvested stock options granted prior to January 1, 2007 are forfeited; |
· | vested stock options will expire the earlier of ten years from the grant date or three years following the executive's death; |
· | restricted units may be subject to specific death benefits depending on the restricted unit agreement (as noted, where applicable, in the tables above). |
Compensation of Directors
For information regarding compensation of the directors of Entergy Corporation, see the Proxy Statement under the heading “Director Compensation”,Compensation,” which information is incorporated herein by reference. The Boards of Directors of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are comprised solely of employee directors who receive no compensation for service as directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Entergy Corporation owns 100% of the outstanding common stock of registrants Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. The information with respect to persons known by Entergy Corporation to be beneficial owners of more than 5% of Entergy Corporation’s outstanding common stock is included under the heading “Stockholders Who Own at Least Five Percent” in the Proxy Statement, which information is incorporated herein by reference. The registrants know of no contractual arrangements that may, at a subsequent date, result in a change in control of any of the registrants.
The following table sets forth the beneficial ownership of Common Stock of Entergy Corporation and stock-based units as of DecemberJanuary 31, 20112015 for all directors and Named Executive Officers. Unless otherwise noted, each person had sole voting and investment power over the number of shares of Common Stock and stock-based units of Entergy Corporation set forth across from his or her name.
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | | | | | | | | | Entergy Corporation | | | | | | | | Maureen S. Bateman* | | 4,300 | | - | | 8,800 | | Leo P. Denault** | | 14,126 | | 334,294 | | - | | Gary W. Edwards* | | 1,400 | | - | | 7,181 | | Alexis Herman* | | 5,118 | | - | | 6,400 | | Donald C. Hintz* | | 8,944 | | 260,000 | | 6,950 | | J. Wayne Leonard*** | | 444,898 | | 1,458,533 | | 3,111 | | Stuart L. Levenick* | | 3,800 | | - | | 4,631 | | Blanche L. Lincoln* | | 454 | | - | | 200 | | Stewart C. Myers* | | 1,376 | | - | | 1,383 | | William A. Percy, II* | | 3,100 | | - | | 13,104 | | Mark T. Savoff** | | 4,363 | | 199,467 | | 263 | | Richard J. Smith** | | 45,672 | | 365,933 | | - | | W. J. Tauzin* | | 3,700 | | - | | 4,493 | | Gary J. Taylor** | | 4,674 | | 310,233 | | - | | Steven V. Wilkinson* | | 4,855 | | - | | 6,027 | | All directors and executive | | | | | | | | officers as a group (21 persons) | | 585,170 | | 3,497,111 | | 62,543 |
| | | | | | | | | | | Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | Entergy Corporation | | | | | | | | Maureen S. Bateman* | | 6,258 |
| | — |
| | 11,263 |
| | Leo P. Denault*** | | 64,450 |
| | 378,666 |
| | — |
| | Kirkland H. Donald* | | 965 |
| | — |
| | 753 |
| | Gary W. Edwards* | | 1,791 |
| | — |
| | 10,852 |
| | Alexis Herman* | | 556 |
| | — |
| | 8,863 |
| | Donald C. Hintz* | | 3,650 |
| | — |
| | 10,471 |
| | Stuart L. Levenick* | | 5,758 |
| | — |
| | 7,094 |
| | Blanche L. Lincoln* | | 2,618 |
| | — |
| | 2,663 |
| | Andrew S. Marsh** | | 18,620 |
| | 84,599 |
| | — |
| | William M. Mohl** | | 18,946 |
| | 80,799 |
| | — |
| | Stewart C. Myers* | | 3,682 |
| | — |
| | 3,846 |
| | Mark T. Savoff** | | 26,546 |
| | 182,832 |
| | 305 |
| | W. J. Tauzin* | | 5,658 |
| | — |
| | 6,956 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | Steven V. Wilkinson* | | 6,813 |
| | — |
| | 8,490 |
| | All directors and executive | | | | | | | | officers as a group (20 persons) | | 271,309 |
| | 1,153,759 |
| | 71,617 |
| | | | | | | | | | Entergy Arkansas | | |
| | |
| | |
| | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Hugh T. McDonald*** | | 15,653 |
| | 48,933 |
| | — |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (10 persons) | | 230,267 |
| | 1,121,893 |
| | 366 |
| | | | | | | | | | Entergy Gulf States Louisiana | | | | | | | | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Phillip R. May, Jr.*** | | 12,886 |
| | 40,866 |
| | 11 |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (10 persons) | | 227,500 |
| | 1,113,826 |
| | 377 |
|
475
512
| | | | | | | | | | | Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | Entergy Louisiana | | | | | | | | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Phillip R. May, Jr.*** | | 12,886 |
| | 40,866 |
| | 11 |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (10 persons) | | 227,500 |
| | 1,113,826 |
| | 377 |
| | | | | | | | | | Entergy Mississippi | | | | | | | | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Haley R. Fisackerly*** | | 7,269 |
| | 28,667 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (9 persons) | | 203,967 |
| | 1,002,461 |
| | 305 |
| | | | | | | | | | Entergy New Orleans | | | | | | | | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Charles L. Rice, Jr.*** | | 4,831 |
| | 12,566 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (9 persons) | | 201,529 |
| | 986,360 |
| | 305 |
| | | | | | | | | | Entergy Texas | | | | | | | | Theodore H. Bunting, Jr.* | | 21,009 |
| | 111,466 |
| | — |
| | Leo P. Denault** | | 64,450 |
| | 378,666 |
| | — |
| | Andrew S. Marsh*** | | 18,620 |
| | 84,599 |
| | — |
| | Alyson M. Mount** | | 9,653 |
| | 15,700 |
| | — |
| | Sallie T. Rainer*** | | 8,586 |
| | 16,299 |
| | — |
| | Mark T. Savoff*** | | 26,546 |
| | 182,832 |
| | 305 |
| | Roderick K. West** | | 26,191 |
| | 117,666 |
| | — |
| | All directors and executive | | | | | | | | officers as a group (9 persons) | | 205,284 |
| | 990,093 |
| | 305 |
|
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | | | | | | | | | Entergy Arkansas | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | Hugh T. McDonald*** | | 10,091 | | 67,555 | | - | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 558,214 | | 3,304,666 | | 3,374 |
| Entergy Gulf States Louisiana | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | William M. Mohl*** | | 1,154 | | 36,333 | | - | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 549,277 | | 3,273,444 | | 3,374 | | | | | | | | | | Entergy Louisiana | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | William M. Mohl*** | | 1,154 | | 36,333 | | - | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 549,277 | | 3,273,444 | | 3,374 | | | | | | | | | | Entergy Mississippi | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | Haley R. Fisackerly*** | | 2,743 | | 19,267 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 550,866 | | 3,256,378 | | 3,374 | | | | | | | | | | Entergy New Orleans | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | Charles L. Rice, Jr.*** | | 1,253 | | 967 | | - | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 549,376 | | 3,238,078 | | 3,374 |
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | | | | | | | | | Entergy Texas | | | | | | | | Theodore H. Bunting, Jr.** | | 2,818 | | 60,133 | | - | | Leo P. Denault*** | | 14,126 | | 334,294 | | - | | Joseph F. Domino*** | | 954 | | 65,533 | | - | | J. Wayne Leonard** | | 444,898 | | 1,458,533 | | 3,111 | | Mark T. Savoff* | | 4,363 | | 199,467 | | 263 | | Gary J. Taylor*** | | 4,674 | | 310,233 | | - | | All directors and executive | | | | | | | | officers as a group (12 persons) | | 549,077 | | 3,302,644 | | 3,374 |
| | | | * | Director of the respective Company | | ** | Named Executive Officer of the respective Company | | *** | Director and Named Executive Officer of the respective Company |
| | | (1) | The number of shares of Entergy Corporation common stock owned by each individual and by all directors and executive officers as a group does not exceed one percent of the outstanding Entergy Corporation common stock. |
| | | (2) | Represents the balances of phantom units each executive holds under the defined contribution restoration plan and the deferral provisions of the Equity Ownership Plan. These units will be paid out in either Entergy Corporation Common Stock or cash equivalent to the value of one share of Entergy Corporation Common Stockcommon stock per unit on the date of payout, including accrued dividends. The deferral period is determined by the individual and is at least two years from the award of the bonus. For directors of Entergy Corporation the phantom units are issued under the Service Recognition Program for Outside Directors. All non-employee directors are credited with units for each year of service on the Board. In addition, Messrs. Edwards Hintz and PercyHintz have deferred receipt of some of their quarterly stock grants. The deferred shares will be settled in unitscash in an amount equal to the market value of Entergy Corporation common stock at the end of the deferral period. |
Equity Compensation Plan Information
The following table summarizes the equity compensation plan information as of December 31, 2011.2014. Information is included for equity compensation plans approved by the stockholders and equity compensation plans not approved by the stockholders.
Plan | | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | | Weighted Average Exercise Price (b) | | Number of Securities Remaining Available for Future Issuance (excluding securities reflected in column (a)) (c) | | | | | | | | | Equity compensation plans approved by security holders (1) | | 9,683,058 | | $78.07 | | 7,269,562 | Equity compensation plans not approved by security holders(2) | | 776,360 | | $42.82 | | - | | Total | | 10,459,418 | | $75.46 | | 7,269,562 |
| | | | | | | | | | | Plan | | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | | Weighted Average Exercise Price (b) | | Number of Securities Remaining Available for Future Issuance (excluding securities reflected in column (a)) (c) | Equity compensation plans approved by security holders (1) | | 7,281,396 |
| | $83.25 | | 3,569,309 |
| Equity compensation plans not approved by security holders(2) | | — |
| | — |
| | — |
| | Total | | 7,281,396 |
| | $83.25 | | 3,569,309 |
|
| | | (1) | Includes the Equity Ownership Plan, which was approved by the shareholders on May 15, 1998, the 2007 Equity Ownership Plan and the 2011 Equity Ownership Plan. The 2007 Equity Ownership Plan was approved by Entergy Corporation shareholders on May 12, 2006, and 7,000,000 shares of Entergy Corporation common stock can be issued, with no more than 2,000,000 shares available for non-option grants. The 2011 Equity Ownership Plan was approved by Entergy Corporation shareholders on May 6, 2011, and 5,500,000 shares of Entergy Corporation common stock can be issued from the 2011 Equity Ownership Plan, with no more than 2,000,000 shares available for incentive stock option grants. The Equity Ownership Plan, the 2007 Equity Ownership Plan and the 2011 Equity Ownership Plan (the “Plans”) are administered by the Personnel Committee of the Board of Directors (other than with respect to awards granted to non-employee directors, which awards are administered by the entire Board of Directors). Eligibility under the Plans is limited to the non-employee directors and to the officers and employees of an Entergy System employer and any corporation 80% or more of whose stock (based on voting power) or value is owned, directly or indirectly, by Entergy Corporation. The Plans provide for the issuance of stock options, restricted shares, equity awards (units whose value is related to the value of shares of the Common Stock but do not represent actual shares of Common Stock), performance awards (performance shares or units valued by reference to shares of Common Stock or performance units valued by reference to financial measures or property other than Common Stock) and other stock-based awards. |
| | | (2) | Entergy has a Board-approved stock-based compensation plan. However, effective May 9, 2003, the Board has directed that no further awards be issued under that plan. As of December 31, 2014, all options outstanding under the plan were either exercised or expired. |
Item 13. Certain Relationships and Related Transactions and Director Independence
For information regarding certain relationships, related transactions and director independence of Entergy Corporation, see the Proxy Statement under the headings “Corporate Governance - Director Independence” and “Transactions with Related Persons,” which information is incorporated herein by reference.
Since December 31, 2010,2011, none of the Subsidiaries or any of their affiliates has participated in any transaction involving an amount in excess of $120,000 in which any director or executive officer of any of the Subsidiaries, any nominee for director, or any immediate family member of the foregoing had a material interest as contemplated by Item 404(a) of Regulation S-K (“Related Party Transactions”).
Entergy Corporation’s Board of Directors has adopted written policies and procedures for the review, approval or ratification of Related Party Transactions. Under these policies and procedures, the Corporate Governance Committee, or a subcommittee of the Board of Directors of Entergy Corporation composed of independent directors, reviews the transaction and either approves or rejects the transaction after taking into account the following factors: · | Whether the proposed transaction is on terms at least as favorable to Entergy Corporation or the subsidiary as those achievable with an unaffiliated third party; |
· | Size of transaction and amount of consideration; |
· | Nature of the interest; |
· | Whether the transaction involves a conflict of interest; |
· | Whether the transaction involves services available from unaffiliated third parties; and |
· | Any other factors that the Corporate Governance Committee or subcommittee deems relevant. |
The policy does not apply to (a) compensation and Related Party Transactions involving a director or an executive officer solely resulting from that person’s service as a director or employment with the Company so long as the compensation is approved by Entergy’s Board of Directors, (b) transactions involving the rendering of services as a public utility at rates or charges fixed in conformity with law or governmental authority or (c) any other categories of transactions currently or in the future excluded from the reporting requirements of Item 404(a) of Regulation SK.
None of the Subsidiaries are listed issuers. As previously noted, the Boards of Directors of the Subsidiaries are composed solely of employee directors. None of the Boards of Directors of any of the Subsidiaries has any committees.
Aggregate fees billed to Entergy Corporation (consolidated), Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy for the years ended December 31, 20112014 and 20102013 by Deloitte & Touche LLP were as follows:
| | | 2011 | | 2010 | | Entergy Corporation (consolidated) | | | | | | Audit Fees | | $9,096,870 | | $8,376,900 | | Audit-Related Fees (a) | | 740,000 | | 1,235,000 | | | | | | | | Total audit and audit-related fees | | 9,836,870 | | 9,611,900 | | Tax Fees (b) | | 46,083 | | 43,812 | | All Other Fees | | - | | - | | | | | | | | Total Fees (c) | | $9,882,953 | | $9,655,712 | | | | | | | | Entergy Arkansas | | | | | | Audit Fees | | $969,218 | | $956,592 | | Audit-Related Fees (a) | | - | | 200,000 | | | | | | | | Total audit and audit-related fees | | 969,218 | | 1,156,592 | | Tax Fees | | - | | - | | All Other Fees | | - | | - | | | | | | | | Total Fees (c) | | $969,218 | | $1,156,592 | | | | | | | | Entergy Gulf States Louisiana | | | | | | Audit Fees | | $897,218 | | $876,592 | | Audit-Related Fees (a) | | 80,000 | | 315,000 | | | | | | | | Total audit and audit-related fees | | 977,218 | | 1,191,592 | | Tax Fees | | - | | - | | All Other Fees | | - | | - | | | | | | | | Total Fees (c) | | $977,218 | | $1,191,592 | | | | | | | | Entergy Louisiana | | | | | | Audit Fees | | $1,031,718 | | $946,592 | | Audit-Related Fees (a) | | 280,000 | | 315,000 | | | | | | | | Total audit and audit-related fees | | 1,311,718 | | 1,261,592 | | Tax Fees | | - | | - | | All Other Fees | | - | | - | | | | | | | | Total Fees (c) | | $1,311,718 | | $1,261,592 |
| | | | | | | | | | | 2014 | | 2013 | | Entergy Corporation (consolidated) | | | | | Audit Fees |
| $8,097,000 |
| |
| $9,832,698 |
| | Audit-Related Fees (a) | 1,135,000 |
| | 545,000 |
| | Total audit and audit-related fees | 9,232,000 |
| | 10,377,698 |
| | Tax Fees (b) | — |
| | — |
| | All Other Fees | — |
| | — |
| | Total Fees (c) |
| $9,232,000 |
| |
| $10,377,698 |
| | Entergy Arkansas | | | | | Audit Fees |
| $984,813 |
| |
| $985,484 |
| | Audit-Related Fees (a) | 19,000 |
| | — |
| | Total audit and audit-related fees | 1,003,813 |
| | 985,484 |
| | Tax Fees | — |
| | — |
| | All Other Fees | — |
| | — |
| | Total Fees (c) |
| $1,003,813 |
| |
| $985,484 |
| | Entergy Gulf States Louisiana | | | | | Audit Fees |
| $874,813 |
| |
| $840,484 |
| | Audit-Related Fees (a) | 375,000 |
| | 100,000 |
| | Total audit and audit-related fees | 1,249,813 |
| | 940,484 |
| | Tax Fees | — |
| | — |
| | All Other Fees | — |
| | — |
| | Total Fees (c) |
| $1,249,813 |
| |
| $940,484 |
| | Entergy Louisiana | | | | | Audit Fees |
| $1,134,813 |
| |
| $985,484 |
| | Audit-Related Fees (a) | 375,000 |
| | 100,000 |
| | Total audit and audit-related fees | 1,509,813 |
| | 1,085,484 |
| | Tax Fees | — |
| | — |
| | All Other Fees | — |
| | — |
| | Total Fees (c) |
| $1,509,813 |
| |
| $1,085,484 |
|
| | | | | 2011 | | 2010 | 2014 | | 2013 | | Entergy Mississippi | | | | | | | | | Audit Fees | | $971,218 | | $838,092 |
| $869,813 |
| |
| $840,484 |
| | Audit-Related Fees (a) | | - | | - | — |
| | — |
| | | | | | | | | Total audit and audit-related fees | | 971,218 | | 838,092 | 869,813 |
| | 840,484 |
| | Tax Fees | | - | | - | — |
| | — |
| | All Other Fees | | - | | - | — |
| | — |
| | | | | | | | | Total Fees (c) | | $971,218 | | $838,092 |
| $869,813 |
| |
| $840,484 |
| | | | | | | | | Entergy New Orleans | | | | | | | | | Audit Fees | | $901,218 | | $838,092 |
| $824,813 |
| |
| $885,484 |
| | Audit-Related Fees (a) | | - | | - | — |
| | — |
| | | | | | | | | Total audit and audit-related fees | | 901,218 | | 838,092 | 824,813 |
| | 885,484 |
| | Tax Fees | | - | | - | — |
| | — |
| | All Other Fees | | - | | - | — |
| | — |
| | | | | | | | | Total Fees (c) | | $901,218 | | $838,092 |
| $824,813 |
| |
| $885,484 |
| | | | | | | | | Entergy Texas | | | | | | | | | Audit Fees | | $1,945,188 | | $998,092 |
| $1,004,813 |
| |
| $1,886,280 |
| | Audit-Related Fees (a) | | - | | - | — |
| | — |
| | | | | | | | | Total audit and audit-related fees | | 1,945,188 | | 998,092 | 1,004,813 |
| | 1,886,280 |
| | Tax Fees | | - | | - | — |
| | — |
| | All Other Fees | | - | | - | — |
| | — |
| | | | | | | | | Total Fees (c) | | $1,945,188 | | $998,092 |
| $1,004,813 |
| |
| $1,886,280 |
| | | | | | | | | System Energy | | | | | | | | | Audit Fees | | $901,218 | | $803,092 |
| $824,813 |
| |
| $840,484 |
| | Audit-Related Fees (a) | | - | | - | — |
| | — |
| | | | | | | | | Total audit and audit-related fees | | 901,218 | | 803,092 | 824,813 |
| | 840,484 |
| | Tax Fees | | - | | - | — |
| | — |
| | All Other Fees | | - | | - | — |
| | — |
| | | | | | | | | Total Fees (c) | | $901,218 | | $803,092 |
| $824,813 |
| |
| $840,484 |
|
| | | (a) | Includes fees for employee benefit plan audits, consultation on financial accounting and reporting, and other attestation services. |
| | | (b) | Includes fees for tax advisory services. |
| | | (c) | 100% of fees paid in 20112014 and 20102013 were pre-approved by the Entergy Corporation Audit Committee. |
Entergy Audit Committee Guidelines for Pre-approval of Independent Auditor Services
The Audit Committee has adopted the following guidelines regarding the engagement of Entergy’s independent auditor to perform services for Entergy:
| | | 1. | The independent auditor will provide the Audit Committee, for approval, an annual engagement letter outlining the scope of services proposed to be performed during the fiscal year, including audit services and other permissible non-audit services (e.g. audit-related services, tax services, and all other services). |
| | | 2. | For other permissible services not included in the engagement letter, Entergy management will submit a description of the proposed service, including a budget estimate, to the Audit Committee for pre-approval. Management and the independent auditor must agree that the requested service is consistent with the SEC’s rules on auditor independence prior to submission to the Audit Committee. The Audit Committee, at its discretion, will pre-approve permissible services and has established the following additional guidelines for permissible non-audit services provided by the independent auditor: |
Aggregate non-audit service fees are targeted at fifty percent or less of the approved audit service fee. All other services should only be provided by the independent auditor if it is the only qualified provider of that service or if the Audit Committee specifically requests the service. ·Aggregate non-audit service fees are targeted at fifty percent or less of the approved audit service fee.
·All other services should only be provided by the independent auditor if it is the only qualified provider of that service or if the Audit Committee specifically requests the service.
| | | 3. | The Audit Committee will be informed quarterly as to the status of pre-approved services actually provided by the independent auditor. |
| | | 4. | To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Audit Committee Chair or its designee the authority to approve permissible services and fees. The Audit Committee Chair or designee will report action taken to the Audit Committee at the next scheduled Audit Committee meeting. |
| | | 5. | The Vice President and General Auditor will be responsible for tracking all independent auditor fees and will report quarterly to the Audit Committee. |
PART IV
Item 15. Exhibits and Financial Statement Schedules
| | | | (a)1. | Financial Statements and Independent Auditors’ Reports for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Table of Contents. | | | | | (a)2. | Financial Statement Schedules | | | | Report of Independent Registered Public Accounting Firm (see page 494)529) | | | | Financial Statement Schedules are listed in the Index to Financial Statement Schedules (see page S-1) | | | | | (a)3. | Exhibits | | | | Exhibits for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Exhibit Index (see page E-1). Each management contract or compensatory plan or arrangement required to be filed as an exhibit hereto is identified as such by footnote in the Exhibit Index. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY CORPORATION | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 27, 201226, 2015 |
J. Wayne LeonardLeo P. Denault (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Leo P. DenaultAndrew S. Marsh (Executive Vice President and Chief Financial Officer; Principal Financial Officer); Maureen S. Bateman, Kirkland H. Donald, Gary W. Edwards, Alexis M. Herman, Donald C. Hintz, Stuart L. Levenick, Blanche L. Lincoln, Stewart C. Myers, William A. Percy, II, W. J. Tauzin, and Steven V. Wilkinson (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY ARKANSAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY ARKANSAS, INC. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
Hugh T. McDonald (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY GULF STATES LOUISIANA, L.L.C.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY GULF STATES LOUISIANA, L.L.C. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
William M. MohlPhillip R. May, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY LOUISIANA, LLC
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY LOUISIANA, LLC | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
William M. MohlPhillip R. May, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY MISSISSIPPI, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY MISSISSIPPI, INC. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
Haley R. Fisackerly (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY NEW ORLEANS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY NEW ORLEANS, INC. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
Charles L. Rice, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
ENTERGY TEXAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | ENTERGY TEXAS, INC. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer)
| February 27, 201226, 2015 |
Joseph F. Domino (ChairmanSallie T. Rainer (Chair of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault,Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Theodore H. Bunting, Jr. and Mark T. Savoff and Gary J. Taylor (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
SYSTEM ENERGY RESOURCES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
| | | | SYSTEM ENERGY RESOURCES, INC. | | | | By /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.
| | Alyson M. Mount | | Senior Vice President and Chief Accounting Officer | | | | Date: February 27, 201226, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
| | | | | Signature | Title | Date | | | | | | | | /s/ Theodore H. Bunting, Jr.Alyson M. Mount Theodore H. Bunting, Jr.Alyson M. Mount
| Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 27, 201226, 2015 |
John T. HerronTheodore H. Bunting, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Wanda C. Curry (ViceAndrew S. Marsh (Executive Vice President, Chief Financial Officer, - Nuclear Operations;and Director; Principal Financial Officer); Leo P. DenaultJeffrey S. Forbes and Steven C. McNeal (Directors).
| | | By: /s/ Theodore H. Bunting, Jr.Alyson M. Mount (Theodore H. Bunting, Jr., Attorney-in-fact)
| February 27, 201226, 2015 | | (Alyson M. Mount, Attorney-in-fact) | |
| CONSENTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
We consent to the incorporation by reference in Post-Effective Amendments Nos. 1 and 2Registration Statement No. 333-190911 on Form S-3 and their related prospectus to Registration Statement No. 333-169315, Post -Effective Amendments Nos. 3 and 5A on Form S-8 and their related prospectuses to Registration Statement No. 33-54298 on Form S-4, and in Registration Statements Nos. 333-55692, 333-68950, 333-75097, 333-90914, 333-98179, 333-140183, 333-142055, 333-168664, 333-174148, and 333-174148333-183090 on Form S-8 of our reports dated February 27, 2012,26, 2015, relating to the consolidated financial statements and financial statement schedule of Entergy Corporation and Subsidiaries, and the effectiveness of Entergy Corporation and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Corporation and Subsidiaries for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment Nos. 1 and 2 on Form S-3, and their related prospectus to Registration Statement No. 333-169315-03333-190911-02 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the consolidated financial statements and financial statement schedule of Entergy Arkansas, Inc. and Subsidiaries and the effectiveness of Entergy Arkansas, Inc. and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Arkansas, Inc. and Subsidiaries for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment Nos. 1 and 2 on Form S-3 and their related prospectus to Registration Statement No. 333-169315-02333-190911-07 on Form S-3 of our reports dated February 27, 2012 relating to the financial statements and financial statement schedule of Entergy Gulf States Louisiana, L.L.C., and the effectiveness of Entergy Gulf States Louisiana, L.L.C.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Gulf States Louisiana, L.L.C. for the year ended December 31, 2011.
We consent to the incorporation by reference in Post-Effective Amendment Nos. 1 and 2 on Form S-3 and their related prospectus to Registration Statement No. 333-169315-01 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the consolidated financial statements and financial statement schedule of Entergy Louisiana, LLC and Subsidiaries and the effectiveness of Entergy Louisiana, LLC and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K10‑K of Entergy Louisiana, LLC and Subsidiaries for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment No. 2 on Form S-3 and its related prospectus to Registration Statement No. 333-169315-07333-190911-06 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the financial statements and financial statement schedule of Entergy Mississippi, Inc., and the effectiveness of Entergy Mississippi, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Mississippi, Inc. for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment No. 2 on Form S-3 and its related prospectus to Registration Statement No. 333-169315-06333-190911-05 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the financial statements and financial statement schedule of Entergy New Orleans, Inc., and the effectiveness of Entergy New Orleans, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy New Orleans, Inc. for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment No. 2 on Form S-3 and its related prospectus to Registration Statement No. 333-169315-05333-190911-04 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the consolidated financial statements and financial statement schedule of Entergy Texas, Inc. and Subsidiaries and the effectiveness of Entergy Texas, Inc. and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Texas, Inc. and Subsidiaries for the year ended December 31, 2011.2014.
We consent to the incorporation by reference in Post-Effective Amendment No. 2 on Form S-3 and its related prospectus to Registration Statement No. 333-169315-04333-190911-03 on Form S-3 of our reports dated February 27, 2012,26, 2015, relating to the financial statements of System Energy Resources, Inc., and the effectiveness of System Energy Resources, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of System Energy Resources, Inc. for the year ended December 31, 2011.2014.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana February 27, 2012
26, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Entergy Corporation and Subsidiaries
We have audited the consolidated financial statements of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2014 and 2013, and for each of the three years in the period ended December 31, 2014, and the Corporation’s internal control over financial reporting as of December 31, 2014, and have issued our reports thereon dated February 26, 2015; such consolidated financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the consolidated financial statement schedules of the Corporation listed in Item 15. These consolidated financial statement schedules are the responsibility of the Corporation’s management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana February 26, 2015
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Entergy Arkansas, Inc. and Subsidiaries Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc. and Subsidiaries
To the Board of Directors and Members of Entergy Gulf States Louisiana, L.L.C. Entergy Louisiana, LLC and Subsidiaries
We have audited the consolidated financial statements of Entergy Corporation and Subsidiaries, Entergy Arkansas, Inc. and Subsidiaries, Entergy Louisiana, LLC and Subsidiaries, and Entergy Texas, Inc. and Subsidiaries, and we have also audited the financial statements of Entergy Gulf States Louisiana, L.L.C., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. (collectively the “Companies”) as of December 31, 20112014 and 2010,2013, and for each of the three years in the period ended December 31, 2011, and the respective Companies’ internal control over financial reporting as of December 31, 2011,2014, and have issued our reports thereon dated February 27, 2012;26, 2015; such financial statements and reports are included elsewhere in this Form 10-K. Our audits also included the financial statement schedules of the respective Companies listed in Item 15. These financial statement schedules are the responsibility of the respective Companies’ management.managements. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana February 27, 201226, 2015
INDEX TO FINANCIAL STATEMENT SCHEDULES
| | | | | Schedule | | Page | | | | | | II | Valuation and Qualifying Accounts 2011, 20102014, 2013, and 2009:2012: | | | | Entergy Corporation and Subsidiaries | | | | Entergy Arkansas, Inc. and Subsidiaries | | | | Entergy Gulf States Louisiana, L.L.C. | | | | Entergy Louisiana, LLC and Subsidiaries | | | | Entergy Mississippi, Inc. | | | | Entergy New Orleans, Inc. | | | | Entergy Texas, Inc. and Subsidiaries | |
Schedules other than those listed above are omitted because they are not required, not applicable, or the required information is shown in the financial statements or notes thereto.
Columns have been omitted from schedules filed because the information is not applicable.
| | | | | | | | | | | | | | | | | | | ENTERGY CORPORATION AND SUBSIDIARIES | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $34,311 |
| |
| $4,573 |
| |
| $3,221 |
| |
| $35,663 |
| | 2013 | |
| $31,956 |
| |
| $2,355 |
| |
| $— |
| |
| $34,311 |
| | 2012 | |
| $31,159 |
| |
| $2,448 |
| |
| $1,651 |
| |
| $31,956 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $30,113 |
| |
| $2,881 |
| |
| $747 |
| |
| $32,247 |
| | 2013 | |
| $28,343 |
| |
| $1,770 |
| |
| $— |
| |
| $30,113 |
| | 2012 | |
| $26,155 |
| |
| $2,188 |
| |
| $— |
| |
| $28,343 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY GULF STATES LOUISIANA, L.L.C. | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $909 |
| |
| $326 |
| |
| $610 |
| |
| $625 |
| | 2013 | |
| $711 |
| |
| $198 |
| |
| $— |
| |
| $909 |
| | 2012 | |
| $843 |
| |
| $123 |
| |
| $255 |
| |
| $711 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $965 |
| |
| $516 |
| |
| $497 |
| |
| $984 |
| | 2013 | |
| $867 |
| |
| $98 |
| |
| $— |
| |
| $965 |
| | 2012 | |
| $1,147 |
| |
| $121 |
| |
| $401 |
| |
| $867 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY MISSISSIPPI, INC. | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $906 |
| |
| $269 |
| |
| $302 |
| |
| $873 |
| | 2013 | |
| $910 |
| |
| ($4 | ) | |
| $— |
| |
| $906 |
| | 2012 | |
| $756 |
| |
| $154 |
| |
| $— |
| |
| $910 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY NEW ORLEANS, INC. | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $974 |
| |
| $99 |
| |
| $811 |
| |
| $262 |
| | 2013 | |
| $446 |
| |
| $528 |
| |
| $— |
| |
| $974 |
| | 2012 | |
| $465 |
| |
| $12 |
| |
| $31 |
| |
| $446 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| | | | | | | | | | | | | | | | | | | ENTERGY TEXAS, INC. AND SUBSIDIARIES | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | For the Years Ended December 31, 2014, 2013, and 2012 | | (In Thousands) | | Column A | | Column B | | Column C | | Column D | | Column E | | | | | | | | Other | | | | | | Balance at | | Additions | | Changes | | Balance | | Description | | Beginning of Period | | Charged to Income | | Deductions (1) | | at End of Period | | Allowance for doubtful accounts | | | | | | | | | | 2014 | |
| $443 |
| |
| $483 |
| |
| $254 |
| |
| $672 |
| | 2013 | |
| $680 |
| |
| ($237 | ) | |
| $— |
| |
| $443 |
| | 2012 | |
| $1,461 |
| |
| ($21 | ) | |
| $760 |
| |
| $680 |
| | Notes: | | |
| | |
| | |
| | |
| | (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off. |
| ENTERGY CORPORATION AND SUBSIDIARIES | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 31,777 | | | $ | 512 | | | $ | 1,130 | | | $ | 31,159 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 395,250 | | | $ | 46,792 | | | $ | 56,530 | | | $ | 385,512 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 27,631 | | | $ | 1,569 | | | $ | (2,577 | ) | | $ | 31,777 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 141,315 | | | $ | 333,371 | | | $ | 79,436 | | | $ | 395,250 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 25,610 | | | $ | 2,021 | | | $ | - | | | $ | 27,631 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 147,452 | | | $ | 52,050 | | | $ | 58,187 | | | $ | 141,315 | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 24,402 | | | $ | 1,753 | | | $ | - | | | $ | 26,155 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 7,970 | | | $ | 19,424 | | | $ | 21,754 | | | $ | 5,640 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 21,853 | | | $ | 2,549 | | | $ | - | | | $ | 24,402 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 13,217 | | | $ | 21,088 | | | $ | 26,335 | | | $ | 7,970 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 19,882 | | | $ | 1,971 | | | $ | - | | | $ | 21,853 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 15,925 | | | $ | 17,076 | | | $ | 19,784 | | | $ | 13,217 | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY GULF STATES LOUISIANA, L.L.C. | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,306 | | | $ | (235 | ) | | $ | 228 | | | $ | 843 | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Not Deducted from Assets (2) | | $ | 97,680 | | | $ | 10,098 | | | $ | 8,745 | | | $ | 99,033 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,235 | | | $ | (413 | ) | | $ | (484 | ) | | $ | 1,306 | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Not Deducted from Assets (2) | | $ | 14,669 | | | $ | 92,647 | | | $ | 9,636 | | | $ | 97,680 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,230 | | | $ | 5 | | | $ | - | | | $ | 1,235 | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Not Deducted from Assets (3) | | $ | 13,896 | | | $ | 7,660 | | | $ | 6,887 | | | $ | 14,669 | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | | | | | | | | | | | | | | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,961 | | | $ | (453 | ) | | $ | 361 | | | $ | 1,147 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 223,556 | | | $ | 6,014 | | | $ | 16,510 | | | $ | 213,060 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,312 | | | $ | (112 | ) | | $ | (761 | ) | | $ | 1,961 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 20,301 | | | $ | 206,832 | | | $ | 3,577 | | | $ | 223,556 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,698 | | | $ | (386 | ) | | $ | - | | | $ | 1,312 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 19,916 | | | $ | 7,851 | | | $ | 7,466 | | | $ | 20,301 | | | | | | | | | | | | | | | | | | | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 985 | | | $ | (229 | ) | | $ | - | | | $ | 756 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 39,466 | | | $ | 645 | | | $ | 1,822 | | | $ | 38,289 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,018 | | | $ | (33 | ) | | $ | - | | | $ | 985 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 41,403 | | | $ | 3,176 | | | $ | 5,113 | | | $ | 39,466 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 687 | | | $ | 331 | | | $ | - | | | $ | 1,018 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 36,957 | | | $ | 11,411 | | | $ | 6,965 | | | $ | 41,403 | | | | | | | | | | | | | | | | | | | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 734 | | | $ | (241 | ) | | $ | 28 | | | $ | 465 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 11,206 | | | $ | 9,203 | | | $ | 4,566 | | | $ | 15,843 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,166 | | | $ | (491 | ) | | $ | (59 | ) | | $ | 734 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 15,991 | | | $ | 7,766 | | | $ | 12,551 | | | $ | 11,206 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,112 | | | $ | 54 | | | $ | - | | | $ | 1,166 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 10,609 | | | $ | 2,187 | | | $ | (3,195 | ) | | $ | 15,991 | | | | | | | | | | | | | | | | | | | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES | | | | | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | | Years Ended December 31, 2011, 2010, and 2009 | | | (In Thousands) | | | | | | | | | | | | | | | | | Column A | | Column B | | | Column C | | | Column D | | | Column E | | | | | | | | | | | Other | | | | | | | | | | | Additions | | | Changes | | | | | | | | | | | | | | Deductions | | | | | | | | Balance at | | | | | | from | | | Balance | | | | | Beginning | | | Charged to Income | | | Provisions | | | at End | | | Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | | | Year ended December 31, 2011 | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 2,185 | | | $ | (212 | ) | | $ | 512 | | | $ | 1,461 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 5,320 | | | $ | 2,321 | | | $ | 2,617 | | | $ | 5,024 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2010 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 844 | | | $ | 69 | | | $ | (1,272 | ) | | $ | 2,185 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (2) | | $ | 8,710 | | | $ | 1,629 | | | $ | 5,019 | | | $ | 5,320 | | | | | | | | | | | | | | | | | | | | | Year ended December 31, 2009 | | | | | | | | | | | | | | | | | | Accumulated Provisions | | | | | | | | | | | | | | | | | | Deducted from Assets-- | | | | | | | | | | | | | | | | | | Doubtful Accounts | | $ | 1,001 | | | $ | (157 | ) | | $ | - | | | $ | 844 | | | Accumulated Provisions Not | | | | | | | | | | | | | | | | | | Deducted from Assets (3) | | $ | 12,936 | | | $ | 4,944 | | | $ | 9,170 | | | $ | 8,710 | | | | | | | | | | | | | | | | | | | | | ___________ | | | | | | | | | | | | | | | | | | Notes: | | | | | | | | | | | | | | | | | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | | created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | | of amounts previously written off. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages | | | and environmental items. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, | | | and pension related items. | | | | | | | | | | | | | | | | |
The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC as the exhibits and in the file numbers indicated and are incorporated herein by reference. The exhibits marked with a (+) are management contracts or compensatory plans or arrangements required to be filed herewith and required to be identified as such by Item 15 of Form 10-K.
Some of the agreements included or incorporated by reference as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from the standard of “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
Entergy acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading.
| (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession |
Entergy Gulf States Louisiana
(a) 1 -- | Merger Agreement, dated as of December 4, 2011, among Entergy Corporation, Mid South TransCo LLC, ITC Holdings Corp. and Ibis Transaction Subsidiary LLC (2.1 to Form 8-K filed December 6, 2011 in 1-11299). | | | (a) 2 -- | Separation Agreement, dated as of December 4, 2011, among Entergy Corporation, ITC Holdings Corp., Mid South TransCo LLC, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and Entergy Services, Inc. (2.2 to Form 8-K filed December 6, 2011 in 1-11299). |
Entergy Gulf States Louisiana |
| (b) 1 -- | Plan of Merger of Entergy Gulf States, Inc. effective December 31, 2007 (2(ii) to Form 8-K15D5 filed January 7, 2008 in 333-148557). | | | (b) 2 -- | Separation Agreement, dated as of December 4, 2011, among Entergy Corporation, ITC Holdings Corp., Mid South TransCo LLC, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and Entergy Services, Inc. (2.2 to Form 8-K filed December 6, 2011 in 1-11299). |
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
(c) 1 -- | Separation Agreement, dated as of December 4, 2011, among Entergy Corporation, ITC Holdings Corp., Mid South TransCo LLC, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and Entergy Services, Inc. (2.2 to Form 8-K filed December 6, 2011 in 1-11299). |
| (3) Articles of Incorporation and By-laws |
Entergy Corporation | | | | (a) 1 -- | Restated Certificate of Incorporation of Entergy Corporation dated October 10, 2006 (3(a) to Form 10-Q for the quarter ended September 30, 2006). | | | | | (a) 2 -- | By-Laws of Entergy Corporation as amended February 12, 2007, and as presently in effect (3(ii) to Form 8-K filed February 16, 2007 in 1-11299). |
System Energy
| | | (b) 1 -- | Amended and Restated Articles of Incorporation of System Energy and amendments thereto through April 28, 1989 (A-1(a) to Form U-1 in 70-5399). | | | | | (b) 2 -- | By-Laws of System Energy effective July 6, 1998, and as presently in effect (3(f) to Form 10-Q for the quarter ended June 30, 1998 in 1-9067). |
Entergy Arkansas
| | | (c) 1 -- | Articles of Amendment and Restatement for the Second Amended and Restated Articles of Incorporation of Entergy Arkansas, effective August 19, 2009 (3 to Form 8-K filed August 24, 2009 in 1-10764). | | | | | (c) 2 -- | By-Laws of Entergy Arkansas effective November 26, 1999, and as presently in effect (3(ii)(c) to Form 10-K for the year ended December 31, 1999 in 1-10764). |
Entergy Gulf States Louisiana Entergy Gulf States Louisiana |
| | | (d) 1 -- | Articles of Organization of Entergy Gulf States Louisiana effective December 31, 2007 (3(i) to Form 8-K15D5 filed January 7, 2008 in 333-148557). | | | | | (d) 2 -- | Operating Agreement of Entergy Gulf States Louisiana, effective as of December 31, 2007 (3(ii) to Form 8-K15D5 filed January 7, 2008 in 333-148557). |
Entergy Louisiana
| | | (e) 1 -- | Articles of Organization of Entergy Louisiana effective December 31, 2005 (3(c) to Form 8-K filed January 6, 2006 in 1-32718). | | | | | (e) 2 -- | Regulations of Entergy Louisiana effective December 31, 2005, and as presently in effect (3(d) to Form 8-K filed January 6, 2006 in 1-32718). |
Entergy Mississippi
| | | (f) 1 -- | Second Amended and Restated Articles of Incorporation of Entergy Mississippi, effective July 21, 2009 (99.1 to Form 8-K filed July 27, 2009 in 1-31508). | | | | | (f) 2 -- | By-Laws of Entergy Mississippi effective November 26, 1999, and as presently in effect (3(ii)(f) to Form 10-K for the year ended December 31, 1999 in 0-320). |
Entergy New Orleans
| | | (g) 1 -- | Amended and Restated Articles of Incorporation of Entergy New Orleans, effective May 8, 2007 (3(a) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). | | | | | (g) 2 -- | Amended By-Laws of Entergy New Orleans effective May 8, 2007, and as presently in effect (3(b) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). |
Entergy Texas
| | | (h) 1 -- | Certificate of Formation of Entergy Texas, effective December 31, 2007 (3(i) to Form 10 filed March 14, 2008 in 000-53134). | | | | | (h) 2 -- | Bylaws of Entergy Texas effective December 31, 2007 (3(ii) to Form 10 filed March 14, 2008 in 000-53134). |
(4) | Instruments Defining Rights of Security Holders, Including Indentures |
E-2
(4)Instruments Defining Rights of Security Holders, Including Indentures
Entergy Corporation
| | | (a) 1 -- | See (4)(b) through (4)(h) below for instruments defining the rights of holders of long-term debt of System Energy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. | | | | | (a) 2 -- | Credit Agreement ($3,500,000,000), dated as of August 2, 2007,March 9, 2012, among Entergy Corporation, as borrower, the Banks named therein (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), J. P. MorganJPMorgan Chase Bank, N.A., KeyBankWells Fargo Bank, National Association, Lehman Brothers Bank (FSB), Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, Regions Bank, Societe Generale, The Bank of New York, The Bank of Nova Scotia, The Bank of Toyko-MitsubishiTokyo-Mitsubishi UFJ, Ltd. (New York Branch), Union Bank, N.A., Barclays Bank PLC, Goldman Sachs Bank USA, KeyBank National Association, Morgan Stanley Bank, N.A., The Royal Bank of Scotland plc, UnionBNP Paribas, Bank of California, N.A., Wachoviathe West, The Bank of New York Mellon, CoBank, ACB, Deutsche Bank AG New York Branch, Regions Bank, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association, SunTrust Bank, National Cooperative Services Corporation, and William Street Commitment Corporation)The Northern Trust Company), Citibank, N.A., as Administrative Agent and LC Issuing Bank, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and ABN AMROUnion Bank, N.V.N.A., as LC Issuing Bank (10(a)Banks, and the other LC Issuing Banks from time to time parties thereto (4.1 to Form 10-Q for the quarter ended June 30, 20078-K filed March 14, 2012 in 1-11299). | | | | | *(a) 3 -- | Extension Agreement, dated as of March 1, 2013, to Credit Agreement. | | | | *(a) 4 -- | Extension Agreement, dated as of March 14, 2014, to Credit Agreement. | | | | (a) 5 -- | Indenture (For Unsecured Debt Securities), dated as of September 1, 2010, between Entergy Corporation and Wells Fargo Bank, National Association (4.01 to Form 8-K filed September 16, 2010 in 1-11299). | | | | (a) 46 -- | Officer’s Certificate for Entergy Corporation relating to 3.625% Senior Notes due September 15, 2015 (4.02(a) to Form 8-K filed September 16, 2010 in 1-11299). | | | | (a) 57 -- | Officer’s Certificate for Entergy Corporation relating to 5.125% Senior Notes due September 15, 2020 (4.02(b) to Form 8-K filed September 16, 2010 in 1-11299). | | | | (a) 68 -- | Officer’s Certificate for Entergy Corporation relating to 4.70% Senior Notes due January 15, 2017 (4.02 to Form 8-K filed January 13, 2012 in 1-11299). |
System Energy | | | (a) 9 -- | Officer’s Certificate for Entergy Corporation relating to 4.50% Senior Note due December 16, 2028 (4(a)7 to Form 10-K for the year ended December 31, 2013 in 1-11299). |
System Energy | | | | (b) 1 -- | Mortgage and Deed of Trust, dated as of June 15, 1977, as amended by twenty-threetwenty-four Supplemental Indentures (A-1 in 70-5890 (Mortgage); B and C to Rule 24 Certificate in 70-5890 (First); B to Rule 24 Certificate in 70-6259 (Second); 20(a)-5 to Form 10-Q for the quarter ended June 30, 1981 in 1-3517 (Third); A-1(e)-1 to Rule 24 Certificate in 70-6985 (Fourth); B to Rule 24 Certificate in 70-7021 (Fifth); B to Rule 24 Certificate in 70-7021 (Sixth); A-3(b) to Rule 24 Certificate in 70-7026 (Seventh); A-3(b) to Rule 24 Certificate in 70-7158 (Eighth); B to Rule 24 Certificate in 70-7123 (Ninth); B-1 to Rule 24 Certificate in 70-7272 (Tenth); B-2 to Rule 24 Certificate in 70-7272 (Eleventh); B-3 to Rule 24 Certificate in 70-7272 (Twelfth); B-1 to Rule 24 Certificate in 70-7382 (Thirteenth); B-2 to Rule 24 Certificate in 70-7382 (Fourteenth); A-2(c) to Rule 24 Certificate in 70-7946 (Fifteenth); A-2(c) to Rule 24 Certificate in 70-7946 (Sixteenth); A-2(d) to Rule 24 Certificate in 70-7946 (Seventeenth); A-2(e) to Rule 24 Certificate dated May 4, 1993 in 70-7946 (Eighteenth); A-2(g) to Rule 24 Certificate dated May 6, 1994 in 70-7946 (Nineteenth); A-2(a)(1) to Rule 24 Certificate dated August 8, 1996 in 70-8511 (Twentieth); A-2(a)(2) to Rule 24 Certificate dated August 8, 1996 in 70-8511 (Twenty-first); A-2(a) to Rule 24 Certificate filed October 4, 2002 in 70-9753 (Twenty-second); and 4(b) to Form 10-Q for the quarter ended September 30, 2007 in 1-9067 (Twenty-third); and 4.42 to Form 8-K dated September 25, 2012 in 1-9067 (Twenty-fourth)). |
| | | | (b) 2 -- | Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Steven Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-3(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). | | | | | (b) 3 -- | Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Steven Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-4(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
Entergy Arkansas
| | | (c) 1 -- | Mortgage and Deed of Trust, dated as of October 1, 1944, as amended by seventyseventy-seven Supplemental Indentures (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121 (First); 7(c) in 2-7605 (Second); 7(d) in 2-8100 (Third); 7(a)-4 in 2-8482 (Fourth); 7(a)-5 in 2-9149 (Fifth); 4(a)-6 in 2-9789 (Sixth); 4(a)-7 in 2-10261 (Seventh); 4(a)-8 in 2-11043 (Eighth); 2(b)-9 in 2-11468 (Ninth); 2(b)-10 in 2-15767 (Tenth); D in 70-3952 (Eleventh); D in 70-4099 (Twelfth); 4(d) in 2-23185 (Thirteenth); 2(c) in 2-24414 (Fourteenth); 2(c) in 2-25913 (Fifteenth); 2(c) in 2-28869 (Sixteenth); 2(d) in 2-28869 (Seventeenth); 2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646 (Nineteenth); 2(c) in 2-39253 (Twentieth); 2(c) in 2-41080 (Twenty-first); C-1 to Rule 24 Certificate in 70-5151 (Twenty-second); C-1 to Rule 24 Certificate in 70-5257 (Twenty-third); C to Rule 24 Certificate in 70-5343 (Twenty-fourth); C-1 to Rule 24 Certificate in 70-5404 (Twenty-fifth); C to Rule 24 Certificate in 70-5502 (Twenty-sixth); C-1 to Rule 24 Certificate in 70-5556 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-5693 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6078 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6174 (Thirtieth); C-1 to Rule 24 Certificate in 70-6246 (Thirty-first); C-1 to Rule 24 Certificate in 70-6498 (Thirty-second); A-4b-2 to Rule 24 Certificate in 70-6326 (Thirty-third); C-1 to Rule 24 Certificate in 70-6607 (Thirty-fourth); C-1 to Rule 24 Certificate in 70-6650 (Thirty-fifth); C-1 to Rule 24 Certificate dated December 1, 1982 in 70-6774 (Thirty-sixth); C-1 to Rule 24 Certificate dated February 17, 1983 in 70-6774 (Thirty-seventh); A-2(a) to Rule 24 Certificate dated December 5, 1984 in 70-6858 (Thirty-eighth); A-3(a) to Rule 24 Certificate in 70-7127 (Thirty-ninth); A-7 to Rule 24 Certificate in 70-7068 (Fortieth); A-8(b) to Rule 24 Certificate dated July 6, 1989 in 70-7346 (Forty-first); A-8(c) to Rule 24 Certificate dated February 1, 1990 in 70-7346 (Forty-second); 4 to Form 10-Q for the quarter ended September 30, 1990 in 1-10764 (Forty-third); A-2(a) to Rule 24 Certificate dated November 30, 1990 in 70-7802 (Forty-fourth); A-2(b) to Rule 24 Certificate dated January 24, 1991 in 70-7802 (Forty-fifth); 4(d)(2) in 33-54298 (Forty-sixth); 4(c)(2) to Form 10-K for the year ended December 31, 1992 in 1-10764 (Forty-seventh); 4(b) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-eighth); 4(c) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-ninth); 4(b) to Form 10-Q for the quarter ended September 30, 1993 in 1-10764 (Fiftieth); 4(c) to Form 10-Q for the quarter ended September 30, 1993 in 1-10764 (Fifty-first); 4(a) to Form 10-Q for the quarter ended June 30, 1994 in 1-10764 (Fifty-second); C-2 to Form U5S for the year ended December 31, 1995 (Fifty-third); C-2(a) to Form U5S for the year ended December 31, 1996 (Fifty-fourth); 4(a) to Form 10-Q for the quarter ended March 31, 2000 in 1-10764 (Fifty-fifth); 4(a) to Form 10-Q for the quarter ended September 30, 2001 in 1-10764 (Fifty-sixth); C-2(a) to Form U5S for the year ended December 31, 2001 (Fifty-seventh); 4(c)1 to Form 10-K for the year December 31, 2002 in 1-10764 (Fifty-eighth); 4(a) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Fifty-ninth); 4(f) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Sixtieth); 4(h) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Sixty-first); 4(e) to Form 10-Q for the quarter ended September 30, 2004 in 1-10764 (Sixty-second); 4(c)1 to Form 10-K for the year December 31, 2004 in 1-10764 (Sixty-third); C-2(a) to Form U5S for the year ended December 31, 2004 (Sixty-fourth); 4(c) to Form 10-Q for the quarter ended June 30, 2005 in 1-10764 (Sixty-fifth); 4(a) to Form 10-Q for the quarter ended June 30, 2006 in 1-10764 (Sixty-sixth); 4(b) to Form 10-Q for the quarter ended June 30, 2008 in 1-10764 (Sixty-seventh); 4(c)1 to Form 10-K for the year ended December 31, 2008 in 1-10764 (Sixty-eighth); 4.06 to Form 8-K dated October 8, 2010 in 1-10764 (Sixty-ninth); and 4.06 to Form 8-K dated November 12, 2010 in 1-10764 (Seventieth); 4.06 to Form 8-K dated December 13, 2012 in 1-10764 (Seventy-first); 4(e) to Form 8-K dated January 9, 2013 in 1-10764 (Seventy-second); 4.06 to Form 8-K dated May 30, 2013 in 1-10764 (Seventy-third); 4.06 to Form 8-K dated June 4, 2013 in 1-10764 (Seventy-fourth); 4.02 to Form 8-K dated July 26, 2013 in 1-10764 (Seventy-fifth); 4.05 to Form 8-K dated March 14, 2014 in 1-10764 (Seventy-sixth); and 4.05 to Form 8-K dated December 9, 2014 in 1-10764 (Seventy-Seventh)). | | | | (c) 2 -- | Credit Agreement ($150,000,000), dated as of March 9, 2012, among Entergy Arkansas, Inc., as borrower, the Banks named therein (Citibank, N.A., JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Union Bank, N.A., Barclays Bank PLC, Goldman Sachs Bank USA, KeyBank National Association, Morgan Stanley Bank, N.A., The Royal Bank of Scotland plc, BNP Paribas, The Bank of New York Mellon, CoBank, ACB, Deutsche Bank AG New York Branch, Regions Bank, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association, SunTrust Bank, and National Cooperative Services Corporation), Citibank, N.A., as Administrative Agent and LC Issuing Bank, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Union Bank, N.A., as LC Issuing Banks, and the other LC Issuing Banks from time to time parties thereto (4.2 to Form 8-K filed March 14, 2012 in 1-10764). | | | | *(c) 3 -- | Extension Agreement, dated as of March 1, 2013, to Credit Agreement. | | | | *(c) 4 -- | Extension Agreement, dated as of March 14, 2014, to Credit Agreement. |
Entergy Gulf States Louisiana Entergy Gulf States Louisiana |
| | | (d) 1 -- | Indenture of Mortgage, dated September 1, 1926, as amended by certain Supplemental Indentures (B-a-I-1 in Registration No. 2-2449 (Mortgage); 7-A-9 in Registration No. 2-6893 (Seventh); B to Form 8-K dated September 1, 1959 (Eighteenth); B to Form 8-K dated February 1, 1966 (Twenty-second); B to Form 8-K dated March 1, 1967 (Twenty-third); C to Form 8-K dated March 1, 1968 (Twenty-fourth); B to Form 8-K dated November 1, 1968 (Twenty-fifth); B to Form 8-K dated April 1, 1969 (Twenty-sixth); 2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4-2 to Form 10-K for the year ended December 31, 1984 in 1-27031 (Forty-eighth); 4-2 to Form 10-K for the year ended December 31, 1988 in 1-27031 (Fifty-second); 4 to Form 10-K for the year ended December 31, 1991 in 1-27031 (Fifty-third); 4 to Form 8-K dated July 29, 1992 in 1-27031 (Fifth-fourth); 4 to Form 10-K dated December 31, 1992 in 1-27031 (Fifty-fifth); 4 to Form 10-Q for the quarter ended March 31, 1993 in 1-27031 (Fifty-sixth); 4-2 to Amendment No. 9 to Registration No. 2-76551 (Fifty-seventh); 4(b) to Form 10-Q for the quarter ended March 31,1999 in 1-27031 (Fifty-eighth); A-2(a) to Rule 24 Certificate dated June 23, 2000 in 70-8721 (Fifty-ninth); A-2(a) to Rule 24 Certificate dated September 10, 2001 in 70-9751 (Sixtieth); A-2(b) to Rule 24 Certificate dated November 18, 2002 in 70-9751 (Sixty-first); A-2(c) to Rule 24 Certificate dated December 6, 2002 in 70-9751 (Sixty-second); A-2(d) to Rule 24 Certificate dated June 16, 2003 in 70-9751 (Sixty-third); A-2(e) to Rule 24 Certificate dated June 27, 2003 in 70-9751 (Sixty-fourth); A-2(f) to Rule 24 Certificate dated July 11, 2003 in 70-9751 (Sixty-fifth); A-2(g) to Rule 24 Certificate dated July 28, 2003 in 70-9751 (Sixty-sixth); A-3(i) to Rule 24 Certificate dated November 4, 2004 in 70-10158 (Sixty-seventh); A-3(ii) to Rule 24 Certificate dated November 23, 2004 in 70-10158 (Sixty-eighth); A-3(iii) to Rule 24 Certificate dated February 16, 2005 in 70-10158 (Sixty-ninth); A-3(iv) to Rule 24 Certificate dated June 2, 2005 in 70-10158 (Seventieth); A-3(v) to Rule 24 Certificate dated July 21, 2005 in 70-10158 (Seventy-first); A-3(vi) to Rule 24 Certificate dated October 7, 2005 in 70-10158 (Seventy-second); A-3(vii) to Rule 24 Certificate dated December 19, 2005 in 70-10158 (Seventy-third); 4(a) to Form 10-Q for the quarter ended March 31, 2006 in 1-27031 (Seventy-fourth); 4(iv) to Form 8-K15D5 dated January 7, 2008 in 333-148557 (Seventy-fifth); 4(a) to Form 10-Q for the quarter ended June 30, 2008 in 333-148557 (Seventy-sixth); 4(a) to Form 10-Q for the quarter ended September 30, 2009 in 0-20371 (Seventy-seventh); 4.07 to Form 8-K dated October 1, 2010 in 0-20371 (Seventy-eighth); 4(c) to Form 8-K filed October 12, 2010 in 0-20371 (Seventy-ninth); and 4(f) to Form 8-K filed October 12, 2010 in 0-20371 (Eightieth); and 4.07 to Form 8-K dated July 1, 2014 in 0-20371 (Eighty-first)). | | | | | (d) 2 -- | Indenture, dated March 21, 1939, accepting resignation of The Chase National Bank of the City of New York as trustee and appointing Central Hanover Bank and Trust Company as successor trustee (B-a-1-6 in Registration No. 2-4076). |
| | | | (d) 3 -- | Agreement of Resignation, Appointment and Acceptance, dated as of October 3, 2007, among Entergy Gulf States, Inc., JPMorgan Chase Bank, National Association, as resigning trustee, and The Bank of New York, as successor trustee (4(a) to Form 10-Q for the quarter ended September 30, 2007 in 1-27031). | | | | | (d) 4 -- | Credit Agreement ($200,000,000), dated as of August 2, 2007, among Entergy Gulf States, Inc., the Banks (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), JPMorgan Chase Bank, N.A., KeyBank National Association, Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, The Bank of New York, The Royal Bank of Scotland plc, and Wachovia Bank, National Association), Citibank, N.A., as Administrative Agent, and the LC Issuing Banks (10(c) to Form 10-Q for the quarter ended June 30, 2007 in 1-27031). | | | (d) 5 -- | Assumption Agreement, dated as of May 30, 2008, among Entergy Texas, Inc., Entergy Gulf States Louisiana, L.L.C. and Citibank, N.A., as administrative agent (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 0-53134). | | | | (d) 5 -- | Credit Agreement ($150,000,000), dated as of March 9, 2012, among Entergy Gulf States Louisiana, L.L.C., as borrower, the Banks named therein (Citibank, N.A., JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Union Bank, N.A., Barclays Bank PLC, Goldman Sachs Bank USA, KeyBank National Association, Morgan Stanley Bank, N.A., The Royal Bank of Scotland plc, BNP Paribas, The Bank of New York Mellon, CoBank, ACB, Deutsche Bank AG New York Branch, Regions Bank, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association, SunTrust Bank, and National Cooperative Services Corporation), Citibank, N.A., as Administrative Agent and LC Issuing Bank, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Union Bank, N.A., as LC Issuing Banks, and the other LC Issuing Banks from time to time parties thereto (4.3 to Form 8-K filed March 14, 2012 in 0-20371). | | | | *(d) 6 -- | Extension Agreement, dated as of March 1, 2013, to Credit Agreement. | | | | *(d) 7 -- | Extension Agreement, dated as of March 14, 2014, to Credit Agreement. |
Entergy Louisiana
| | | (e) 1 -- | Mortgage and Deed of Trust, dated as of April 1, 1944, as amended by seventy-fourseventy-eight Supplemental Indentures (7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); 7(c) in 2-8636 (Second); 4(b)-3 in 2-10412 (Third); 4(b)-4 in 2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862 (Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429 (Eighth); 4(c)-9 in 2-25801 (Ninth); 4(c)-10 in 2-26911 (Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659 (Twelfth); C to Rule 24 Certificate in 70-4793 (Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 2(b)-2 in 2-39437 (Fifteenth); 2(b)-2 in 2-42523 (Sixteenth); C to Rule 24 Certificate in 70-5242 (Seventeenth); C to Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to Rule 24 Certificate in 70-5449 (Nineteenth); C-1 to Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to Rule 24 Certificate in 70-5711 (Twenty-second); C-1 to Rule 24 Certificate in 70-5919 (Twenty-third); C-1 to Rule 24 Certificate in 70-6102 (Twenty-fourth); C-1 to Rule 24 Certificate in 70-6169 (Twenty-fifth); C-1 to Rule 24 Certificate in 70-6278 (Twenty-sixth); C-1 to Rule 24 Certificate in 70-6355 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-6508 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6556 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6635 (Thirtieth); C-1 to Rule 24 Certificate in 70-6834 (Thirty-first); C-1 to Rule 24 Certificate in 70-6886 (Thirty-second); C-1 to Rule 24 Certificate in 70-6993 (Thirty-third); C-2 to Rule 24 Certificate in 70-6993 (Thirty-fourth); C-3 to Rule 24 Certificate in 70-6993 (Thirty-fifth); A-2(a) to Rule 24 Certificate in 70-7166 (Thirty-sixth); A-2(a) in 70-7226 (Thirty-seventh); C-1 to Rule 24 Certificate in 70-7270 (Thirty-eighth); 4(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 in 1-8474 (Thirty-ninth); A-2(b) to Rule 24 Certificate in 70-7553 (Fortieth); A-2(d) to Rule 24 Certificate in 70-7553 (Forty-first); A-3(a) to Rule 24 Certificate in 70-7822 (Forty-second); A-3(b) to Rule 24 Certificate in 70-7822 (Forty-third); A-2(b) to Rule 24 Certificate in 70-7822 (Forty-fourth); A-3(c) to Rule 24 Certificate in 70-7822 (Forty-fifth); A-2(c) to Rule 24 Certificate dated April 7, 1993 in 70-7822 (Forty-sixth); A-3(d) to Rule 24 Certificate dated June 4, 1993 in 70-7822 (Forth-seventh); A-3(e) to Rule 24 Certificate dated December 21, 1993 in 70-7822 (Forty-eighth); A-3(f) to Rule 24 Certificate dated August 1, 1994 in 70-7822 (Forty-ninth); A-4(c) to Rule 24 Certificate dated September 28, 1994 in 70-7653 (Fiftieth); A-2(a) to Rule 24 Certificate dated April 4, 1996 in 70-8487 (Fifty-first); A-2(a) to Rule 24 Certificate dated April 3, 1998 in 70-9141 (Fifty-second); A-2(b) to Rule 24 Certificate dated April 9, 1999 in 70-9141 (Fifty-third); A-3(a) to Rule 24 Certificate dated July 6, 1999 in 70-9141 (Fifty-fourth); A-2(c) to Rule 24 Certificate dated June 2, 2000 in 70-9141 (Fifty-fifth); A-2(d) to Rule 24 Certificate dated April 4, 2002 in 70-9141 (Fifty-sixth); A-3(a) to Rule 24 Certificate dated March 30, 2004 in 70-10086 (Fifty-seventh); A-3(b) to Rule 24 Certificate dated October 15, 2004 in 70-10086 (Fifty-eighth); A-3(c) to Rule 24 Certificate dated October 26, 2004 in 70-10086 (Fifty-ninth); A-3(d) to Rule 24 Certificate dated May 18, 2005 in 70-10086 (Sixtieth); A-3(e) to Rule 24 Certificate dated August 25, 2005 in 70-10086 (Sixty-first); A-3(f) to Rule 24 Certificate dated October 31, 2005 in 70-10086 (Sixty-second); B-4(i) to Rule 24 Certificate dated January 10, 2006 in 70-10324 (Sixty-third); B-4(ii) to Rule 24 Certificate dated January 10, 2006 in 70-10324 (Sixty-fourth); 4(a) to Form 10-Q for the quarter ended September 30, 2008 in 1-32718 (Sixty-fifth); 4(e)1 to Form 10-K for the year ended December 31, 2009 in 1-132718 (Sixty-sixth); 4(a) to Form 10-Q for the quarter ended March 31, 2010 in 1-32718 (Sixty-seventh); 4.08 to Form 8-K dated September 24, 2010 in 1-32718 (Sixty-eighth); 4(c) to Form 8-K filed October 12, 2010 in 1-32718 (Sixty-ninth); 4.08 to Form 8-K dated November 23, 2010 in 1-32718 (Seventieth); 4.08 to Form 8-K dated March 24, 2011 in 1-32718 (Seventy-first); 4(a) to Form 10-Q for the quarter ended June 30, 2011 in 1-32718 (Seventy-second); 4.08 to Form 8-K dated December 15, 2011 in 1-32718 (Seventy-third); and 4.08 to Form 8-K dated January 12, 2012 in 1-32718 (Seventy-fourth); 4.08 to Form 8-K dated July 3, 2012 in 1-32718 (Seventy-fifth); 4.08 to Form 8-K dated December 4, 2012 in 1-32718 (Seventy-sixth); 4.08 to Form 8-K dated May 21, 2013 in 1-32718 (Seventy-seventh); 4.08 to Form 8-K dated August 23, 2013 in 1-32718 (Seventy-eighth); 4.08 to Form 8-K dated June 24, 2014 in 1-32718 (Seventy-ninth); 4.08 to Form 8-K dated July 1, 2014 in 1-32718 (Eightieth); and 4.08 to Form 8-K dated November 21, 2014 (Eighty-first)). |
| | | | (e) 2 -- | Facility Lease No. 1, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-1 in Registration No. 33-30660), as supplemented by Lease Supplement No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 1, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 2 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). | | | | | (e) 3 -- | Facility Lease No. 2, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-2 in Registration No. 33-30660), as supplemented by Lease Supplemental No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 2, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 3 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). | | | |
| | | | (e) 4 -- | Facility Lease No. 3, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-3 in Registration No. 33-30660), as supplemented by Lease Supplemental No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 3, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 4 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). | | | | | (e) 5 -- | Credit Agreement ($200,000,000), dated as of August 2, 2007,March 9, 2012, among Entergy Louisiana, LLC, as borrower, the Banks named therein (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), JPMorgan Chase Bank, N.A., KeyBankWells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Union Bank, N.A., Barclays Bank PLC, Goldman Sachs Bank USA, KeyBank National Association, Morgan Stanley Bank, The Bank of New York,N.A., The Royal Bank of Scotland plc, and WachoviaBNP Paribas, The Bank of New York Mellon, CoBank, ACB, Deutsche Bank AG New York Branch, Regions Bank, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association)Association, SunTrust Bank, and National Cooperative Services Corporation), Citibank, N.A., as Administrative Agent and theLC Issuing Bank, JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Union Bank, N.A., as LC Issuing Banks, (10(b)and the other LC Issuing Banks from time to time parties thereto (4.4 to Form 10-Q for the quarter ended June 30, 20078-K filed March 14, 2012 in 1-11299)1-32718). | | | | *(e) 6 -- | Extension Agreement, dated as of March 1, 2013, to Credit Agreement. | | | | *(e) 7 -- | Extension Agreement, dated as of March 14, 2014, to Credit Agreement. |
Entergy Mississippi
| | | (f) 1 -- | Mortgage and Deed of Trust, dated as of February 1, 1988, as amended by twenty-ninethirty-one Supplemental Indentures (A-2(a)-2 to Rule 24 Certificate in 70-7461 (Mortgage); A-2(b)-2 in 70-7461 (First); A-5(b) to Rule 24 Certificate in 70-7419 (Second); A-4(b) to Rule 24 Certificate in 70-7554 (Third); A-1(b)-1 to Rule 24 Certificate in 70-7737 (Fourth); A-2(b) to Rule 24 Certificate dated November 24, 1992 in 70-7914 (Fifth); A-2(e) to Rule 24 Certificate dated January 22, 1993 in 70-7914 (Sixth); A-2(g) to Form U-1 in 70-7914 (Seventh); A-2(i) to Rule 24 Certificate dated November 10, 1993 in 70-7914 (Eighth); A-2(j) to Rule 24 Certificate dated July 22, 1994 in 70-7914 (Ninth); (A-2(l) to Rule 24 Certificate dated April 21, 1995 in 70-7914 (Tenth); A-2(a) to Rule 24 Certificate dated June 27, 1997 in 70-8719 (Eleventh); A-2(b) to Rule 24 Certificate dated April 16, 1998 in 70-8719 (Twelfth); A-2(c) to Rule 24 Certificate dated May 12, 1999 in 70-8719 (Thirteenth); A-3(a) to Rule 24 Certificate dated June 8, 1999 in 70-8719 (Fourteenth); A-2(d) to Rule 24 Certificate dated February 24, 2000 in 70-8719 (Fifteenth); A-2(a) to Rule 24 Certificate dated February 9, 2001 in 70-9757 (Sixteenth); A-2(b) to Rule 24 Certificate dated October 31, 2002 in 70-9757 (Seventeenth); A-2(c) to Rule 24 Certificate dated December 2, 2002 in 70-9757 (Eighteenth); A-2(d) to Rule 24 Certificate dated February 6, 2003 in 70-9757 (Nineteenth); A-2(e) to Rule 24 Certificate dated April 4, 2003 in 70-9757 (Twentieth); A-2(f) to Rule 24 Certificate dated June 6, 2003 in 70-9757 (Twenty-first); A-3(a) to Rule 24 Certificate dated April 8, 2004 in 70-10157 (Twenty-second); A-3(b) to Rule 24 Certificate dated April 29, 2004 in 70-10157 (Twenty-third); A-3(c) to Rule 24 Certificate dated October 4, 2004 in 70-10157 (Twenty-fourth); A-3(d) to Rule 24 Certificate dated January 27, 2006 in 70-10157 (Twenty-fifth); 4(b) to Form 10-Q for the quarter ended June 30, 2009 in 1-31508 (Twenty-sixth); 4(b) to Form 10-Q for the quarter ended March 31, 2010 in 1-31508 (Twenty-seventh); 4.38 to Form 8-K dated April 15, 2011 in 1-31508 (Twenty-eighth); and 4.38 to Form 8-K dated May 13, 2011 in 1-31508 (Twenty-ninth); 4.38 to Form 8-K dated December 11, 2012 in 1-31508 (Thirtieth); and 4.05 to Form 8-K dated March 21, 2014 in 1-31508 (Thirty-first)). |
Entergy New Orleans | | | | (g) 1 -- | Mortgage and Deed of Trust, dated as of May 1, 1987, as amended by fifteenseventeen Supplemental Indentures (A-2(c) to Rule 24 Certificate in 70-7350 (Mortgage); A-5(b) to Rule 24 Certificate in 70-7350 (First); A-4(b) to Rule 24 Certificate in 70-7448 (Second); 4(f)4 to Form 10-K for the year ended December 31, 1992 in 0-5807 (Third); 4(a) to Form 10-Q for the quarter ended September 30, 1993 in 0-5807 (Fourth); 4(a) to Form 8-K dated April 26, 1995 in 0-5807 (Fifth); 4(a) to Form 8-K dated March 22, 1996 in 0-5807 (Sixth); 4(b) to Form 10-Q for the quarter ended June 30, 1998 in 0-5807 (Seventh); 4(d) to Form 10-Q for the quarter ended June 30, 2000 in 0-5807 (Eighth); C-5(a) to Form U5S for the year ended December 31, 2000 (Ninth); 4(b) to Form 10-Q for the quarter ended September 30, 2002 in 0-5807 (Tenth); 4(k) to Form 10-Q for the quarter ended June 30, 2003 in 0-5807 (Eleventh); 4(a) to Form 10-Q for the quarter ended September 30, 2004 in 0-5807 (Twelfth); 4(b) to Form 10-Q for the quarter ended September 30, 2004 in 0-5807 (Thirteenth); 4(e) to Form 10-Q for the quarter ended June 30, 2005 in 0-5807 (Fourteenth); and 4.02 to Form 8-K dated November 23, 2010 in 0-5807 (Fifteenth); 4.02 to Form 8-K dated November 29, 2012 in 0-5807 (Sixteenth); and 4.02 to Form 8-K dated June 21, 2013 in 0-5807 (Seventeenth)). |
Entergy Texas
| | | (h) 1 -- | Credit Agreement ($200,000,000)150,000,000), dated as of August 2, 2007,March 9, 2012, among Entergy Gulf States,Texas, Inc., as borrower, the Banks named therein (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), J. P. MorganJPMorgan Chase Bank, N.A., KeyBankWells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., Union Bank, N.A., Barclays Bank PLC, Goldman Sachs Bank USA, KeyBank National Association, Morgan Stanley Bank, The Bank of New York,N.A., The Royal Bank of Scotland plc, and WachoviaBNP Paribas, The Bank of New York Mellon, CoBank, ACB, Deutsche Bank AG New York Branch, Regions Bank, Sumitomo Mitsui Banking Corporation, U.S. Bank National Association)Association, SunTrust Bank, and National Cooperative Services Corporation), Citibank, N.A., as Administrative Agent and LC Issuing Bank, (10(c)JPMorgan Chase Bank, N.A., Wells Fargo Bank, National Association, Mizuho Corporate Bank, Ltd., The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Union Bank, N.A., as LC Issuing Banks, and the other LC Issuing Banks from time to time parties thereto (4.5 to Form 10-Q for the quarter ended June 30, 20078-K filed March 14, 2012 in 1-11299)1-34360). | | | | *(h) 2 -- | Extension Agreement, dated as of March 1, 2013, to Credit Agreement. | | | | *(h) 3 -- | Extension Agreement, dated as of March 14, 2014, to Credit Agreement. | | | | (h) 24 -- | Assumption Agreement, dated as of May 30, 2008, among Entergy Texas, Inc., Entergy Gulf States Louisiana, L.L.C. and Citibank, N.A., as administrative agent (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 0-53134). | | | | (h) 35 -- | Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(h)2 to Form 10-K for the year ended December 31, 2008 in 0-53134). | | | | (h) 46 -- | Officer’s Certificate No. 1-B-1 dated January 27, 2009, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(h)3 to Form 10-K for the year ended December 31, 2008 in 0-53134). |
| | | (h) 57 -- | Officer’s Certificate No. 2-B-2 dated May 14, 2009, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(a) to Form 10-Q for the quarter ended June 30, 2009 in 1-34360). | | | | (h) 68 -- | Officer’s Certificate No. 3-B-3 dated May 18, 2010, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(a) to Form 10-Q for the quarter ended June 30, 2010 in 1-34360). | | | | (h) 79 -- | Officer’s Certificate No. 5-B-4 dated September 7, 2011, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4.40 to Form 8-K dated September 13, 2011 in 1-34360). | | | | (h) 10 -- | Officer’s Certificate No. 7-B-5 dated May 13, 2014, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(d) to Form 10-Q for the quarter ended June 30, 2014 in 1-34360). |
(10) Material Contracts
| | | (a) 1 -- | Agreement, dated April 23, 1982, among certain System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | | (a) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-11299). | | | |
| | | | (a) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). | | | | | (a) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-41080). | | | | | (a) 5 -- | Amendment, dated April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). | | | | | (a) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(a)12 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | | *(a) 7 -- | Amendment, dated January 1, 2011,December 19, 2013, to Service Agreement with Entergy Services.Services (10(a)7 to Form 10-K for the year ended December 31, 2013 in 1-11299). | | | | | (a) 8 -- | Availability Agreement, dated June 21, 1974, among System Energy and certain other System companies (B to Rule 24 Certificate dated June 24, 1974 in 70-5399). | | | | | (a) 9 -- | First Amendment to Availability Agreement, dated as of June 30, 1977 (B to Rule 24 Certificate dated June 24, 1977 in 70-5399). | | | | | (a) 10 -- | Second Amendment to Availability Agreement, dated as of June 15, 1981 (E to Rule 24 Certificate dated July 1, 1981 in 70-6592). | | | | | (a) 11 -- | Third Amendment to Availability Agreement, dated as of June 28, 1984 (B-13(a) to Rule 24 Certificate dated July 6, 1984 in 70-6985). | | | | | (a) 12 -- | Fourth Amendment to Availability Agreement, dated as of June 1, 1989 (A to Rule 24 Certificate dated June 8, 1989 in 70-5399). | | | |
| (a) 13 -- | Thirty-fifth Assignment of Availability Agreement, Consent and Agreement, dated as of December 22, 2003, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and Union Bank of California, N.A (10(a)25 to Form 10-K for the year ended December 31, 2003 in 1-11299). | | | | | (a) 14 -- | First Amendment to Thirty-fifth Assignment of Availability Agreement, Consent and Agreement, dated as of December 17, 2004 (10(a)24 to Form 10-K for the year ended December 31, 2004 in 1-11299). | | | | | (a) 15 -- | Thirty-sixthThirty-seventh Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 2007,2012, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and The Bank of New York and Douglas J. MacInnes,Mellon, as trusteessuccessor trustee (10(a)2415 to Form 10-K for the year ended December 31, 20072012 in 1-11299). | | | | | (a) 16 -- | Capital Funds Agreement, dated June 21, 1974, between Entergy Corporation and System Energy (C to Rule 24 Certificate dated June 24, 1974 in 70-5399). | | | | | (a) 17 -- | First Amendment to Capital Funds Agreement, dated as of June 1, 1989 (B to Rule 24 Certificate dated June 8, 1989 in 70-5399). | | | | | (a) 18 -- | Thirty-fifth Supplementary Capital Funds Agreement and Assignment, dated as of December 22, 2003, among Entergy Corporation, System Energy, and Union Bank of California, N.A (10(a)38 to Form 10-K for the year ended December 31, 2003 in 1-11299). | | | | | (a) 19 -- | Thirty-sixthThirty-seventh Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 2007,2012, among Entergy Corporation, System Energy, and The Bank of New York and Douglas J. MacInnes,Mellon, as Trusteessuccessor trustee (10(a)3619 to Form 10-K for the year ended December 31, 20072012 in 1-11299). | | | |
| | | | (a) 20 -- | First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, Deposit Guaranty National Bank, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate dated June 8, 1989 in 70-7026). | | | | | (a) 21 -- | First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate dated June 8, 1989 in 70-7123). | | | | | (a) 22 -- | First Amendment to Supplementary Capital Funds Agreement and Assignment, dated as of June 1, 1989, by and between Entergy Corporation, System Energy and Chemical Bank (C to Rule 24 Certificate dated June 8, 1989 in 70-7561). | | | | | (a) 23 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | | | (a) 24 -- | Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-1(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate dated October 30, 1981 in 70-6337). | | | |
| (a) 25 -- | Operating Agreement dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337). | | | | | (a) 26 -- | Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561). | | | | | (a) 27 -- | Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561). | | | | | (a) 28 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337). | | | | | (a) 29 -- | Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (10(aaa) in 33-4033). | | | | | (a) 30 -- | Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K dated June 4, 1982 in 1-3517). | | | | | (a) 31 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | | (a) 32 -- | First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | | | (a) 33 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | | (a) 34 -- | Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). | | | | | (a) 35 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). | | | |
| | | | (a) 36 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). | | | | | (a) 37 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | | (a) 38 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | | | (a) 39 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299). | | | |
| (a) 40 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-11299). | | | | | (a) 41 -- | Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). | | | | | (a) 42 -- | Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). | | | | | (a) 43 -- | Guarantee Agreement between Entergy Corporation and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate dated September 27, 1990 in 70- 7757). | | | | | (a) 44 -- | Loan Agreement between Entergy Operations and Entergy Corporation, dated as of September 20, 1990 (B-12(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). | | | | | (a) 45 -- | Loan Agreement between Entergy Corporation and Entergy Systems and Service, Inc., dated as of December 29, 1992 (A-4(b) to Rule 24 Certificate in 70-7947). | | | | | +(a) 46 -- | 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Effective for Grants and Elections On or After January 1, 2007) (Appendix B to Entergy Corporation’s Definitive Proxy Statement filed on March 24, 2006 in 1-11299). | | | | | +(a) 47 -- | First Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective October 26, 2006 (10(a)50 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | | +(a) 48 -- | Second Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective January 1, 2009 (10(a)51 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | | +(a) 49 -- | Third Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective December 30, 2010 (10(a)52 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | | +(a) 50 -- | Amended and Restated 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries (Effective for Grants and Elections After February 13, 2003) (10(a) to Form 10-Q for the quarter ended March 31, 2003 in 1-11299). | | | | | +(a) 51 -- | First Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective January 1, 2005 (10(a)54 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | |
| | | | +(a) 52 -- | Second Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective October 26, 2006 (10(a)55 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | | +(a) 53 -- | Third Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective January 1, 2009 (10(a)56 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | |
| +(a) 54 -- | 2011 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Annex A to Entergy Corporation’s Definitive Proxy Statement filed on March 24, 2011 in 1-11299). | | | | | +(a) 55 -- | Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2009 (10(a)57 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | | +(a) 56 -- | First Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)58 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | *+(a) 57 -- | Second Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011.2011 (10(a)57 to Form 10-K for the year ended December 31, 2011 in 1-11299). | | | | | +(a) 58 -- | Third Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 25, 2013 (10(b) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). | | | | +(a) 59 -- | Fourth Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014 (10(c) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). | | | | +(a) 60 -- | Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2009 (10(a)59 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 5961 -- | First Amendment of the Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)60 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | *+(a) 6062 -- | Second Amendment of the Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011.2011 (10(a)60 to Form 10-K for the year ended December 31, 2011 in 1-11299). | | | | +(a) 6163 -- | Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)74 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | | +(a) 6264 -- | Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2009 (10(a)62 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 6365 -- | First Amendment of the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)63 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | *+(a) 6466 -- | Second Amendment of the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011. | | | +(a) 65 -- | Equity Awards Plan of Entergy Corporation and Subsidiaries, effective as of August 31, 20002011 (10(a)7764 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | +(a) 66 -- | Amendment, effective December 7, 2001, to the Equity Awards Plan of Entergy Corporation and Subsidiaries (10(a)78 to Form 10-K for the year ended December 31, 20012011 in 1-11299). | | | | +(a) 67 -- | Amendment, effective December 10, 2001, to the Equity Awards Plan of Entergy Corporation and Subsidiaries (10(b) to Form 10-Q for the quarter ended March 31, 2002 in 1-11299). | | | +(a) 68 -- | System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective as of January 1, 2009 (10(a)77 to Form 10-K for the year ended December 31, 2009 in 1-11299). | | | |
+(a) 69--68-- | First Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January 1, 2010 (10(a)78 to Form 10-K for the year ended December 31, 2009 in 1-11299). | | | | +(a) 7069 -- | Second Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)69 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | |
* | | | +(a) 7170 -- | Third Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011.2011 (10(a)71 to Form 10-K for the year ended December 31, 2011 in 1-11299). | | | | +(a) 7271 -- | Post-Retirement Plan of Entergy Corporation and Subsidiaries, as amended effective January 1, 2000 (10(a)80 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | | +(a) 7372 -- | Amendment, effective December 28, 2001, to the Post-Retirement Plan of Entergy Corporation and Subsidiaries (10(a)81 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | | +(a) 7473 -- | Pension Equalization Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2009 (10(a)74 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 7574 -- | First Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)75 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | *+(a) 7675 -- | Second Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011.2011 (10(a)76 to Form 10-K for the year ended December 31, 2011 in 1-11299). | | | | +(a) 76 -- | Third Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective June 19, 2013 (10(b) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). | | | | | +(a) 77 -- | Fourth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective July 25, 2013 (10(c) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). | | | | +(a) 78 -- | Fifth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014 (10(a) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). | | | | +(a) 79 -- | Service Recognition Program for Non-Employee Outside Directors of Entergy Corporation and Subsidiaries, as amended and restated effective JanuaryJune 1, 20092012 (10(a) to Form 10-Q for the quarter ended JuneSeptember 30, 20082012 in 1-11299). | | | | +(a) 7880 -- | Executive Income Security Plan of Gulf States Utilities Company, as amended effective March 1, 1991 (10(a)86 to Form 10-K for the year ended December 31, 2001 in 1-11299). | | | | +(a) 7981 -- | System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective January 1, 2009 (10(a)78 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 8082 -- | First Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010 (10(a)79 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | *+(a) 8183 -- | Second Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011. | | | +(a) 82 -- | Retention Agreement effective October 27, 2000 between J. Wayne Leonard and Entergy Corporation2011 (10(a)81 to Form 10-K for the year ended December 31, 20002011 in 1-11299). | | | | +(a) 83 --84-- | Third Amendment to Retention Agreement effective March 8, 2004 between J. Wayne Leonard andof the System Executive Retirement Plan of Entergy Corporation (10(c) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). | | |
+(a) 84 -- | Amendment to Retention Agreementand Subsidiaries, effective December 30, 2005 between J. Wayne Leonard and Entergy CorporationJanuary 26, 2012 (10(a)9181 to Form 10-K for the year ended December 31, 20052013 in 1-11299). | | | | | +(a) 85 -- | Fourth Amendment to Retention Agreement effective January 1, 2009 between J. Wayne Leonard andof the System Executive Retirement Plan of Entergy Corporation (10(a)83and Subsidiaries, effective July 25, 2013 (10(d) to Form 10-K10-Q for the year ended December 31, 2010June 30, 2013 in 1-11299). | | | | | +(a) 86 -- | Fifth Amendment to Retention Agreement effective January 1, 2010 between J. Wayne Leonard andof the System Executive Retirement Plan of Entergy Corporation (10(a)92and Subsidiaries, effective July 1, 2014 (10(d) to Form 10-K10-Q for the year ended December 31, 2009 in 1-11299). | | | +(a) 87 -- | Amendment to Retention Agreement effective DecemberSeptember 30, 2010 between J. Wayne Leonard and Entergy Corporation (10(a)85 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | +(a) 88 -- | Restricted Unit Agreement between J. Wayne Leonard and Entergy Corporation (10(a)93 to Form 10-K for the year ended December 31, 20092014 in 1-11299). | | | | (a) 8987 -- | Agreement of Limited Partnership of Entergy-Koch, LP among EKLP, LLC, EK Holding I, LLC, EK Holding II, LLC and Koch Energy, Inc. dated January 31, 2001 (10(a)94 to Form 10-K/A for the year ended December 31, 2000 in 1-11299). | | | |
| | | +(a) 9088 -- | Employment Agreement effective November 24, 2003 between Mark T. Savoff and Entergy Services (10(a)99 to Form 10-K for the year ended December 31, 2003 in 1-11299). | | | | +(a) 9189 -- | Employment Agreement effective February 9, 1999 between Leo P. Denault and Entergy Services (10(a) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). | | | | +(a) 9290 -- | Amendment to Employment Agreement effective March 5, 2004 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). | | | | +(a) 9391 -- | Retention Agreement effective August 3, 2006 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Q for the quarter ended June 30, 2006 in 1-11299). | | | | +(a) 9492 -- | Amendment to Retention Agreement effective January 1, 2009 between Leo P. Denault and Entergy Corporation (10(a)93 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 9593 -- | Amendment to Retention Agreement effective January 1, 2010 between Leo P. Denault and Entergy Corporation (10(a)101 to Form 10-K for the year ended December 31, 2009 in 1-11299). | | | | +(a) 9694 -- | Amendment to Retention Agreement effective December 30, 2010 between Leo P. Denault and Entergy Corporation (10(a)95 to Form 10-K for the year ended December 31, 2010 in 1-11299). | | | | +(a) 9795 -- | Shareholder Approval of Future Severance Agreements Policy, effective March 8, 2004 (10(f) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). | | | | +(a) 98 -- | Entergy Corporation Outside Director Stock Program Established under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Amended and Restated effective January 1, 2009) (10(b) to Form 10-Q for the quarter ended June 30, 2008 in 1-11299). | | | +(a) 99 -- | First Amendment to Entergy Corporation Outside Director Stock Program Established under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation Subsidiaries (10(a)105 to Form 10-K for the year ended December 31, 2008 in 1-11299). | | |
+(a) 10096 -- | Entergy Corporation Outside Director Stock Program Established under the 2011 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (10(b) to Form 10-Q for the quarter ended June 30, 2011 in 1-11299). | | | | +(a) 10197 -- | Rescission Agreement effective July 26, 2007 between Richard J. SmithFirst Amendment to Entergy Corporation Outside Director Stock Program Established under the 2011 Equity Ownership and Long Term Cash Incentive Plan of Entergy Services, Inc. (10(d)Corporation Subsidiaries (10(b) to Form 10-Q for the quarter ended JuneSeptember 30, 20072012 in 1-11299). | | | | +(a) 10298 -- | Entergy Nuclear Retention Plan, as amended and restated January 1, 2007 (10(a)107 to Form 10-K for the year ended December 31, 2007 in 1-11299). | | | | +(a) 103 -- | Restricted Unit Agreement between Leo P. Denault and Entergy Corporation (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 1-11299). | | | +(a) 104 -- | Retention Agreement effective December 16, 2009 between Richard J. Smith and Entergy Corporation (10(a)112 to Form 10-K for the year ended December 31, 2009 in 1-11299). | | | +(a) 10599 -- | Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries as amended and restated effective January 1, 2010 (Annex A to Entergy Corporation’s Definitive Proxy Statement filed on March 17, 2010 in 1-11299). | | | | *+(a) 106100 -- | First Amendment of the Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries, effective January 27, 2011.2011 (10(a)106 to Form 10-K for the year ended December 31, 2011 in 1-11299). | | | | *+(a) 107 --101- | Form of Stock Option Grant Letter. | | | | *+(a) 108 --102- | Form of Long Term Incentive Program Performance Unit Grant Letter. | | | | *+(a) 109 --103- | Form of Restricted Stock Grant Letter. | | | | (a) 110104 -- | Employee Matters Agreement, dated as of December 4, 2011, among Entergy Corporation, Mid South TransCo LLC and ITC Holdings Corp. (10.1 to Form 8-K filed December 6, 2011 in 1-11299). | | | | *+(a)105- | Retention Agreement effective February 1, 2013 between William M. Mohl and Entergy Corporation. | | | | +(a)106 -- | Restricted Units Agreement between Roderick K. West and Entergy Corporation (10(a) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). | | |
System Energy | | | | +(a)107 -- | Restricted Unit Agreement between Jeffrey S. Forbes and Entergy Corporation (10(a)109 to Form 10-K for the year ended December 31, 2013 in 1-11299). |
System Energy
| | | | (b) 1 through | | (b) 8 -- See 10(a)8 through 10(a)15 above. | | | (b) 9 through | | (b) 15 -- See 10(a)16 through 10(a)22 above. | | | | (b) 16 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | | | (b) 17 -- | Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-1(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate dated October 30, 1981 in 70-6337). | | | | | (b) 18 -- | Operating Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337). | | | | | (b) 19 -- | Amended and Restated Installment Sale Agreement, dated as of February 15, 1996, between System Energy and Claiborne County, Mississippi (B-6(a) to Rule 24 Certificate dated March 4, 1996 in 70-8511). | | | | | (b) 20 -- | Loan Agreement, dated as of October 15, 1998, between System Energy and Mississippi Business Finance Corporation (B-6(b) to Rule 24 Certificate dated November 12, 1998 in 70-8511). | | | |
(b) 21 -- | Loan Agreement, dated as of May 15, 1999, between System Energy and Mississippi Business Finance Corporation (B-6(c) to Rule 24 Certificate dated June 8, 1999 in 70-8511). | | | (b) 22 -- | Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-3(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). | | | | (b) 2322 -- | Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-4(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). | | | | (b) 2423 -- | Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561). | | | | (b) 2524 -- | Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561). | | | | (b) 26 -- | Collateral Trust Indenture, dated as of May 1, 2004, among GG1C Funding Corporation, System Energy, and Deutsche Bank Trust Company Americas, as Trustee (A-3(a) to Rule 24 Certificate dated June 4, 2004 in 70-10182), as supplemented by Supplemental Indenture No. 1 dated May 1, 2004, (A-4(a) to Rule 24 Certificate dated June 4, 2004 in 70-10182). | | | (b) 2725 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337). | | | |
| | | (b) 2826 -- | Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (10(aaa) in 33-4033). | | | | (b) 2927 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | (b) 3028 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | | (b) 3129 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | (b) 3230 -- | Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(b) to Rule 24 Certificate dated March 3, 1989 in 70-7604). | | | |
(b) 3331 -- | System Energy’s Consent, dated January 31, 1995, pursuant to Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(c) to Rule 24 Certificate dated February 13, 1995 in 70-7604). | | | | (b) 3432 -- | Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate dated June 26, 1974 in 70-5399). | | | | (b) 3533 -- | Service Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (E to Rule 24 Certificate dated June 26, 1974 in 70-5399). | | | | (b) 3634 -- | Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate dated January 8, 1987 in 70-5399). | | | | (b) 3735 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). | | | | (b) 3836 -- | First Amendment, dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). | | | | (b) 3937 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). | | | | (b) 4038 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | (b) 4139 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | | (b) 4240 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-9067). | | | | (b) 4341 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-9067). | | | | (b) 4442 -- | Service Agreement with Entergy Services, dated as of July 16, 1974, as amended (10(b)43 to Form 10-K for the year ended December 31, 1988 in 1-9067). | | | |
| | | (b) 4543 -- | Amendment, dated January 1, 2004, to Service Agreement with Entergy Services (10(b)57 to Form 10-K for the year ended December 31, 2004 in 1-9067). | | | | *(b) 4644 -- | Amendment, dated January 1, 2011,December 19, 2013, to Service Agreement with Entergy Services.Services (10(b)44 to Form 10-K for the year ended December 31, 2013 in 1-9067). | | | |
(b) 4745 -- | Operating Agreement between Entergy Operations and System Energy, dated as of June 6, 1990 (B-3(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). | | | | (b) 4846 -- | Guarantee Agreement between Entergy Corporation and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). | | | | (b) 4947 -- | Letter of Credit and Reimbursement Agreement, dated as of December 22, 2003, among System Energy Resources, Inc., Union Bank of California, N.A., as administrating bank and funding bank, Keybank National Association, as syndication agent, Banc One Capital Markets, Inc., as documentation agent, and the Banks named therein, as Participating Banks (10(b)63 to Form 10-K for the year ended December 31, 2003 in 1-9067). | | | | (b) 5048 -- | Amendment to Letter of Credit and Reimbursement Agreement, dated as of December 22, 2003 (10(b)62 to Form 10-K for the year ended December 31, 2004 in 1-9067). | | | | (b) 5149 -- | First Amendment and Consent, dated as of May 3, 2004, to Letter of Credit and Reimbursement Agreement (10(b)63 to Form 10-K for the year ended December 31, 2004 in 1-9067). | | | | (b) 5250 -- | Second Amendment and Consent, dated as of December 17, 2004, to Letter of Credit and Reimbursement Agreement (99 to Form 8-K dated December 22, 2004 in 1-9067). | | | | (b) 5351 -- | Third Amendment and Consent, dated as of May 14, 2009, to Letter of Credit and Reimbursement Agreement (10(b)69 to Form 10-K for the year ended December 31, 2009 in 1-9067). | | | | (b) 5452 -- | Fourth Amendment and Consent, dated as of April 15, 2010, to Letter of Credit and Reimbursement Agreement (10(a) to Form 10-Q for the quarter ended March 31, 2010 in 1-9067). | | | | (b) 53 -- | Fifth Amendment and Consent, dated as of November 15, 2012, to Letter of Credit and Reimbursement Agreement (10(b)55 to Form 10-K for the year ended December 31, 2012 in 1-9067). |
Entergy Arkansas
| | | (c) 1 -- | Agreement, dated April 23, 1982, among Entergy Arkansas and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a) 1 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | | (c) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-10764). | | | | | (c) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). | | | | | (c) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-41080). | | | | | (c) 5 -- | Amendment, dated April 27, 1984,December 19, 2013, to Service Agreement, with Entergy Services (10(a)7(includes Amended and Restated Service Agreement for Administrative and General Support Services, Service Agreement for Generation Planning and Operational Support Services, and Service Agreement for Transmission Planning and Reliability Support Services (10(c)5 to Form 10-K for the year ended December 31, 19842013 in 1-3517)1-10764). | | | | (c) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(a)12 to Form 10-K for the year ended December 31, 2002 in 1-10764).through | | | *(c) 7 -- | Amendment, dated January 1, 2011, to Service Agreement with Entergy Services. | | | (c) 8 through
(c) 1513 -- See 10(a)8 through 10(a)15 above.
| | |
| | | (c) 1614 -- | Agreement, dated August 20, 1954, between Entergy Arkansas and the United States of America (SPA)(13(h) in 2-11467). | | | | (c) 1715 -- | Amendment, dated April 19, 1955, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)2 in 2-41080). | | | | (c) 1816 -- | Amendment, dated January 3, 1964, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)3 in 2-41080). | | | | (c) 1917 -- | Amendment, dated September 5, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)4 in 2-41080). | | | | (c) 2018 -- | Amendment, dated November 19, 1970, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)5 in 2-41080). | | | | (c) 2119 -- | Amendment, dated July 18, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)6 in 2-41080). | | | | (c) 2220 -- | Amendment, dated December 27, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)7 in 2-41080). | | | | (c) 2321 -- | Amendment, dated January 25, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)8 in 2-41080). | | | | (c) 2422 -- | Amendment, dated October 14, 1971, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)9 in 2-43175). | | | | (c) 2523 -- | Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)10 in 2-60233). | | | | (c) 2624 -- | Agreement, dated May 14, 1971, between Entergy Arkansas and the United States of America (SPA) (5(e) in 2-41080). | | | | (c) 2725 -- | Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated May 14, 1971 (5(e)1 in 2-60233). | | | | (c) 2826 -- | Contract, dated May 28, 1943, Amendment to Contract, dated July 21, 1949, and Supplement to Amendment to Contract, dated December 30, 1949, between Entergy Arkansas and McKamie Gas Cleaning Company; Agreements, dated as of September 30, 1965, between Entergy Arkansas and former stockholders of McKamie Gas Cleaning Company; and Letter Agreement, dated June 22, 1966, by Humble Oil & Refining Company accepted by Entergy Arkansas on June 24, 1966 (5(k)7 in 2-41080). | | | | (c) 2927 -- | Fuel Lease, dated as of December 22, 1988, between River Fuel Trust #1 and Entergy Arkansas (B-1(b) to Rule 24 Certificate in 70-7571). | | | | (c) 3028 -- | White Bluff Operating Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-2(a) to Rule 24 Certificate dated June 30, 1977 in 70-6009). | | | |
(c) 3129 -- | White Bluff Ownership Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-1(a) to Rule 24 Certificate dated June 30, 1977 in 70-6009). | | | | (c) 3230 -- | Agreement, dated June 29, 1979, between Entergy Arkansas and City of Conway, Arkansas (5(r)3 in 2-66235). | | | | (c) 3331 -- | Transmission Agreement, dated August 2, 1977, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)3 in 2-60233). | | | |
| | | (c) 3432 -- | Power Coordination, Interchange and Transmission Service Agreement, dated as of June 27, 1977, between Arkansas Electric Cooperative Corporation and Entergy Arkansas (5(r)4 in 2-60233). | | | | (c) 3533 -- | Independence Steam Electric Station Operating Agreement, dated July 31, 1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and City of Conway, Arkansas (5(r)6 in 2-66235). | | | | (c) 3634 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c)51 to Form 10-K for the year ended December 31, 1984 in 1-10764). | | | | (c) 3735 -- | Independence Steam Electric Station Ownership Agreement, dated July 31, 1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and City of Conway, Arkansas (5(r)7 in 2-66235). | | | | (c) 3836 -- | Amendment, dated December 28, 1979, to the Independence Steam Electric Station Ownership Agreement (5(r)7(a) in 2-66235). | | | | (c) 3937 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c)54 to Form 10-K for the year ended December 31, 1984 in 1-10764). | | | | (c) 4038 -- | Owner’s Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station (10(c)55 to Form 10-K for the year ended December 31, 1984 in 1-10764). | | | | (c) 4139 -- | Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company of New York, as Trustee (10(c)56 to Form 10-K for the year ended December 31, 1984 in 1-10764). | | | | (c) 4240 -- | Power Coordination, Interchange and Transmission Service Agreement, dated as of July 31, 1979, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)8 in 2-66235). | | | | (c) 4341 -- | Power Coordination, Interchange and Transmission Agreement, dated as of June 29, 1979, between City of Conway, Arkansas and Entergy Arkansas (5(r)9 in 2-66235). | | | | (c) 4442 -- | Agreement, dated June 21, 1979, between Entergy Arkansas and Reeves E. Ritchie (10(b)90 to Form 10-K for the year ended December 31, 1980 in 1-10764). | | | | (c) 4543 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | |
(c) 4644 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | (c) 4745 -- | First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | | (c) 4846 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | (c) 4947 -- | Contract For Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated June 30, 1983, among the DOE, System Fuels and Entergy Arkansas (10(b)57 to Form 10-K for the year ended December 31, 1983 in 1-10764). | | | | (c) 5048 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). | | | |
| | | (c) 5149 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). | | | | (c) 5250 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). | | | | (c) 5351 -- | Third Amendment dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | (c) 5452 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | | (c) 5553 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-10764). | | | | (c) 5654 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-10764). | | | | (c) 5755 -- | Assignment of Coal Supply Agreement, dated December 1, 1987, between System Fuels and Entergy Arkansas (B to Rule 24 letter filing dated November 10, 1987 in 70-5964). | | | | (c) 5856 -- | Coal Supply Agreement, dated December 22, 1976, between System Fuels and Antelope Coal Company (B-1 in 70-5964), as amended by First Amendment (A to Rule 24 Certificate in 70-5964); Second Amendment (A to Rule 24 letter filing dated December 16, 1983 in 70-5964); and Third Amendment (A to Rule 24 letter filing dated November 10, 1987 in 70-5964). | | | |
(c) 5957 -- | Operating Agreement between Entergy Operations and Entergy Arkansas, dated as of June 6, 1990 (B-1(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). | | | | (c) 6058 -- | Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). | | | | (c) 6159 -- | Agreement for Purchase and Sale of Independence Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-3(c) to Rule 24 Certificate dated September 6, 1990 in 70-7684). | | | | (c) 6260 -- | Agreement for Purchase and Sale of Ritchie Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-4(d) to Rule 24 Certificate dated September 6, 1990 in 70-7684). | | | | (c) 6361 -- | Ritchie Steam Electric Station Unit No. 2 Operating Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-5(a) to Rule 24 Certificate dated September 6, 1990 in 70-7684). | | | | (c) 6462 -- | Ritchie Steam Electric Station Unit No. 2 Ownership Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-6(a) to Rule 24 Certificate dated September 6, 1990 in 70-7684). | | | | (c) 6563 -- | Power Coordination, Interchange and Transmission Service Agreement between Entergy Power and Entergy Arkansas, dated as of August 28, 1990 (10(c)71 to Form 10-K for the year ended December 31, 1990 in 1-10764). | | | | (c) 64 -- | Loan Agreement, dated as of January 1, 2013, between Jefferson County, Arkansas and Entergy Arkansas relating to Revenue Bonds (Entergy Arkansas, Inc. Project) Series 2013 (4(b) to Form 8-K filed January 9, 2013 in 1-10764). | | |
| | | | (c) 65 -- | Loan Agreement, dated as of January 1, 2013, between Independence County, Arkansas and Entergy Gulf States LouisianaArkansas relating to Revenue Bonds (Entergy Arkansas, Inc. Project) Series 2013 (4(d) to Form 8-K filed January 9, 2013 in 1-10764). |
Entergy Gulf States Louisiana | | | | (d) 1 -- | Agreement effective February 1, 1964, between Sabine River Authority, State of Louisiana, and Sabine River Authority of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented (B to Form 8-K dated May 6, 1964, A to Form 8-K dated October 5, 1967, A to Form 8-K dated May 5, 1969, and A to Form 8-K dated December 1, 1969 in 1-27031). | | | | | (d) 2 -- | Joint Ownership Participation and Operating Agreement regarding River Bend Unit 1 Nuclear Plant, dated August 20, 1979, between Entergy Gulf States, Inc., Cajun, and SRG&T; Power Interconnection Agreement with Cajun, dated June 26, 1978, and approved by the REA on August 16, 1979, between Entergy Gulf States, Inc. and Cajun; and Letter Agreement regarding CEPCO buybacks, dated August 28, 1979, between Entergy Gulf States, Inc. and Cajun (2, 3, and 4, respectively, to Form 8-K dated September 7, 1979 in 1-27031). | | | | | (d) 3 -- | Lease Agreement, dated September 18, 1980, between BLC Corporation and Entergy Gulf States, Inc. (1 to Form 8-K dated October 6, 1980 in 1-27031). | | | | | (d) 4 -- | Joint Ownership Participation and Operating Agreement for Big Cajun, between Entergy Gulf States, Inc., Cajun Electric Power Cooperative, Inc., and Sam Rayburn G&T, Inc, dated November 14, 1980 (6 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 1, dated December 12, 1980 (7 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 2, dated December 29, 1980 (8 to Form 8-K dated January 29, 1981 in 1-27031). | | | |
| (d) 5 -- | Agreement of Joint Ownership Participation between SRMPA, SRG&T and Entergy Gulf States, Inc., dated June 6, 1980, for Nelson Station, Coal Unit #6, as amended (8 to Form 8-K dated June 11, 1980, A-2-b to Form 10-Q for the quarter ended June 30, 1982; and 10-1 to Form 8-K dated February 19, 1988 in 1-27031). | | | | | (d) 6 -- | Agreements between Southern Company and Entergy Gulf States, Inc., dated February 25, 1982, which cover the construction of a 140-mile transmission line to connect the two systems, purchase of power and use of transmission facilities (10-31 to Form 10-K for the year ended December 31, 1981 in 1-27031). | | | | | (d) 7 -- | Transmission Facilities Agreement between Entergy Gulf States, Inc. and Mississippi Power Company, dated February 28, 1982, and Amendment, dated May 12, 1982 (A-2-c to Form 10-Q for the quarter ended March 31, 1982 in 1-27031) and Amendment, dated December 6, 1983 (10-43 to Form 10-K for the year ended December 31, 1983 in 1-27031). | | | | | (d) 8 -- | First Amended Power Sales Agreement, dated December 1, 1985 between Sabine River Authority, State of Louisiana, and Sabine River Authority, State of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Co., Inc., and Louisiana Power and Light Company (10-72 to Form 10-K for the year ended December 31, 1985 in 1-27031). | | | | | +(d) 9 -- | Deferred Compensation Plan for Directors of Entergy Gulf States, Inc. and Varibus Corporation, as amended January 8, 1987, and effective January 1, 1987 (10-77 to Form 10-K for the year ended December 31, 1986 in 1-27031). Amendment dated December 4, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). | | | | | +(d) 10 -- | Trust Agreement for Deferred Payments to be made by Entergy Gulf States, Inc. pursuant to the Executive Income Security Plan, by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective November 1, 1986 (10-78 to Form 10-K for the year ended December 31, 1986 in 1-27031). | | | |
| | | | +(d) 11 -- | Trust Agreement for Deferred Installments under Entergy Gulf States, Inc. Management Incentive Compensation Plan and Administrative Guidelines by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective June 1, 1986 (10-79 to Form 10-K for the year ended December 31, 1986 in 1-27031). | | | | | +(d) 12 -- | Nonqualified Deferred Compensation Plan for Officers, Nonemployee Directors and Designated Key Employees, effective December 1, 1985, as amended, continued and completely restated effective as of March 1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). | | | | | +(d) 13 -- | Trust Agreement for Entergy Gulf States, Inc. Nonqualified Directors and Designated Key Employees by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective July 1, 1991 (10-4 to Form 10-K for the year ended December 31, 1992 in 1-27031). | | | | | (d) 14 -- | Nuclear Fuel Lease Agreement between Entergy Gulf States, Inc. and River Bend Fuel Services, Inc. to lease the fuel for River Bend Unit 1, dated February 7, 1989 (10-64 to Form 10-K for the year ended December 31, 1988 in 1-27031). | | | | | (d) 15 -- | Trust and Investment Management Agreement between Entergy Gulf States, Inc. and Morgan Guaranty and Trust Company of New York (the “Decommissioning Trust Agreement”) with respect to decommissioning funds authorized to be collected by Entergy Gulf States, Inc., dated March 15, 1989 (10-66 to Form 10-K for the year ended December 31, 1988 in 1-27031). | | | |
| (d) 16 -- | Amendment No. 2 dated November 1, 1995 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)31 to Form 10-K for the year ended December 31, 1995 in 1-27031). | | | | | (d) 17 -- | Amendment No. 3 dated March 5, 1998 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)23 to Form 10-K for the year ended December 31, 2004 in 1-27031). | | | | | (d) 18 -- | Amendment No. 4 dated December 17, 2003 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)24 to Form 10-K for the year ended December 31, 2004 in 1-27031). | | | | | (d) 19 -- | Amendment No. 5 dated December 31, 2007 between Entergy Gulf States Louisiana, L.L.C. and Mellon Bank. N.A. to Decommissioning Trust Agreement (10(d)21 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | | (d) 20 -- | Partnership Agreement by and among Conoco Inc., and Entergy Gulf States, Inc., CITGO Petroleum Corporation and Vista Chemical Company, dated April 28, 1988 (10-67 to Form 10-K for the year ended December 31, 1988 in 1-27031). | | | | | +(d) 21 -- | Gulf States Utilities Company Executive Continuity Plan, dated January 18, 1991 (10-6 to Form 10-K for the year ended December 31, 1990 in 1-27031). | | | | | +(d) 22 -- | Trust Agreement for Entergy Gulf States, Inc. Executive Continuity Plan, by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective May 20, 1991 (10-5 to Form 10-K for the year ended December 31, 1992 in 1-27031). | | | | | +(d) 23 -- | Gulf States Utilities Board of Directors’ Retirement Plan, dated February 15, 1991 (10-8 to Form 10-K for the year ended December 31, 1990 in 1-27031). | | | | | (d) 24 -- | Third Amendment, dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | | (d) 25 -- | Fourth Amendment, dated April 1, 1997, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
| | | | | | | (d) 26 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 0-20371). | | | | | (d) 27 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 0-20371). | | | | | (d) 28 -- | Operating Agreement dated as of January 1, 2008, between Entergy Operations, Inc. and Entergy Gulf States Louisiana (10(d)39 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | |
| (d) 29 -- | Service Agreement dated as of January 1, 2008, between Entergy Services, Inc. and Entergy Gulf States Louisiana (10(d)40 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | *(d) 30 -- | Amendment, dated January 1, 2011,December 19, 2013, to Service Agreement with Entergy Services.Services (includes Amended and Restated Service Agreement for Administrative and General Support Services and Service Agreement for Generation Planning and Operational Support Services) (10(d)30 to Form 10-K for the year ended December 31, 2013 in 0-20371). | | | | | (d) 31 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | | (d) 32 -- | Decommissioning Trust Agreement, dated as of December 22, 1997, by and between Cajun Electric Power Cooperative, Inc. and Mellon Bank, N.A. with respect to decommissioning funds authorized to be collected by Cajun Electric Power Cooperative, Inc. and related Settlement Term Sheet (10(d)42 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | | (d) 33 -- | First Amendment to Decommissioning Trust Agreement, dated as of December 23, 2003, by and among Cajun Electric Power Cooperative, Inc., Mellon Bank, N.A., Entergy Gulf States, Inc., and the Rural Utilities Services of the United States Department of Agriculture (10(d)43 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | | (d) 34 -- | Second Amendment to Decommissioning Trust Agreement, dated December 31, 2007, by and among Cajun Electric Power Cooperative, Inc., Mellon Bank, N.A., Entergy Gulf States Louisiana, L.L.C., and the Rural Utilities Services of the United States Department of Agriculture (10(d)44 to Form 10-K for the year ended December 31, 2007 in 333-148557). | | | | | (d) 35 -- | Second Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC dated as of July 22, 2010 (10(a) to Form 10-Q for the quarter ended June 30, 2010). | | | | | (d) 36 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Gulf States Louisiana, L.L.C. relating to Revenue Bonds (Entergy Gulf States Louisiana, L.L.C. Project) Series 2010A (4(b) to Form 8-K filed October 12, 2010 in 0-20371). | | | | | (d) 37 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Gulf States Louisiana, L.L.C. relating to Revenue Bonds (Entergy Gulf States Louisiana, L.L.C. Project) Series 2010B (4(e) to Form 8-K filed October 12, 2010 in 0-20371). |
| | | (d) 38 -- | Asset Purchase Agreement, dated as of December 8, 2014, by and among Union Power Partners, L.P., Entegra TC LLC, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas (10.1 to Form 8-K filed December 12, 2014 in 0-20371). |
Entergy Louisiana | | | | (e) 1 -- | Agreement, dated April 23, 1982, among Entergy Louisiana and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982, in 1-3517). | | | |
| | | | (e) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-32718). | | | | | (e) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). | | | | | (e) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-42523). | | | | | (e) 5 -- | Amendment, dated as of April 27, 1984,December 19, 2013, to Service Agreement with Entergy Services (10(a)7(includes Amended and Restated Service Agreement for Administrative and General Support Services and Service Agreement for Generation Planning and Operational Support Services) (10(e)5 to Form 10-K for the year ended December 31, 19842013 in 1-3517)1-32718). | | |
(e) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(e)12 to Form 10-K for the year ended December 31, 2002 in 1-8474). | | | *(e) 7 -- | Amendment, dated January 1, 2011, to Service Agreement with Entergy Services. | | | (e) 8 through
(e) 15 -- See 10(a)8 through 10(a)15 above.
| | | | (e) 166 through | | (e) 13 -- See 10(a)8 through 10(a)15 above. | | | | (e) 14 -- | Fuel Lease, dated as of January 31, 1989, between River Fuel Company #2, Inc., and Entergy Louisiana (B-1(b) to Rule 24 Certificate in 70-7580). | | | | (e) 1715 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | | (e) 1816 -- | Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K dated June 4, 1982 in 1-8474). | | | | (e) 1917 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | (e) 2018 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | | (e) 2119 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | (e) 2220 -- | Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated February 2, 1984, among DOE, System Fuels and Entergy Louisiana (10(d)33 to Form 10-K for the year ended December 31, 1984 in 1-8474). | | | | (e) 23--21-- | Operating Agreement between Entergy Operations and Entergy Louisiana, dated as of June 6, 1990 (B-2(c) to Rule 24 Certificate dated June 15, 1990 in 70-7679). | | | | (e) 2422 -- | Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). | | | | (e) 2523 -- | Second Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC dated as of July 22, 2010 (10(a) to Form 10-Q for the quarter ended June 30, 2010). | | | | (e) 2624 -- | Third Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC dated as of August 6, 2014 (10(a) to Form 10-Q for the quarter ended June 30, 2014). | | | | (e) 25 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-32718). | | | | (e) 2726 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-32718). | | | |
| | | (e) 2827 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Louisiana, LLC relating to Revenue Bonds (Entergy Louisiana, LLC Project) Series 2010 (4(b) to Form 8-K filed October 12, 2010 in 1-32718). |
Entergy Mississippi
| | | (f) 1 -- | Agreement dated April 23, 1982, among Entergy Mississippi and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | | (f) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-31508). | | | | | (f) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). | | | | | (f) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (D in 37-63). | | | | | (f) 5 -- | Amendment, dated April 27, 1984,December 19, 2013, to Service Agreement with Entergy Services (10(a)7(includes Amended and Restated Service Agreement for Administrative and General Support Services and Service Agreement for Generation Planning and Operational Support Services) (10(f)5 to Form 10-K for the year ended December 31, 19842013 in 1-3517)1-31508). | | | | (f) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(f)12 to Form 10-K for the year ended December 31, 2002 in 1-31508).through | | | *(f) 7 -- | Amendment, dated January 1, 2011, to Service Agreement with Entergy Services. | | | (f) 8 through
(f) 1513 -- See 10(a)8 through 10(a)15 above.
| | | | (f) 16 -- | Loan Agreement, dated as of September 1, 2004, between Entergy Mississippi and Mississippi Business Finance Corporation (B-3(a) to Rule 24 Certificate dated October 4, 2004 in 70-10157). | | | (f) 1714 -- | Refunding Agreement, dated as of May 1, 1999, between Entergy Mississippi and Independence County, Arkansas (B-6(a) to Rule 24 Certificate dated June 8, 1999 in 70-8719). | | | | (f) 1815 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B-3(a) in 70-6337). | | | | (f) 1916 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c)51 to Form 10-K for the year ended December 31, 1984 in 0-375). | | | | (f) 2017 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c)54 to Form 10-K for the year ended December 31, 1984 in 0-375). | | | | (f) 2118 -- | Owners Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi and other co-owners of the Independence Station (10(c)55 to Form 10-K for the year ended December 31, 1984 in 0-375). | | | | (f) 2219 -- | Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company of New York, as Trustee (10(c)56 to Form 10-K for the year ended December 31, 1984 in 0-375). | | | | (f) 2320 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | |
+(f) 2421 -- | Post-Retirement Plan (10(d)24 to Form 10-K for the year ended December 31, 1983 in 0-320). | | | | (f) 2522 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | (f) 2623 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | |
| | | (f) 2724 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | (f) 2825 -- | Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate dated June 26, 1974 in 70-5399). | | | | (f) 2926 -- | Service Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (E to Rule 24 Certificate dated June 26, 1974 in 70-5399). | | | | (f) 3027 -- | Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate dated January 8, 1987 in 70-5399). | | | | (f) 3128 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). | | | | (f) 3229 -- | First Amendment dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). | | | | (f) 3330 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). | | | | (f) 3431 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | (f) 3532 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | | (f) 3633 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-31508). | | | | (f) 3734 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-31508). | | | | (f) 3835 -- | Purchase and Sale Agreement by and between Central Mississippi Generating Company, LLC and Entergy Mississippi, Inc., dated as of March 16, 2005 (10(b) to Form 10-Q for the quarter ended March 31, 2005 in 1-31508). |
Entergy New Orleans
| | | (g) 1 -- | Agreement, dated April 23, 1982, among Entergy New Orleans and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | | (g) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 0-5807). | | | | | (g) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). | | | | | (g) 4 -- | Service Agreement with Entergy Services dated as of April 1, 1963 (5(a)5 in 2-42523). | | | | | (g) 5 -- | Amendment, dated as of April 27, 1984,December 19, 2013, to Service Agreement with Entergy Services (10(a)7(includes Amended and Restated Service Agreement for Administrative and General Support Services and Service Agreement for Generation Planning and Operational Support Services) (10(g)5 to Form 10-K for the year ended December 31, 1984 in 1-3517). | | | (g) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(g)12 to Form 10-K for the year ended December 31, 20022013 in 0-5807). | | | | *(g) 7 -- | Amendment, dated January 1, 2011, to Service Agreement with Entergy Services. | | | |
| | | (g) 86 through | (g) 1513 -- See 10(a)8 through 10(a)15 above. | | | | (g) 1614 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). | | | | (g) 1715 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). | | | | (g) 1816 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). | | | | (g) 1917 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). | | | | (g) 2018 -- | Transfer Agreement, dated as of June 28, 1983, among the City of New Orleans, Entergy New Orleans and Regional Transit Authority (2(a) to Form 8-K dated June 24, 1983 in 1-1319). | | | | (g) 2119 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). | | | | (g) 2220 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). | | | |
(g) 2321 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). | | | | (g) 2422 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | (g) 2523 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | | (g) 2624 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 0-5807). | | | | (g) 2725 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 0-5807). | | | | (g) 2826 -- | Chapter 11 Plan of Reorganization of Entergy New Orleans, Inc., as modified, dated May 2, 2007, confirmed by bankruptcy court order dated May 7, 2007 (2(a) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). |
Entergy Texas
| | | (h) 1 -- | Agreement effective February 1, 1964, between Sabine River Authority, State of Louisiana, and Sabine River Authority of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented (B to Form 8-K dated May 6, 1964, A to Form 8-K dated October 5, 1967, A to Form 8-K dated May 5, 1969, and A to Form 8-K dated December 1, 1969 in 1-27031). | | | | | (h) 2 -- | Ground Lease, dated August 15, 1980, between Statmont Associates Limited Partnership (Statmont) and Entergy Gulf States, Inc., as amended (3 to Form 8-K dated August 19, 1980 and A-3-b to Form 10-Q for the quarter ended September 30, 1983 in 1-27031). |
| | | | | | | (h) 3 -- | Lease and Sublease Agreement, dated August 15, 1980, between Statmont and Entergy Gulf States, Inc., as amended (4 to Form 8-K dated August 19, 1980 and A-3-c to Form 10-Q for the quarter ended September 30, 1983 in 1-27031). | | | | | (h) 4 -- | Lease Agreement, dated September 18, 1980, between BLC Corporation and Entergy Gulf States, Inc. (1 to Form 8-K dated October 6, 1980 in 1-27031). | | | | | (h) 5 -- | Joint Ownership Participation and Operating Agreement for Big Cajun, between Entergy Gulf States, Inc., Cajun Electric Power Cooperative, Inc., and Sam Rayburn G&T, Inc, dated November 14, 1980 (6 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 1, dated December 12, 1980 (7 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 2, dated December 29, 1980 (8 to Form 8-K dated January 29, 1981 in 1-27031). | | | | | (h) 6 -- | Agreement of Joint Ownership Participation between SRMPA, SRG&T and Entergy Gulf States, Inc., dated June 6, 1980, for Nelson Station, Coal Unit #6, as amended (8 to Form 8-K dated June 11, 1980, A-2-b to Form 10-Q for the quarter ended June 30, 1982; and 10-1 to Form 8-K dated February 19, 1988 in 1-27031). | | | |
| (h) 7 -- | First Amended Power Sales Agreement, dated December 1, 1985 between Sabine River Authority, State of Louisiana, and Sabine River Authority, State of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Co., Inc., and Louisiana Power and Light Company (10-72 to Form 10-K for the year ended December 31, 1985 in 1-27031). | | | | | +(h) 8 -- | Deferred Compensation Plan for Directors of Entergy Gulf States, Inc. and Varibus Corporation, as amended January 8, 1987, and effective January 1, 1987 (10-77 to Form 10-K for the year ended December 31, 1986 in 1-27031). Amendment dated December 4, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). | | | | | +(h) 9 -- | Trust Agreement for Deferred Payments to be made by Entergy Gulf States, Inc. pursuant to the Executive Income Security Plan, by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective November 1, 1986 (10-78 to Form 10-K for the year ended December 31, 1986 in 1-27031). | | | | | +(h) 10 -- | Trust Agreement for Deferred Installments under Entergy Gulf States, Inc. Management Incentive Compensation Plan and Administrative Guidelines by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective June 1, 1986 (10-79 to Form 10-K for the year ended December 31, 1986 in 1-27031). | | | | | +(h) 11 -- | Nonqualified Deferred Compensation Plan for Officers, Nonemployee Directors and Designated Key Employees, effective December 1, 1985, as amended, continued and completely restated effective as of March 1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). | | | | | +(h) 12 -- | Trust Agreement for Entergy Gulf States, Inc. Nonqualified Directors and Designated Key Employees by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective July 1, 1991 (10-4 to Form 10-K for the year ended December 31, 1992 in 1-27031). | | | | | (h) 13 -- | Lease Agreement, dated as of June 29, 1987, among GSG&T, Inc., and Entergy Gulf States, Inc. related to the leaseback of the Lewis Creek generating station (10-83 to Form 10-K for the year ended December 31, 1988 in 1-27031). | | | | | +(h) 14 -- | Gulf States Utilities Company Executive Continuity Plan, dated January 18, 1991 (10-6 to Form 10-K for the year ended December 31, 1990 in 1-27031). | | | | | +(h) 15 -- | Trust Agreement for Entergy Gulf States, Inc. Executive Continuity Plan, by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective May 20, 1991 (10-5 to Form 10-K for the year ended December 31, 1992 in 1-27031). | | | |
| | | | +(h) 16 -- | Gulf States Utilities Board of Directors’ Retirement Plan, dated February 15, 1991 (10-8 to Form 10-K for the year ended December 31, 1990 in 1-27031). | | | | | (h) 17 -- | Third Amendment, dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). | | | | | (h) 18 -- | Fourth Amendment, dated April 1, 1997, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). | | | |
| (h) 19 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-34360). | | | | | (h) 20 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-34360). | | | | | (h) 21 -- | Service Agreement dated as of January 1, 2008, between Entergy Services, Inc. and Entergy Texas (10(h)25 to Form 10-K for the year ended December 31, 2008 in 3-53134). | | | | *(h) 22 -- | Amendment, dated January 1, 2011,December 19, 2013, to Service Agreement with Entergy Services.Services (includes Amended and Restated Service Agreement for Administrative and General Support Services and Service Agreement for Generation Planning and Operational Support Services) (10(h)22 to Form 10-K for the year ended December 31, 2013 in 1-34360). |
| (12) Statement Re Computation of Ratios |
| | | | *(a) | Entergy Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. | | | | | *(b) | Entergy Gulf States Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Distributions, as defined. | | | | | *(c) | Entergy Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Distributions, as defined. | | | | | *(d) | Entergy Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. | | | | | *(e) | Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. | | | | | *(f) | Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined. | | | | | *(g) | System Energy’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
*(21) Subsidiaries of the Registrants |
*(21) Subsidiaries of the Registrants
(23) Consents of Experts and Counsel
(23) Consents of Experts and Counsel |
| *(a) | The consent of Deloitte & Touche LLP is contained herein at page 492.528. |
(31) Rule 13a-14(a)/15d-14(a) Certifications
(31) Rule 13a-14(a)/15d-14(a) Certifications |
| | | *(a) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. | | | | | *(b) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. | | | | | *(c) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. | | | |
| *(d) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. | | | | | *(e) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana. | | | | | *(f) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana. | | | | | *(g) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. | | | | | *(h) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. | | | | | *(i) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. | | | | | *(j) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. | | | | | *(k) | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. | | | | | *(l) | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. | | | | | *(m) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. | | | | | *(n) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. | | | | | *(o) | Rule 13a-14(a)/15d-14(a) Certification for System Energy. | | | | | *(p) | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
E-32
(32) Section 1350 Certifications |
| | | | *(a) | Section 1350 Certification for Entergy Corporation. | | | | | *(b) | Section 1350 Certification for Entergy Corporation. | | | | | *(c) | Section 1350 Certification for Entergy Arkansas. | | | | | *(d) | Section 1350 Certification for Entergy Arkansas. | | | | | *(e) | Section 1350 Certification for Entergy Gulf States Louisiana. | | | | | *(f) | Section 1350 Certification for Entergy Gulf States Louisiana. | | | | | *(g) | Section 1350 Certification for Entergy Louisiana. | | | | | *(h) | Section 1350 Certification for Entergy Louisiana. | | | | | *(i) | Section 1350 Certification for Entergy Mississippi. | | | | | *(j) | Section 1350 Certification for Entergy Mississippi. | | | | | *(k) | Section 1350 Certification for Entergy New Orleans. | | | |
| *(l) | Section 1350 Certification for Entergy New Orleans. | | | | | *(m) | Section 1350 Certification for Entergy Texas. | | | | | *(n) | Section 1350 Certification for Entergy Texas. | | | | | *(o) | Section 1350 Certification for System Energy. | | | | | *(p) | Section 1350 Certification for System Energy. |
(101) XBRL Documents
Entergy Corporation
| *INS - | XBRL Instance Document. | | | | | *SCH - | XBRL Taxonomy Extension Schema Document. | | | | | *CAL - | XBRL Taxonomy Extension Calculation Linkbase Document. | | | | | *DEF - | XBRL Taxonomy Extension Definition Linkbase Document. | | | | | *LAB - | XBRL Taxonomy Extension Label Linkbase Document. | | | | | *PRE - | XBRL Taxonomy Extension Presentation Linkbase Document. |
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| + | Management contracts or compensatory plans or arrangements. |
|
